Failed tender or bids above the base budget: what the LCSP allows

Article 100.1 of the LCSP defines the base tender budget as "the maximum spending limit that the contracting authority may commit under the contract, including Value Added Tax, unless otherwise provided" (unofficial translation). A bid that exceeds it asks the authority to commit spending the contract does not allow it to commit. For the contracting entity's own budget, this makes the base budget the critical figure in the whole file: if it is too low, the tender fails; if it is too high, too much funding is committed.

The law requires that ceiling to be realistic. The base budget must be "appropriate to market prices" and broken down in the tender documents with "the direct and indirect costs and any other expenses calculated to determine it" (art. 100.2). The estimated value, for its part, is calculated using "the usual market prices" at the time the contract notice is sent or, failing that, when the procedure begins (art. 101.7). The structure of the calculation is given by article 131 of the Reglamento general de la Ley de Contratos de las Administraciones Públicas (General Regulation of the Public Administration Contracts Act): the presupuesto de ejecución material (PEM, the net construction cost), plus overheads "of 13 to 17 per cent", plus "6 per cent as industrial profit", plus VAT. An out-of-date PEM drags everything else with it. How a reliable design budget is built on public works, with its mandatory project review from 500,000 euros, is covered in the article on the design budget in public works.

A tender cannot be declared void while an admissible bid exists. Article 150.3 says so: "A tender may not be declared void when there is any admissible tender or proposal". Declaring a tender void is therefore the finding that there is no bid that can be awarded, not a discretionary decision by the authority.

Three situations should be distinguished, because they do not open the same routes.

The diagnosis decides the route. If the problem was not the price (a submission period that was too short, disproportionate standing requirements, a confusing design), correcting those conditions is often enough. If the problem was the price, any route that keeps the base budget will lead to the same result.

Article 168.a) 1.º allows recourse to the negotiated procedure without publication when, following an open or restricted procedure, no bid or no suitable bid has been submitted. The condition is strict: "provided that the initial conditions of the contract are not substantially modified, and in no case may the base tender budget be increased or the remuneration system altered". Article 168.b) 2.º repeats the prohibition ("increase the tender price") where the bids submitted were irregular or unacceptable.

For the budget, the consequence is direct: the negotiated procedure does not resolve an insufficient base budget. It can be useful when the tender failed for reasons unrelated to price and the authority can negotiate with contractors willing to build within the ceiling. It cannot be used to reach an agreement above it, nor to cut the design down substantially until it fits the price, since that would substantially modify the initial conditions. The cases and risks of this procedure are developed in the article on the restricted and negotiated procedures and competitive dialogue.

If the market price exceeds the base budget, the route that corrects the problem is a new tender. The authority revises the design budget, which must set out "the unit prices and [...] the breakdowns, where applicable, the schedule of quantities and the details needed for its valuation" (art. 233.1.d), or revises the design itself to reduce its scope, and tenders again.

Revising the budget has knock-on effects that must be anticipated. First, funding: a higher base budget requires more appropriated funds. Second, project review: if the base budget equals or exceeds 500,000 euros excluding VAT, the revised design requires a review report before it is approved (art. 235). Third, the procedure: a new estimated value may cross a threshold (2,000,000 euros for the simplified open procedure, 5,404,000 euros for harmonised regulation since 1 January 2026) and change the route and the time limits. The thresholds are detailed in the article on the SARA thresholds and minor contracts.

Reducing the design rather than raising the budget is a legitimate option in the new tender, provided the reduction reflects a decision about the public need and not an artificial adjustment. What cannot be done is to split the subject matter to avoid thresholds: for minor contracts, article 118.2 requires justification "that its subject matter is not being altered in order to avoid the application of the thresholds".

Before the contract is formalised, the authority may decide not to award or to withdraw from the procedure (art. 152). Both decisions are notified to the candidates and require them to be compensated for the expenses they have incurred, as provided in the notice or the tender documents or, failing that, in accordance with the principles of the authorities' financial liability (responsabilidad patrimonial).

A decision not to award is only possible "for reasons of public interest duly justified in the file", and a new tender for the same subject matter may not be launched "while the reasons given persist". It is the route when the need has changed or when the expenditure is no longer justified.

Withdrawal is based on an "infringement that cannot be remedied" of the rules governing preparation of the contract or the award procedure, and "shall not prevent a tender procedure from being started immediately". It is the route when the file has a defect that cannot be corrected within the procedure under way.

The cost of a failed tender is not just the delay. To it are added the expenses compensated to bidders, the work of a new file and, often, the revision of the design and the budget. It is the price of a base budget that was not "appropriate to market prices", and the best way to avoid it is the one applied before going out to tender.

When some bids exceed the ceiling and another comes in far below, the problem changes in nature. If the low bid is admissible, the tender cannot be declared void; if it falls under the presumption of abnormality, the authority must request its justification with a "sufficient period" and seek the technical advice of the relevant department (art. 149.4). The procedure is covered in the article on abnormally low tenders. For the budget, a bid far removed from the others is one more sign that the base budget deserves review.

On private works, the promotor (the client) may negotiate freely above their budget, reduce the scope with the best-placed contractor or invite tenders again. None of those freedoms exists on public works to the same extent, as the article on private works tenders above budget explains. The contracting authority has, on the other hand, a protection the private client does not: a legal ceiling that prevents it from committing more expenditure than planned.