How to analyse a contractor's tender: the reading grid and the warning signs

1. Two dimensions: compliance and economics

Analysing a tender has two distinct dimensions, taken in sequence. Compliance first: checking that the submission is complete and admissible. Economics second: checking that the prices are coherent, complete and comparable.

A tender that is administratively incomplete can be set aside without any economic analysis. That is rarer on private contracts than on public ones, but some documents are indispensable, a signed form of tender, current insurance certificates. On a private contract the usual practice is to ask for the missing documents before excluding anyone, though that delay can be awkward while the tender period is still running.

2. The compliance check

Document	What is checked	Blocking if missing?
Signed form of tender	Signature and company stamp, date, name of the authorised signatory	Yes; without it there is no admissible tender
Priced and signed pricing schedule	Every line completed, total consistent with the form of tender, signature	Yes
Current structural warranty insurance	Expiry date, activities covered matching the works	Yes
Public liability insurance	Expiry date, limits of indemnity	Yes
Tax and social security compliance certificate	Issued within six months, no arrears	Yes above the statutory threshold
References on comparable projects	At least two projects of comparable nature and size	Recommended, may be a condition of the tender instructions
Technical submission	Staff and plant, programme, product data	As set by the instructions; can carry 30 to 50 % of the score

The structural warranty certificate is the document most often checked badly. Its mere existence is not enough. The activities it covers must match the works in the package, a certificate covering general masonry does not cover complex structural work, the expiry date must fall after the planned completion date, and the limit of indemnity must be adequate against the value of the contract.

3. Five levels of economic analysis

The economic analysis works as a funnel: start with the overall checks that quickly separate the coherent tenders from the suspect ones, then refine the analysis on the packages or items that triggered an alert.

Level	What is checked	Tool	Alert threshold	Time
1, package total	Gap between the tender total and the priced bill subtotal	Comparison schedule, totals column	Gap over ± 15 %	5 min per package
2, sub-package subtotals	Gap by phase of execution, foundations, frame and so on	Comparison schedule, sub-package columns	Gap over ± 20 % on a sub-package	10 min per package
3, rates on the heavy items	Consistency of the rates on the five items carrying 60 to 70 % of the package	Rates against market ranges	Rate below 50 % or above 150 % of the reference	20 min per package
4, omitted items	Lines present in the priced bill but absent or at zero in the pricing schedule	Structural comparison of the two documents	Any missing item over 2 000 €	15 min per package
5, overall coherence	Rate per m² of the tender against market ranges, internal consistency between packages	Rate calculation and market comparison	Rate below 85 % or above 115 % of the range	5 min per package

For a standard package of ten trades, a complete economic analysis is three to five hours of work for an experienced economist, provided the priced bill is well structured and the pricing schedules have been filled in properly. On the complex packages, frame, mechanical services, façades, allow 45 to 90 minutes each for a level 3 and level 4 analysis.

4. A worked example: four tenders on the concrete frame

The table below sets out the analysis of four tenders received for the concrete frame of a scheme of 890 m² habitable area. The reference priced bill stands at 237 595 €.

Sub-package	Priced bill	Contractor A	Contractor B	Contractor C	Contractor D	Signal
Foundations	28 400 €	29 100 €	31 200 €	22 600 €	28 800 €	C at − 20 %
Frame and superstructure	178 350 €	182 000 €	174 500 €	176 000 €	95 000 €	D at − 47 %
Stairs	25 500 €	26 400 €	24 800 €	25 000 €	12 000 €	D at − 53 %
Sundry structural items	5 345 €	5 800 €	4 900 €	5 200 €	0 €	D, item omitted
PACKAGE TOTAL	237 595 €	243 300 €	235 400 €	228 800 €	135 800 €	D at − 43 %
Rate per m²	267 €	273 €	265 €	257 €	153 €	D outside the range
Recommendation	Reference	Coherent	Coherent	Check the foundations	Abnormally low

The reading is immediate. Contractor D is outside the market on every indicator: package total at − 43 %, a rate of 153 € against a range of 250 to 320 €, one item omitted entirely, frame and stairs at − 47 % and − 53 %. Contractor C deserves a targeted check on the foundations, 20 % below the reference. That gap may be explained by a different assumption on the foundation type, in which case a request for clarification is needed before any award.

5. Requesting clarification: when and how

When to ask

Any tender showing a significant gap, over ± 20 % on an important sub-package, over ± 15 % on the package total, deserves a request for clarification before it is either accepted or excluded. On a private contract that request is good practice rather than a legal obligation. On a public contract it is compulsory before an abnormally low tender can be rejected.

How to word it

The request must be precise and factual: name the item, state the gap observed, and ask for the technical or commercial explanation. For example: "Your foundations item stands at 22 600 € against 28 400 € in our reference estimate, 20 % lower. Could you set out the foundation assumptions adopted, type, depth, section, and confirm that this price includes removal of the spoil?"

ℹ The three possible readings of a low price First, the contractor has made a different technical assumption, lighter foundations or a cheaper technique. If the assumption is technically valid, the low price is legitimate and reflects a real competitive advantage. Second, the contractor has made an arithmetical error or missed an item. It can ask to correct its tender, which makes it non-comparable, or hold its price while committing to deliver the full scope, which carries a risk of dispute or of failure on site. Third, the contractor has deliberately underpriced to win, counting on recovering its margin through variations. That is the most dangerous scenario.

6. The tender analysis report

The exercise concludes with a tender analysis report to the client. For each package it sets out the number of tenders received, the amounts by contractor, the gaps against the priced bill, the warning signs identified, any requests for clarification and the answers received, and a reasoned award recommendation.

The recommendation has to be reasoned on more than price. It must be reasoned technically, on demonstrated competence in this type of work, and financially, since the contractor's solidity and the absence of signals of distress count as much as the amount. An award made purely on the lowest price, with no analysis of whether the tender is viable, is the leading cause of failed contracts.

Standard structure of the report, per package: comparison schedule, analysis of the gaps, warning signs, requests for clarification and answers, reasoned recommendation, any conditions to be satisfied before award.

In summary

Analysing a contractor's tender happens in two stages: the compliance check on the submission documents, insurance certificates and signed form of tender, then the economic analysis at five levels, package total, sub-package subtotals, rates on the heavy items, omitted items, overall coherence. The funnel concentrates the time on the packages that triggered an alert. The standard trigger thresholds are ± 15 % on the package total and ± 20 % on a sub-package. A low price has three possible readings: a different technical assumption, which is legitimate; an arithmetical error, which is a risk; or deliberate underpricing, which is an abnormally low tender. The report must justify the award recommendation on more than price alone.

The nature of the figures quoted

The percentages and amounts quoted on this page are orders of magnitude for framing, not measurements. They illustrate mechanisms and proportions, and they substitute neither for a tender exercise nor for an estimate prepared on drawings.

Articles liés

Sources: the BT construction cost indices published monthly by INSEE on its 2010 base, used to update the figures · construction cost statistics from SDES, the statistical service of the ministry responsible for construction · regulatory texts published in the Journal officiel and consolidated on Légifrance for the requirements cited.