“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 Construction Procurement Transformation Action Plan working group which is part of the Construction Leadership Forum 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.”

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