14 Tender Risks You Should Identify Before Submitting

14 Tender Risks You Should Identify Before Submitting

Submitting a tender is more than offering a competitive price. Successful bids balance commercial opportunity with legal exposure. Overlooking key risks can turn a winning tender into a costly contract. This post outlines 14 commercial and legal risks to identify before you submit, how to spot them, and practical mitigations that protect margin and reputation.

Why identifying risks matters

Risks that look theoretical during the bidding stage often become real costs after contract award. Early identification helps you price accurately, decide whether to bid, and build negotiation points into your offer. Split into commercial and legal categories, the following list covers common pitfalls across industries.

14 key tender risks (what to look for and how to mitigate)

1. 1. Ambiguous scope and specifications

   Risk: Vague or incomplete scope leads to differing expectations, disputes, and unpaid work.

   Type: Commercial & Legal

   • Signs: Broad wording, missing deliverables, conflicting requirements.
   • Mitigation: Clarify assumptions in your bid, request written clarifications, or include tightly worded exclusions and a defined change control process.

2. 2. Underestimating costs and margins

   Risk: Incorrect price estimates, hidden costs, or optimistic assumptions erode profitability.

   Type: Commercial

   • Signs: Aggressive pricing requests, incomplete cost data, unfamiliar delivery environments.
   • Mitigation: Use detailed cost models, include contingency buffers, run scenario sensitivity, and highlight alternative scope options.

3. 3. Onerous contract terms and non-negotiable clauses

   Risk: Unfavorable clauses (e.g., strict performance standards, unlimited liability) increase legal exposure.

   Type: Legal

   • Signs: Draft contract provided with the tender, standard form with no room for amendment, severe penalties for breach.
   • Mitigation: Identify problematic clauses early, prepare fallback positions, and seek legal review before submitting a bid or accepting award.

4. 4. Payment terms and cashflow strain

   Risk: Long payment cycles, retention, or milestone-linked payments cause cashflow issues.

   Type: Commercial

   • Signs: Extended payment windows, high retention percentages, payment only on client testing acceptance.
   • Mitigation: Build cashflow into pricing, request staged payments, propose lower retentions or bank guarantees, and ensure supply chain financing options.

5. 5. Delivery schedule and time risk

   Risk: Tight timelines increase the chance of delays, penalties, and overtime costs.

   Type: Commercial

   • Signs: Unrealistic milestones, no allowance for approvals, single-point critical path items.
   • Mitigation: Map critical path, add realistic lead times, include acceleration costs, and insist on schedule buffers or liquidated damages caps.

6. 6. Subcontractor and supply chain risk

   Risk: Reliance on single suppliers, weak subcontractor terms, or suppliers with financial instability can derail delivery.

   Type: Commercial & Legal

   • Signs: Lack of backup suppliers, informal supplier arrangements, or reliance on unvetted partners.
   • Mitigation: Pre-qualify vendors, include subcontractor flow-down clauses, diversify suppliers, and set performance bonds or warranties.

7. 7. Compliance, regulatory and licensing risk

   Risk: Failing to meet legal, environmental, safety, or industry-specific regulations can result in fines or contract termination.

   Type: Legal

   • Signs: Regulatory references in tender documents, licensing requirements not confirmed, or unclear jurisdictional obligations.
   • Mitigation: Confirm regulatory obligations, include compliance costs in the bid, and obtain necessary licenses before contract start.

8. 8. Intellectual property (IP) and confidentiality

   Risk: Tender terms may require assignment or broad licenses over your IP, or insufficient protection of sensitive information.

   Type: Legal

   • Signs: Broad IP assignment clauses, lack of confidentiality safeguards, or demands for open-source contributions.
   • Mitigation: Limit IP license scope, clarify ownership of background and foreground IP, and secure robust confidentiality agreements.

9. 9. Insurance, indemnity and liability gaps

   Risk: Required insurance levels may be excessive, or indemnity clauses could expose you to third-party claims beyond control.

   Type: Legal & Commercial

   • Signs: High minimum insurance limits, broad indemnity obligations, or joint-venture ambiguities.
   • Mitigation: Check current policies, price additional insurance if needed, negotiate indemnity caps and exclusions for indirect damages.

10. 10. Change control and variations

    Risk: No clear process for changes leads to unpaid variations or disputes over scope creep.

    Type: Commercial & Legal

    • Signs: Tender lacks a defined variation/change mechanism or permits unilateral client changes without pricing rules.
    • Mitigation: Define change control steps, include pricing rules for variations, and require written change orders before work starts.

11. 11. Liability caps and unlimited liability exposure

    Risk: Unlimited liability or inadequate caps can threaten solvency in a major claim.

    Type: Legal

    • Signs: No liability cap, broad consequential damage clauses, or client insisting on absolute guarantees.
    • Mitigation: Negotiate reasonable caps tied to contract value, exclude indirect and consequential losses, and align insurance with cap levels.

12. 12. Termination rights and exit costs

    Risk: One-sided termination clauses or high exit costs create uncertainty and potential losses if the contract ends early.

    Type: Legal & Commercial

    • Signs: Client unilateral termination for convenience with little compensation, or complex handover obligations without funding.
    • Mitigation: Seek fair termination compensation, clarify handover responsibilities, and estimate potential exit costs when pricing.

13. 13. Procurement rules and anti-competitive issues

    Risk: Non-compliance with procurement rules (e.g., collusion, false claims, debarment risks) can invalidate bids and lead to penalties.

    Type: Legal

    • Signs: Unclear procurement process, requests for bid rigging, or pressure to share confidential competitor information.
    • Mitigation: Follow procurement rules scrupulously, document all communications, avoid undisclosed partnerships, and run compliance checks.

14. 14. Force majeure and allocation of unforeseen risk

    Risk: Inadequate force majeure clauses or unclear allocation of pandemic, strike, or supply chain disruption risks.

    Type: Legal & Commercial

    • Signs: Generic force majeure wording or no remedies for prolonged disruption.
    • Mitigation: Clarify events covered, set pragmatic notice and relief mechanisms, and bundle contingency plans into the bid.

Risk assessment checklist (quick scoring)

Use a simple scoring approach: likelihood (1–5) x impact (1–5) = risk score. Items scoring above a chosen threshold (e.g., 12+) require mitigation or a 'no-bid' decision.

• Confirm scope clarity and list assumptions.
• Validate critical pricing inputs and add contingencies.
• Identify contract clauses that require legal negotiation.
• Check payment terms against cashflow model.
• Pre-qualify subcontractors and map supply-chain risks.
• Align insurance and indemnity limits with potential exposure.
• Ensure regulatory, licensing and compliance obligations are met.

Practical tips for safe bidding

• Start commercial and legal reviews early—late changes damage options.
• Use standard playbooks and clause banks for faster negotiation.
• Document every assumption in the bid and make exclusions explicit.
• Hold a formal bid/no-bid meeting; include finance, commercial, delivery, and legal stakeholders.
• If awarded, insist on contract sign-off before mobilising resources.

Conclusion

Identifying these 14 tender risks before submitting a bid helps you price accurately, reduce surprises after award, and protect your business from avoidable legal exposure. A structured assessment, combined with early legal input and clear commercial assumptions, transforms risky tenders into manageable, profitable contracts.

If you're preparing a high-value tender, use the checklist above and involve legal counsel early—small clarifications in the bid stage can save substantial costs later.