Congratulation on securing a tender. This is a significant achievement – one that validates your company’s capabilities and competitive positioning.
However, being awarded a tender is just the beginning. Successful fulfilment requires careful planning, adequate resources and often, access to working capital.
Below we outline the main steps that occur once you’ve been awarded a tender, along with key tips for success.
Receiving your letter of award
Your letter of award is the final notice of acceptance of your bid.
It typically contains the name of your company, and details of the awarded project (total contract price, scope of work, timelines, technical specifications and payment terms).
Reviewing the terms of the contract is key to mitigating risk and protecting your company. It ensures all the terms are accurately set out in writing before an agreement is signed.
The tender acceptance and contracting phase
Once you are satisfied with the terms, you must formally accept the awarded tender from the relevant government entity.
It’s not uncommon for a form of offer and acceptance, which you must complete and submit, to be included with the letter of award.
The next step is to sign a contract that legally binds both parties to the contract terms.
Terms may include insurance requirements, and performance guarantees and bonds requested by government to ensure you fulfil your contractual obligations.
Immediate post-award requirements
The formalities are followed by a site handover, or project briefing meetings to iron out the specifics of the tender.
At this point, you’ll be required to provide your company’s Tax Compliance Status (TCS), B-BBEE Certification, and any other compliance documents requested by the client.
Project managers are appointed to manage the contract, perform due diligence and establish communication channels with the client.
Mobilisation: preparing for project execution
Mobilising adequate resources for project execution is the benchmark for success.
It entails procuring materials and equipment, engaging suppliers and subcontractors, and hiring or allocating staff.
Site facilities or operational infrastructure must be set up, and project timelines and milestones created to streamline works.
The cash flow challenge: why you need capital before you receive payment
Most tenders, especially government tenders, involve payment after delivery, or at specific milestones well into the project.
Upfront costs for procuring materials, labour, equipment, and subcontractor payments can lead to cash flow constraints that impact project completion.
When monetary performance security – which may have to be paid from company coffers – is taken, access to capital is one of the greatest threats to timeous tender fulfilment.
BizFunding helps South African businesses bridge the gap between securing tenders and fulfilling them, through access to funding and hands-on guidance. Our model is partnership-based – and you don’t pay back funds until you get paid.
Understanding payment terms and schedules
Different tenders have different payment structures: progress payments, milestone-based payments and payment upon completion. As does government versus private sector clients.
Government has a mandatory 30-day payment cycle from receipt of an invoice. The private sector is more flexible and open to negotiating payment terms on a project-to-project basis.
The retention factor must also be taken into account. In South Africa, retention amounts of between five and 10% of the value of the tender are withheld by the client.
Funds are usually released in two tranches – on completion of the project, and following the defects liability period.
Project execution and compliance requirements
All project activities must be performed according to compliance requirements.
This entails meeting quality standards and specifications, and maintaining timelines and deliverables.
Any issues with the tender must be reported, site inspections and audits regularly carried out, and health and safety and environmental demands fully complied with.
To achieve compliance, project managers must identify compliance requirements, develop a comprehensive plan, and allocate resources and train staff to implement compliance activities.
Documentation during project execution
Maintaining a systematic record of work completed tracks progress, ensures transparency, manages risk and improves contractor-to-client communication.
Depending on the type and scale of the project, required documentation may include project status reports, timesheets and resource allocation records, expense tracking, issue and risk logs, and photographic evidence of progress.
In addition, project claims or invoices must be prepared and timeously submitted to formally request payment for work completed over the subsequent period.
Managing variations and change orders
Managing scope changes is a formal process that must be concluded in writing and authorised by the client.
It may involve setting up a contingency fund to handle additional project costs until your request for additional budget has been met.
All variations should be documented and tracked through a variation register.
Detailed documentation must be created for all change orders.
To ensure current documentation reflects these changes, all project records must be updated.
When managing variations, profit margins can take a hit. It’s critical to plan proactively, implement strict change control and track variations, and their impact on work, in real-time.
Project completion and handover
On completion of the project, final inspections are carried out. Any defects must be documented on a snag list and resolved.
Once the client is satisfied, a completion certificate acknowledging that all work specified in the contract has been carried out is issued.
Final documentation is submitted and the site is formally handed over.
At this point, project warranty periods and obligations kick in, contractually requiring your company to address any defects for an agreed period after project completion.
Invoice submission and payment collection
On fulfilment of the tender, compliant invoices are prepared, and submitted along with supporting documentation, such as:
- signed delivery notes
- job cards
- purchase orders
- the company’s VAT number and Central Supplier Database (CSD) number.
The preferred method for the submission of invoices is usually outlined in the contract.
Payments from government entities are made within 30 days from receipt of the invoice. If the funds are not received by due date, follow-up requests must be made.
Failing that, non-payments from government entities can be reported to the National Treasury via a call centre number or email address.
How tender funding enables successful project fulfilment
Access to working capital removes the barrier between securing and successfully completing tenders. It allows businesses to procure materials, pay suppliers upfront and maintain cash flow.
With sufficient funding, your company can focus on quality delivery rather than financial shortfalls.
Building on success: leveraging completed tenders for future growth
Completing tenders on time and within budget builds track record, enhances your company’s reputation and drives growth.
Acquired reference letters and testimonials support your business in its quest for future tenders, while the experience gained can be leveraged to upgrade your CIDB level. This is a critical grading system that enables access to more lucrative projects.
Common pitfalls to avoid after being awarded a tender
Among the most common pitfalls to avoid are:
- scope creep and unrealistic pricing
- weaknesses in documentation
- poor communication with the client
- supplier delays or failures
- cash shortages, resulting in delays or performance failures.
All these pitfalls can lead to failure to provide agreed deliverables, to specifications and on time.
To build trust and ensure profitability, adhere strictly to contract terms. Be meticulous about documentation, communicate often and clearly with the client and manage suppliers carefully. Also keep firm control over cash flow, ensuring you can make necessary purchases and pay suppliers on time.
How BizFunding supports businesses through the tender journey
At BizFunding, we not only provide the capital to finance your tender from start to finish, we also work with you to ensure the quality completion of the project.
Funds of up to R2 million are available on award of the tender. We only request payment once the client has paid you.
Call 010 157 2499 to find out more about our tender funding, or apply online now.
