Why everything is decided before the tenders are opened
Two rules of Luxembourg public procurement law close the door after opening. The first is article 85 of the implementing Grand-Ducal Regulation of 8 April 2018: "After the opening of the tender, the contracting authority may in no case come to an arrangement with the tenderers with a view to changing the prices of their tenders" (unofficial translation), except where prices are equal and there is no presumption of collusion. In an open or restricted procedure, there is therefore no round of negotiation to recover a gap.
The second is article 39 (1) of the Law of 8 April 2018 on public procurement: "The contract must be awarded if at least one tender meeting the conditions of the specifications has been received." Abandoning the procedure requires a reasoned decision, after the Commission des soumissions (the tenders board) has first been heard; cancellation requires one of the grounds allowed by the law (art. 39 (3)). These outcomes are detailed in the article on tenders above the estimate.
In a private contract, the constraint is practical rather than legal. The client can negotiate and re-tender, but each round costs time, and a reduction in the brief decided after the tenders often means redoing part of the drawings and asking for prices again.
Diagnose the gap before looking for savings
An overall gap does not say where to act. It has to be broken down into three parts, because each part calls for a different lever.
| Part of the gap | Question | Natural lever |
|---|---|---|
| Prices | are the unit rates used higher than those in the budget, at the same date? | check the price date and the price assumptions, possibly through a counter-estimate |
| Quantities | with the same brief, does the design have more floor area, volume or linear metres than planned? | compactness, circulation areas, optimisation of the measurements |
| Brief | has the client added requirements, raised the standard expected, widened the scope? | return to the original brief or costed acceptance of a higher budget |
The "prices" part is dealt with first, because it may be a false alarm. An estimate updated to a more recent date than the budget looks more expensive without anything having changed in the design. If the estimate itself is disputed, an independent counter-estimate makes it possible to tell a cautious estimate from a design that is genuinely too expensive.
The "quantities" part is read in the measurements. With the brief unchanged, an increase in facade areas, excavation volumes or lengths of service runs points to the design itself: this is the situation article 9 of the 1992 regulation targets, and the response expected from the architect is an adjustment with the brief unchanged. The "brief" part is read in the written record. Each requirement added since the agreement should appear in an additional agreement; anything that does not must be reconstructed, dated and costed before the trade-off, otherwise the discussion will be about the origin of the gap rather than the solutions.
The five levers, in order
Order matters: the most effective levers are also the ones that cost the most redesign if they are pulled late.
| Lever | What it changes | Main risk | Further reading |
|---|---|---|---|
| 1. Brief and floor areas | the requirements and the built areas | redrawing, poorer use if badly decided | additional agreement (art. 9) |
| 2. Standard of specification | the quality of materials, finishes and equipment | higher running costs, disappointment in use | what changes the cost |
| 3. Options and variants | what is ordered firm and what remains optional | poorly described options, tenders that cannot be compared | variants and options |
| 4. Phasing | what is built now and what is deferred | higher total cost, site set up twice | estimated value of all lots |
| 5. Procurement route | general contractor or separate packages | interfaces and coordination borne by the client | general contractor or packages |
Brief and floor areas. This is the most powerful lever, because removing an area takes with it every item attached to it. It affects the brief, and therefore the agreement: see below.
Standard of specification. The cost differences between two levels of finish, technical systems or equipment are described in the article on what changes the cost of a building. Beware of trade labels: terms such as "hors eau, hors air" (weathertight shell) or "clé en main" (turnkey) have no legal definition, as the article on shell and turnkey points out; a change of standard must be described item by item, not by a label.
Options and variants. Including clearly described options in the tender documents makes it possible to tender on a wider scope and to decide, after the tenders, what is ordered. The drafting rules are covered in the article on variants and options. In a public contract, the estimated value includes "any form of option" (Law, art. 12, § 5, a)): an option reduces the firm commitment, not the value that determines the procedure.
Phasing. Deferring part of the works reduces immediate spending, rarely the total cost. In a public contract, it cannot be used to change procedure: where there are lots, the estimated value is the total value of all the lots (art. 12, § 5, g)), and for small contracts, spending in the same year on the same subject is added together (art. 20 (1) a)).
Procurement route. Moving from a general contractor to separate packages, or the reverse, changes the allocation of risk more than the price of the works. The budget effect is analysed in the article on general contractor or separate trade packages.
Any change to the brief goes through an additional agreement
As soon as a lever affects the brief, the article 9 rule applies. The Grand-Ducal Regulation of 17 June 1992 on the code of conduct for architects and consulting engineers provides that "any significant change to the brief set in the agreement, occurring during the design or the execution of the works, must be the subject of an additional agreement stating its financial impact".
For the client, this agreement serves two purposes. It sets the new brief and the budget arising from it, which gives the following phases a reference again. It also records the origin of the gap: what was removed from the brief to return within the budget, and what was added knowingly.
The case of a municipality
For a municipality, the timetable of decisions is set by the implementing regulation. The municipal council approves the detailed final design (art. 146), and "any subsequent significant departure from the detailed final design must be approved by the municipal council and the supervisory authority" (art. 147).
The trade-off should therefore come before the design is approved. Reducing the brief before the vote costs a round of redesign; reducing it afterwards costs a new council resolution and approval by the supervisory authority. The trade-off note then serves to prepare the resolution.
The false solutions
- Lowering the devis (estimate) without changing the design: an underestimated devis does not make the tenders cheaper; it merely creates a bigger gap at opening, and it will remain the reference for the final account, which compares the devis, the awarded price and the final cost (Law, art. 47).
- Relying on negotiation after the tenders: in an open or restricted procedure, article 85 prohibits it. Negotiation is possible only in the procedures that provide for it, under their own conditions.
- Removing the contingency: it does not reduce the likely cost of the building; it only removes the capacity to absorb unforeseen events, and in a public contract it is those events that will give rise to amendments.
- Putting off the decision: each phase approved without a trade-off makes the next lever more expensive, until the only options left are award or abandonment.
This article sets out the rules as they stood on the date of verification and is intended as professional guidance. It does not replace legal advice or an examination of the specific case.