+suicide bidding
TRANSCRIPT
-
8/13/2019 +Suicide Bidding
1/2
SUICIDE BIDDING: A CAUTIONARY TALE FOR SMES
This article, written by Matthew Needham-Laing, first featured on the 8 March 2012 in the
SME Spotlight pages of the latest edition of Construction News.
The recent ConstructionLine survey of 1500 contractors highlighted the pressure SMEs face
from the reduction in tendering opportunities following the Governments Comprehensive
Spending Review last autumn. Clients with reduced construction budgets are searching for
cost savings and tendering opportunities are limited. Large companies are consequentlymuscling in on sectors of the construction market which have traditionally been dominated by
SMEs. As contractors struggle to fill their order books, it is all too tempting to tender at a loss
in the hope of making a profit from claims at a later date. The collapse of Rok and Connaught
provide cautionary examples of what happens if this is your business model.
The problem is that the whole procurement process is driven by cost. Public sector
procurement requires work to be awarded either on the basis of lowest price or most
economically advantageous with the temptation for a contracting authority to choose the easy
option of lowest price. Even if the contracting authority decides to award the contract on the
basis of most economically advantageous bid, while it is more subjective, without some
reasonable indication of price or cost (in relation to which other non-price advantages might
be taken into account), it will be difficult to determine what is or is not an economically
advantageous bid1.
However SMEs do have some protection from suicide bidding if tendering for public sector
contracts. The contracting authority has a duty to investigate abnormally low tenders2 and
arguably this duty extends to the competing tenderers3. If an SME believes that it would have
won the tender but for the abnormally low bid, it must act within 30 days of the date it knew,
1Henry Bros (Magherafelt) ltd v Department of Education for Northern Ireland [2009] BLR 1182Directive 2004/18 art.55(1) Renco SpA v Council of the European Union [203] E.C.R. II-1713Morrison Facilities Services Ltd v Norwich City Council
-
8/13/2019 +Suicide Bidding
2/2
or ought to have known, of the breach. The SME has the option of requesting interim relief,
such as an injunction to suspend the award procedure or damages. In reality the two are
inextricably bound together as the Court will consider whether damages are an adequate
remedy as an alternative to granting an injunction.
Unfortunately, bidders of private sector contracts have none of this protection. The best that
they can hope for is that the circumstances of the tender give rise to an implied obligation on
the part of the employer to consider the tender if others are considered,4and considers it in
accordance with pre-agreed criteria5.
Matthew Needham-Laing is head of the construction & engineering team at Stevens &Bolton LLP. Matthew can be contacted on 01483 734 263 or by email at
4Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 11955MJB Enterprises Ltd v Defence Construction (1951) ltd [1999] 1 S.C.R 619