Just because someone's selling burgers for 5 bucks doesn't mean they're plotting to bankrupt McDonald's, sometimes, they're just really good at flipping patties fast. When it comes to competitive bidding, a rock-bottom price might raise eyebrows, but it isn't always anti-competitive, nor does it necessarily undermine the competitive integrity of the process. Some tenderers, especially incumbents, have simply mastered the art of sizzling and flipping with a bit more speed in comparison to others.
In the recent Court decision of Ndodana Consulting Engineers & Others v SANRAL & Others, handed down by the Pretoria High Court, and spearheaded by the FWB Team, it was confirmed that a comparatively low tender, which by default implies very low prices, does not automatically make a bid anti-competitive and would not undermine the integrity of the process, especially when the bidder can show genuine operational advantages or historical efficiencies. This case centred around a dispute over major road-maintenance tenders. One bidder (the incumbent contractor) had a long history of providing the same services and had been the successful tenderer for the last 25 years and claimed it could offer lower prices thanks to existing infrastructure, data, experienced staff, and industry related knowledge obtained as a result of doing the work for such a significant period.
However, the tendering authority declared these prices as "unbalanced" and further disqualified the bids on the basis that they were deemed too low and posed a financial risk. The precise ambit of this financial risk was never fully explained, and this is still open to speculation, however one might reasonably infer that the authority questioned the feasibility of delivering the required work at such rates perhaps concluding, in effect, that no one can flip a patty that fast without cutting corners.
The Court, reviewing both the process and the reasons for disqualification, concluded that relatively low bids are not automatically anti-competitive. Provided a bidder can show how and why it arrived at its lower prices, whether through operational efficiencies or historical knowledge. The mere fact that the rates are lower than competitors' does not mean the bid is unacceptably risky, anti-competitive, nor does it mean that a tenderer undercuts the market. The Court confirmed that a truly competitive price, grounded in proven efficiency or prior experience, is both lawful and beneficial to the public purse. The key is transparency: a clear explanation of costs protects both the bidder's credibility and the integrity of the tender process itself.
That said, the flip side of the burger patty does exist, where low bids could amount to anti-competitive conduct, and due to the nature of the bid, is deserving of being disqualified. For example, when a bidder offers prices below the reasonable cost of performing the work with the intent of driving competitors out of the market and creating a monopoly, this can distort competition. If a bidder's low price is unsustainable and designed to undercut competitors with the expectation of raising prices in later bids once they have eliminated competition, this could amount to predatory pricing. Additionally, if the bidder is not able to demonstrate that the low price is backed by efficiencies or legitimate cost savings, and instead relies on unrealistic assumptions or concealed cost-cutting measures, this would suggest that the bid may be anti-competitive. In such cases, the tendering authority has a responsibility to thoroughly assess the bidder's pricing model to ensure it is not indicative of market manipulation or anti-competitive behaviour.
In conclusion, low prices, in and of themselves, are not indicative of anti-competitive conduct. When supported by rational justification such as prior experience or operational efficiencies such pricing promotes healthy competition rather than being anti-competitive. Disqualifying bids solely on the basis of price in the absence of a benchmark against which tender pricing will be evaluated, and without proper inquiry into the bidder's capabilities or cost structures, undermines the very competitiveness that public procurement seeks to promote. As long as the bidder can demonstrate an ability to deliver the required services without compromising quality, sustainability, or contractual obligations, a competitively priced offer should be viewed not with suspicion, but as a potential win for both the public entity and the taxpayer.
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