On 25 May 2021, the Regulation of Tenderers Bill 2021 (No. 81 of 2021) was published.
If enacted, the Bill will introduce a new mechanism allowing for the identification and disqualification of abnormally low tenders for construction works contracts with a value equal to or more than the threshold value for public works contracts in the EU (Award of Public Authority Contracts) Regulations 2016 (the “2016 Regulations”). The Bill aims to address a shortcoming in the 2016 Regulations in it currently doesn’t specify when a tender will be considered to be ‘abnormally low’. The Bill will also make it easier to exclude tenderers from participation in a public procurement process on grounds of poor performance of a prior public contract.
Identification and disqualification of abnormally low tenders
The Bill provides that when four or more tender bids are submitted for a public works contract, a tender that’s more than 15% below the adjusted average shall be considered an abnormally low tender. If fewer than four tender bids are submitted or if a tender is less than 15% below the adjusted average, a tender may be considered to be abnormally low based on the discretion of the contracting authority or on the basis of professional advice.
In the event of an abnormally low tender being submitted, the contracting authority must seek information on, and explanation of, the following:
- the economics of the construction method/detailed cost breakdown;
- exceptionally favourable conditions available;
- technical solutions or exceptionally favourable conditions available and
- compliance with contractual and legislative requirements.
The Bill provides that if the contracting authority does not receive a reasonable explanation of how the tenderer can deliver the works required for the tender price submitted, the tender price should be rejected, and the tenderer disqualified from the procurement process. The contracting authority should record the reasons for rejection and submit them to the Office of Government Procurement (“OGP”).
Conversely, if the contracting authority accepts the explanation given by the tenderer, it must notify the Chief Procurement Officer of the OGP if it intends to award a contract to an abnormally low tender. In addition, it must recognise the potential requirement for enhanced contract management resources to be put in place for the duration of the contract and provide regular reports to the Chief Procurement Officer of the OGP for the duration of the contract.
Exclusion from participation in a procurement process on grounds of prior poor performance
The Bill also provides that contracting authorities may exclude an economic operator from participation in a procurement procedure for a public works contract or works contract where “the economic operator has shown significant or persistent deficiencies or failures in the performance of a prior public contract.”
This will make it substantially easier for contracting authorities to exclude tenderers on grounds of prior poor performance than under the current legal framework in Regulation 57(8)(g) of the 2016 Regulations. Regulation 57(8)(g) allows for exclusion “where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract, which led to early termination of that prior contract, damages or other comparable sanctions”. Furthermore, under the current legal framework, if three or more years have elapsed since the relevant prior contract, the contracting authority cannot rely on Regulation 57(8)(g) to exclude the tenderer. The tenderer also has a right to provide evidence to the effect that measures it took are sufficient to demonstrate its reliability despite the existence of the ground for exclusion in Regulation 57(8)(g).
Abnormally low tenders have been a hot topic in the Irish media in recent times with multiple reports alleging that companies have been submitting low-priced tenders to win construction contracts and subsequently seeking to increase the budget (commonly known as ‘low-balling’).
The Bill follows another Bill, the Quality in Public Procurement (Contract Preparation and Award Criteria) Bill 2021 (Bill 32 of 2021), published on 8 March 2021, which also targeted ‘low-balling’ in public procurement, albeit by way of:
- seeking to make evaluations based on a ‘price-quality ratio’ (i.e. where the contract is evaluated based on both price and quality criteria) the default approach, thereby rendering ‘price-only’ evaluations the exception; and
- with respect to major national infrastructure, setting a minimum target of 50% quality criteria when awarding public contracts for projects above the EU works threshold of €5,350,000.