Thursday, 24 April 2014

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.’

Readers' comments (7)

  • Alpha One

    Seems sensible to me.

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  • Wouldn't confirming the supplier's ability to do the work form part of the due diligence on any sizeable service contract?

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  • Rick Campbell

    Oh dear, I find myself in agreement with Alpha One, AGAIN!

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  • Progressive Solutions Required

    From the headline I thought this was going to be the regular Friday outing from Shapps - his new choice based letting scheme where the succesful bidder - well you get the picture, and it would help him keep his promise to end homelessness.

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  • The Democratic Dictator

    First suicide bombing, now suicide bidding....what are they going to outlaw next?

    In my country, if you get £100 worth of work done for £1, it is considered a poor deal - after all, what are slaves for !!!

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  • So the Willmott Dixon bid for Notting Hill Housing Trust's maintenance contract isn't suicide? I guess as WD can afford a loss leader it's ok. So what about staff and subbies... Lovely.

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  • isn't this the old scam where the contractor submits the lowest bid in order to win contract and then subsequently bumps up the price while laughing all the way to the bank?

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