Abnormally Low Tender Rates- Case Study 1

One of the prime tasks of a consultant quantity surveyor is to perform tender evaluations in view of preparing tender reports. While I was working as a consultant quantity surveyor, I had ample chances of performing this task. This is where I stumbled on the term "Abnormally Low Tenders (ALT)" for the first time.

In the beginning of my career, I used to benchmark the rates submitted by the respective tenderers against the pretender estimate performed by my own organisation for the respective tender. Whenever a rate submitted by a tenderer deviates by +or - 15% of that of the pretender estimate, we used to query the respective tenderer as a good practice.

In one of those tenders, I observed a significant deviation of the Glassfibre Reinforced Concrete (GRC) screens priced. They were about 40% less than that of the pretender estimate. Firstly, I was quite alarmed, as I had a doubt whether the rate in the pretender estimate was correct. Then I had a sigh of relief as the rate is less, not more which will never contribute to exceed the pretender estimate. This is a common mistake as most quantity surveyors think that if the pretender estimate has not been exceeded, the client will be happy, but in reality if you provide an overestimated pretender estimate, the client will block more money than required for the project wherein the client lose the opportunity to invest those additional money somewhere else. However, in this case, the other tenderers have priced GRC screen rates closer to that of the pretender. Therefore I regained confidence of our pretender estimate.

Then the question came into my mind, how on earth this particular tenderer has priced the GRC screens substantially lower than that of the others. The query answer by the tenderers threw some light into the matter. They have got their own GRC fabrication yard. As most of the GRC screens are very common across construction projects (especially in the Middle East, the patterns are similar) they have got the moulds of the exact GRC screens in place. Therefore there is no requirement for this particular tenderer to include the price of the GRC moulds into their unit rate.

This is what we call as "Economics of Manufacturing Process" where certain tenderers will get an advantage over the others which is  justifiable. There are other similar cases I found within tenders which promotes this notion especially if a tenderer owns his/her own prefabrication yards of various Construction elements such as Post Tension (PT) slabs, Autoclaved Aerated Concrete (AAC) blocks, etc.

I hope to write more case studies on this subject which you will be able to read in near future.