When is an offer too good to be true?

Rulings of 6 March 2020 by the Complaints Board for Public Procurement: Autocentralen.com A/S and Aktieselskabet Carl Christensen versus the Danish Ministry of Defence Acquisition and Logistics Organisation (“DALO”)

In the two cases, DALO had invited tenders for a framework agreement for the provision of maintenance services and spare parts for 2,500 vehicles owned by the Danish Defence. DALO’s existing supplier was Robert Bosch A/S ("Robert Bosch"). All tenderers were asked to submit a price list specifying six price categories, which had to be further broken down into units.

The award criterion was the best price-quality ratio with the price weighing 60% and the quality and delivery time each weighing 20%. For each tender, an evaluation price was calculated as the sum of the unit price multiplied by DALO’s estimated consumption of the individual units. In the evaluation process, DALO had reviewed all prices in each category without making any comments.

Robert Bosch had offered the lowest evaluation price of approx. DKK 8 million as against the second lowest evaluation price, which was approx. DKK 13.2 million. With an evaluation price of approx. DKK 17.7 million, the highest tender was more than twice as high as Robert Bosch’s tender. Further, there were huge spreads in the listed unit prices compared to the lowest tender (up to 229,900%), but there were also significant spreads at unit level, where Robert Bosch was not the lowest bidder (up to 32,638%).

As the tender from Robert Bosch offered the best price-quality ratio, the framework agreement was awarded to Robert Bosch. Both Autocentralen.com A/S and Aktieselskabet Carl Christensen complained about the award, claiming that DALO should have investigated the offer from Robert Bosch more closely, as the tendered prices were allegedly abnormally low. 

Decision(s) of the Complaints Board

The Complaints Board noted in its decision that a contracting entity must ask a tenderer to explain its tender if it appears abnormally low. However, it is not specified in section 169 of the Public Procurement Act when a tender is “abnormally low”. This will require a case-by-case assessment by the contracting entity, which is allowed a wide discretion for this purpose.

The Complaints Board found no reason to set aside DALO’s award of the contract to Robert Bosch notwithstanding the large differences in the tendered prices - including in unit prices. Accordingly, DALO had no obligation to request Robert Bosch to explain its tender in more detail.

Kromann Reumert's comments

The decision confirms the Complaints Board’s previous findings that it takes a lot for a contracting entity to be required to obtain an explanation for an “abnormally low” tender.  Thus, great variations in the evaluation price will not per se trigger a duty of investigation for the contracting entity.

The considerable price spreads could also indicate large market variations (and the fact that an operator has priced a unit very low) and attempts by the tenderers to optimise their offer, which is generally ok. The tenderers may have expected that a higher profit on some units would compensate for the “loss” of profit on other units - or maybe have tendered in anticipation of DALO not actually buying the estimated number. Such “swings and roundabouts” principle is quite common when preparing a tender.

Read the Complaints Board’s ruling  - Autocentralen.com A/S (in Danish).

Read the Complaints Board’s ruling  - Aktieselskabet Carl Christensen (in Danish).