Abnormally Low Tenders: Obligations and Risk Management for Irish Authorities

Article 69 of Directive 2014/24/EU (transposed by Regulation 69 of S.I. 284/2016) requires contracting authorities to investigate tenders that appear abnormally low in relation to the works, supplies or services. There is no prescribed formula in the directive for identifying an ALT — the determination is a judgment call based on the contracting authority's knowledge of the market, the breakdown of the tender, and comparison with other tenders received.

Common triggers include: a tender price more than 15–20% below the next lowest tender; a price below the contracting authority's own estimate; or a price that appears insufficient to cover labour costs at statutory minimum wage rates.

Where a tender appears abnormally low, the contracting authority MUST request written clarification from the tenderer before it can reject the tender. This is a legal obligation, not a discretionary step. The authority must allow adequate time for the tenderer to provide a detailed explanation — typically at least five working days.

The clarification must be genuinely assessed — not treated as a formality before a predetermined rejection. If the explanation is credible and the authority remains in doubt, it may seek further information. The assessment and the authority's conclusions must be fully documented in the evaluation record.

After receiving the explanation, the contracting authority has three options: accept the tender (where the explanation is satisfactory), reject the tender (where the price cannot be substantiated), or seek further information. Where the low price results from non-compliance with employment law, environmental law or social law applicable to the contract, the authority is required to reject the tender.

The assessment must be proportionate and reason-based. An authority that rejects a low tender without genuine assessment of the explanation risks a successful legal challenge. Conversely, an authority that accepts a low tender without proper investigation risks the tenderer's inability to perform the contract.

The ALT assessment must be fully documented: the initial identification of the potential ALT, the clarification request sent to the tenderer, the response received, the authority's assessment of that response, and the final decision. This documentation forms part of the procurement file and must be retained for audit purposes.

Practical risk management requires clear ALT assessment criteria in tender documentation, specifying the methodology the authority will use to identify potential ALTs. Setting this out in advance makes the process more defensible and reduces the risk of challenge based on inconsistent application.