Patrick O'Donovan (Limerick County, Fine Gael) | Oireachtas source

The awarding of public contracts is governed by the fundamental principles derived from the Treaty on the Functioning of the European Union as they apply to public procurement. These include transparency, equal treatment and non-discrimination, proportionality and mutual recognition. The European Union directives set out the legal framework for the award of contracts that exceed the specified monetary threshold for supplies, services and works. Under Article 69 of Directive 2014/24/EU, the EU directive governing public procurement, contracting authorities are obliged to require tenderers to explain the price or costs in a tender where tenders appear to be abnormally low in relation to the works, supplies or services. Contracting authorities must assess the response from the tenderer before coming to a decision as to whether they will admit the tender or reject it on the basis that it is abnormally low. Where the explanation provided by a tenderer does not satisfactorily account for the low level of price or costs, having taken into account the circumstances outlined in the procurement directives, the contracting authority may reject the tender, although it is not obliged to do so. When investigating what may appear to be an abnormally low tender, contracting authorities must take into consideration the possibility that the tenderer may be obtaining more favourable terms from suppliers and subcontractors than rival tenderers.

There is little scope for manoeuvre on labour rates since contractors are required by law to pay workers covered by the sectoral employment orders, SEOs, in accordance with the terms of the applicable SEO. More efficient methods, however, of working to reduce labour costs cannot be ruled out in assessing a tender. Notwithstanding this, there is nothing to prevent an entity from performing a contract at a loss, subject to it being compliant with labour, social and environmental regulations. Where the contracting authority discovers that the price is abnormally low because the tenderer is not meeting its obligations in the field of social, labour or environmental law, the tender must be rejected. Where works contracts are concerned, specific reference to unbalanced tenders and abnormally low tenders is made in section 8 of the standard template instructions to tenderers published under the capital works management framework. These documents, which constitute the rules under which a tender competition is run, must be used in all public works contracts and have been published since 2008.

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