The cheapest tender is often the least complete one

The three returns arrived within a day of each other. Same schedule of works, a refurbishment in the low six figures, the kind of project where the surveyor writes the schedule and there is no quantity surveyor in the room. Two of the returns sat within four per cent of each other. The third was seventeen per cent below both.

Against the item covering removal and disposal of the existing asbestos cement soffits, the lowest return said one word: noted.

The figures and details here are changed and the project is a composite of several, because I am not going to write about live client work. But the pattern is not invented. It is one of the most reliable patterns in small works tendering, and it is the reason the cheapest tender is so often the least complete one.

This should be simple

On projects like this the comparison ought to be arithmetic. The surveyor authors the schedule of works, sends the same document to every contractor, and receives it back with prices against the items. Same questions, same order, same scope. Add up the columns, compare the totals.

There is no bill of quantities, no cost plan, no NRM2 take off. That is not a failing. It is proportionate for the size of the work, and it is how the majority of refurbishment and repair projects in this country are actually procured.

I should be honest about one thing before going further. I cannot give you a statistic for how often the lowest tender turns out to be the least complete, because no such statistic exists for work of this size. The research on tender prices and outturn costs is almost entirely about infrastructure and megaprojects, which tells you very little about a roof recovering in Leeds. What I can do is show you the mechanism. Once you see where the difference between two returns actually lives, you can judge for yourself how often it is likely to matter.

Where the difference lives

The contractor pricing your schedule controls three things: what they attach to the return, what they write against each line, and what they assume about time. The bottom line figure is the product of all three, and only one of them is visible in it.

What is attached to the return. The covering letter or the qualifications page is where the schedule you wrote gets quietly rewritten. Excluded: scaffolding to the rear elevation. Assumed: skip permits by others. Subject to: joist ends being found sound on opening up. Each of these is a small transfer of scope or risk back to the client, and each one makes the number above it smaller. None of them appears in the total. A return with a page of qualifications and a return with none can show the same figure and be offers for materially different work.

What is written against the line. This is the one that gets the least attention, because it sits in the pricing column itself, where everyone assumes the numbers live. Read down the pricing column of a real return and you will not find a clean column of numbers. You will find prices, and then you will find everything else: items left blank, items marked noted, items marked included elsewhere, two items bundled into one figure with no way to separate them. Every one of those responses occupies a space where a price should be, and every one of them is invisible in the total. A blank is not a zero. Noted is not a price. Included in item twelve is a claim you can only test by taking item twelve apart. When the lowest return is the one carrying the most of these, and in my experience it usually is, the gap between the figures is not a saving. It is unpriced scope.

What is assumed about time. Preliminaries are the contractor's costs of simply being on site: management, welfare, temporary services, plant, security. Most of these are time related, which means they are really a bet on the programme. A contractor who assumes eight weeks on site where the work honestly needs eleven has not found an efficiency. They have understated three weeks of running costs, and the shortfall does not disappear. It comes back later as a claim, a compromise, or a corner. On small works the preliminaries are usually a single lump sum or a rough percentage rather than a priced schedule, so the whole bet sits inside one figure and nothing in the return forces it into the open.

Why low and incomplete travel together

None of this means the lowest bidder is cutting corners on purpose. Tenders come in low for different reasons, and the reason changes what you should do next.

A tender comes in low for a handful of recognisable reasons. The estimator made an error. The contractor deliberately priced thin to win the work. The contractor takes a genuinely different view of the risk than you do. The tender documents were ambiguous enough that they priced a smaller job than you thought you described. Or they are simply better at buying this kind of work than their competitors.

Notice that the first four all produce the same pair of symptoms: a lower number and a less complete return. An error usually means something was missed. Thin pricing usually means the awkward items were left blank or qualified away. A different view of risk shows up as exclusions. And an ambiguous schedule invites every tenderer to fill the gaps in their own favour, which the keenest one will do most aggressively. In all four cases the low figure and the missing scope have the same cause. Find one and you will usually find the other.

The ambiguous schedule is the uncomfortable one, because that low bid points back at the person who wrote the tender documents. If three tenderers priced an item and one marked it noted, the odds are on the contractor. If all three returns diverge wildly on the same item, the schedule probably asked an unclear question, and that is worth knowing before the next project.

Sometimes, though, the cheapest tender genuinely is the cheapest, from a contractor with better supply chains, a keen appetite for the work, or a gap in their order book. The courts have said as much in the public procurement context: a sharp price is legitimate commercial behaviour, not evidence of a problem. You cannot tell a keen price from a hollow one on suspicion. You have to read the whole return.

What incompleteness costs after award

The strongest reason to care about all this rarely makes it into the conversation with the client.

The missing scope in a thin return does not vanish when the contract is signed. It comes back during the works as a variation, priced by one contractor, with no competition, at the moment the client's leverage is at its lowest. That much is widely understood.

What is less widely understood is that the thin return costs you a second time, at the point of valuing that variation. Under the standard forms, additional work is valued by reference to the rates and prices in the contract documents wherever the work is of a similar character. A well priced return, with a rate against every item, gives the contract administrator a full deck of agreed rates to value changes against. A return full of blanks, noted, and bundled lump sums gives them almost nothing. Every gap in the pricing document at tender stage is a rate you cannot point to during the works, an opening for the contractor to argue for a new rate or daywork, and a negotiation you now have to win from a weaker position. Where no price can be agreed, the contract administrator falls back on valuing at a fair and reasonable assessment, which is a polite description of an argument.

So a thin return is two problems: a cheaper looking number at tender, and weaker leverage for the entire duration of the contract. The client pays for the same gap twice.

When you do not take the lowest

For most private work, recommending against the lowest tender is a matter of professional judgement and a clear paper trail. For one segment it is more than that.

On leasehold major works, where the cost to any one leaseholder exceeds the statutory threshold, the consultation requirements under Section 20 of the Landlord and Tenant Act 1985 apply, and they include a requirement that makes everything above more than good practice. If the landlord awards the contract to anyone other than the contractor who gave the lowest estimate, they must serve a notice within twenty one days stating their reasons. Departing from the lowest figure is precisely the act that triggers a statutory duty to write the justification down, and that justification has to survive the scrutiny of leaseholders who are paying for the works and, if it comes to it, a tribunal.

Everything above is what that document has to contain. The exclusions, the unpriced items, the programme assumptions: the reasons the lowest figure was not the best offer, set out clearly enough that someone with no construction background can follow them. The threshold and the consultation regime are currently under government review, but the principle is not going anywhere. If anything, the direction of reform is towards more scrutiny of major works costs, not less.

I will come back to Section 20 properly in a later post, because it deserves more than a section.

The judgement is the job

None of this is an argument against low tenders, and it is certainly not an argument against contractors, most of whom price honestly and would rather you asked about the blank on line thirty than found it on site. It is an argument for reading the whole return rather than the last row of it, and for being able to show your working when the recommendation is not the obvious one.

At Tendermark we build software that makes the gaps in a tender return visible: the blanks, the bundles, the qualifications, the items marked noted. What those gaps mean, and what to do about them, stays where it belongs, with the surveyor. If you level tenders for a living and any of this reads wrong to you, I would genuinely like to hear about it. That is how this series gets better.

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Oliver Wingfield is a practising building surveyor and co-founder of Tendermark.

Notes

1. On the reasons abnormally low tenders arise, see James Golden, Abnormally Low Tenders in Public Sector Procurement, Society of Construction Law, 2013. The taxonomy in this post is adapted from that paper.
2. On a keen price as legitimate commercial behaviour, see NATS (Services) Ltd v Gatwick Airport Ltd [2014] EWHC 3133 (TCC).
3. On the valuation of variations by reference to contract rates and the fair and reasonable fallback under the JCT Minor Works form, see the relevant valuation provisions of MW 2024.
4. Section 20, Landlord and Tenant Act 1985, and the Service Charges (Consultation Requirements) (England) Regulations 2003. The notice of reasons requirement applies where the appointed contractor did not provide the lowest estimate and was not a leaseholder nominee. The government has consulted on reform of the major works regime, including the consultation thresholds; no changes were in force at the time of writing.