What is an Abnormally Low Bid?
Video | 8 November 2019
This video outlines how ADB borrowers can identify and assess an Abnormally Low Bid during the evaluation phase of the procurement process.
What is an abnormally low bid?
An abnormally low bid or ALB describes a situation where the price proposed by a bidder appears unreasonably low, so much that it raises concerns about a bidder’s ability to successfully and compliantly fulfill a contract.
It could be a sign of risks such as lack of competence, inability to follow agreed standards and specifications, or comply with environmental and labor laws.
How can a borrower identify a potential ALB?
The borrower can compare the bid price with its own cost estimate, with the prices submitted by other substantially responsive bidders, or with the prices paid for previous contracts that are similar in nature and scope.
If there are significant variances with any of these benchmarks, the borrower should seek clarification from the bidder so it can make an informed decision whether or not the submitted price is justified to effectively perform the obligations of the contract.
Why is it important to seek clarification for an ALB?
By seeking clarification and then conducting thorough analysis, the borrower can either reject the bid if it presents substantial performance or compliance risks, accept the bid but require an increase in the performance security to mitigate for potential financial loss or performance issues, or conclude that the low bid price is reasonably justified and thus can be accepted by both the borrower and ADB.
ADB’s Guidance Note aims to assist users on how to identify and address ALBs during the bid evaluation phase of the procurement cycle.