Friday, 27 March 2015

Housing associations introduce new clauses to stop abnormally low bids

Landlords crack down on ‘suicide-bidding’

Housing associations are including new clauses in tenders to try to prevent companies winning work with abnormally low ‘suicide’ bids.

A handful of landlords are understood to be using the clauses, which for the first time allow them to discard bids that fall below a specific threshold.

Poplar Harca has introduced a clause in tenders awarded as part of its £145 million refurbishment programme. The clause gives the 8,400-home association the right to ask contractors for evidence that the work can be carried out to standard if the bid is more than 10 per cent below the average. The clause says: ‘In the event that… the employer still considers a tender price to be abnormally low, the employer reserves the right to discount that tender submission.’

Although EU law allows businesses to reject abnormally low bids, it does not define ‘abnormally low’, which has lead to disputes with bidders.

Paul Dooley, director of estate regeneration at Poplar Harca, said the association decided to act after receiving several low bids, including some of up to 20 per cent lower than the average. He said: ‘We feel that without a clause in the contract we could be subject to contractors making a challenge.’

The move follows concern in the sector about ‘suicide-bidding’, in which companies bid at amounts that do not cover the cost of their work. This can lead to poor quality service and to firms seeking contract loopholes to charge clients extra.

Suicide-bidding was partly blamed for last year’s collapse of contractors Connaught and Rok.

Peter Kitson, solicitor at Trowers & Hamlins, confirmed a small number of associations are now using the clauses. Mr Kitson warned that any clause would have to comply with EU procurement regulations, which aim to ensure value for money.

The move was welcomed by contractors, including United House, Willmott Dixon, Lovell and Morrison. Stewart Davenport, managing director of Lovell, said: ‘This is the right thing to do. If bids come in too low contractors might start looking at every claim possible and it is not possible to have a proper relationship.’

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