Two mechanisms, not one
The congruity check is the ordinary mechanism. The contracting authority identifies tenders that appear abnormally low and asks the tenderer to justify them, through an adversarial process concluding with acceptance or exclusion.
Automatic exclusion is the derogating mechanism provided for certain below threshold procedures. There is no adversarial process: tenders exceeding a threshold calculated under a stated method are excluded, with no assessment of the merits of any justification.
The difference is total. In the first case an aggressive discount can be defended; in the second it is simply a losing one.
The five conditions for automatic exclusion
Article 54 of the code makes automatic exclusion subject to conditions to be read as cumulative. The absence of a single condition returns the procedure to the ordinary check.
The contract is for works or services. The award criterion is lowest price. The value is below the EU thresholds. The procedure presents no certain cross border interest. The number of admitted tenders is five or more.
Where all these conditions are present, contracting authorities, derogating from the ordinary rules on the anomaly check, provide in the tender documents for the automatic exclusion of tenders found to be abnormal. The provision must be inserted in the tender documents and is not implied.
Two exclusions complete the picture. The mechanism does not apply to the direct awards the code provides for the lower bands. And in any event authorities retain the power to assess the congruity of any other tender which, on specific evidence, appears abnormally low.
| Aspect | Automatic exclusion | Ordinary congruity check |
|---|---|---|
| Condition | The article 54 conditions, cumulative | Residual regime, applies otherwise |
| Adversarial stage | Absent | Present, with a request for justifications |
| Basis of calculation | Mathematical threshold on admitted discounts | Assessment of overall sustainability |
| Tender exactly at the threshold | Excluded | Not relevant |
| Exposed strategy | The maximum discount | The undocumented tender |
The three methods and the role of the tender documents
The second paragraph of article 54 introduces an obligation that did not exist under the previous regime and that has generated significant litigation. It concerns stating the method for calculating the threshold.
Contracting authorities state in the tender documents the method for identifying abnormal tenders, chosen from those described in Annex II.2, or select it when evaluating the tenders by drawing lots among the compatible methods. Drawing lots at the evaluation stage makes the threshold unpredictable for bidders.
The annex provides three methods, identified by letters, each defining its own mathematical procedure for calculating the threshold. The three methods produce different thresholds on the same distribution of discounts.
Case law has drawn a strict consequence from that wording: where the conditions are present the authority must include in the tender documents the express provision for automatic exclusion and, unless it opts for drawing lots, the method chosen. The absence of that provision precludes application of the mechanism.
The fifteen tender threshold
Within each method the calculation varies according to the number of admitted tenders, with a dividing line at fifteen. The number of admitted tenders cannot be known in advance.
The method identified by the letter A distinguishes the case where the number of admitted tenders is fifteen or more from that where it is fewer, and in each case congruity is assessed on tenders presenting a discount equal to or above an anomaly threshold determined by its own procedure. The two cases have distinct formulas that cannot be interpolated.
The consequence for a bidder is that the outcome depends not only on its own discount but on the number and distribution of the other discounts, elements that are not knowable when the tender is drawn up. A maximum discount strategy is therefore the most exposed.
One settled reading deserves flagging because it is not intuitive: all tenders with a discount equal to or above the calculated threshold are excluded. A tender exactly at the threshold is not saved.
The question of decimals
An apparently minimal aspect has generated specific judgments and is worth knowing. It concerns decimals and rounding.
The rules the authority sets for calculating the threshold must not confine themselves to referring to the chosen method: they must also address, through a specific clause in the tender documents, the number of decimals used in the calculation and the technique adopted for any truncation or rounding. The absence of that clause has been held to be a defect in the tender documents.
The reason is arithmetical. Where the distribution of discounts is tightly clustered, the number of decimals and the rounding rule determine which tenders fall above or below the threshold, and the outcome of the competition can turn on that choice.
Digital procurement platforms, aligned with the annex methods, allow authorities to manage the calculation and return the identification of abnormal tenders directly. Automatic calculation reduces clerical errors but does not remove litigation over the method.
The ordinary congruity check
Outside the conditions for automatic exclusion the ordinary rules on abnormally low tenders apply. The ordinary check produces no automatic exclusions.
The process is adversarial: the authority asks for explanations of the price or costs proposed, the tenderer provides them, and the authority assesses whether the tender is sustainable overall. The tenderer therefore has an opportunity to defend its tender.
The elements the check focuses on typically concern the economics of the production process, the technical solutions adopted, any particularly favourable conditions available to the tenderer and compliance with employment and safety obligations. Each element must be documented rather than merely asserted.
The labour costs stated by the tenderer are one of the central elements of the assessment, and their consistency with the authority's own estimate is subject to scrutiny. A material divergence must be justified with verifiable material.
The role of the collective agreement
One specific point has received a useful judicial clarification. It concerns the applicable collective agreement.
Where the contracting authority has not identified the collective agreement to be applied to the workers employed on the service being awarded, the economic operator must be regarded as free to classify staff under the rules of the collective agreement it applies. That freedom of classification remains subject to the overall consistency check.
The clarification has defensive value during a congruity check, because a challenge based on comparison with an agreement other than the one applied does not stand if the authority had not identified it in the documents. It is therefore worth checking in the documents whether an agreement was identified.
How to calibrate a discount
Three points follow from the above.
The first check concerns which mechanism applies. Where the conditions for automatic exclusion are present, a large discount cannot be defended and the strategy consists in positioning oneself in a statistically safe zone rather than maximising the reduction.
The second concerns the method stated. The three methods produce different thresholds on the same distribution of tenders, and knowing which applies allows a better informed assessment.
The third concerns documentable sustainability. Even where the adversarial check applies, defending a discount requires justifications prepared in advance rather than improvised within the period allowed, which is usually short.
The most frequent errors
Applying a maximum discount strategy without checking which mechanism governs the procedure is the first, and in automatic exclusion procedures it is simply a losing one. The maximum discount places the tender out of the running rather than at the front.
Assuming a tender exactly at the threshold is saved is the second, and contradicts the settled reading. A bidder aiming at the exact threshold excludes itself.
Not reading the method stated in the documents is the third, since the three methods produce different thresholds on the same distribution of discounts. Reading it takes a few minutes and shapes the whole pricing strategy.
Preparing justifications only after receiving the request is the fourth, and the period allowed is usually too short to build them from scratch. It is worth preparing the structure of the justifications alongside the tender.
Overlooking the consistency between the labour costs stated and the structure of the tender is the fifth, and is the element on which the congruity check concentrates most often. The inconsistency is the first point the authority raises.
Note: the legislative references in this page relate to Italy and are current as at the date of publication. The calculation methods are contained in an annex to the code and case law on the application of automatic exclusion is still developing: the text in force and the tender documents of the individual award should be checked before any operational use.