The Tender Settlement Meeting: How the Final Number Actually Gets Set

The estimate says $2.84 million. Someone says it feels high. Someone else says the client has used us before and we should sharpen it. A number gets rounded, a percentage gets removed, and the submission goes in at $2.71 million. Nobody writes down what was taken out or why. Four months later the job is running and the site manager is asking which of the things he can see on the drawings were actually priced.

That conversation is a tender settlement meeting, whether or not anyone calls it one. Every contractor holds it. The difference between businesses is whether it is a structured review with a record, or a conversation that leaves no trace and cannot be learned from.

This guide sets out how to run it: what has to be on the table, what to test, how risk and qualifications get priced rather than assumed away, who is allowed to move the margin, and what must be written down before the submission goes. It follows on from the go/no-go decision and the estimate — see our guides to the go/no-go decision and preparing civil works cost estimates.

The hour that decides the year

• It is the only point where the whole bid is visible at once. The estimator has seen the rates, the contracts person has seen the conditions, the site people have seen the ground. Settlement is where those three views meet, and it is often the first and last time they do.
• The adjustments made here are larger than any efficiency you will find on site. A few per cent moved at settlement is worth more than months of production improvement, in both directions.
• Undocumented reductions become site losses. When a number is cut without recording what was cut, the site team delivers a scope that was never priced, and the variance is discovered as a monthly cost report surprise. Our guide to job costing and cost control covers what that looks like from the other end.
• It is the last defence against a bid you should not have made. Go/no-go is a judgement made on limited information; settlement is made on complete information, and it is legitimate to no-bid at settlement.
• It is where the qualifications are set. What you exclude, assume and qualify is decided here or it is decided by default, and default means you carry everything.

What settlement is, and what it is not

Activity	Question it answers	When
Go / no-go	Should we spend the effort bidding this?	On release, before the estimate
Estimating	What will it cost us to do the work?	Through the tender period
Settlement	What price will we submit, and on what basis?	Late, before submission, once
Post-award handover	What did we actually price, and who delivers it?	After award, before mobilisation

• Settlement is not estimating. If the meeting turns into re-rating items, the estimate was not finished and the meeting should be rescheduled.
• Settlement is not a sales meeting. “We need this job” is a real input to the margin decision, but it is an input, not an argument that changes what the work costs.
• Settlement is not a compliance check, though it should confirm one was done. The returnable schedules, forms and submission mechanics are a separate discipline — see our guide to common tender mistakes.
• Settlement is a decision meeting with a decision-maker in the room. If the person who can set the margin is not there, it is a review, and a second meeting will be needed.

When to hold it

• Late enough that the estimate is complete and the significant subcontract and supply prices are in.
• Early enough to act on what it finds. A settlement meeting the afternoon before close can identify a scope gap and do nothing about it. Two working days before submission is the practical minimum on a job of any size.
• After the addenda have closed. An addendum issued after settlement forces a re-run, and late addenda are common — see our guide to tender clarifications and the RFI window.
• Before the submission is assembled, not after, because the price flows into schedules, rates, cash flow forecasts and sometimes the written response.
• Put it in the tender programme on the day the tender is released. Settlement is skipped because it was never scheduled, not because anyone decided to skip it.

The settlement pack

A meeting without a pack becomes a discussion of opinions. The pack does not have to be elaborate — on a small job it is three pages — but the categories should be constant, so that the same questions get asked every time.

• The estimate summary — cost by major element, with preliminaries and overheads shown separately from direct work.
• The basis of estimate — the assumptions the price rests on: production rates, crew sizes, plant availability, working hours, weather allowance, source of materials.
• The scope statement — what is in, what is out, and what is assumed. This is the document the site team will need most.
• The subcontract and supply comparison for each significant package, showing what each price includes.
• The risk register with prices against items, not a list of worries. See our guide to the tender risk register and risk allocation.
• The contract review summary — the amendments to the standard form that move money, from the person who read the conditions. Our guide to contract forms beyond construct-only covers what to look for.
• The programme, with the critical path and the assumed start date, plus any liquidated damages exposure. See writing a construction program for tenders.
• A cash flow forecast for the job.
• The competitive picture — who else is likely bidding and what the evaluation weighting is. See how government tenders are scored.
• The current workload and resource position across the business.

Reviewing the estimate

The point is not to re-check arithmetic. It is to test the assumptions the arithmetic sits on, because that is where the errors that matter live.

• Quantities against the drawings. Not all of them — the ones that dominate. On most civil jobs a handful of items carry most of the cost, and a measurement error in one of those is fatal while an error in the rest is noise.
• Production rates against your own history. The most common estimating error is an optimistic production rate, and the correction is your own job costing data rather than a published figure.
• Preliminaries against the programme duration. Preliminaries are time-based; if the programme grew and preliminaries did not, the estimate is wrong by the difference.
• Plant: owned, hired or subcontracted, and priced consistently with how it will actually be resourced. See plant hire agreements and plant and equipment schedules.
• Labour rates, including on-costs. Superannuation, leave, portable long service leave, payroll tax, insurance and site allowances are frequently under-loaded — see superannuation and payroll tax for civil employers and portable long service leave.
• Temporary works, access and site establishment, which are systematically underpriced because they are not in the bill.
• The weather allowance, tested against the season the job will actually run in rather than a standard figure.
• Escalation where the job runs long or the market is moving — see rise and fall and cost escalation.

Ask one question about each major assumption: what would have to be true for this to be wrong, and how would we know? It is a better use of the hour than checking rates, and it finds the errors that rate-checking cannot.

Subcontract and supplier coverage

On most civil jobs, a large share of the price is other people’s prices. The gaps between those prices are where the money is lost, and they are invisible unless someone deliberately looks for them.

• Compare like for like, not bottom line to bottom line. Two prices for the same package routinely include different things, and the cheaper one is often cheaper because it excludes more.
• List the exclusions from every quote in one place. The exclusions, read together, are the scope gap.
• Check the gaps between packages. Excavation stops at the structure, the structure starts at the slab, and the item between them is in nobody’s price. This is the single most common source of an unpriced scope.
• Check coverage of the whole scope. Every bill item and every drawing element should be attributable to a package or to your own resources.
• Check validity periods. A quote that expires before the tender is likely to be awarded is not a price, and a supplier under no obligation will reprice.
• Check that the terms flow down. A subcontractor who has not accepted the head contract’s programme, liquidated damages, insurance or security obligations has priced a different job. See subcontracting and subcontract packages.
• Treat a single price for a significant package as a risk item, and price it as one.
• Check the supply market. Long lead items, constrained materials and regional supply are programme risks that belong in the price — see materials supply agreements.
• Do not carry a subcontract price you would not sign. If the quote is too good to be true, the risk you are carrying is that they cannot perform, and that risk lands on you at the worst possible moment. Our guide to insolvency in the contracting chain covers what that costs.

Pricing the risk register, not the feeling

• A risk register with no money against it does nothing. The purpose of the register at settlement is to convert identified risks into either a priced allowance, a qualification, or an accepted exposure — and to say which.
• Three outcomes only, per item. Priced (money in the estimate), transferred (a qualification, an exclusion, or a subcontract term), or accepted (deliberately carried, with the reason recorded). An item with none of the three has been ignored.
• Ground risk is the big one on civil work, and the contract’s latent conditions regime determines whether it is yours — see latent conditions in civil contracts.
• Approvals and third parties — authority approvals, service relocations, network connections, land access — sit outside your control and routinely drive delay. See environmental approvals and permits and land access and notices of entry.
• Liquidated damages exposure should be quantified against the programme float, not noted as a concern.
• Do not double count. A risk priced in the rates and again in a contingency inflates the bid, and the estimator and the reviewer often each assume the other did not allow for it.
• Opportunities count too. Alternative methods, material sources, staging improvements and value engineering are legitimate reductions when they are real and identified — our guide to alternative and non-conforming tenders covers how to offer them without going non-conforming.

The discipline that matters is that reductions must have a reason attached. “Remove $80,000 of contingency” is a decision; “remove $80,000” is a hope.

Qualifications, exclusions and assumptions

What you say about the basis of your price is part of the price. Settlement is where that gets decided deliberately rather than by whoever writes the covering letter.

• Know what the tender permits. Some tenders accept qualifications; some deem a qualified tender non-conforming; some require departures on a specified schedule. Getting this wrong can void an otherwise winning bid — see conforming and non-conforming tenders.
• Distinguish three things. An exclusion says work is not in the price. An assumption says the price depends on a stated fact. A departure says you do not accept a contract term. They have different consequences and should not be mixed in one list.
• Qualify sparingly and specifically. A long list of boilerplate exclusions reads as risk aversion and is often scored down; three precise, material qualifications read as competence.
• Every qualification should be traceable to a risk item. If it does not correspond to something on the register, ask why it is there.
• An unpriced risk with no qualification is an accepted risk. Say so out loud in the meeting, so it is a decision.
• Where a term is unacceptable, price it or depart from it — do not ignore it. Unlimited liability, uncapped liquidated damages, onerous indemnities and unusual insurance obligations all have a price. See insurance requirements in government civil tenders.
• Assumptions belong in the handover pack as well as the submission, because the site team has to know what the price assumed. See contract award and mobilisation.

The cash flow and capacity check

• A profitable job you cannot fund is a bad job. Front-loaded costs, monthly claims, payment terms, retention and a slow final claim can absorb more working capital than the margin returns. See cash flow in civil construction contracts.
• Check the peak cash requirement, not the total, and check it against your facility, not your intentions.
• Check security obligations. Bank guarantees, retention and any bonding tie up capacity that may be needed for the next bid — see demonstrating financial capacity.
• Check resource availability against the assumed start date and against the other jobs you have bid but not won. Winning three of them is the risk nobody plans for.
• Check key personnel. If the price assumes a particular supervisor and that person is committed elsewhere, the price is wrong — see key personnel CVs and organisation charts.
• Check the concentration. A job that would be a large share of your turnover, or with a client you already have significant exposure to, is a different proposition from the same job at a smaller scale. See scaling a civil contracting business.

The margin decision, and who makes it

• Separate cost from margin, visibly. Once they are blended, nobody can tell whether a reduction is removing profit or removing an allowance for work that still has to be done.
• Name who is authorised to set it. In most civil SMEs that is the owner. Writing it down matters because it prevents the margin being eroded in stages by people who each think they are moving it slightly.
• Reasons for a lower margin that are legitimate: genuine strategic value in the client relationship, a period of low workload where recovery of overhead matters more than profit, work that fits the existing fleet and crew, a job that builds evidence for a scheme or panel you want.
• Reasons that are not: a belief the number “feels high”, pressure from the person who found the opportunity, and the assumption that variations will make it up. Our guide to pricing government tenders deals with the last one directly.
• Test the downside. At the submitted price, what is the outcome if production is meaningfully below assumption, or if the job runs a month longer? If a modest adverse variance produces a loss, the price is too thin regardless of what the competition is doing.
• Where the evaluation is not price-only, buying the job on price may not even work. Check the weighting before discounting — see how government tenders are scored.
• No-bid remains available. Withdrawing at settlement costs the tender effort; winning a job you priced badly costs considerably more. Our guide to managing a loss-making job describes the alternative.

Rate loading and the line you should not cross

• Where you place money across a schedule of rates affects cash flow, and thinking about it deliberately is ordinary commercial practice.
• Front-end loading — weighting early items — improves cash position and is widely understood by clients, who often check for it.
• Unbalanced bidding against quantities you expect to change is a different thing. Loading a rate because you believe the scheduled quantity will increase is a gamble on the client’s measurement, and where the quantities move the other way it is a loss.
• Some contracts explicitly permit rate adjustment where quantities vary beyond a threshold, which removes much of the benefit.
• Evaluators reject obviously distorted schedules, and a rate that is visibly disconnected from cost invites a clarification you cannot answer well.
• The line is misrepresentation. A rate structure that reflects a genuine commercial position is legitimate; a schedule constructed to mislead the evaluation is not, and the consequences run beyond the tender.
• Whatever you do, record the reasoning, because the person administering the contract will need to understand the rate structure when quantities move. See schedule of rates versus lump sum and variations in construction contracts.

The record you must keep

This is the part that is skipped, and it is the part that compounds. A one-page record per tender, kept consistently, becomes the most valuable commercial dataset a civil SME owns.

• The submitted price, and how it was built — cost, allowances, margin, each as a number.
• Every adjustment made at settlement, with its reason. This is the single most important line.
• The assumptions the price depends on, in language the site team will understand.
• What was excluded, assumed and qualified, and where it appears in the submission.
• The risks accepted deliberately, so that if one materialises it is a known exposure rather than a surprise.
• Who attended and who made the margin decision.
• Store it where it will be found — with the tender, under the same reference, in the same place every time. Our guide to document control and version management covers the filing discipline, and building a tender content library covers reusing what you learn.
• Hand it over on award. The settlement record is the core of the handover pack, and delivering a job to a team that has never seen the assumptions behind its price is how avoidable losses begin.

After submission

• Record the outcome against the record. Won, lost, position, and the spread if it is published.
• Request a debrief every time, win or lose. It is the only external data you will get about whether your settlement decisions are calibrated — see how to request a tender debrief.
• Watch the pattern, not the tender. Consistently second by a small margin, consistently last, and consistently winning by a wide margin are three different problems, and only the pattern reveals which one you have.
• Compare the settlement record against the final job cost once the job is complete. That comparison is the feedback loop that improves estimating, and almost nobody closes it.
• Feed the result back into go/no-go. Where you consistently lose a category of work, that is a go/no-go input rather than a pricing problem.

Doing this with three people

Most Australian civil SMEs do not have an estimating department, a contracts manager and a commercial manager. The process still works, but it has to be scaled honestly rather than aspirationally.

• Two people is enough, and one is not. The value comes from someone who did not build the estimate asking questions about it. A supervisor, a partner or a trusted external adviser will do.
• Half an hour with a checklist beats two hours without one. The structure is doing the work, not the duration.
• Use the same one-page template every time. Consistency is what makes the records comparable later.
• Do it standing up if you have to, but do it before the submission is assembled, not while it uploads.
• Schedule it when the tender is registered, and treat it as a fixed commitment.
• Bring in outside review on the big ones. On a tender that would materially change the business, an independent commercial review is cheap relative to the exposure — see when to hire a tender writer versus DIY.

Checklist

• Is settlement scheduled in the tender programme, at least two working days before close?
• Have all addenda been issued, received and incorporated?
• Is the estimate complete, with cost and margin shown separately?
• Are the basis of estimate and the scope statement written down?
• Have the dominant quantities been checked against the drawings?
• Are production rates consistent with your own recorded job costing history?
• Do preliminaries match the current programme duration?
• Are labour on-costs fully loaded?
• Has every bill item and drawing element been attributed to a package or to your own resources?
• Have subcontract exclusions been listed together and the gaps between packages checked?
• Are quote validity periods long enough, and have head contract terms been flowed down?
• Does every risk register item have an outcome: priced, transferred or accepted?
• Is any risk double counted in both a rate and a contingency?
• Does the tender permit qualifications, and are yours on the required schedule?
• Is each qualification traceable to a risk item?
• Has the peak cash requirement been checked against the available facility?
• Are the assumed key personnel and plant actually available at the assumed start date?
• Has the downside been tested — what happens at reduced production or extended duration?
• Is the person authorised to set the margin present, and did they set it?
• Is every adjustment recorded with its reason?
• Will the settlement record be handed to the delivery team on award?

Sources and further reading

This guide is general information for Australian civil construction businesses and is not financial, accounting, legal or procurement advice. It deliberately states no margin percentages, contingency rates, production figures or benchmark values: appropriate levels depend on the work, the contract, the market and the individual business, and a figure taken from elsewhere is not a substitute for your own recorded cost history. Whether a tender may be qualified, and how departures must be presented, is set by the conditions of tendering for each individual procurement — a qualification can render a tender non-conforming. Decisions about pricing structure must not misrepresent the basis of a tender. Nothing here should be used as a substitute for advice on a specific tender or contract.

• Conditions of tendering referenced in §08 govern whether qualifications, departures and alternative tenders are permitted and how they must be presented; they are set individually for each procurement and vary between jurisdictions, agencies and councils. Sourced in full in our guide to conforming, non-conforming and alternative tenders.
• Value for money and evaluation requirements referenced in §02 and §10 arise under the Commonwealth, state and territory procurement frameworks and each council’s procurement policy. Weightings are published in the individual tender documents.
• Employment on-costs referenced in §05 — superannuation, leave entitlements, portable long service leave levies, payroll tax and workers compensation premiums — are set under Commonwealth and state and territory legislation and differ by jurisdiction. Sourced in full in our related guides.
• Standard form contract provisions referenced in §04, §07 and §08 — including latent conditions, liquidated damages, security, insurance and indemnity clauses — are as amended by the particular contract; amendments to standard forms are the usual location of transferred risk.
• Misleading or deceptive conduct and anti-competitive conduct in tendering referenced in §11 are regulated under Australian competition and consumer law. Rate structures that misrepresent the basis of a tender carry consequences beyond the procurement.
• Related TenderBuilt guides carrying the primary-source detail referenced above: the go/no-go decision, pricing government tenders, preparing civil works cost estimates, the tender risk register, conforming and alternative tenders, schedule of rates versus lump sum, cash flow in civil construction contracts, demonstrating financial capacity, contract award and mobilisation and how to request a tender debrief.