We round up the series with the final part; perhaps most surprising:
‘Your bid price is too low.
I am quite satisfied with your technical capability as all assessments turned out fine.
However, your commercial bid is too low. It is below my expectations for jobs of this nature.
Now, I have many fears.
That you may not be able to cope with the financial demands of this project.
That competitive laws may demand the contract be awarded to you regardless
That I may end up with poor quality job
That we may need a change order; which will delay my project and possibly erode my budget.’
Likely reasons for aggressively low bids (as I like to call them) include …
Misinterpretation of the commercial model/template; miscalculations, omissions; and unfortunately in some cases, a deliberate ploy to win the contract and seek variation thereafter.
Whatever the reason, there are grave consequences for both parties including delayed projects, overrun budgets and strained relationships.
Depending on the particular circumstances, companies tend to react in one of four ways:
Have a conversation with the bidder to understand the basis of the bid price and how they intend to perform the work;
Award the contract and a back-up contract in the event the awardee fails
Award the contract to the next lowest priced bidder
Re-publish the tender with/without additional bidders
All in all, an aggressively low bid prepared with the intention of winning a contract; may achieve the inverse... a lost opportunity.
I would love to hear about your experience, either as a Buyer or as a Bidder. Please share in the comment section below...
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