The field of tenders attracts the eyes and pockets of many factors in the business sector, whereas it holds most valuable business opportunities. Notwithstanding, whoever enters the field of tender laws, is bound to soon discover that issues and rules that appear evident at first glance, are realized in gray tones. In this article we will attempt to shed light on one of the central and fascinating issues in the field of tender laws, the question of the lowest bid – does it always prevail?
Background
The field of tenders is attractive to the eyes and pockets of many factors in the business sector, for it holds most valuable business opportunities. Nonwithstanding, whoever enters the filed of tender law, is bound to soon doscover that issues and rules that appear evident at first glance, are realized in gray tones. This, the tender laws is a filed satiated by intricate legal proceedings, that set afloat many and diverse issues from tangent areas such as principles from the field of public law, economics, financing and ethics.
In order to assist the potential bidder to correctly plan its moves, we will try to shed light in this article on one of the central and most fascinating issues in the field of tender laws, the question of the lowest bid – does it always prevail?
Rejecting the low bid – when?
Apparently, the self-evident answer is that as a general rule, the lowest bid in a tender is the first one to be considered. The reasons for that are clear: inasmuch as the lowest bidder fulfilled the threshold conditions of the tender, and submitted the bid that yields the most significant discount for the public authority, and thus also to the general public – then apparently its bid should be pronounced as the winner. Therefore it was ruled, that when this bid is disqualified, for the reason of its being a low bid, the onus is transferred to the tender manager to demonstrate why did it not choose that bid, and it should present a reasonable and special argument which is relevant for that same matter. A hearing duty that must be provided to the lowest bidder in case its bid was disqualified was even set forth in legislation, since avoiding to choose the lowest bid constitutes a diversion from the “high road” in tender laws[1].
The considerations why not to choose the lowest bid derives for the most part from the mere low pricing in the bid. One of the major reasons is that a low bid may indicate fear of future financial collapse of the bidder, who will be unable to finance the project at a loss, and it may also serve as an indication for the bidder’s lack of seriousness. Another argument arises when the bid includes labor wages, and out of the bid arises that the wages to be paid to the bidder’s workers will be lower than allowed by virtue of the law. In such instances, it can be argued, that the public interest requires the lowest bid – to be rejected. Notwithstanding, one should bear in mind, that such fears are usually not sufficiently crystallized in such a preliminary stage, therefore great caution is required in the decision to disqualify a bid due to them. The hearing that is granted by virtue of the law to the lowest bidder that was rejected constitutes an opportunity for him to try to alleviate the concerns attributed to its bid.
However, one should keep in mind that if the lowest bidder withstood the threshold conditions, inter alia, the required guarantees, then the tenders committee is not required to examine neither the lowest bidder’s profit and loss consideration nor the financial profitability of its bid, e.g. where a bidder files a bid of extremely low competitive price, only in order to penetrate the market and accumulate prestige, and it is sufficiently financially sound in order to execute its bid as submitted in the tender without breaching the labor laws. Additional example would be a bidder, who is familiar with the secrets of the field in which it submitted the bid, knows how to lower costs or to use other equivalent materials without damaging the quality of work, and therefore can offer a price that is lower than the estimated price set in the tender. Should these bidders be denied winning the tender? Additionally, let us not forget that the tender manager has additional diverse tools to examine the capability and qualifications of the bidder, such as a bank guarantee, enclosing recommendations due to projects previously executed by it, presenting projects previously executed by it, affidavit according to which it is not breaching the labor laws, etc.
Furthermore, the lowest bidder could attempt to support its bid by the weights attributed to each parameter in the tender. This may play in its favor in case the price parameter received high weight. In this context let it be noted that it will of course make it easier for the lowest bidder, if the bid it submitted impeccably satisfies the remaining tender’s conditions, and it will make it harder for the tender manager not to pronounce its bid as the winner.
Fixing a minimum price – is it within the scope of a recommendation?
When a bidder attempts to examine the estimated price published in the tender, it is faced with the question – what was his purpose? Well, comparing the bid to the estimated price is a tool in the hands of the tender committee that helps it to select the optimal bid. It is presumed that the estimated price expresses the engagement’s true value, but this presumption may be refuted where it was proven that the estimate’s price is unreasonable. Deviation from the estimated price does not require the tender committee to disqualify the bid, but to operate discretion provided thereto.
For illustration purposes, while the lowest bidder could attempt to present convincing arguments regarding the pricing of different components in the bid, whether by use of other equivalent materials or advanced working methods that save on costs, it will find it difficult to explain pricing for workers’ wages which is lower than the minimum wage. The tender manager will also be obligated to disqualify such a bid.
In this context, the court views the issue of maintaining the workers’ rights as an inseparable part of the tender laws and as the duty of the public authority. Acceptance of a bid that does not facilitate safeguarding the minimal rights of the workers constitutes a deviation from the realm of reasonability, and will be disqualified as a situation where a public authority will cooperate in illegal conduct cannot be accepted.
An owner of a disqualified lowest bid – what remedy will it seek?
Inasmuch as the lowest bidder is absolutely sure that it withstood all the tender’s conditions, including providing rights to its workers by virtue of the law, and was disqualified notwithstanding its being the lowest bid – 2 principal options are available to it: the one – filing an administrative petition to pronounce the petitioner as the winner, including filing an application for a prohibition order aiming to prevent the engagement of the tender manager with the (other) winner of the tender. The second option is filing an administrative claim to the court, which in essence constitutes a monetary claim. A central consideration to be taken into account prior to receiving the decision which option to choose, is whether the lowest bidder is willing to take the risk that a prohibition order that may cause multitudinous damages to the public authority, to the winner and even to the public (when it is dependent on the tender’s timetable, its complexity, etc.) will be granted, and at the end of the day the petition of the lowest bidder will be rejected. Such a situation may inflict extremely high costs on the lowest bidder, which apparently will even exceed the profit it would have been able to receive in case it would have won the tender. The question that should be asked is to what extent is the lowest bidder interested in winning the tender, or whether it will be willing to choose the alternative of filing a monetary claim to the court, while the tender is being executed by the winner.
Additionally, in case the lowest bidder is content to file a petition, it must make sure that prior to service thereof its exhausted the entirety of preliminary proceedings, which include inter alia an approach to the tenders committee with a demand for a hearing (in case it did not receive it), demand to receive reasons for the disqualification, receipt of the tender committee’s protocols and their reviewal, etc.
Conclusion
The tender laws allegedly set forth clear instructions regarding the considerations in proclaiming the winning bid, but reality strikes and prove as it is also evident in other fields of law, that the actual decisions are more complex and in most cases are not intended to determine between black and white. Therefore, the recommendation is to punctually fill the conditions of the tender, which may assure a more solid stand, whether legally or factually, for the lowest bidder, in case it will not win the tender.
[1] See Regulation 23(b) of the Tender Duty Regulations, 5753 – 1993.