Legal Issues During the Tender Stage: The Argument — and the Counter-Argument — on Both Sides
Legal Issues During the Tender Stage: The Argument — and the Counter-Argument — on Both Sides
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Most people in our industry treat the tender phase as a commercial prelude — the paperwork you get through before the "real" project begins. After more years in complex construction projects than we care to count, we can say with confidence that this view is wrong. Some of the most difficult disputes we have seen arise before a contract is ever signed: over whether an invitation to tender was actually an offer, whether a bid was binding, whether a tender was fairly considered, and who pays for the small fortune that preparing a serious tender costs.
The tender stage is, in legal terms, a grey zone. The parties are negotiating toward a contract that does not yet exist — and yet their conduct in this phase already carries real legal consequences. In this post, we walk through the principal legal issues that arise during pre-qualification, the invitation to tender, and the tender itself. For each issue, we set out the argument as it is usually advanced by one side, and the counter-argument as it is usually answered by the other — because, in our experience, understanding both positions is what keeps you out of trouble.
1. Is an Invitation to Tender an Offer — or Merely an Invitation?
The contractor's argument. Anyone who has priced a major project knows that an invitation to tender (ITT) can read very much like a promise. It sets out the scope, the commercial terms, the evaluation criteria, and sometimes even states that the contract will go to the bidder whose submission best matches the requirements. It is natural for tenderers to read that as: submit the best bid, and you win the work.
The employer's counter-argument. As a general rule, an ITT is not an offer at all. It is an invitation to treat — an invitation to contractors to make offers. No binding contract comes into existence unless and until the employer accepts one of the tenders. The employer remains free, in principle, to accept none of them. This is why we usually recommend — even though many consider it unnecessary — that the ITT documentation expressly reserves the employer's discretion to reject any tender. It costs nothing and avoids an argument later.
Where it gets interesting. The grey zone is real, and we have seen projects land squarely in it. If the ITT expressly states that the employer will accept the lowest tender, the document may cross the line from invitation into offer — or an undertaking coupled with the invitation — with the result that a contract is concluded the moment the lowest offer is communicated, provided it is sufficiently detailed to be capable of acceptance. Equally, where the language is ambiguous, tribunals and courts will look at substance rather than labels. A statement that would appear to a reasonable recipient to be a serious offer can be treated as one, even if its author called it a "mere invitation." The lesson we draw from this is simple: employers should be deliberate about the legal character of every commitment they put into tender documents, and contractors should read those documents for what they actually say — not for what they would like them to mean.
2. Must an Employer Consider Every Compliant Tender Fairly?
The contractor's argument. Preparing a compliant tender for a complex project is expensive and time-consuming. Where the ITT prescribes the rules of the game — a deadline, the required content, the evaluation criteria — a tenderer who submits a conforming bid within those rules is entitled, the argument runs, to have that bid properly considered alongside the others. If an employer receives a timely, compliant tender and simply ignores it — for instance, because its own staff failed to collect it from the inbox before the deadline passed — the tenderer should have a remedy.
The employer's counter-argument. The ITT itself usually states that the employer is not bound to accept any particular tender. Freedom to reject all bids is a cornerstone of competitive procurement: employers need room to cancel, re-scope, or simply conclude that none of the offers is acceptable. Imposing a duty to award, the argument goes, would turn every tender process into a lottery where the most compliant bidder could force a contract into existence.
Where the balance currently lies. The law has settled on a middle position that we think is sensible. An ITT followed by a compliant tender can create what is best described as a collateral contractual relationship — limited in scope — under which the employer owes a duty to consider, and to consider fairly, all tenders that properly match the stated criteria. This is now well accepted in public-sector procurement. Whether the same principle extends to private procurement remains genuinely uncertain, though in our view the direction of travel is clear: the common law recognises no inherent distinction between a public body and a private employer, and we have seen decisions moving the same way in private disputes.
One recurring pattern we warn employers about is the post-tender price squeeze. Where a tender process is conducted under a code of practice for fair competition, approaching the lowest tenderers and asking them to reduce their prices arbitrarily — then awarding to someone else when the lowest bidder refuses — can amount to a breach of the process itself. If, had the rules been followed, the aggrieved tenderer would have won the award, the exposure is real. In our experience, this is one of the most common self-inflicted wounds of the tender phase.
3. Bid Bonds: Protection or Pressure?
The employer's argument. Organising a tender for a large project costs the employer a considerable amount of time and money. The risk that a tenderer withdraws from an ongoing tender — or, worse, refuses to sign after award — is not theoretical. We have seen withdrawals force employers to re-open entire tender processes, with permits expiring and financing becoming unavailable in the meantime. The bid bond exists to discourage exactly this: if a tenderer breaches an obligation attached to the bond — withdrawing a submitted tender, refusing to sign after award, or failing to procure the required performance or advance payment bond — the employer may call on the bond and recover part of its loss.
The contractor's counter-argument. From the tenderer's side, bid bonds lock up financial capacity across multiple simultaneous bids, and the power to call the bond sits with the employer. Contractors understandably ask whether the bond is genuine security or commercial pressure — a lever that can be used to keep a bidder at the table on terms it never agreed to.
How it should work in practice. The chapter's mechanics are fair, and we advise clients to make sure they are reflected in the ITT. An unsuccessful tenderer who has breached no obligation gets the bond back immediately. A successful tenderer gets it back once the obligations for which it was issued — providing the performance bond, arranging insurance within the stated number of days — have been complied with. Disputes in this area almost always trace back to drafting: vague trigger conditions and unclear release mechanics. Precision here is cheap insurance.
4. Who Pays for Tendering — and When Can the Cost Be Recovered?
The default position. This surprises people outside our industry: tenderers are generally not paid for their tendering costs, however substantial. Preparing a bid is work done gratuitously and at the tenderer's own risk — and we have seen tender exercises for complex projects that cost contractors genuinely significant sums. The ITT will often say so expressly: costs borne by the tenderer regardless of the conduct or outcome of the process. Occasionally — much less frequently — the documents provide that the winning contractor's tender costs will be refunded.
The counter-position. There are, however, situations where the employer's conduct shifts the position, and a bidder responding to an ITT may have a grounded claim for those costs. We group them into five:
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The employer never intended to contract anyone. If a tender process is cancelled and a tenderer can show that the employer never had any real intention of awarding to any of the invited tenderers, the employer may be liable in fraud and the affected tenderers may recover their tendering expenses. We emphasise the flip side, because it matters: a genuinely cancelled process is a completely different situation. The difference is intent — and intent is proved by conduct.
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Compliant tenders were not fairly considered. Where an employer breaches the duty to consider all compliant tenders — or to consider them fairly — the affected tenderer may have a claim, at least in the public-procurement context we discussed above.
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Fraudulent or negligent misrepresentation. If the tenderer relied on inaccurate statements of fact in the ITT documents and suffered loss as a result, a claim may lie — even where the employer has attempted to exclude responsibility, a point we develop below.
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Corruption and bribery. Where the process has been corrupted, losing tenderers are entitled to bring actions in deceit or fraud. We have seen this argument move from the theoretical to the very real in procurement disputes.
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Uncertainty created by alternative tenders. Where tenderers are permitted to submit more than one bid with different content, the flexibility itself can generate disputes — particularly where the employer's acceptance is imprecise (more on this below).
5. Disclaimers in the ITT: Can Employers Exclude Responsibility for Inaccurate Information?
The employer's argument. Tender documents are assembled under time pressure and necessarily include statements of fact and information — site data, quantities, design inputs — that the employer has not fully verified. It is standard practice, therefore, for employers to include clauses excluding responsibility for inaccuracies in the information provided, pushing the verification risk onto the tenderer.
The contractor's counter-argument. Tenderers price the works on the basis of that information. Where an inaccuracy in the technical documents — an error in the design, say, or in the quantities — causes the contractor loss, it seems unjust that a boilerplate disclaimer should extinguish the claim entirely.
The legal reality. Two points, both of which we raise with clients regularly. First, exclusion clauses of this kind are construed narrowly: the party relying on them must bring the loss squarely within their wording. Second, such clauses may have to satisfy a reasonableness test before they can do their work. A tenderer who has relied on an inaccurate statement and suffered loss may still have a claim for fraudulent or negligent misrepresentation despite the disclaimer. And separately, we should not forget that inaccurate technical documents are themselves a fertile source of dispute — we have seen entire claims programmes built on errors in the employer's design or quantity information carried from tender stage into the contract.
6. Is a Tender Binding Once Submitted? The "Estimate" Question
The contractor's argument. Contractors sometimes submit documents labelled as "estimates" and take the position that such a document was never intended to be a binding offer — that there is a trade understanding that estimates are provisional, not commitments.
The counter-argument. The short answer, which has been given by the courts more than once, is that no such custom exists — and if it did, it would be contrary to law. A document is read as a reasonable recipient would understand it. If a contractor sends a priced document responding to drawings and specifications, and the employer accepts it, a contract can exist whatever the contractor later says it "intended."
Our practical advice. It is vital that a tender states clearly whether it is an offer capable of acceptance. Beyond that, the tender must be prepared with care and — critically — with enough time. In our experience, insufficient preparation time is at the root of most tender-stage errors: mistakes in measurement quantities, poor knowledge of the work actually required, underestimation of price escalation, and plain clerical errors in the bid documents. Employers award projects based on the tenders they receive, and these inaccuracies become the raw material of complex disputes later. This is also why we value mid-tender interviews: they let the employer clarify the ITT before submission and avoid inaccurate tenders being produced in the first place.
7. Alternative Tenders: Flexibility or a Recipe for Dispute?
The argument for. Some tender processes allow a contractor to submit two tenders with different content — for example, one at a fixed price and another on a cost-plus basis — from which the employer may choose. There is real commercial logic in this: it gives the employer options and lets the contractor offer alternatives that may suit the project better.
The counter-argument. We have seen this flexibility turn into a trap. If the employer communicates acceptance of "your tender" without specifying which tender is being accepted, the acceptance is imprecise — and there may be no contract at all. In one situation familiar to practitioners, an employer accepted a contractor's tender "pending formalities," then, when material prices rose, purported to confirm acceptance of the fixed-price version. The contractor refused to sign but carried on working. The result was that no contract was concluded on either tender, and the contractor was entitled to be paid for the work actually done on a value basis.
The lesson. Where alternative tenders are permitted, the acceptance must identify precisely which one is accepted. Anything less invites exactly the uncertainty that ends in quantum meruit claims and renegotiation under pressure — the worst possible basis on which to start a complex project.
8. Lowest Price or Best Value: How Should Tenders Be Evaluated?
The lowest-price argument. Awarding to the lowest compliant bidder is simple, objective, and easy to defend against disappointed competitors. For employers exposed to challenge, there is real comfort in a number.
The counter-argument. We have seen too many projects where the lowest upfront price became the highest final cost. Awarding a construction contract on price alone, without regard to other factors, can lead directly to cost and time overruns. This is why most sophisticated employers now seek value for money: the best mix of quality for the least cost, weighting price against non-price factors such as technical merit, track record, aesthetic and functional characteristics, accessibility, social and environmental characteristics, innovation, and delivery conditions.
The MEAT approach. One of the most widely used evaluation methods is MEAT — the Most Economically Advantageous Tender. Each tender receives a score calculated by reference to the best price-to-quality ratio, with each criterion given a relative weighting stated in the tender documents, so that every bid is assessed against the same published yardstick.
Reducing the risk of challenge. Whatever method is chosen, we advise three disciplines, all drawn from hard-won experience:
- Carry out the evaluation in accordance with the criteria and methodology stated in the ITT — not criteria invented afterwards;
- Ensure the criteria and methodology are objective; and
- Where possible, have the same team of evaluators assess all bids, to guarantee consistency.
On large processes with many tenderers, employers may first exclude extreme tenders — in price or technical terms — and those deviating most from the ITT requirements, before scoring the remainder.
Conclusion: The Tender Phase Deserves the Same Discipline as the Contract
The common thread through every one of these issues is the same: conduct that parties treat as preliminary has legal consequences. The ITT sets the rules of a process that the law may hold you to. The tender is an offer that may bind. The evaluation is a decision that may be challenged. The costs of bidding may, in defined circumstances, become the employer's liability.
Our takeaways, for both sides of the table:
For employers: reserve discretion expressly; run the process exactly as advertised; consider every compliant tender fairly; never squeeze prices arbitrarily after submission; draft bid-bond triggers and release mechanics precisely; and remember that disclaimers are not bulletproof.
For contractors: read the ITT for its legal effect, not just its scope; make clear whether your submission is an offer; allow genuine time for preparation; document your compliance with every stated requirement; and know that if the process is a sham, or your compliant bid is ignored, or you relied on a misrepresentation, the costs you spent bidding may be recoverable.
The tender phase is not a prelude to the contract. In many ways, it is where the project — and its disputes — truly begin.