“The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

The above is a quote credited to Benjamin Franklin, a leading 18th century American writer, statesman, diplomat and political philosopher.

And more than 230 years since his death, that quote remains as pertinent today as the day it was written as it’s rare to buy something of great quality and at a low price – and if you do, alarm bells should be ringing.

Unsustainable low cost tenders will not benefit the construction industry or our communities in the long run, and all parties should work to prevent them from occurring.

However, across the construction sector, there is a culture of low-cost tender submissions and acceptance. They smother innovation and are damaging to productivity and growth in the industry, all of which in the longer term have an impact on the economy and the ability of contracting authorities to get the best contractors to bid for work. The situation is, in short, perpetuated by an industry that is willing to submit unsustainable pricing and a public sector which is usually required to accept them. Both sides recognise the damage this does.

In an effort to redress the situation, Scottish Government’s procurement team have recently taken action and introduced a new Graduated Pricing Mechanism (GPM) to remove the incentive on suppliers to submit unsustainable low prices in order to compete with other low tenders. This is done through the tender scoring having less recognition of price differences below the median price.

Launched through Scottish Government’s Construction Policy Note 3/2024, the GPM has been developed to encourage the private sector submit appropriately priced tenders for work which will meet the specified requirements the public sector has set out, without placing unsustainable financial pressures on either them, or the project they are bidding for.

The Sustainable Pricing sub group said: “We believe this is a massive step towards eliminating low cost tenders being submitted for good.

“Some firms have been prepared to submit uneconomic or unsustainable tender prices. Such practices significantly increase the risk of poor contract performance, create difficulties within supply chains, have a damaging effect on the industry and contribute to the creation of an adversarial claims culture.

“Scottish Government’s commitment to eradicating low cost tenders is clear to see and we very much welcome the recent Construction Policy Note that will help towards our vision of creating a more sustainable, productive, innovative, and diverse construction industry.”

Welcoming news of the Graduated Pricing Mechanism, architect Willie Watt speaking on behalf of the Royal Incorporation of Architects in Scotland which is represented within the Sustainable Pricing Working Group, said: “The rise of open tendering for construction consultants and architects in the public sector has contributed to over competition, to an extent that there has been much less focus on quality and much greater pressure on costs, with few checks and balances this has contributed to unsustainable pricing, which introduces risk.

"The Royal Incorporation of Architects in Scotland therefore enthusiastically welcomes the Scottish Government’s recently published Graduated Pricing Mechanism. This mechanism should be seen in the context of Grenfell where the cost quality failures contributed significantly to the tragedy, and notable build failures cases in Scotland.

"The Incorporation supports the detailed work carried out across the industry by both the public and private sectors to develop this new approach, which we believe will reduce risk and lead to fairer and more sustainable outcomes. Crucially this is backed up by the Scottish Government’s guidance within the Client Guide to Construction Projects and Construction Policy Notes which includes guidance on Abnormally Low Tenders and Sustainable Tender Pricing. Taken together as a suite of guidance the public sector in Scotland now have the tools to prevent unsustainable pricing.

"We therefore wish to promote their use across public sector projects."