Lowest Total Price: How Hiring Engineering Services on Price Alone Can Lead to Stoppages and Contract Amendments

Understand why hiring engineering services solely on the lowest total price can lead to unfeasible bids, contract amendments, poor quality and stoppages — and how Owner’s Engineering and consulting engineering protect the client.

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Hiring engineering services based on the lowest total price may, at first glance, seem like an objective, transparent and economically advantageous decision. The problem begins when price becomes the only relevant filter in the procurement.

In construction works, design, supervision, inspection, technical consulting and specialized engineering services, the cheapest proposal is not always the safest proposal. When the scope is complex, the reference estimate is weak or the technical analysis of the bid is superficial, the lowest total price may conceal risks that only appear later: poor technical quality, requests for contract amendments, delays, economic-financial rebalancing, contractual disputes and even work stoppage.

This is a critical issue for public and private clients. Procurement should seek not only the lowest initial outlay, but the proposal most capable of delivering the expected result on schedule, with quality, safety, technical traceability and economic-financial sustainability.

It is in this context that Owner’s Engineering, technical procurement support and consulting engineering become instruments for protecting the client.

Lowest total price is not the problem. The problem is procuring without adequate engineering support.

The lowest total price criterion may be appropriate for certain procurements, especially when the scope is well defined, technical requirements are objective, quantities are reliable and proposals are comparable. The risk arises when this criterion is used as a shortcut to replace a consistent technical assessment.

In engineering services, price depends on variables that are not always clearly shown in the proposal: allocated technical team, professional seniority, work methodology, estimated productivity, field assumptions, software, equipment, travel, testing, documentation, ART professional-responsibility registrations, insurance, quality controls, assumed risks and interfaces with other suppliers.

When all of this is reduced to a single price line, technically very different proposals begin to look equivalent. The client sees only the final amount, but may not realize that each bidder or supplier is pricing completely different scopes, risks and quality levels.

Why do very low bids create a risk of stoppage?

The CBIC report on stalled public works notes that a procurement culture based on the lowest price can encourage underpriced bids with low economic-financial sustainability. The study also highlights so-called “price diving”: the bidder aggressively reduces its price to win the competition and, during execution, realizes that it cannot honor the offered price.

In practice, this creates a familiar cycle in construction and engineering services:

1. the procurement is decided by the lowest total price;
2. the winning bid presents a steep discount;
3. the allocated team is smaller or less experienced than necessary;
4. the supplier tries to recover margin through claims, scope reduction, low productivity or contract amendments;
5. the schedule starts to slip;
6. technical quality declines;
7. the client must intervene, renegotiate, reprocure or stop part of the scope.

In this scenario, the lowest price does not reduce procurement cost. It merely transfers part of the cost into the future, in a more expensive and less controllable form.

Procurement is more critical for consulting engineering and technical support services

Consulting engineering services are intellectual in nature and depend heavily on team quality, methodology and accumulated experience. This applies to design development and review, feasibility studies, construction supervision, inspection support, technical due diligence, commissioning, interface management, bid analysis, technical opinions and Owner’s Engineering.

In its guidance on cost-estimate spreadsheets for public works, the TCU points out that pricing specialized engineering and architectural services involves a reasonable degree of uncertainty because these are intellectual and creative activities. Adequate estimating requires a detailed scope, definition of deliverables, schedules, activities, team, professional allocation and direct and indirect costs.

For this reason, comparing only the total price may be insufficient. Two proposals may have the same title — “technical supervision,” “consulting,” “executive design,” “inspection support” — while delivering completely different levels of technical depth, documentation, control and responsibility.

Five signs that the lowest total price may become expensive

1. A discount incompatible with the scope

A proposal far below the reference estimate or market average should be technically analyzed. The point is not to automatically reject the lowest price, but to verify whether the supplier has demonstrated how it intends to perform the scope at that price.

Technical hours, team composition, methodology, productivity, travel costs, inputs, tools, risks and deliverables must be assessed. Without this analysis, the client may accept a proposal that appears economical but is not executable.

2. Proposal without a cost breakdown

When a proposal presents only the final price without showing how the amount was built up, future inspection loses a basis for monitoring execution, measuring progress, analyzing claims and discussing scope changes.

For engineering services, the cost breakdown should make it possible to understand the team, technical hours, direct expenses, mobilization, equipment, tests, travel, labor charges, taxes and remuneration. This transparency protects both the client and the contractor.

3. Generic or poorly detailed scope

The more generic the Terms of Reference, the greater the chance that each bidder will interpret the scope differently. One supplier may consider weekly visits; another, monthly visits. One may plan for a senior engineer; another, a junior team. One may include multidisciplinary coordination; another, only document review.

In this scenario, the lowest total price no longer compares equivalent proposals. In practice, it compares different interpretations of the same problem.

4. Award criterion without minimum technical evaluation

Engineering procurement needs to verify experience, technical capability, team, methodology, deliverables, standards compliance and management capability. When the analysis is limited to formal qualification and price, the client may select a company that meets the documentary minimum but lacks the robustness to handle the project’s real complexity.

In critical procurements, technical evaluation is not excessive rigor. It is investment protection.

5. Absence of a risk allocation matrix

Without a risk matrix, the offered price may be based on undeclared assumptions. When an interference, delayed area release, design change, operational restriction, information delay or technical rework occurs, the dispute begins: was the risk the client’s or the contractor’s?

The risk matrix does not eliminate uncertainty, but it defines in advance how uncertainty will be handled. This reduces disputes, improves predictability and allows more realistic proposals.

The false economy of the lowest total price

The savings obtained at procurement can quickly disappear when the winning proposal cannot sustain execution. The client begins to face indirect costs that were often not considered in the initial decision:

• successive design or documentation revisions;
• increased internal inspection workload;
• rework due to technical failures;
• delays to the main construction schedule;
• contract amendments caused by poorly defined scope;
• claims for economic-financial rebalancing;
• loss of productivity in dependent contracts;
• supplier replacement;
• litigation or administrative disputes;
• partial or total project stoppage.

The contract price is only one part of the cost. The client must assess the total cost of the decision, including schedule, quality, governance and project-continuity risks.

How to protect procurement without sacrificing competition

The objective is not to make procurement closed, subjective or excessively bureaucratic. The objective is to build technically healthy competition in which price is analyzed on a consistent basis of comparison.

1. Define the scope before asking for a price

The first step is to clearly define what will be procured: products, responsibilities, assumptions, interfaces, applicable standards, acceptance criteria, meeting frequency, reporting routines, measurement method and required seniority level.

The clearer the scope, the greater the chance of receiving comparable proposals.

2. Build a defensible reference estimate

The reference estimate should reflect the service’s actual complexity. For consulting engineering, this means estimating team, technical hours, allocation period, travel, equipment, tests, software, document issuance, ART registrations and other necessary costs.

A weak estimate undermines feasibility analysis and reduces the client’s ability to identify artificially low proposals.

3. Require cost breakdowns and assumptions

The proposal should show how the price was built. This does not mean intruding into the supplier’s commercial strategy, but requiring enough information to assess technical and economic consistency.

Without a breakdown, there is no sound feasibility analysis. Without assumptions, there is no sound contract management.

4. Perform technical analysis of proposals

The technical analysis should verify whether the methodology, team, schedule, resources and assumptions are compatible with the scope. This assessment must be made before contracting, not only when the contract is already in crisis.

In critical projects, an independent review can identify weaknesses that the procurement department alone would be unlikely to detect.

5. Use the risk matrix as a pricing instrument

Poorly allocated risk distorts price. If the contractor assumes risks it cannot control, it may include excessive contingencies or simply ignore them to win the competition. If the client unknowingly assumes risks, the procurement may appear cheap but become expensive later.

The risk matrix helps price the contract correctly, reduce disputes and define responsibilities before execution.

Where does Owner’s Engineering fit?

Owner’s Engineering acts as the project owner’s technical representative. Its role is to protect the client’s interests in technical, commercial and contractual engineering decisions.

During procurement, this support may include:

• reviewing the scope and Terms of Reference;
• supporting definition of the procurement model;
• preparing or reviewing the reference estimate;
• defining technical evaluation criteria;
• structuring the risk matrix;
• analyzing proposal feasibility;
• technically comparing suppliers;
• issuing a technical opinion to support the decision;
• supporting technical and commercial negotiation;
• preparing the control baseline for contract execution.

This role reduces asymmetry between the client and suppliers. It also prevents the decision from being made solely on total price without understanding the real robustness of each proposal.

And where does consulting engineering fit?

Consulting engineering enters before procurement to turn a purchasing intention into a technically sound procurement. It helps answer questions that directly affect contract success:

• is the scope mature?
• is the procurement model appropriate for the risk?
• is the reference estimate consistent with the market?
• is the cheapest proposal technically feasible?
• does the supplier have real delivery capability?
• are measurement and acceptance criteria clear?
• have risks been properly allocated?
• is the contract prepared for inevitable changes?

This analysis does not eliminate competition. On the contrary, it creates an environment in which qualified companies compete on clear parameters rather than unsustainable discounts.

Checklist for safely procuring engineering services

1. Is the scope detailed enough for all bidders to price the same thing?
2. Are products, deliverables and acceptance criteria clearly defined?
3. Does the reference estimate have a defensible technical breakdown?
4. Does the proposal present team, hours, methodology and assumptions?
5. Is the discount compatible with expected productivity?
6. Is there evidence of experience with a similar scope?
7. Is the risk matrix clear?
8. Do measurement and payment criteria avoid distortions?
9. Is there a change-management plan?
10. Was the winning proposal technically analyzed before contracting?

If the answer is no for several of these points, the procurement may be vulnerable to amendments, disputes and stoppages.

Conclusion: a low price does not compensate for poorly structured procurement

Lowest total price can be a legitimate criterion. But in engineering services it only works when the client has a mature scope, reliable estimate, clear technical criteria, a risk matrix and feasibility analysis.

When these elements are missing, the cheapest proposal can become the most expensive contract. The cost appears later: in contract amendments, rework, delays, disputes, poor quality and stoppage.

Good engineering procurement does not start by comparing prices. It starts with the technical structuring of what will be procured, definition of risks and the ability to assess whether the winning proposal is genuinely capable of delivering the expected result.

A3A Engenharia supports clients through Owner’s Engineering, consulting engineering, technical procurement support, technical proposal analysis, scope structuring, reference estimating and risk matrices. The objective is simple: reduce uncertainty before it becomes contract amendments, delays or stoppages.

Frequently asked questions about lowest total price in engineering services

Is awarding on the lowest total price wrong?

Not necessarily. Lowest total price may be appropriate when the scope is well defined, proposals are comparable and there is a technical feasibility analysis. The risk lies in procuring on price alone without verifying real delivery capability.

What is an unfeasible proposal?

It is a proposal whose price does not appear sufficient to perform the scope with adequate quality, schedule and resources. It may result from an estimating error, aggressive discounting, hidden assumptions or an attempt to win the competition and renegotiate later.

How can the feasibility of an engineering proposal be assessed?

Cost breakdown, team, technical hours, methodology, schedule, assumptions, assumed risks, supplier experience and compatibility between price and scope must be analyzed.

How does Owner’s Engineering help in procurement?

Owner’s Engineering supports the client in reviewing scope, estimates, technical criteria, the risk matrix, proposals and decision-making, reducing the chance of hiring an unsuitable supplier.

Why can very cheap proposals lead to contract amendments?

Because they may not include all actual execution costs. During the contract, the supplier may seek recovery through claims, scope changes, economic-financial rebalancing or reduced delivered quality.

Technical sources consulted

• CBIC — Stalled public works in Brazil: diagnosis and proposals.
• Brazilian Federal Court of Accounts — Guidance for preparing public-works cost-estimate spreadsheets.
• Law No. 14,133/2021 — Public Procurement and Administrative Contracts Law.
• IBRAOP — Technical Guidance on construction works and engineering services.