In this post you will discover what exactly an abnormally low bid (baja temeraria) is, something that can greatly affect a tender and in which the Ley de Contratos de las Administraciones Públicas comes into play.
In tender bids, the economic aspect is a decisive element.
That is why, in many public contracts, it is the economic cost that determines the awards, especially in the case of public works, since they usually involve high costs.
For this reason, it is essential to submit a proposal with the maximum reduction in the amount of the economic bid.
If this reduction is significant, it can become what is known as an “abnormally low bid”.
That is to say, the bid presented reflects abnormal or disproportionate values.
So that you can learn more about the subject, in the following post we explain the details of this practice.
Definition of an abnormally low bid
So we start with the definition of what an abnormally low bid is: this is the name given to bids whose probability of materialising is remote or doubtful when it comes to properly fulfilling the object of the contract.
In this case, since there is a presumption of abnormality or disproportion, it must be justified by means of a technical-economic report.
The administrative body then decides whether the proposal is accepted or rejected.
The procedure for its exclusion from the file must be processed in compliance with Article 149 of Ley 9/2007, of 8 November, de Contratos del Sector Público (LCSP).
When does an abnormally low bid exist?
As we already mentioned at the beginning of the post, in a Public Sector tender there is the possibility that one of the bids comes out with a value that can be classified as abnormal in relation to the others.
To know for certain when this scenario occurs, let us review Article 85 of the Reglamento General de la LCAP (Ley de Contratos de las Administraciones Públicas).
The article explains various situations in which, depending on the number of economic bids submitted, the benchmark by which a company falls into an abnormally low bid changes.
- In the case of there being only two bidders, if one of the companies submits an economic bid more than 20 percentage points below the other, we would be talking about an abnormally low bid.
- When 4 or more bidders take part, we would be in an abnormally low bid when one of the bids is 10 percentage points lower than the arithmetic mean of the bids; it is true that, if there are excessively high bids at the top end, they can also be discarded in order to obtain the calculation of the arithmetic mean.
The aim of this criterion is to prevent a company, for whatever reason, from being awarded a project at a price so low that it cannot then fulfil the contract and harms the Administration.
Justifying an abnormally low bid. Deadlines and steps
The abnormally low value of a bid in a tender is grounds for the awarding body to disqualify the bidder if it does not have a supporting technical-economic report.
In this case, it has to explain that, despite the saving, it is in a position to perform the contract in accordance with the terms of the Pliego de Cláusulas Administrativas Particulares and the Pliego de Prescripciones Técnicas.
To produce the report, the deadline is 3 to 6 working days.
In this regard, the Administration issues the request for the bid to be justified.
It must therefore be demonstrated that compliance is possible in accordance with the labour and technical requirements of the service to be provided, as well as with quality.
The aim is to convince them that, even though the offer is lower than that of the competition, performance will be achieved with those amounts and conditions.
Therefore, the administrative body has to confirm whether that report is sound.
How to justify an abnormally low bid
To defend the price reduction, several aspects must be set out:
➡️ Argument covering all the solutions and conditions of the bidding company that make it possible to propose those prices.
➡️ Savings allowed by the contract performance process chosen by the company.
➡️ Study of the procedure for providing the service.
➡️ Explanation of the bid indicating the amount of each unit or item needed to provide the service.
➡️ Calculation of the average indirect costs or savings.
➡️ Quotation or commitment from suppliers of supplies or collaborators that back up the price.
➡️ Analysis of the units and items that form part of the project.
➡️ Availability of operating centres in areas close to the place where the service is provided.
➡️ General expenses, including health and safety. These amounts can be evidenced with an acceptable percentage, since financial expenses have fewer tax burdens than usual.
➡️ Particular conditions of the company with respect to the performance of the work. For example, knowledge of the environment where the services will be provided.
➡️ Data backing up the company’s solvency, such as insurance and quality systems.
➡️ Originality of the solutions proposed, including the training and experience of its professionals.
➡️ Compliance with the labour laws in force, salary conditions, working hours, and the health and safety of staff.
➡️ In addition, justify whether there are State aids or subsidies that make a better proposal possible.
With this scheme, what is established in the Law is complied with, and the contracting body is given the explanation of why the prices are viable.
Steps taken by the Public Administration in response to a defence of the price reduction
For its part, the procurement committee or the contracting body evaluate all the information and documentation submitted by the bidder.
If the offer is rejected, it is because it is determined to be involved in assumptions or practices that are unviable from a technical, economic or legal perspective.
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