Abnormally low tender

An Abnormally low tender is a tender whose price is considered significantly lower than most of or the average of all tenders in the same procurement procedure.

Legislation
Abnormally low tenders are referred to in the EU procurement directives.

Article 30 of the Works Directive provides:


 * "(4) If, for a given contract, tenders appear to be abnormally low in relation to the works, the contracting authority shall, before it may reject those tenders, request, in writing, details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received."

The direction applies whether the contract is awarded on the basis of "lowest price" or "the economically most advantageous tender".

Definition of Abnormally Low
An abnormally law tender is not defined in EU legislation, nor has the Court of Justice, when the opportunities arose, given a definitive ruling on how to calculate such a tender.

In the original 1971 Works Directive the power to reject a tender applied to those tenders that were "clearly abnormally low", however the test was relaxed to its present standard in 1989.

National legislation that statutorily defines an abnormally low tender by reference to a mathematical formula is not prohibited. Indeed, according to the European Commission, such laws exist in Belgium, Italy, Portugal, Spain and Greece. In these states, a certain percentage less than the average of all tenders submitted or discounts granted is applied to identify an abnormally low tender. However the Court of Justice has ruled that tenders may not automatically be excluded on the grounds of excessive deviation from the average of all other tenders submitted. (See Judgement of 18 June 1991 in case C-295/89 "Alfonso"; judgement of 26 October 1995 in case C-143/94 "Furlanis"; judgement of 16 October 1997 in case C-304/96 "Genova")

Verification of abnormally low tenders
When an abnormally low tender is identified, the contracting authority shall request, in writing, details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received.

Thereafter, the authority may take into consideration explanations which are justified on objective grounds including the economy of the construction method, or the technical solution chosen, or the exceptionally favourable conditions available to the tenderer for the execution of the work, or the originality of the work proposed by the tenderer.

Reporting to European Commission
A contracting authority must communicate to the Commission the rejection of tenders which it considers to be too low. This does not apply to rejections in the case of a contract to be awarded based on consideration of "the economically most advantageous tender"