Abnormally Low Tenders: Calculate and Justify Your Bid
In public procurement, price is a double-edged sword. An offer that is too high leaves you out of the market, but an excessively aggressive offer places you in the dreaded zone of "abnormally low tender" (ALT) or, technically, presumption of abnormality.
For both bidding companies and contracting authorities, the management of these abnormally low tenders is a critical point of friction and legal risk.
In this technical guide, we break down the mathematical formula behind the risk and how technology is automating both the calculation and the justification.
How to Calculate Abnormally Low Tenders: The Mathematical Formula Behind the Risk
"Recklessness" is not a subjective opinion; it is a mathematical threshold strictly defined in the specifications.
According to Article 149 of the Law on Public Sector Contracts (LCSP) and Article 98 of the Regional Law on Public Contracts, the objective parameters to identify these offers must be foreseen in the specifications.
The problem lies in the fact that the threshold is dynamic. It is not a fixed percentage (e.g. "drop greater than 20%"), but depends on the behavior of the rest of the bidders. This turns the tender into a game theory scenario: your safety limit depends on your competitors' offers, which we do not know until the opening of the economic envelope.
Practical Threshold Calculation Example
Let's imagine a cleaning tender with 5 offers. The typical formula marks the abnormality at 10 percentage points below the arithmetic mean.
| Bidder | Offer (€) | Drop (%) |
|---|---|---|
| Company A | 100,000 | 0% |
| Company B | 90,000 | 10% |
| Company C | 85,000 | 15% |
| Arithmetic mean | 91,666 € | 8.33% |
| Abnormality threshold | Mean - 10 pp | 18.33% |
In this scenario, any offer with a drop greater than 18.33% would fall into abnormally low tender and would require justification.
Do you want to know at what price your competitors are bidding and with what drop?
How to Justify an Abnormally Low Tender (For Bidding Companies)
If your strategy implies going to the limit, you must have the justification report prepared before sending the offer. Preparing this documentation a posteriori, with a requirement deadline that is usually 5 working days (or less according to the specifications), is a guarantee of failure.
The law establishes 4 ways to justify the viability of your offer (Art. 149.4 LCSP):
- Savings in the execution procedure: Demonstrate more efficient methods (industrialized manufacturing process, etc.).
- Technical solutions or favorable conditions: Exclusive advantages of your company (e.g. amortized own stock).
- Originality: Innovation in the proposal that reduces costs.
- Strict compliance: Prove that, despite the price, the applicable obligations in environmental, social, and labor matters (including current sectoral collective agreements) are respected.
Tip: Do not use generic arguments ("we are very efficient"). Breakdown unit costs, provide commitments signed by suppliers, and demonstrate the real margin, even if minimal.
The Administration's Challenge: Detection and Valuation (For Public Sector Entities)
For the contracting technician, the receipt of offers entails the tedious task of dumping data into spreadsheets to apply the PCAP formulas and detect who has crossed the red line. An error in this formula can nullify the entire procedure.
Once the abnormally low tender is identified, the contracting authority must require justification. The real headache arrives when evaluating that justification: Is that cost saving credible? Is the collective agreement being violated to achieve that price?
The contracting committee needs objective data to accept or reject the justification with legal certainty.
Do you want to access tender databases, legislation, and resolutions in real-time?
Frequently Asked Questions About Abnormally Low Tenders
When is an offer considered abnormally low?
When it exceeds the parametric limits defined in the specifications (PCAP). If the specifications do not define it, the general regulations of Art. 85 of the RGLCAP apply.
What happens if I do not adequately justify an abnormally low tender?
Your offer will be rejected and excluded from the tender procedure. You cannot be the adjudicate even if you have the lowest price.
How much time do I have to justify my offer?
The general regulation (RGLCAP) establishes 5 working days, although the Law allows fixing a sufficient period that the specifications could reduce. In any case, it is a very short period to put together a complex economic report.
Conclusion: Precision to Avoid Risks
The rules on abnormally low tenders are a system defense mechanism.
- For companies, understanding the formula is vital to protect their adjudication.
- For the administration, having access to this information is key to speeding up the adjudication.
Do you want to obtain relevant information about tenders?
