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Clarity on ‘abnormally low’ tender bids – Philip Lee

Lawyers at Philip Lee say that a recent Court of Appeal decision has provided more clarity on how contracting authorities should approach the issue of tenders that appear to be abnormally low. 

The case arose from a decision by Mayo County Council to exclude a company called Killaree Lighting Services Limited from the award process for a public lighting contract on the basis that its tender was abnormally low. 

The Court of Appeal upheld an earlier High Court decision that the council did not err in excluding the company. 

In a note on the firm’s website, the Philip Lee lawyers say that the Court of Appeal ruling provides further clarity for authorities on the approach they should take to investigating prices that appear to be abnormally low. 

Authorities ‘can reach own conclusions’ 

The lawyers note that the court found that authorities are not obliged to accept a tenderer’s explanation for a price that appears abnormally low. 

The judges ruled that, under the European Union (Award of Public Authority Contracts) Regulations 2016, contracting authorities were entitled to reach their own conclusions on whether a tender was genuine, reliable, and would not impair the proper performance of the contract. 

The Court of Appeal also found that contracting authorities were entitled to assess whether the constituent parts of a tender, as opposed to the total price, were abnormally low. 

“The Court of Appeal also emphasised that, when a contracting authority requires a tenderer to explain prices or rates that appear to be abnormally low, contracting authorities are not required to seek to obtain additional information verifying the tenderer’s explanations,” the lawyers note. 

“The onus is on the tenderer to provide information that explains that the prices or rates are not abnormally low, and the contracting authority is only required to consider the information provided,” they add. 

Standstill letter 

The court, however, disagreed with the High Court on one issue, finding that the council’s failure to provide a standstill letter had deprived Killaree of the chance to seek remedies before the contract was signed with the successful tenderer. 

The council’s letter to Killaree had stated that its tender had been excluded from the competition but had not clarified that the council had identified a successful tender. 

The Philip Lee lawyers note that the Court of Appeal agreed with the High Court’s decision not to grant a mandatory declaration of ineffectiveness (a declaration that the contract between the council and the successful tenderer should be set aside). 

'Important and controversial' 

The court, however, said that it was mandatory for the court to impose a civil financial penalty on the council for breaching the rules on public contracts, and sent the issue back to the High Court to determine the sum that the council should pay. 

“The Court of Appeal’s Decision adds further clarity and provides very welcome guidance in an area that has been – and will continue to be – both important and controversial,” the Philip Lee lawyers conclude.