Low pricing can be attractive, especially in financially constrained environments. However, under the Procurement Act 2023, councils cannot simply reject a bid because it appears unusually low.
Authorities are required to investigate before taking a decision. That makes this a practical evaluation issue rather than a simple judgement call.
Why this matters now
As councils continue to seek value for money, low bids are likely to appear regularly.
The challenge is distinguishing between genuinely competitive pricing and bids that may be unsustainable, non-compliant or based on incorrect assumptions.
If handled poorly, the authority risks either accepting a bid that later fails or rejecting a supplier without proper justification.
What the Act expects
Where a tender appears abnormally low, the authority should request an explanation from the supplier.
This may include examining the bidder’s pricing assumptions, delivery model, workforce arrangements or supply chain structure.
The key point is that the authority must base its decision on evidence, not assumption.
Common mistakes
One mistake is rejecting a bid too quickly without giving the supplier an opportunity to explain.
Another is accepting a weak explanation without proper scrutiny, particularly where the contract involves critical services.
A third is failing to document the reasoning clearly, leaving the authority exposed if the decision is questioned.
What councils should do now
Authorities should ensure evaluation guidance and templates include clear steps for handling abnormally low tenders.
Evaluation panels should be briefed on when to escalate concerns and how to record the outcome of any investigation.
Procurement teams should also make sure that decisions are consistent across different procurements.
Where councils want structured support on evaluation processes and defensible decision-making, the Prestige Commercial Consulting Learning Portal provides relevant training resources.
The takeaway
Abnormally low tenders are not a problem in themselves. The issue is how councils respond.
Authorities that investigate properly and document their reasoning will be better placed to make sound decisions and defend them if challenged.