Tenders above the estimate: award, waive or cancel

The estimate (devis) is the figure drawn up by the contracting authority for the procedure, not a contractor's price. It underpins the estimated value of the contract, and therefore the choice of procedure, and later the comparison with the final account (law of 8 April 2018, art. 47). How it is built, dated and kept confidential is covered in the article on the contracting authority's estimate.

Two practical consequences for reading tenders. The estimate is not known to tenderers: the implementing grand-ducal regulation (règlement grand-ducal, RGD) prohibits disclosing it to them (art. 45 (5)). The gap between tenders and estimate is therefore observed at opening, without contractors having been able to align with it. And an old or undated estimate makes the gap unreadable: part of it may be due to price movements between the estimate's value date and the opening, part to the content of the tenders.

Article 39 (1) of the law leaves no ambiguity: "The contract must be awarded if at least one tender meeting the conditions of the specification has been received" (unofficial translation, as are the other quotations in this article). The rule does not turn the estimate into a ceiling. A compliant tender that is more expensive than the estimate remains, in principle, a tender to which the contract must be awarded.

Examining prices does not automatically turn an expensive tender into an inadmissible one. The regulation provides for tenders to be examined "as to whether the prices are justified and as to the accuracy of the calculations", and for tenders whose prices are "found unacceptable" to be eliminated (art. 80 (1)). That finding results from the examination; the texts read for this article do not say that a price above the estimate is unacceptable by nature. A contracting authority wishing to set aside a tender on price level alone must therefore use one of the routes in article 39, not a rejection presented as self-evident.

The examination is still useful. It allows the calculations to be checked (the regulation governs the correction of arithmetical errors in article 81), a price analysis to be requested from tenders whose total price or certain unit prices seem suspect (art. 87), and experts to be called in (art. 80 (1)). An "expensive" tender sometimes turns out to be expensive on only two or three items, which shapes the decision. How to compare tenders is covered in the article on what makes bids comparable.

Conversely, an abnormally low tender has its own regime. A price analysis must be requested from tenders more than 15% below the average of compliant tenders, where there are at least 5 compliant tenders (RGD art. 88); the subject is covered in the article on reading an abnormally low price.

The lever people instinctively look for does not exist in an open or restricted procedure. "After the opening of the tender, the contracting authority may under no circumstances come to an arrangement with tenderers with a view to changing the prices of their tenders" (RGD art. 85). The only exception concerns equal prices with no presumption of collusion: the tenderers concerned are then invited in writing to propose a reduction (art. 86).

Budget consequence: in these procedures, the gap observed at opening is the real gap. It does not shrink through discussion with the best-placed contractor. The cases in which negotiation is permitted are set out in the article when the procedure allows negotiation.

Faced with tenders above the estimate, the contracting authority has three outcomes, each with its own formalities.

Outcome	Condition	Formality	Effect on the budget
Award	at least one compliant tender (art. 39 (1))	award decision; for a municipality, appropriations voted	the gap is funded: contingency, additional appropriations, savings elsewhere
Waive	reasoned decision (art. 39 (2))	Tender Board's opinion heard beforehand	the project is suspended; design fees already incurred remain payable
Cancel	cases in art. 39 (3), notably an unsatisfactory result	prior opinion of the Tender Board in that case	new procedure, with its own timescale and the risk of a different price

Awarding means accepting the gap and funding it. The gap goes into the cost dashboard from the moment of award. For a municipality (commune), the municipal council (conseil communal) must first have provided the appropriations (RGD art. 144); an award beyond the appropriations voted therefore means going back to the council. From this point of view, a public budget is a voted ceiling.

Waiving means giving up the contract, not just the tender. The decision must be reasoned and the Tender Board must have been heard beforehand. Waiver is the appropriate outcome when the need itself is called into question, or when funding is no longer secured.

Cancelling opens the way to a new procedure. Article 39 (3) lists, among others: the absence of any compliant tender, or a tender considered "as not having produced a satisfactory result" (with the prior opinion of the Tender Board in that last case); collusion; substantial changes to the basis of the contract following unforeseen circumstances; substantial errors in the tender file. The "unsatisfactory result" is the route most often considered for tenders that are too expensive, but it is not automatic: it requires the Tender Board's prior opinion and reasoning that holds up.

Entirely fictional example, round figures. An estimate of €1,000,000 excluding VAT, dated at the end of the preliminary design stage; 3 compliant tenders at €1,180,000, €1,240,000 and €1,300,000. The cheapest tender exceeds the estimate by €180,000, or 18%.

Before choosing an outcome, break the gap down. Suppose that updating the estimate to the opening date accounts for €50,000, that 2 items (structural work and façades) carry €110,000 of the gap and that the remaining €20,000 is spread across the rest. The gap excluding the update is then €130,000, of which €110,000 sits on just 2 items. The right question is no longer "is the tender too expensive?" but "was the estimate for these 2 items right, and can the brief change?".

If the estimate was too low, re-tendering with the same file is unlikely to produce a better price; awarding and funding the gap, or waiving, are more consistent. If the file can be slimmed down without losing the purpose of the contract, cancellation followed by re-tendering on a revised file may be justified, provided the delay is costed.

After an open procedure is cancelled, the rule is a new open procedure (law, art. 40), subject to the cases in article 20 (1) b). That provision allows a negotiated or restricted procedure without publication where the tenders in an open or restricted procedure with publication were non-compliant or unacceptable, or where no tender was received, in case of urgency; without urgency, only after a second procedure.

On re-tendering, prices are compared with those of the first tender round. If the unit prices in the second round differ from those in the cancelled one, tenderers may be asked to justify them with a price analysis (art. 41). It is a control tool, not a guarantee of a reduction.

Re-tendering costs time. The duration of a new procedure, price movements during that period and, where applicable, updating the file all add to the cost of the project. Re-tendering is only a budget lever if something changes between the two rounds.

Three things are reviewed, in this order. First the estimate: its value date, its quantities, and its unit prices on the items carrying the gap. An independent cost check on those items is often enough to decide between a weak estimate and high tenders. Then the brief: floor areas, standard of finish, options. Finally the packaging: a different split into lots or a general contractor changes competition and interfaces; the estimated value is nevertheless still calculated across all lots (law, art. 12, § 5, g)).

Every change to the brief leaves a written record. On the architect's side, a significant change to the brief calls for an additional agreement (convention additionnelle) stating its financial impact (grand-ducal regulation of 17 June 1992, art. 9). On the municipality's side, if the detailed final design changes significantly, it must be approved by the municipal council and the supervisory authority (RGD art. 147).

The pitfall is re-tendering the same file in the hope of a different price. Without a change to the estimate, the brief or the packaging, the second round generally reproduces the first, a few months later.