Protecting Public Funds Without Undermining Suppliers in a Public Tender

Selecting the lowest compliant bidder is straightforward, transparent and, in some cases, entirely appropriate. But when this approach is applied to complex services, an apparent saving can quickly become an operational risk. To protect public funds, contracting authorities and service providers, Quebec is gradually shifting from a lowest-price model toward best value procurement.

For decades, awarding a contract to the lowest compliant bidder has been viewed as one of the strongest safeguards against favouritism and excessive public spending. The reasoning appears difficult to challenge: if several companies meet the same requirements, why should the public sector pay more?

That logic remains sound for standardized goods and services that can be described precisely and assessed objectively. It becomes less reliable, however, when performance depends on labour, supervision, work methods, equipment, operational continuity and the ability to respond to unforeseen conditions.

Building maintenance services are a good example. Two contractors may both claim compliance with the same specifications while proposing very different staffing levels, equipment inventories, supervisory structures and periodic maintenance programs. On paper, both bids may appear compliant. Operationally, they may describe two very different levels of service.

The issue is therefore not whether public organizations should abandon financial discipline. The real question is when the lowest compliant price genuinely delivers the best return on public spending.

Why is the lowest compliant price so difficult to replace?

The lowest-price model remains popular because it is simple. A dollar amount is easy to read, rank and explain. It appears to limit decision-makers’ discretion and simplifies accountability: the organization awarded the contract to the lowest-priced compliant bidder.

An evaluation based on best overall value is more demanding. The contracting authority must clearly define what it means by:

• an adequate operating structure;

• sufficient supervision;

• a credible mobilization plan;

• an effective quality-control process;

• a demonstrated ability to maintain service continuity.

  
  

It also requires a meaningful evaluation grid, a qualified committee and documented justification for the scores assigned.

Public-sector caution is therefore understandable. A poorly designed qualitative evaluation can become subjective, favour companies that produce the most polished proposals or create grounds for disputes.

Quebec’s Autorité des marchés publics illustrated this concern in a 2024 decision involving a quality-price evaluation process. The organization had rejected a proposal based on minimum expectations that were not clearly stated in the tender documents. The AMP concluded that this approach was inconsistent with the principles of transparency and fairness.

Quality criteria cannot be introduced after bids have been submitted. They must be defined, measurable and disclosed to all bidders in advance.

Moving away from an automatic lowest-price reflex does not mean giving evaluation committees more unchecked discretion. It requires better planning, clearer requirements and stronger transparency.

The lowest price is not automatically a false economy

A lower-priced bid is not necessarily inadequate.

A company may be able to submit a more competitive price because of:

• better work organization;

• more productive equipment;

• stronger purchasing power;

• resources already located nearby;

• reduced non-productive travel;

• automation of administrative tasks;

• reasonable sharing of supervisory resources.

  
  

Conversely, a more expensive proposal does not guarantee better service quality. It may reflect a heavier administrative structure, less efficient methods or a higher margin that offers no direct benefit to the contracting authority.

Price therefore remains an essential part of the decision. The problem arises when it is treated as sufficient evidence of value.

Quebec’s procurement framework already provides several award methods, including minimum quality followed by price, quality-adjusted price and the lowest compliant price. The latter is appropriate when the organization can define the expected quality through precise compliance conditions, performance levels and technical or functional specifications.

In practical terms:

The more precisely a requirement can be described and measured, the more heavily price can be weighted. The more a service depends on people, judgement and operating conditions, the more important qualitative analysis becomes.

When compliant bids do not describe the same service

In one recent institutional tender, four annual proposals ranged from approximately $930,000 to $1.85 million, representing a difference of nearly 50% between the lowest and highest bids.

A price-only comparison would have suggested a substantial saving. A review of the labour component, however, revealed four very different operating models. The lowest bidder proposed approximately 325 labour hours per week, while the other proposals provided 450, 550 and 650 hours respectively.

The lower number of hours did not automatically prove that the contractor would be unable to perform the work. It did, however, require an explanation. Was the bidder relying on better equipment? A particular technology? Subcontracting that was not clearly shown in the cost breakdown? A different interpretation of the required frequencies?

The analysis also identified missing safety-related equipment and no separate cost for wall washing. That omission could have meant several things:

• the work was included in regular labour hours;

• it had been overlooked;

• it would later be billed as additional work.

  
  

Without clarification, the proposals were not truly comparable.

In a second institutional procurement process, six five-year proposals showed a 44% spread between the lowest and highest prices. Annual labour hours ranged from 11,500 to 21,900—almost double from one proposal to another. These differences reflected fundamentally different interpretations of the expected workload.

One proposal also appeared competitive over the full five-year term, but its costs dropped by approximately 83% during the two option years. Most labour expenses had disappeared from the corresponding columns. Over the three firm years, that same proposal was actually the most expensive in the group.

The price ranking was mathematically accurate, but economically misleading.

Bid analysis should not stop at verifying that the totals add up. It must determine whether the underlying operational assumptions are coherent.

The true cost of the contract often appears after award

When a proposal is underfunded, the problem is not always visible during mobilization. A contractor may initially deploy a full team, temporarily relocate equipment from other sites or postpone less visible periodic work.

The consequences emerge gradually:

• absences are not fully covered;

• periodic work is deferred;

• supervisors are pulled into production;

• equipment becomes insufficient;

• complaints and rework increase;

• certain services are reclassified as additional work.

  
  

The submitted price then represents only part of the true contract cost. The contracting authority must also consider:

• contract amendments;

• additional work;

• extra inspections;

• management time spent resolving complaints;

• rework;

• premature deterioration of surfaces or materials;

• the risk of interruption or termination;

• the cost of launching a new procurement process.

  
  

The overall cost can be viewed through a simple framework:

Contract price + amendments + additional oversight + cost of poor quality + disruption risk.

This is not an official accounting formula. It is a decision-making tool. A saving achieved at contract award may be erased by the costs and management effort required to sustain service delivery afterward.

Protecting service providers also protects public funds

The debate around lowest-price procurement is often framed solely as a matter of protecting public funds. Yet the contractor’s economic viability is also in the contracting authority’s interest.

A company may submit an aggressive price to:

• retain a major client;

• enter a new market;

• protect its volume;

• maintain its workforce;

• secure a public-sector reference.

  
  

If it underestimates the workload or contractual obligations, it may later have to absorb losses, reduce resources or seek to renegotiate certain conditions.

That outcome weakens both parties.

The contractor has less capacity to invest in training, equipment, supervision, and occupational health and safety. Employees are expected to carry an unrealistic workload. The client receives an unstable service and must spend more time on vendor management.

Over time, companies that genuinely invest in compliance and quality may stop participating in procurement processes where price consistently outweighs those investments. The market then loses credible suppliers, competition declines and public organizations become more dependent on a smaller pool of contractors.

Protecting a contractor does not mean guaranteeing its profit margin. It means allowing the company to bid on a clearly defined requirement, with understandable risks and an economically deliverable contract.

Federal guidance on firm pricing similarly notes that this model is best suited to services that are readily quantifiable, supported by precise specifications and based on labour, material and overhead costs that can be estimated reliably.

When those conditions are not present, transferring all uncertainty to the contractor can produce either an overly cautious bid or an unrealistically aggressive one.

Quebec is moving toward best value

Quebec’s 2026–2030 Government Procurement Strategy signals a clear policy shift. The government has stated its intention to move away from the lowest compliant price “in its current form” and give greater weight to quality, best value, competitive dialogue and collaborative approaches.

The strategy aims to increase the share of contracts awarded on the basis of quality and value from 28% to 33%, rather than relying solely on the lowest compliant price. It also calls for stronger buyer competencies through new training pathways and practical tools designed to support procurement methods already permitted under the regulatory framework.

The transition will necessarily be gradual. Not every contract requires a complex qualitative evaluation. Lowest price can remain effective for standardized purchases where features, quantities and outcomes can be defined precisely.

Quebec’s municipal procurement framework also provides several award procedures, including lowest proposed price, overall criteria evaluation, delayed disclosure of price, prequalification of suppliers and certain partnership-based approaches tailored to the project.

The tools largely exist already. The challenge is to select the right mechanism for the complexity and risk profile of each contract.

The abnormally low bid: a safeguard that deserves greater use

A significant price difference should not automatically result in rejection. A company must be given an opportunity to explain its genuine economic advantage.

For certain service contracts issued by Quebec public bodies, an abnormally low bid is one that, following a serious and documented analysis, appears insufficient to perform the contract under the stated conditions without putting its execution at risk.

When a proposal appears abnormally low, the organization must ask the supplier to justify its price in writing within five days of receiving the request.

This process protects both parties.

The contracting authority can determine whether the price is based on:

• credible productivity gains;

• equipment that has already been amortized;

• clearly documented resource sharing;

• an innovative work method;

• particularly favourable purchasing conditions;

• a complete understanding of the specifications.

  
  

The supplier, in turn, can demonstrate that the price is not the result of an error or omission.

An automatic threshold based only on a percentage difference from the average would be less reliable. A substantially lower proposal may be entirely justified, while a bid close to the median may still contain missing work or unrealistic assumptions.

The World Bank similarly recommends a structured process for identifying, clarifying and assessing potentially abnormally low bids before a decision is made.

Six ways to move from price to best value

1. Select the award method according to risk

Price can remain the dominant factor for repetitive, measurable and fully defined requirements. A complex labour-intensive service calls for a stronger evaluation of quality and operational capacity.

2. Define the expected outcomes

Tender documents should specify:

• service levels;

• tasks and frequencies;

• measurable results;

• correction timelines;

• each party’s responsibilities;

• inspection mechanisms;

• reporting requirements.

  
  

3. Require comparable cost breakdowns

A proper bid analysis should clearly compare:

• labour hours;

• supervision;

• periodic work;

• equipment;

• subcontracting;

• rates for additional work;

• firm and option years;

• escalation assumptions.

  
  

4. Clarify differences without condemning them automatically

A price, staffing level or unit rate that differs substantially from other bids should trigger a question, not an immediate verdict. The supplier’s response should then be assessed and retained in the procurement record.

5. Use verifiable qualitative criteria

A promise of “superior quality” cannot be evaluated objectively. A replacement plan, inspection frequency, correction timeframe or supervisory structure can be documented and compared.

6. Measure contract performance

Best value should not be assessed only at the award stage. It should be monitored throughout the contract through:

• inspections;

• audits;

• performance indicators;

• periodic-task tracking;

• correction times;

• occupant feedback;

• formal supplier performance evaluations.

  
  

Pursuing value without weakening competition

The lowest compliant price has long reassured public organizations because it offers a simple answer to a complex decision. It remains appropriate when the requirement can be fully defined and the compliant bids are genuinely equivalent.

In property services, maintenance, cleaning and many other operational contracts, that equivalence should not be assumed.

Moving from price to best value does not mean paying more without justification. It means:

• defining needs more precisely;

• comparing proposals more effectively;

• validating price viability;

• allocating risk more fairly;

• measuring results after award.

  
  

This shift protects the contracting authority from artificial savings. It protects the contractor from unsustainable commitments. It also protects employees and building occupants, who experience the direct consequences of an under-resourced contract.

A successful public procurement process does not simply identify the least expensive offer on opening day. It identifies the proposal that will remain the most advantageous until the contract ends.

Key takeaways

• The lowest compliant price remains appropriate for standardized and precisely defined requirements.

• A low bid is not proof of under-resourcing, but it must be explainable.

• Quality requirements must be defined and disclosed before bids are submitted.

• An economically viable contract protects both the service provider and the contracting authority.

• An abnormally low bid should be clarified and assessed, not rejected automatically.

• Best value balances price, quality, risk and delivery capacity.

• Successful reform will depend on clear specifications, skilled evaluation committees and ongoing contract performance monitoring.