New Rules on Unbalanced Bidding - Implications of the New Rules on Bidding Strategies
The new rules are changing the competitive environment. There is less chance a competitor’s bid will be rejected as unbalanced and, similarly, bidders may put forth more aggressive bidding strategies under the new rules.
There are several ways a bidder can seek an advantage using an unbalanced bid. Most common is when a bidder perceives an error in the estimated quantities used for bid evaluation, it can inflate prices for those items where the quantities may be underestimated and maybe offset them with lower prices where quantities appear to be overestimated. This strategy can result in a bid that is artificially low in the evaluation but just as profitable, if not more, than a balanced price during performance.
Under another method, a bidder has more opportunities to "front-load" its bid price since the new rules have eliminated reference to the practice. In such a bid, the contractor will, in effect, receive advanced payment for later contract work resulting in interest free use of money with obvious cost benefits for contract financing. Advanced payments are still illegal but the rules have been liberalized.
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