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Procurement process: dealing with abnormally low tenders

Procurement process: dealing with abnormally low tenders

Tuesday 14th November 2017

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The recent case of Agriconsulting Europe v European Commission concerned an appeal against the rejection by a contracting authority of a tender which it considered to be ‘abnormally low’. What protection is there for a bidder submitting a genuine bid which is then rejected for being abnormally low? Also, the counter argument, what protection is there for a tenderer who considers that a procuring authority has awarded a contract to a supplier who has submitted an abnormally low tender?

In this case, Agriconsulting had submitted a bid in response to a contract notice published by the European Commission. Agriconsulting was notified that its bid had been unsuccessful because it had failed to reach the minimum score and because its tender was abnormally low in relation to the price offered for the performance of additional tasks. In the facts of the case, it was stated that the Commission’s evaluation committee had identified the tender as being abnormally low by comparing the amount of that tender to the total maximum budget, as set out by the Commission. There were two bidders left at the price evaluation stage and whilst one bidder was slightly lower than the budget set by the Commission, Agriconsulting’s price was approximately 40% lower. The Commission requested information from Agriconsulting which responded with explanations and a breakdown of the proposed prices for the contract. The Commission found there to be an overlap between tasks which it considered did not comply with the tender specification and concluded that the tender submission did not meet the minimum score required by the tender specification and that the bid was abnormally low. The Commission rejected the tender.

An appeal to the General Court was dismissed in its entirety and Agriconsulting subsequently appealed to the ECJ. The ECJ also dismissed the appeal, noting that nothing prevented the contracting authority from comparing tenders with the estimated budget in the tender specifications and from identifying one of them as being abnormally low where the amount of that tender was considerably lower than the estimated budget. The ECJ held that it was for the contracting authority to determine the method used to identify abnormally low tenders provided that such method was objective and non-discriminatory.

Under the Public Contracts Regulations 2015 when a contracting authority identifies a tender that it considers to be abnormally low, it is obliged to require the tenderer to explain the price or costs proposed in the tender. The contracting authority is required to assess the information provided and may only reject the tender where the evidence supplied “does not satisfactorily account for the low level of price or costs proposed”. However, there is no definition of what constitutes an abnormally low tender. Some factors which may indicate an abnormally low tender include:

• A tender which contains significant variations from the other bids;
• A tender that is below what the contracting authority was expecting based on its own market knowledge and costings, but query how far below;
• A greater transfer of risk to the authority combined with a lower price.

There is therefore an opportunity for a supplier who submits a tender which is deemed to be ‘abnormally low’ to demonstrate that the price submitted is genuine and based on realistic assumptions. Equally if an unsuccessful supplier claims an ‘abnormally low’ tender has won, there is the opportunity to ensure due process has been followed and to challenge a procurement process that does not comply with all of the tender requirements.

Contracting authorities must identify and be cognisant of the risks associated with abnormally low tenders. If the tender is low and the supplier has submitted a low tender as part of a wider procurement strategy to enter into a market, this could be a valid opportunity for the contracting authority. However the danger is that if the tender is unrealistic, it could ultimately lead to higher costs and/or performance issues during the life of the contract and the risk of a procurement challenge by an unsuccessful bidder.

If you have any queries regarding the evaluation process, or public procurement law in general, please visit our procurement page or contact public procurement lawyer, Victoria Trigwell.