First, find out where the gap comes from
The first question is not which contractor is dearest, but whether the problem lies in the tenders or in the design. If every tender exceeds the budget by similar proportions and in the same sections, the most likely explanation is that the design budget was miscalculated, not brought up to date, or based on specifications different from those designed. That situation should have been resolved before going out to tender, as explained in the article on the design estimate that exceeds the client's budget; if it comes to light now, negotiation will not correct it and the sensible course is to go back to the design.
If the tenders differ widely from one another, the problem usually lies in the tender package or in the way each contractor has read it. A tender that comes in far below the others is rarely a gift: more often it has left something out, turned into a lump sum what the design measured, or read a specification differently. The risk grows when tenders are invited on a proyecto básico (outline design): under the Código Técnico de la Edificación (Technical Building Code), it only defines "the general characteristics of the works" (unofficial translation), and it is the proyecto de ejecución (detailed design) that develops it (art. 6 of Part I). Tenders obtained on an outline design do not yet describe the same building.
Normalise the tenders before comparing them
Comparing means rebuilding each tender on the same scope, section by section, using the structure of the design budget. The full method is in the article on how to compare contractors' tenders. For the decision that matters here, four checks are enough.
Exclusions. Every section of the design that a tender does not price is added to that tender at a reasonable value: the one in the design budget itself or that of the nearest complete tender. Common exclusions: external works, utility connections, temporary works and plant, waste management, statutory approvals for building services.
Lump-sum items. A partida alzada (lump-sum item) where the design had measured quantities shifts the quantity risk onto the client. It is replaced by a prudent value and noted as a point to negotiate.
Conditions. Proposed programme, payment terms, retentions and guarantees offered, validity of the tender and reservations about the design. A tender conditional on changing the payment schedule cannot be compared with one that accepts the schedule in the specification.
Pricing basis. A fixed-price tender and a unit-rate tender do not share the measurement risk in the same way. The difference is explained in the article on fixed price and unit rates. Under an ajuste alzado (lump-sum contract), article 1593 of the Código Civil (Civil Code) prevents the contractor from claiming a price increase "even if the cost of wages or materials has risen", but allows it for a change to the plan that produces an increase in the works authorised by the owner: whatever the plan does not set out clearly will end up as a dispute over extra works.
Break down the gap by cause
Once the tenders are normalised, the gap between the best-placed tender and the budget is split by section and, within each section, by cause. Four causes cover almost every case.
| Cause | How to recognise it | Appropriate lever |
|---|---|---|
| Market price | all tenders agree on the section and exceed the design | adjust the solution or accept the increase |
| Poorly defined item | widely scattered prices between contractors for the same section | clarify the design and ask for a fresh price |
| Risk premium | a mark-up on sections with uncertainty (existing structure, foundations, short programme, penalties) | reduce the uncertainty or share the risk in the contract |
| Scope | the tender includes specifications or elements beyond what is needed | reduce scope or change specifications |
This table avoids the most expensive mistake: negotiating down a section whose price is the market price. The contractor will appear to give way and will recover the difference during construction, through extra works or in quality. Negotiation makes sense where there is margin or a mispriced risk, not where the price is simply the real one.
Three ways forward
Negotiate. This is the right course when the gap is moderate and concentrated in sections with scattered prices or risk premiums. Negotiate with data: the prices of the other normalised tenders, the clarifications to the design and the conditions the client can relax (programme, payment milestones, allocation of a specific risk). Negotiating with several contractors at once is lawful on private works, but they should be given the same information so that prices remain comparable.
Adjust the design. When the gap is structural, a reduction in scope or a change of technical solutions is agreed with the best-placed contractor. The contractor does not decide the change: it must go through the designer and the dirección facultativa (site direction team), since the Ley de Ordenación de la Edificación (Building Act, LOE) gives the director de obra (works director) responsibility for preparing changes to the design "at the request of the promotor or with their agreement" (art. 12.3.d). Each adjustment is recorded in the design that will serve as the agreed plan, so that the fixed price covers exactly what is going to be built.
Invite tenders again. This is appropriate when the tender package was incomplete, when there are few tenders or they are widely scattered, or when the design adjustment is so significant that the tenders received no longer describe the works. It takes time, and the delay has its own cost for the development; but signing on a package known to be incomplete usually costs more.
| Way forward | When | Risk to the budget |
|---|---|---|
| Negotiate | moderate gap, margins or mispriced risks | apparent reduction recovered on site |
| Adjust with the best tender | structural gap, solutions or scope open to revision | changes poorly carried into the design and the contract |
| Invite tenders again | incomplete package, few tenders, heavily modified design | delay to the development |
Changing the procurement model is also a lever, for example letting some sections separately. Its real effect on the budget, with the interfaces it creates, is analysed in the article on main contractor or separate packages.
A fictitious example
The amounts below are fictitious and exclude VAT; they only illustrate the method. A client has set a construction budget of 1,200,000 euros and receives three tenders.
| Tender A | Tender B | Tender C | |
|---|---|---|---|
| Tendered amount | 1,380,000 | 1,310,000 | 1,265,000 |
| External works excluded | 0 | 0 | + 70,000 |
| HVAC as a lump sum (60,000), brought to B's measured price | 0 | 0 | + 40,000 |
| Normalised amount | 1,380,000 | 1,310,000 | 1,375,000 |
The lowest tender becomes the second most expensive once normalised. Tender B, which is complete, exceeds the budget by 110,000 euros, or 9.2%. By section, the gap breaks down as follows: structure 15,000, facades 55,000, building services 30,000, other 10,000, making 110,000 in total.
The analysis by cause points to the levers. The facades agree across all three tenders: that is the market price, and the designer proposes an alternative with equivalent performance that saves 40,000 euros. A pergola that can be done without is removed (20,000). In building services, the spread between tenders indicates margin, and negotiation secures 15,000. The adjustment totals 75,000 euros: the price falls to 1,235,000 euros and the remaining gap is 35,000 euros, 2.9% of the budget. The client then decides, with full knowledge of the facts, whether to absorb it from the contingency or look for a further adjustment, and records the decision.
Before signing
The adjusted price must match the contract documents. If negotiation has changed solutions or scope, the design, the bill of quantities and the specification must reflect it before signature; otherwise the contract refers to a plan that is no longer that of the works, and every difference will become a claim. The same applies to clarifications obtained during negotiation: they are written into the contract or they do not exist.
The contingency is recalculated after signature. If the adjustment has used up part of the contingency, the figure that remains is the one that must cover unforeseen events on site, and the client should know it before work starts.
This article describes the state of the rules on the date of verification and is intended as professional guidance. It does not replace legal advice or the examination of the specific case.