Before tendering for a particular construction project, there are various risks that one needs to consider. The consideration of these risks affects the pricing of various terminal activities in the tender among other factors of the tendering process. One of these risks is the political risk. This risk relates to the manner in which changes in the political environment affects the delivery of the project (Agerberg & Agren, 2012, p.19). Other risks to consider before the tendering process include the financial risks. These risks include factors such as inflation and its effect on the price of supplies, the availability of financing and interest rates among others.
There are legal risks to be considered before the tendering process. These are risks brought about by the legal and regulatory mechanisms that relate to the construction industry (Agerberg & Agren, 2012, p.19). Weather related risks should be considered before the tendering process. Changes in the weather can affect the delivery of the project by increasing the cost or using more time than was allocated for various terminal activities (Agerberg & Agren, 2012, p.19).
Environmental risks such as the location of the construction site might also affect the manner in which the bud is packaged. The tendering company should also consider contract risks, design risks, commissioning risks, technological risks, supply risks, force majeure risks, subcontractor risks, completion risks, injury and safety risks, third party risks, communication risks, client related risks, construction risks, social risks, and geotechnical risks among others (Agerberg & Agren, 2012, p.19).
One may not always know the contractors with whom one engages in the delivery of the project. Engage with unknown contractors exposes one to several risks. While there are safeguards to these risks, their consideration is important before engaging subcontractors. The main risks involved when dealing with suppliers and sub-contractors with whom one is not conversant are categorized under their character, competence, capital, and capacity.
Character relates to factors such as the length of operation in the construction industry, history of non-performance, safety record, and the ethicality of the practices of the subcontractor (Hartle, 2011, p.2). The element of competence relates to the ability, expertise and experience to complete the task for which they are submitting the tender. Engaging incompetent subcontractors exposes the contractor to low quality of work, late deliveries, uncompleted tasks and financial loses (Hartle, 2011, p.2).
The other category of the risks relates to the capacity of the sub-contractor. This relates to the capabilities of the sub-contractor to complete the volume of work contained in the contractual engagement. This category is predicted by aspects such as personnel and the ability to hire more, the type, size, and amount of equipment, and other facilities that are required for the delivery of their terminal activities (Hartle, 2011, p.2). Engaging sub-contractors with a limited capacity in task that has a high volume of work results in risk such as the failure to complete the terminal activities promptly, poor workmanship, and a poor quality of work (Hartle, 2011, p.2).
The final category of risks is the capital category. This category relates to the financial health of the sub-contract. Depending on the contracts signed, the sub-contractors might be required to use their capital to deliver their terminal activities so that they are paid upon completion. If the sub-contractors are not sufficiently liquid, they might experience cash flow problems which will affect the delivery of the projects (Hartle, 2011, p.2).
References
Agerberg, A. and Agren, J. 2012. Risk management in the tendering process. Master of Design and Construction Project management. Chalmers University of Technology. Available at :< http://publications.lib.chalmers.se/records/fulltext/159227.pdf> [Accessed 26.6.2016].
Hartle, C. 2011. Mitigate Risks and Maximize Resources with Subcontractor Prequalification. Available at :< http://www.barnesdennig.com/uploads/Subcontractor%20Prequalification.pdf> [Accessed 26.6.2016].
