Legal Red Flags in Bid Documents: What to NOT Overlook Before You Bid

August 12, 2025
Legal Red Flags in Bid Documents: What to NOT Overlook Before You Bid

Why Legal Risk Starts Before You Even Bid

You’ve got 3 days to turn around a bid. The project looks winnable, the team is moving fast, but buried in the 500+ pages of contract terms is one clause that could ruin your margin post-award. 

Legal risk doesn’t wait for construction to start. It’s baked into the documents you review (or miss) during the pursuit phase. The most dangerous clauses are often the most familiar, hiding in plain sight across: 

  • RFPs / ITBs / RFQs 
  • Contract exhibits 
  • Technical specifications 
  • Addenda and supporting agreements 

When you overlook them, you’re risking compliance and you’re risking winning the wrong job entirely. 

8 Clauses That Can Cost You

Here’s what to flag early—and why.

1. Change Orders 

  • Where it Lives: General Conditions 
  • Why it Matters: This is the only formal mechanism to adjust price, time, or scope once work is underway.  
  • Watch For: Vague, loosely defined change order procedures; the more detail the better. 

2. Indemnity 

  • Where It Lives: General Conditions or Agreement section 
  • Why It Matters: You may be accepting liability for someone else’s actions—including subcontractors or owners. 
  • Watch For: “To the fullest extent permitted…” or no carve-outs for negligence 

3. Liquidated Damages (LDs) 

  • Where It Lives: Exhibit A or Special Terms 
  • Why It Matters: You could be penalized per day for delays—even if they’re out of your control. 
  • Watch For: High per-day fees with no cap or clear thresholds and/or no grace periods 

4. Termination for Convenience 

  • Where It Lives: Agreement or Owner Rights 
  • Why It Matters: The owner can cancel the project without cause, potentially leaving you unrecovered costs. 
  • Watch For: Lack of reimbursement language or broad cancellation rights 

5. Flowdowns 

  • Where It Lives: Subcontract Terms or Exhibits 
  • Why It Matters: You may be subject to owner-GC terms without seeing the full upstream contract. 
  • Watch For: “Contractor shall assume all obligations of the Prime Contract…” 

6. Insurance Requirements 

  • Where It Lives: Exhibit B or Risk Management Section 
  • Why It Matters: Specialty insurance types or high policy limits can drastically increase cost. 
  • Watch For: Professional liability, pollution coverage, or excess umbrella amounts 

7. Payment Terms 

  • Where It Lives: Exhibit C, Subcontract, or GC Agreement 
  • Why It Matters: Delayed cash flow or conditional payment can create financial risk. 
  • Watch For: “Pay if paid” language or extended payment timelines 

8. Dispute Resolution / Jurisdiction 

  • Where It Lives: General Conditions or Legal Terms 
  • Why It Matters: Arbitration clauses or out-of-state jurisdictions can add major time and cost if issues arise. 
  • Watch For: Mandatory arbitration or unfamiliar jurisdictions 

Quick Risk Readiness Check

Use this checklist before every bid submission. If you check “no” on two or more, pause and reassess. Your exposure may outweigh the opportunity. 

  • Can we clearly identify and accept the most material risks in this bid? 

→ If not, you may be pricing blind—or worse, taking on uninsurable liability. 

  • Have we identified where the contract terms deviate from our company standards? 

→ Deviations often hide in exhibits or general conditions. Knowing where you’re misaligned is critical to protecting your position. 

  • Are major risks accounted for in our cost assumptions and margin targets? 

→ LDs, insurance limits, or scope ambiguity can easily drain your contingency if not priced in. 

  • Have all flowdowns and referenced upstream terms been reviewed? 

→ Missing an upstream clause can create downstream chaos, especially in subcontracts. 

  • Did Legal, Risk, or a senior reviewer validate the flagged terms? 

→ Final oversight ensures you’re not committing the business to conditions no one approved. 

How to Make Risk Review Fast and Foolproof 

Bid timelines are tight. Legal and risk teams are stretched. And yet, the risks you miss now can cost you later. Document Crunch equips your pursuit team with powerful, easy-to-use tools that make risk review fast, accurate, and collaborative without needing a legal background. 

Here’s how: 

✅ CrunchAI Checklists scan contracts, specs, and exhibits to automatically flag high-risk provisions, including indemnity, flowdowns, LDs, insurance obligations, and more, in just minutes, not hours.  

✅ CrunchAI Chat lets anyone ask direct questions like “What are our termination rights?” or “Does this agreement include pay-if-paid language?” and receive accurate, easy-to-understand answers with no legalese. 

✅ Citations provide links back to original document, so you can quickly find and verify answers and information. 

These tools help you reduce risk before you commit to the job, so you can bid smarter and faster. Want a closer look? Schedule a demo here.