TRaCRs: Contract Risk Scoring with the “Tender Risk and Contract Review system”

Welcome to TRaCRs, the “Tender Risk and Contract Review system” developed by AfiTaC.

You can use it FREE of charge directly on AfiTaC.com and obtain an output report. The information you provide by answering the 20 questions will be kept confidential.

This tool will help establish the CONTRACT RISK SCORING in a tender or a contract. In case you need support or training, AfiTaC can provide it to you. You can also find some answers to 10 usual questions on the following page: click here.

AfiTaC can customize TRaCRs© so that it better corresponds to your needs and to the specific risks you want to track. You can contact AfiTaC at info@afitac.com

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In the box below the Question & Answers you can put some relevant comments that will be integrated in the report.

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1. What is the type of Customer (Employer/Owner)?

0 State-owned company/utility financed by multilateral development bank.

1 State-owned company/utility with own financing.

2 Large private utility.

3 Large private business company/contractor.

4 IPP (independent power producer) well established in the industry.

5 IPP - Special Purpose Company with financial investors.

2. What is the type of contract?

0 Well-balanced, well-known contract standard (like World Bank).

1 Standard, proven supply contract in line with industry standard.

2 FIDIC Yellow Book/Silver Book.

3 Ad-hoc/bespoke contract balanced btw Employer and Contractor.

4 EPC Contract.

5 Ad-hoc/bespoke contract biased towards Employer.

3. Prices are (firm vs escalation) ... ?

0 Indicative / to be negotiated on case by case basis.

1 Included in a well-established and updated (e.g. annual) price list.

2 Revised with a price escalation formula based on indexes and weights defined by Contractor.

3 Revised with a price escalation formula based on indexes and weights defined by the Customer.

4 Fixed and firm with adjustment only for major economic dislocation.

5 Fixed and firm without adjustment.

4. Payment terms are (Terms of Payment, Payment Security) ... ?

0 Excellent (exposure neutral) and covered by payment guarantee (confirmed L/C, special commitment from World Bank etc).

1 Good (between exposure neutral and cash flow neutral) and covered by a payment guarantee.

2 Reasonable (cash flow neutral) and covered by a solid payment guarantee.

3 Reasonable (cash flow neutral) but with less payment guarantee.

4 Bad (very negative cash flow; major payments occur only after fulfillment of the contract) and with payment guarantee.

5 Bad (very negative cash flow; major payments occur only after fulfillment of the contract) and without payment guarantee).

5. What are the conditions for starting work on Variation Orders (scope, prior agreement)?

0 Variation Orders are only to be implemented after prior agreement between Customer and Contractor.

1 Contractor is obliged to proceed with variation orders without prior agreement but only up to a maximum of 1% of the contract amount.

2 Contractor is obliged to proceed with variation orders without prior agreement but only up to a maximum of 5% of the contract amount.

3 Contractor is obliged to proceed with variation orders without prior agreement but only up to a maximum of 15% of the contract amount.

4 Contractor is obliged to proceed with variation orders without prior agreement but subject to a fast and impartial dispute resolution mechanism.

5 Scope of Contract is not fully clear with risk of implementation of additional works without compensation. Contractor is obliged to proceed with variation orders without prior agreement nor limitations.

6. What are the rules around bank guarantees (amount, rating clause)?

0 Performance bond and warranty bond are not required.

1 Performance Bond is less than 10%, Warranty Bond is less than 5%; there is no rating clause nor revolving bank guarantees.

2 Performance Bond is 15% or less, Warranty Bond is 7.5% or less; there is no rating clause nor revolving bank guarantees.

3 Performance Bond is 20% or less, Warranty Bond is 10% or less; there is no rating clause nor revolving bank guarantees.

4 Performance Bond is higher than 20%, Warranty Bond is above 10%; there is no rating clause nor revolving bank guarantees.

5 There is a rating clause and/or bank guarantees are revolving.

7. What risks are Customer's risk (Employer's risk/data/FM/Site Risks)?

0 Contractor receives compensation for any mistake in Customer's specification, for delays by authorities, for force majeure and for site risks.

1 Contractor receives compensation for most issues beyond its control (mistakes in Customer's specification, for delays by authorities, for force majeure and for site risks).

2 Customer is bearing limited risks: war risks, archeological findings, delays by authorities, change in law. Customer bears risk for mistakes in Specifications.

3 Customer is bearing limited risks: war risks, archeological findings. Customer bears risk for mistakes in Specifications.

4 Customer is bearing very limited risks: war risks, archeological findings. Customer doesn't bear risk for mistakes in Specifications except for very limited reliance data.

5 Contractor bears all risk including for Customer's data, site risks etc.

8. Compensation received for (Claims/Extension of Time etc)

0 Full price relief (cost + overhead & margin) for all disruptive events not under the control of the Contractor.

1 Full price relief (cost + overhead & margin) for all identified, but sufficient, events not under the control of the Contractor.

2 Full price relief (cost + overhead & margin) for limited events not under the control of the Contractor.

3 Cost relief only for broad disruptive events not under the control of the Contractor.

4 Cost relief only for limited disruptive events not under the control of the Contractor.

5 No cost relief for any disruptive events not under the control of the Contractor.

9. Subcontractor/Supplier selection freedom

0 Worldwide sourcing allowed with no or minimal interference from Customer.

1 Worldwide sourcing allowed with few excluded origins; Customer approval only required for major subcontractors/suppliers (representing >10% of contract amount).

2 Worldwide sourcing allowed with few excluded origins; Customer approval required for subcontractors/suppliers representing >1% of contract amount.

3 Local content obligation or mandatory suppliers/subcontractors < 15% of contract amount.

4 Local content obligation or mandatory suppliers/subcontractors > 15% of contract amount.

5 All subcontractors and suppliers need prior Customer approval.

10. Currency risk

0 Price is in Contractor's own currency and suppliers/subcontractors from own currency.

1 Price is in Contractor's own currency + suppliers/subcontractors from various currencies but with alternatives in different currencies. Bid validity < 3 months.

2 Price is in Contractor's own currency + suppliers/subcontractors from various currencies and some bottleneck suppliers from specific currencies. Bid validity < 3 months.

3 Substantial currency risk because prices are in a foreign currency + suppliers/subcontractors from various currencies. Bid validity < 3 months.

4 Substantial currency risk because prices are in a foreign currency + suppliers/subcontractors from various currencies. Bid validity < 6 months.

5 Substantial currency risk because prices are in a foreign currency + suppliers/subcontractors from various currencies. Bid validity > 6 months.

11. Fiscal Risk (double taxation, transfer of title, payment of import taxes)

0 Supply only with no onshore portion; title transfer before importation; import taxes by Customer.

1 Contract split into on- and offshore portions and tax treaty in force; title transfer before importation; import taxes by Customer.

2 Contract split into on- and offshore portions and no tax treaty in force; title transfer before importation; import taxes by Customer.

3 Contract split into on- and offshore portions and no tax treaty in force; title transfer before importation; import taxes by Contractor.

4 Contract not split into on- and offshore portions and no tax treaty in force; no title transfer before importation; import taxes by Contractor and amount clear.

5 Contract not split into on- and offshore portions and no tax treaty in force; no title transfer before importation; import taxes by Contractor and amount not clear.

12. Taking-Over / Provisional Acceptance ("deemed taking-over")

0 All taking-over criteria under Contractor's control and easy to reach; Customer cannot use the project before taking-over; taking-over occurs also in case taking-over tests cannot take place for reasons not attributable to Contractor ("deemed" acceptance).

1 Taking-over criteria under Contractor's control but more complicated to reach; Customer cannot use the project before taking-over; taking-over occurs also in case taking-over tests cannot take place for reasons not attributable to Contractor ("deemed" acceptance).

2 Taking-over criteria under Contractor's control but more complicated to reach; Customer cannot use the project before taking-over; no taking-over but extension of time in case taking-over tests cannot take place for reasons not attributable to Contractor ("deemed" acceptance).

3 Some taking-over criteria dependent on authorities; Customer cannot use the project before taking-over; no taking-over but extension of time in case taking-over tests cannot take place for reasons not attributable to Contractor ("deemed" acceptance).

4 Some taking-over criteria dependent on authorities and other contractors; Customer cannot use the project before taking-over; no taking-over but extension of time in case taking-over tests cannot take place for reasons not attributable to Contractor ("deemed" acceptance).

5 Customer can use the project before taking-over + only extension of time in case taking-over tests cannot take place for reasons not attributable to Contractor (no "deemed" acceptance).

13. Delay and Performance LDs (Liquidated Damages)

0 Delay and Perf LD rates are low; Delay LD and Perf LD cap each 5% or less and aggregate LD cap 10%; sole and exclusive remedy.

1 Delay and Perf LD rates are reasonable; Delay LD and Perf LD cap each 10% or less and aggregate LD cap 15%; sole and exclusive remedy.

2 Delay and Perf LD rates are reasonable; Delay LD and Perf LD cap each 15% or less and aggregate LD cap 20%; sole and exclusive remedy.

3 Delay and Perf LD rates are reasonable; Delay LD and Perf LD cap each 15% or less and aggregate LD cap 25%; sole and exclusive remedy with right to terminate above cap.

4 Delay and Perf LD rates are high; Delay LD and Perf LD cap above 15% and aggregate LD cap above 25%; sole and exclusive remedy with right to terminate above cap.

5 Delay and Perf LD rates are high; Delay LD and Perf LD cap above 15% and aggregate LD cap above 25%; right to reject above cap (rejection = returning all moneys paid + reinstatement + financing costs).

14. Limit of Liability (exceptions/"carve outs")

0 Less than 50% of the contract amount; without carve-outs/exceptions.

1 Between 50% and 75% of the contract amount; carve out limited to gross negligence and wilful misconduct.

2 Between 75% and 100% of contract amount; carve-out includes ones above and third-party indemnities.

3 Between 100% and 200% of contract amount; carve-outs include ones above and insurance proceeds.

4 Above 200% but still limited; carve-outs include ones mentioned above + fines by authorities.

5 Unlimited or with broad carve-outs (beyond usual exclusions mentioned above).

15. Special, indirect and consequential damages

0 Such damages are excluded; loss of revenue, loss of contract, etc are explicitly excluded; no carve-outs/exclusions.

1 Such damages are excluded; loss of revenue, loss of contract, etc are explicitly excluded; carve-outs/exclusions limited to patent infringement.

2 Such damages are excluded; loss of revenue, loss of contract, etc are explicitly excluded; carve-outs/exclusions limited to third party indemnities and intellectual property.

3 Such damages are excluded; however, loss of revenue, loss of contract, etc are not explicitly excluded; carve-outs/exclusions limited to third party indemnities and intellectual property.

4 Exclusion of special, indirect and consequential damages but with broader carve-outs/exclusions (beyond third party claims and intellectual property).

5 No exclusion of special, indirect and consequential damages.

16. Contractor's suspension rights

0 Contractor can suspend the works in case of non-fulfilment by Customer of its responsibilities.

1 Contractor can suspend the works in case of material non-fulfilment by Customer of its responsibilities (overdue payment, insurance, access to site etc).

2 Contractor can suspend the works in case of overdue payment < 30 days.

3 Contractor can suspend the works only in case of overdue payment < 60 days.

4 Contractor can suspend the works only in case of overdue payment > 60 days.

5 Contractor cannot suspend the works under any conditions.

17. Contractor's termination rights

0 Contractor can terminate the contract in case of non-fulfillment of any Customer obligation and receives full compensation for the works completed + demobilization + cancellation fee.

1 Contractor can terminate the contract in case of non-fulfillment of a material Customer obligation and receives full compensation for the works completed + demobilization + cancellation fee.

2 Contractor can terminate the contract in case of overdue payment less than 45 days and receives full compensation for the works completed + demobisation.

3 Contractor can terminate the contract only in case of overdue payment less than 90 days and receives compensation for the works completed + demobisation.

4 Contractor can terminate the contract only in case of overdue payment less than 180 days and subject to step-in rights of the Customer's Lenders.

5 Contractor cannot terminate the contract under any conditions.

18. Customer's termination rights

0 Customer cannot terminate the Contractor.

1 Customer can terminate the Contractor only after specific events (after reaching delay LD or performance LD cap); compensation only for extra cost to complete.

2 Customer can terminate the Contractor for material breach by Contractor; compensation only for extra cost to complete.

3 Customer can terminate the Contractor for material breach by Contractor; broader compensation than extra cost to complete.

4 Customer can reject the works under the Contract for specific limited reasons (rejection = returning all moneys paid + reinstatement + financing costs).

5 Customer can reject the works under the Contract for broad reasons (rejection = returning all moneys paid + reinstatement + financing costs).

19. Contract Law and Dispute Resolution

1 Contract law is neutral, well-know and acceptable and dispute resolution in neutral court or international arbitration in neutral venue.

2 Contract law from Customer's country but dispute resolution in neutral court or international arbitration in neutral venue.

3 Contract law is neutral but dispute resolution in Customer's country.

4 Contract law from Customer's country and dispute resolution in courts of the country of Customer but well-known and acceptable.

5 Contract law from Customer's country and dispute resolution in courts of the country of Customer and not well-known or likely to be biased towards Customer's interests.

0 Contract law from Contractor's country and dispute resolution in courts of the country of Contractor.

20. Warranty (period, "evergreen")

0 Warranty period of 1 year; no extension in case of repairs.

1 Warranty period of 2 years; extension only for outage period (as in World Bank conditions).

2 Warranty period of 2 years; re-warranty for repaired or replaced equipment; cut-off date 1 year after original warranty period.

3 Warranty period of 2 years; re-warranty for repaired or replaced equipment; cut-off date 2 years after original warranty period.

4 Warranty period of more than 2 years; re-warranty for repaired or replaced equipment; cut-off date 2 years after original warranty.

5 Warranty period of 2 years or more; re-warranty for repaired or replaced equipment without cut-off (= "evergreen warranty").

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