Handling Abnormally Low Tenders Under Irish Procurement Law

A tender that appears significantly lower than other submissions or than the authority's own estimate can indicate that the tenderer has failed to price all required work, has made errors in pricing, intends to recover cost through variations or claims, is not complying with employment law or subcontractor payment requirements, or is in financial difficulty that threatens project delivery. In the worst cases, acceptance of an abnormally low tender leads to contractor insolvency mid-project, significant additional cost to the authority, and programme delays that damage public services.

EU Directive 2014/24/EU Article 69 and its Irish transposition under S.I. 284/2016 create mandatory procedural requirements before a contracting authority may reject a tender on grounds that it is abnormally low. The authority cannot simply reject a low tender without giving the tenderer an opportunity to explain the pricing. Failure to follow the correct process can expose the rejection decision to legal challenge from the tenderer concerned.

The Directive does not set a fixed mathematical threshold for 'abnormally low'. The OGP and CWMF guidance suggest that a tender more than 15% below the engineer's or architect's estimate, or more than 15% below the second-lowest tender, should be treated as potentially abnormally low and subject to clarification. Some authorities apply both tests; others use a combination with a minimum absolute value filter to avoid querying small differences on high-value contracts.

The authority should document its chosen methodology for identifying abnormally low tenders in the tender documents so that tenderers are aware in advance that very low pricing will trigger a clarification request. Where the methodology is not pre-disclosed, the authority must still follow the clarification process but should be prepared to defend its identification methodology if challenged.

When a tender is identified as potentially abnormally low, the authority must request a written explanation from the tenderer before making an award decision. The request should specify the elements of the tender that appear abnormally low and invite the tenderer to provide detailed explanations. Article 69 lists the types of explanation that may be relevant: the economics of the manufacturing process, the technical solutions chosen, particularly favourable conditions the tenderer enjoys, originality of the works or services, and compliance with environmental and social obligations.

The authority must then assess the explanation with technical and legal advice and decide whether the explanation is satisfactory. If satisfied, the tender proceeds. If not, the authority may reject the tender and must document in the procurement report why the explanation was insufficient. The rejected tenderer has the right to challenge this decision, so the documentation of the authority's reasoning is critical to defending any subsequent challenge.

For CWMF works contracts, the Employer's Representative and technical advisors should review the bill of quantities or schedule of works to identify where the tenderer has priced abnormally low — it is often not the total price but specific work packages that are underpriced. Common patterns include very low preliminaries pricing (indicating the tenderer has not costed the full overhead of operating the site), low prices on early work packages combined with higher prices on later packages (a 'front loading' or 'back loading' strategy), and zero or nominal pricing for contingency and risk items.

Where an explanation identifies that low pricing results from employment law non-compliance — underpaying workers or misclassifying employees as self-employed — the authority must reject the tender. Similarly, where the explanation reveals that the tenderer plans to use non-registered electrical or mechanical subcontractors in contravention of statutory licensing requirements, rejection is mandatory. GovIQ's evaluation module prompts evaluators to consider each of these factors when reviewing an abnormally low tender response.