Public Contracts Regulations 2015 - Regulation 69

Regulation 69 - Abnormally low tenders

Regulation 69 establishes the obligation for contracting authorities to investigate abnormally low tenders and transposes Article 69 of Directive 2014/24/EU into England, Wales and Northern Ireland. I have always been fascinated with abnormally low tenders and would love to know how often they are detected in procurement and if abnormally low tenders are usually excluded or not. Albert's entry is here.

According to paragraph 1 (and 3) contracting authorities are under the obligation of requiring explanations from tenderers in case they (the authority) thinks the tender is abnormally low. Although the legal command appears to be mandatory ("shall"), there is no indication of the need to establish previously a "trigger point" that would force contracting authorities to act. In consequence, there is only an obligation to investigate if in a preliminary moment the contracting authority already thinks that something is not right with the price. This is a circular logic and in my view defies the purpose of the legal command. It would have been preferable to force contracting authorities to define in advance of a contract what will be considered to be an abnormally low tender, even though as with the price such value would not have to be disclosed to tenderers. Sadly, that is not the case.

Furthermore, even if the contracting authority finds the tender to be abnormally low, there is no obligation to exclude it in most cases. According to paragraph 4 and 6, the contracting authority may exclude the tender if it is abnormally low. There is no obligation to proceed with an actual exclusion even if the tender is abnormally low. It makes no sense to have a mandatory investigation of abnormally low tenders and then discretion to exclude tenders or not if they are so found to be abnormally low. I suspect the incentives at this stage are look aside to those problems and will lead to two conclusions. One, during the abnormally low tender assessment, the contracting authority is nudged to accept the explanations given by the tenderer. Two, even if the tender is indeed abnormally low, as there is no obligation of exclusion, the temptation of saving money at face value is just too high.

The only situation which triggers an automatic exclusion for the abnormally low tender is if it violates any of the obligations of Regulation 56(2): "Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with applicable obligations in the fields of environmental, social and labour law established by EU law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X to the Public Contracts Directive as amended from time to time." In other words, if the tender is abnormally low because it does not comply say with EU minimum environmental standards, then there is no discretion for the contracting authority and said tender must be excluded.

Paragraph 2 provides a list of examples of explanations that may be required by the contracting authority. This list is simply indicative and does not limit the power of the contracting authority of requiring further elements of proof.

If a tender is abnormally low due to illegal State aid then the contracting authority may exclude it (paragraph 6) and the Commission needs to be informed if an exclusion occurs. Surely the Commission should be informed that illegal State aid was detected and not if the contracting authority decided to actually exclude a supplier on those grounds. However, that appears not to be the case.