When the Lowest Tender Becomes the Most Expensive Choice

Last Updated 55 mins ago by Kenya Engineer

In a competitive construction market, choosing the lowest price can appear to be the obvious financial decision. Budgets are under pressure, clients want to demonstrate that they have obtained value for money, and procurement processes often place considerable emphasis on the financial component of a tender.

But a construction project is not a commodity that can be selected simply by comparing numbers on a spreadsheet.

A building, road, bridge, hospital or water infrastructure project has to be designed, procured, constructed, operated and maintained. The price submitted at tender stage is only one part of that equation. A significantly lower bid may reflect genuine efficiency and innovation, but it may also point to omissions, unrealistic assumptions, under-pricing or an inadequate appreciation of the risks involved.

The difference may not become apparent until the contractor is on site.

By then, changing the decision can be expensive. A saving achieved at procurement stage can be consumed by variations, delays, rework, disputes, additional supervision, remedial works and higher maintenance costs. In some cases, the consequences continue long after the project has been handed over.

The question, therefore, is not simply who submitted the lowest price. It is whether the procurement decision is likely to deliver the required outcome over the life of the asset.

The attraction of the lowest price

There is a good reason why the lowest price remains attractive.

For public-sector clients in particular, procurement decisions must be transparent, defensible and economical. Taxpayers expect public institutions to avoid unnecessary expenditure. Private developers face similar pressures from investors, lenders and shareholders.

Price is also relatively easy to compare. A tenderer submits a figure and the client can place it alongside competing figures. Quality, capability, risk and future performance are more difficult to reduce to a single number.

This creates a temptation to regard the lowest compliant price as the safest procurement decision.

Yet construction projects are rarely straightforward enough for price alone to tell the full story.

Two contractors can tender for exactly the same project while making very different assumptions about productivity, materials, subcontractors, plant, programme, site conditions, risk and overheads. One may have identified risks that another has overlooked. Another may have a more efficient construction methodology. A third may simply have underestimated the work.

The tender prices may look comparable. The underlying propositions may not be.

When a low tender becomes expensive

An unusually low tender should not automatically be regarded as evidence of poor quality or an attempt to undercut competitors. Contractors may have legitimate reasons for being competitive. They may have available capacity, stronger supplier relationships, better access to plant or an innovative construction method.

The issue is whether the price is realistic in relation to the scope and risks of the project.

If it is not, the pressure can emerge in several ways.

A contractor operating with an inadequate margin may have less room to absorb unexpected costs. Cash-flow pressure can affect procurement and subcontractor payments. Programme resources may be reduced. Decisions about materials, workmanship and supervision may become increasingly driven by short-term cost rather than the requirements of the project.

The consequences can include poor workmanship, defects, rework and delays. Safety can also come under pressure where cost-cutting affects site resources, supervision or working practices.

There is another consequence that is sometimes overlooked: disputes.

A contractor that has priced a project too aggressively may subsequently seek additional compensation through variations, claims or extensions of time. Some claims will be legitimate and arise from genuine changes in the client’s requirements or unforeseen conditions. Others may arise from the commercial difficulty of delivering the original scope at the tendered price.

This can turn a procurement decision that initially appeared to save money into a prolonged commercial dispute.

South Africa’s construction procurement experience

The issue is particularly relevant in South Africa, where construction procurement in the public sector operates within a framework that recognises the particular characteristics of infrastructure procurement.

The Construction Industry Development Board (cidb) has developed procurement prescripts and guidance for public-sector infrastructure procurement, including guidance on evaluating tender offers and evaluating quality in tender submissions. The framework provides for consideration of quality and price, rather than treating the tender process as simply a comparison of headline prices.

This distinction is important.

The objective is not to remove price from procurement. Nor is it to create a system in which the most expensive proposal is assumed to be the best. Rather, the procurement process needs to establish whether the bidders are capable of delivering the required work and whether the prices submitted are credible for the scope and conditions of the project.

South Africa’s current procurement framework also illustrates the wider challenge of balancing value for money with other public-policy objectives. The Preferential Procurement Regulations 2022 provide a framework for incorporating specified goals into public procurement alongside price.

For construction clients, therefore, procurement is already about more than asking which contractor has written the smallest number at the bottom of the tender form.

The same question is being asked across Africa

The debate is not unique to South Africa.

In Kenya, public procurement is governed by the Public Procurement and Asset Disposal Act and its regulations. The Public Procurement Regulatory Authority also publishes market price reference information to help public entities make informed decisions on prices. The June 2026 guide, for example, is based on a market survey covering several Kenyan towns and includes building materials and other commonly procured items.

This type of market information is important because a client needs some basis for asking whether a tender price is commercially realistic.

Kenyan construction projects can also demonstrate why the headline tender price is only the beginning of the conversation. A road project, for example, may face changing ground conditions, utility relocations, land-access issues, material price movements, weather disruptions and traffic-management requirements. A building project may face similar pressures around design changes, services coordination, imported equipment and availability of materials.

The same principle applies elsewhere on the continent.

Uganda’s public procurement system, for example, provides for evaluation against criteria stated in the bidding documents and recommends the best evaluated bidder following evaluation and due diligence.

Tanzania’s procurement framework provides an even more direct illustration of the distinction between submitted price and evaluated cost. Its procurement rules allow factors beyond the initial price to be considered where these are specified in the tender documents, while the 2025 regulations provide for quality-and-cost-based selection in certain types of procurement, including works.

Ghana similarly defines the lowest evaluated tender in terms that can include factors such as operating, maintenance and repair costs, delivery or completion time and functional characteristics, where these are specified in the procurement documents.

Nigeria’s procurement system likewise uses the concept of the least evaluated responsive bidder following technical and financial evaluation rather than simply accepting an unqualified bid because it carries the lowest initial figure.

The terminology differs between jurisdictions, but the underlying challenge is familiar: how do clients distinguish a genuinely competitive offer from a price that creates unacceptable delivery risk?

What does best value actually mean?

“Best value” can easily become another procurement phrase unless it is clearly defined.

It does not mean paying the highest price.

It does not mean giving preference to the contractor with the largest company, the longest track record or the most impressive presentation.

And it should not become a mechanism for introducing subjective preferences into an otherwise transparent procurement process.

Best value should be understood in relation to the outcome that the client is trying to achieve.

For a hospital, that may include completion within a defined programme, reliable building services, infection-control requirements, maintainability and the ability to keep parts of the facility operational.

For a road, the relevant considerations may include construction quality, durability, traffic management, programme, materials, drainage and the long-term maintenance burden.

For a water project, reliability, energy consumption, equipment availability and maintainability may be as important as the initial construction cost.

The procurement criteria therefore need to reflect the project itself.

A contractor’s experience and technical capability may matter greatly on a technically complex project but much less on a simple, standardised procurement. A sophisticated evaluation system should not be imposed simply for the sake of sophistication.

The principle is straightforward: the more complex and consequential the project, the more dangerous it becomes to reduce the procurement decision to one number.

The cost of quality

There is also a need to change the way clients think about quality.

Quality is sometimes treated as something that increases construction cost. In reality, the absence of quality can simply move the cost somewhere else.

A cheaper material may reduce the initial capital cost but increase maintenance requirements. Poor installation may shorten the life of an asset. Inadequate waterproofing may result in repeated repairs. Poorly coordinated mechanical and electrical services can create problems that are expensive to resolve once a building is occupied.

This is particularly important in public infrastructure, where the client is often responsible for the asset for many years after the contractor has left the site.

A procurement decision that saves a few percentage points at construction stage may therefore have implications for decades.

This is where the quantity surveyor, engineer, architect, project manager and other built-environment professionals have an important role. Their responsibility is not simply to establish what something costs, but to help the client understand what it is likely to cost to deliver, operate, maintain and ultimately replace.

The importance of an abnormally low tender

One of the practical questions procurement teams should ask is what happens when a tender is significantly below the client’s estimate and the competing bids.

An abnormally low price deserves investigation.

That does not necessarily mean rejecting the tender. The bidder should have an opportunity to demonstrate how the price has been developed and whether it can realistically deliver the specified scope.

There may be a perfectly reasonable explanation. Perhaps the contractor has an innovative methodology. Perhaps it has secured materials at a better price or has spare capacity that reduces its overhead allocation.

But if the explanation is not credible, the apparent saving should not be treated as free money.

The procurement team should be asking what assumptions underpin the price, whether all the required work has been allowed for, whether the proposed programme is achievable, whether the contractor has sufficient resources and whether the financial position of the project remains sustainable.

This is not about protecting contractors from competitive pressure. It is about protecting the project from an unrealistic commercial proposition.

Public procurement carries a wider responsibility

The consequences of procurement decisions are particularly significant when public money is involved.

A delayed school is not simply a delayed construction project. It means learners may continue using inadequate facilities.

A delayed hospital means communities wait longer for services.

A road that deteriorates prematurely creates additional costs for government and disruption for road users.

When a project fails, the eventual bill may include remedial works, professional fees, claims, legal costs, financing costs and the cost of completing the project. There is also the less easily measured cost of lost public benefit.

This changes the question that procurement teams should ask.

Instead of asking only, “How much will this project cost?”, they should also ask, “What will it cost if this procurement decision goes wrong?”

That question does not eliminate the need for financial discipline. It strengthens it.

Moving from price to value

The construction industry does not need to abandon competitive tendering.

Clients still need competitive prices. Contractors still need to operate efficiently. Public institutions still have a duty to protect public funds.

What needs greater attention is the assumption that the lowest initial price necessarily represents the lowest cost to the client.

A more useful approach is to consider price alongside capability, methodology, programme, risk, quality and expected asset performance, with the weighting determined by the nature of the project and clearly stated before bids are evaluated.

This also places greater responsibility on clients to prepare better tender documents. If quality, programme, technical capability or lifecycle considerations are important, they should be identified in the procurement strategy and reflected in the tender requirements. Procurement cannot fairly evaluate something that was never defined.

The same applies to contractors. A tender should be more than a number. It should demonstrate an understanding of the project, its risks and the resources required to deliver it.

Ultimately, value for money is not about paying the least at the beginning.

It is about achieving the required outcome, at a competitive and realistic cost, to the required standard, within the required timeframe and with the risks properly understood.

The lowest price may sometimes be the right price.

But before accepting it, the more useful question may be:

What are we actually buying for that price, and what will it cost us if we get the decision wrong?