Bids above the budget: not awarding, negotiating, starting again

A gap always has one or more of three causes: the estimate was out of date, the estimate was incomplete, or the market is asking for more. The three causes lead to different decisions, and confusing them is the most expensive mistake at this stage.

An out-of-date estimate shows in the date of its prices. If the designer's estimate was drawn up months before the bids, part of the gap is simply a price update. That part cannot be recovered by negotiation: it is accepted by updating the budget, or offset by reducing the scope.

An incomplete estimate shows item by item. Underestimated quantities, forgotten work items and costs not taken into account emerge when every bid exceeds the estimate on the same item. In that case the contractors are not expensive: the project costs more than was thought, and the question goes back to the designer and the estimate (see The estimate exceeds the budget: what to do before awarding the works).

A market asking for more shows in the spread. If the bids are close to one another and far from the estimate on correctly measured items, the market price is the price in the bids. If only one contractor is far out, the problem is that bid, not the budget.

Cause	Signal in the bids	Suitable lever
Out-of-date estimate	Widespread, similar gap on every item	Update the budget or reduce the scope
Incomplete estimate	Every bid above the estimate on the same items	Revise the estimate and the design
Dearer market	Bids close to one another, far from the estimate	Reduce the scope, revisit the technical choices
Isolated bid	A single bid far out	Not a budget problem: compare it with the others

The diagnosis is made on a table, not on the totals. The bids must be set out on the same item structure as the estimate, with the same quantities, at the same date. The method is described in Comparing contractor quotes on the same basis.

The stazione appaltante (the public contracting authority) may decline to award, but only if it reserved that right. Under art. 108(10) of D.Lgs. 36/2023, contracting authorities "may decide not to proceed with the award if no bid proves advantageous or suitable in relation to the subject matter of the contract" (unofficial translation). The option must be provided for in the tender notice or the letter of invitation and is exercised within 30 days of the evaluation of the bids.

Two conditions, both to be prepared in advance. The first is written: without the clause in the tender documents, the option is not available on those terms. The second is about time: 30 days from the evaluation are enough only if the contracting authority already has an updated estimate against which to measure whether a bid is advantageous. The practical advice is to include the clause in every tender notice and letter of invitation, and to have the comparison table against the estimate ready when the bids are opened.

Whether a bid is advantageous must be reasoned on the subject matter of the contract. The text refers to bids that are not advantageous or not suitable "in relation to the subject matter of the contract": the decision stands if the contracting authority can show, with its own estimate and the quadro economico (the project's overall cost schedule), why no bid is sustainable for that project. Other mechanisms that affect the procedure after the award have their own conditions and are not covered on this page.

The project budget is the quadro economico, not just the amount put out to tender. With the same funding, every extra euro on the price of the works is one euro less for what the quadro economico still has to cover on site. Contingencies in particular also serve to fund price revision, for which the contracting authority also draws on those sums, within the limit of 50 per cent, alongside tender savings and other savings (art. 60(5)). Assessing whether a bid is advantageous therefore means looking at the whole schedule, not only the works line.

Starting again means revising the estimate, the brief or the split, not simply relaunching the same tender. A procedure repeated on the same design with the same estimate usually brings back the same bids. The levers are those available before the award: brief and floor areas, level of finishes, options, phasing.

The new amount may change the procedure. The estimate must be fixed again at the time the procedure is launched (art. 14(7)), and the band of art. 50(1) depends on that amount. For works: direct award below 150,000 euros, even without consulting several operators; negotiated procedure without a notice with at least 5 operators, where they exist, from 150,000 euros to under 1 million; with at least 10 operators from 1 million up to the EU thresholds. The detail is covered on the pages on direct award below the threshold and on the negotiated procedure without a notice; the EU thresholds in force are given on the page on EU thresholds for public contracts.

Reducing the amount does not mean splitting the contract. "A contract may not be split in order to avoid the application of the rules of the code", save for objective reasons (art. 14(6)), and with several lots the cumulative value is counted (para. 9). Genuinely removing part of the brief reduces the amount; moving it into a second contract to drop into a lower band does not.

Negotiating on price in public works is not a free shortcut. Negotiation takes place only in the procedures that provide for it and within the limits of their regime. A public client that wants room to negotiate must choose it upstream, with the procedure, and not improvise it after the bids are opened.

The private client needs no clause to decline to sign. Until the contract is concluded, it can reject every bid, negotiate with one or more contractors, consult again or revise the design. The freedom is complete; the useful discipline is to keep a record of every version.

Negotiating on scope pays more than negotiating on price. Asking for a discount on the total often produces a reduction the contractor will recover through variations or quality. Discussing specific items pays better: cheaper equivalent technical solutions, alternative finishes, deferred options, site organisation. Each proposal from the contractor must be translated into an amended item of the bill of quantities, with its price.

A discount obtained by force has a cost. A bid squeezed beyond what is sustainable becomes a risk to the final cost, as the article The bid that is too low as a budget risk explains. The same applies to a lump sum quote obtained on a design cut back in a hurry: if the price is a lump sum, agreed variations give no right to payment unless otherwise agreed (art. 1659 of the civil code), but variations ordered by the client within one sixth must be paid for even under a lump sum (art. 1661). What is removed today and requested tomorrow comes back as a variation.

Consulting again makes sense only on a new basis. If the design or the scope changes, every contractor must respond on the new version, with the same unpriced bill of quantities. Consulting one contractor alone on the reduced scope and comparing it with the others on the old one distorts the comparison.

The example is entirely fictitious and serves to show the diagnosis. A private client has a works estimate of 800,000 euros, excluding VAT, at January 2026 prices. Three contractors respond in September on the same unpriced bill of quantities: 905,000, 930,000 and 980,000 euros.

Item	Calculation	Amount
Gap on the lowest bid	905,000 - 800,000	105,000 euros (13.1 per cent)
of which update of the estimate's prices	estimate repriced in September	40,000 euros
of which underestimated quantities	items above the estimate in every bid	25,000 euros
of which contractor prices above the market	remainder	40,000 euros
Reduction of scope (finishes, options)	items removed from the bill	- 45,000 euros
Negotiation on three items	prices revised in writing	- 20,000 euros
Final bid	905,000 - 45,000 - 20,000	840,000 euros
Updated budget	800,000 + 40,000	840,000 euros

The reading matters more than the result. The 40,000 euros of price update could not be recovered: the client accepted them by updating the budget. The 25,000 euros of quantities are an estimating question to clear up with the designer. Only the 40,000 euros of prices above the market were open to negotiation, and the negotiation recovered 20,000 of them without pushing the contractor below what is sustainable.