How to Assess a Construction Tender Before Submitting a Bid

Deciding whether to bid starts before calculating the discount

Submitting a bid for a public works contract is not just about adjusting prices to compete. First, you need to determine whether the company can meet the requirements, carry out the scope under the expected conditions, and sustain the contract financially. An orderly review helps identify incompatibilities and risks before committing resources to preparing a proposal.

In Spain, the tender documents and case file define the specific conditions of each procurement. The general reference is the Public Sector Contracts Act (LCSP), but eligibility, award criteria, and performance obligations must be checked in each case. This guide proposes a business assessment method; it is not a legal interpretation applicable to every case file.

1. Confirm capability, financial and technical capacity, and availability

Start by checking whether the company meets the participation requirements and can demonstrate this in the required manner and within the required timeframe. Review the required financial and technical capacity, the experience sought, and any commitments concerning personnel or equipment. If you plan to rely on other companies, check what role they would have and which documentary requirements apply to them.

Then compare these requirements with your actual delivery capacity. It is not enough for a team to appear in a schedule: it must be available throughout the planned period without compromising other projects. Do the same for machinery, facilities, specialists, and critical suppliers.

A gap that cannot be resolved in time—for example, a lack of verifiable experience or unavailable resources—may be grounds for ruling out the tender before preparing a financial bid.

2. Read the case file as a whole

Review the tender documents, project, quantity schedules, drawings, budget, timetable, and published clarifications together. Check the current versions on the relevant contracting authority’s profile. The official platform is the channel for monitoring notices, tender documents, and other procedural milestones, but the case-file documentation is what allows you to identify the specific conditions.

Pay particular attention to:

• The scope of the works, the included items, and any possible interfaces with other contractors or existing services.
• The award criteria and the documentation required to respond to them.
• Performance conditions, the timeframe, and coordination obligations.
• The financial rules, guarantees, penalties, and payment terms set out in the documents.
• Questions and clarifications, which may specify how a requirement should be understood.

Note any contradictions, gaps, or assumptions that affect the price or execution method. If the case file allows questions to be submitted, consider which ones are crucial to pricing the bid and submit them within the established deadline. Do not assume that an item or obligation is excluded simply because it is not clearly detailed in one part of the project.

3. Compare quantities and prices with your own data

The tender budget figure is no substitute for an internal cost calculation. Check the quantities and rebuild the relevant prices using current company data: materials, labour, equipment, transport, productivity rates, indirect costs and, where applicable, subcontracting.

Pay attention to how old the price databases are and to the difference between budgeted costs and available market quotations or terms. The source on the economics of public works warns that some projects may be tendered using outdated prices, particularly when time passes between drafting and tendering. It also notes that some budgets may contain high prices. These are observations about possible situations, not a rule for all contracts: each case file must be checked and the assumptions used documented.

For each significant item, ask whether the expected productivity rate is achievable under the actual site conditions. Review access, work sequencing, interference, location, supply availability, and time restrictions where these are documented. An estimate based on theoretical productivity rates can conceal costs or deadlines that are difficult to sustain.

4. Build a complete cost estimate and cash-flow forecast

Combine direct costs with the site and overhead expenses relevant to delivery. Include staff, machinery, purchases, transport, temporary facilities, coordination, and any other resources needed to fulfil the contract. Separate confirmed costs from estimates and flag the items with the greatest uncertainty.

Then analyse the schedule of outgoings and receipts in accordance with the case-file conditions. A project may be profitable overall and still require more financing than the company can sustain during execution. This deserves particular attention when the payment arrangement requires the contractor to advance resources or receive payment later: account for the need for liquidity and its financing cost, without assuming that all public contracts work the same way.

Include in the analysis any applicable guarantees and other financial obligations set out in the tender documents. The aim is to estimate how much capital and financial capacity would be committed, not merely to compare projected revenue with production costs.

5. Assess execution and contractual risks

Turn the main uncertainties into a list of risks linked to their operational and financial impact. Where justified by the case file, this could include questions about quantities, material availability, coordination with third parties, demanding deadlines, or reliance on subcontractors.

Also review the contractual consequences specified for delays or breaches, as well as the payment terms. Do not attribute penalties, price-adjustment mechanisms, or compensation to the contract unless they appear in the applicable documentation. If a condition is unclear, identify it as an outstanding question, not as an already quantified cost or a guaranteed entitlement.

6. Assess the bid price and any potential abnormally low bid

Compare the price you could bid with the complete cost, the margin the company needs to preserve, and the identified risks. The LCSP provides for rules to deal with abnormally low or disproportionate bids, and their application depends on the criteria established in the procedure. A bid that falls into this category may require a justification of its viability; it is not enough simply to have proposed a low price.

For this reason, every significant reduction must be explainable by a verifiable assumption: a productivity rate supported by experience, a substantiated purchasing term, or a work organisation that saves resources while still ensuring compliance. The possibility of justifying a bid and the commercial decision to accept it are separate matters. If the company cannot support its costs and method with consistent information, the price may expose it to a risk that outweighs the competitive advantage.

7. Document the decision to bid or withdraw

Before submitting the bid, bring together the findings from each review in an internal record:

1. Requirements: which are met and how they will be demonstrated.
2. Execution: which resources will be available and what external support may be needed.
3. Financials: estimated cost, assumptions, margin, and the most uncertain items.
4. Cash flow: financing needs based on the schedule and payment terms.
5. Risks: relevant contractual obligations and possible management measures.
6. Decision: bid, seek clarifications where appropriate, or do not submit a bid, stating the reasons.

The decision not to bid can also be a rational business conclusion when the requirements are unsuitable, the scope cannot be assessed with sufficient certainty, or the combination of costs, timeframe, and financial exposure is not manageable for the company. There is no universal margin or risk threshold that applies to all SMEs: the decision must be assessed in light of the company’s structure, experience, portfolio of projects, and financial capacity.