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Topics: Risk Management
HOW TO BID TENDER COMPETITIVELY CONSIDERING THE RISK CONTINGENCY
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As market are becoming competitive day by day considering extra amount for risk may led to loss of bid. However occurrence of risk is a probability. Kindly suggest the best practice to deal this situation?
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Very good question Mr.Jain. You should consider that all risks doesn't happen at the some time. So, the responses should be analysed during the entire project as they could not make more sense or simply will not occur at that projects fase. And you may consider risks of oportunities that will make you Cost Plan more efficient and lead the project to reach them. This will make an equilibrium at you budget.
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If you are answering a bid the risk is on your side. You can manage your own risk (internal risks) to be competitive. On the other side, you have two risk components: the contingence and the risk that is a component of the estimation. So, you can manage them too.
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What you need to do is to quantify your risk costs and include the contingency reserve into your bid.
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This depends a lot on the industry you are in, the business culture you are in and the kind of relation you have with the customer.

Some customers in some industries see it as a big risk to the customer that the subcontractor might not manage the risks. The customers see a risk that they will end up with a subcontractor going out of business before delivering the product, as a result of the subcontractor not managing risk appropriately. If this is the situation there is an advantage of being open to the customer with how much contingency funds you see as necessary and why you see them as necessary. This might cause the customer to select a more expensive subcontractor as they believe in the risk management of that subcontractor. They might shy away from a cheaper subcontractor if that contractor lacks a credible plan for handling risks.

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