Base tender budget, estimated value and contract price in Spain

The presupuesto base de licitación (PBL, base tender budget) is the maximum expenditure the administration may commit, VAT included. No bid may exceed it: any that does is automatically excluded. The LCSP requires the PBL to be in line with market prices and to be broken down into direct and indirect costs and, where labour cost is significant, estimated wage costs by category and reference collective agreement.

In works contracts, the PBL is built from the design budget following a regulatory cascade:

That breakdown is not administrative trivia: it is the basis of the bidder's cost study. The discount is applied to the budget excluding VAT, and the relationship between the design PEM and the company's real costs determines how far the price can drop without losing money. The logic of the PEM and its levels is developed, for building projects in general, in the article on from PEM to total cost, and the mechanics of quantities and pricing in the guide on quantities and budgets.

A PBL badly calculated by the administration is also a risk for bidders: a below-market budget pushes towards unviable bids and conflict during execution. Tender documents with a manifestly misaligned PBL can be challenged, and review tribunals increasingly annul tenders over unjustified budgets.

The valor estimado (VE, estimated value) is a different figure, calculated excluding VAT, whose function is to determine the contract's regime: whether it is SARA, whether the special review applies, which procedure may be used. That is why its calculation is broader than the PBL's: it includes the amount of foreseen extensions, of modifications provided for in the documents (with their maximum percentage) and any premiums or payments to candidates.

An example clarifies the difference. A works contract with an execution budget of EUR 2,800,000 excluding VAT, with a 20 per cent modification provided for in the documents, has an estimated value of EUR 3,360,000. The PBL (with VAT) will be around 3.4 million, but the figure that matters for the legal regime is the VE: by exceeding EUR 3,000,000, the contract enters the scope of the special review even though it does not reach the SARA threshold. Anyone looking only at the base budget will be surprised by the applicable rules. Thresholds and their effects are detailed in the article on SARA thresholds and minor contracts.

The price is the third figure: the consideration actually agreed, resulting from the winning bid. The 5 per cent performance guarantee is calculated on the final offered price (excluding VAT), and all executed works will be valued at the unit prices resulting from the discount: each monthly certificate applies the award coefficient to the design prices.

That mechanism has a consequence that first-time bidders tend to discover late: the discount is not negotiated item by item, it applies linearly to the whole price schedule. A 15 per cent discount turns every unit price of the design into 85 per cent of its value, including the items where the company has no cost advantage. The cost study must verify the viability of the discount item by item before committing to it globally.

In short: the PBL sets the bid ceiling and the reference breakdown; the VE determines the legal regime and thresholds; the price results from the award and serves as the basis for guarantees and progress certificates. In the tender documents the three appear separately identified; in the analysis of the tender, each answers a different question: how high can I bid, which rules apply, and on what basis will I be paid.

A building project with a direct works budget (PEM) of EUR 1,000,000 and a 20 per cent modification provided for in the documents produces this cascade:

Immediate readings: the contract is not SARA (far below EUR 5,404,000) and does not reach the special review either (below EUR 3,000,000). Staying under EUR 2,000,000 of estimated value, it can run as a simplified open procedure.

If the company bids with a 12 per cent discount, the contract price will be 1,190,000 × 0.88 = EUR 1,047,200 excluding VAT, and the performance guarantee 5 per cent of that figure: EUR 52,360. Each monthly certificate will value the executed works at the design prices multiplied by 0.88, including the foundations item where the cost study had flagged that the company had no margin: that is the real cost of a linear discount.

Benchmarking the discount against the wrong figure. Discounts are expressed and compared on the VAT-exclusive budget. An award history built by mixing percentages over VAT-inclusive and VAT-exclusive amounts distorts the competitive reference by several points, enough to miscalibrate a bid.

Ignoring the budget breakdown. The breakdown of direct, indirect and wage costs accompanying the PBL reveals how the administration priced the works. A breakdown with wage costs manifestly low for the applicable collective agreement signals a tight budget: the viable discount will be smaller than the history suggests, and the abnormality risk higher.

Not recalculating the annuity. Two contracts with the same budget and different durations have different annuities, and the annuity determines the required classification category and how the contract fits the company's production capacity. A EUR 1.8 million contract over 9 months strains the structure far more than a EUR 2.4 million one over 24, even though the second looks bigger.

The three errors share one root: treating the notice's figures as a block instead of decomposing them. The five minutes of table work separating PEM, execution budget, PBL, VE and annuity are the vaccine.