A feasibility due diligence is the procedure through which the Administration verifies, based on technical and economic evidence, whether an apparently low bid can fully perform the tendered scope under the conditions established in the bidding documents. Under Law 14,133\/2021, it is supported particularly by art. 59, \u00a72, and should be used to clarify an objective doubt regarding the bid’s ability to perform, not to allow the bidder to formulate a new offer after the competitive stage.<\/p>\n\n\n\n
For engineering works and services, the analysis requires more than comparing a global percentage. Art. 59, \u00a73, requires consideration of the total price, quantities, and relevant unit prices. \u00a74 establishes the 75% threshold of the Administration’s estimate, while recent TCU case law has treated this threshold as a rebuttable presumption of unfeasibility, with an opportunity for the bidder to demonstrate feasibility before disqualification. This turns due diligence into a decisive technical stage: it must produce a verifiable, equal-treatment process with sufficient reasoning to support either acceptance or rejection of the bid.<\/p>\n\n\n\n
A sound due diligence does not merely ask whether the company \u201cconfirms the price.\u201d It reconstructs the economic logic of the bid and confronts critical costs, productivity, mobilization, materials, labor, BDI, taxes, suppliers, schedule, and risks with the scope actually being procured. At the end, the Administration should be able to answer, with evidence, why that price is or is not compatible with full performance of the scope.<\/p>\n\n\n\n\n
The starting point is art. 59 of Law 14,133\/2021. The statute requires disqualification of bids that present unfeasible prices or whose feasibility is not demonstrated when required by the Administration. At the same time, \u00a72 expressly authorizes due diligence to assess feasibility or require the bidder to demonstrate it.<\/p>\n\n\n\n
This combination is relevant because it prevents two opposite simplifications. The first is accepting any low price simply because the bidder declared it can perform. The second is automatically disqualifying the bid without checking whether particular economic conditions can justify the offer.<\/p>\n\n\n\n
For engineering works and services, \u00a73 adds a technical requirement: the assessment is not limited to the total amount. Quantities and relevant unit prices must also be considered, according to the acceptability criteria established in the bidding documents. This means the analysis must understand the structure of the bid and its relationship with the engineering scope.<\/p>\n\n\n\n
The article on bids below 75% and unfeasible pricing<\/a> specifically addresses the percentage trigger. Here the focus is different: how to structure the due diligence after a doubt arises regarding the bid’s ability to perform.<\/p>\n\n\n\n \u00a74 of art. 59 states that, for engineering works and services, bids below 75% of the amount estimated by the Administration shall be considered unfeasible. Interpretation of this provision generated controversy during the first years of the new law.<\/p>\n\n\n\n Recent TCU case law has converged on an interpretation of rebuttable presumption. In Decision 465\/2024-Plenary, the Court recorded that the Administration must give the bidder an opportunity to demonstrate the feasibility of the bid. Decision 803\/2024-Plenary reinforced the compatibility between \u00a74 and \u00a72 of art. 59. TCU’s updated Procurement and Contracts material also consolidates this guidance.<\/p>\n\n\n\n In practice, this requires the public manager to treat the percentage as a strong warning signal without turning the assessment into a mechanical act. The question is no longer only \u201cwas the price below 75%?\u201d but also \u201cwhat evidence demonstrates that the price can support the scope?\u201d<\/p>\n\n\n\n Due diligence does not authorize reopening the competition. It cannot be used to let the bidder replace the technical solution, remove obligations, substitute essential assumptions, increase the price, change tendered quantities, or redesign the bid in a way that another competitor did not have the opportunity to do.<\/p>\n\n\n\n The procedure should clarify, substantiate, detail, or correct aspects permitted by law and the bidding documents without materially modifying the offer. This boundary is fundamental. The greater the discount, the greater the pressure may be to accept explanations that actually represent new price formation. The technical analysis must distinguish demonstration of the original bid from reformulation of the bid.<\/p>\n\n\n\n\n Not every difference from the estimate requires the same depth of investigation. Due diligence should be proportional to the identified risk, but it must be sufficiently robust whenever there are concrete indications that the price may compromise performance.<\/p>\n\n\n\n Some signals warrant immediate attention:<\/p>\n\n\n\n The objective is not to look for a reason to eliminate the lowest bid. It is to identify whether there is an objective risk that must be clarified before the Administration assumes the contractual commitment.<\/p>\n\n\n\n\n Drafting the request is one of the most sensitive parts of the process. A generic due diligence request \u2014 \u201cprove feasibility within 24 hours\u201d \u2014 tends to produce superficial answers. An excessively open request may allow improper modification of the offer.<\/p>\n\n\n\n The better approach is to tie each request to an objective doubt identified by the review team.<\/p>\n\n\n\n The Administration may request detailed compositions supporting relevant unit prices, particularly those with significant contractual weight or substantial divergence from the reference estimate.<\/p>\n\n\n\n Depending on the scope, the detail should allow verification of:<\/p>\n\n\n\n The analysis should not require the bidder’s private cost structure to replicate the Administration’s composition exactly. Companies may have different productivity, commercial agreements, owned equipment, inventory, tax structures, and strategies. What must be demonstrated is the economic consistency of the offer with the obligations assumed.<\/p>\n\n\n\n When a particular price depends on a significant purchase, a supplier quotation can be useful evidence. However, the quotation must be analyzed, not merely attached.<\/p>\n\n\n\n The team should verify whether it corresponds to the same product or performance, quantity, schedule, freight, delivery location, taxes, validity, and payment conditions required by the contract. An exceptionally low quotation valid for only a few days and requiring advance payment may not prove the feasibility of a purchase that will occur nine months later.<\/p>\n\n\n\n Current contracts, recent invoices, commercial agreements, private price lists, supply commitments, evidence of inventory, and equivalent documents may also be relevant. Their evidentiary value depends on adherence to the scope and the base date.<\/p>\n\n\n\n Material discounts may result from higher productivity. In that case, due diligence should verify how that productivity will be achieved.<\/p>\n\n\n\n The demonstration may include execution history, construction method, crew composition, equipment, automation, prefabrication, logistics, sequencing, work plan, and indicators from previous projects. The data must be comparable. Productivity achieved on a repetitive large-scale project with unrestricted access may not be transferable to a hospital renovation under operation, for example.<\/p>\n\n\n\n\n When a material discount requires analysis beyond the spreadsheet, the Administration needs to reconstruct the bid’s logic: critical costs, productivity, suppliers, BDI, schedule, and risks. Specialized technical support turns due diligence into an evidence matrix capable of supporting the administrative decision.<\/p>\n\n\n\n Technical Support for Engineering Procurement and Bid Evaluation<\/a><\/p>\n<\/div>\n\n\n\n Due diligence becomes more consistent when it follows a repeatable method. The procedure below does not replace the bidding documents or the entity’s regulations, but it organizes the engineering analysis in an auditable manner.<\/p>\n\n\n\n Before questioning the bidder, the Administration needs to understand its own reference. This includes design, scope, quantities, estimate, base date, BDI, social charges, schedule, execution regime, risk matrix, performance requirements, and site conditions.<\/p>\n\n\n\n Due diligence based on an inconsistent estimate may produce an equally inconsistent conclusion. If the reference price is overstated, a high discount may not indicate unfeasibility. Therefore, the first question is always whether the Administration’s baseline is technically reliable.<\/p>\n\n\n\n The price research for engineering works and services<\/a> and the estimate structure must be read together with the market actually existing on the bidding date.<\/p>\n\n\n\n The total discount should be decomposed. A bid that is 20% below the estimate because nearly all items were reduced uniformly is different from one with the same overall reduction produced by three critical services priced at half the reference value.<\/p>\n\n\n\n The ABC Curve is a simple and powerful tool at this stage. It allows the analysis to focus on the items that most influence cost. It is also advisable to identify items of high technical criticality even when their financial weight is not dominant.<\/p>\n\n\n\n The ABC Curve for construction and estimates<\/a> helps define where due diligence should deepen the evidence.<\/p>\n\n\n\n Each discrepancy should be classified. A useful structure separates:<\/p>\n\n\n\n This classification avoids generic due diligence requests and allows the bidder’s response to be checked item by item.<\/p>\n\n\n\n The request should state exactly which doubt needs to be clarified and which evidence is appropriate for the analysis.<\/p>\n\n\n\n Instead of requesting a \u201cjustification for the discount,\u201d it is technically better to ask, for example, how the unit cost of a given service incorporates the stated productivity, crew cost, social charges, equipment, losses, transportation, and design obligations.<\/p>\n\n\n\n The question should not prejudge the conclusion or require a single demonstration model. The company must have room to explain its legitimate economic advantages.<\/p>\n\n\n\n The response must close mathematically and technically. If the company presents a lower material quotation but keeps an incompatible consumption rate in the composition; if it demonstrates high productivity but the schedule assumes conventional duration; or if it reduces site administration while proposing a large field organization, there are inconsistencies that need to be addressed.<\/p>\n\n\n\n Cross-analysis is more important than the number of attachments. Abundant documentation does not replace coherence.<\/p>\n\n\n\n A bid may work only under the most optimistic scenario. The Administration does not need to require excessive margin, but it should verify whether small foreseeable variations make the contract structurally unviable.<\/p>\n\n\n\n Depending on the risk, scenarios may test:<\/p>\n\n\n\n The objective is not to create contingencies that the bidding documents allocated to the Administration. It is to assess whether the bid supports the obligations and risks that effectively belong to the contractor.<\/p>\n\n\n\n The final report needs to connect doubt, evidence, analysis, and conclusion. A robust decision does not merely state that \u201cthe company proved\u201d or \u201cfailed to prove\u201d feasibility. It records which components were reviewed, which documents were submitted, which inconsistencies remained, and why the evidence set is sufficient or insufficient.<\/p>\n\n\n\n This chain is essential for internal control, administrative appeal, court of accounts review, audit, and future contract management.<\/p>\n\n\n\n\n A conclusion about unfeasibility is only as reliable as the baseline used for comparison. When the reference estimate contains outdated quantities, compositions, BDI, or prices, the apparent discount may be measured against an incorrect reference.<\/p>\n\n\n\n Engineering Works and Services Cost Estimating<\/a><\/p>\n<\/div>\n\n\n\n Art. 59, \u00a73, resolves a common issue: looking only at the total is not enough. In engineering, risk may be hidden in the internal distribution of the bid.<\/p>\n\n\n\n An apparently feasible total bid may contain very low unit prices that become critical during execution. It may also contain excessively high items offset by low items, creating risk when quantities change.<\/p>\n\n\n\n The analysis should consider the execution regime. In unit-price contracting, the relationship between the quantity actually measured and the contracted unit price is central. In lump-sum contracting, unit prices remain relevant for evaluating bid formation, schedule, possible adjustments, and exceptional changes, although the contractual logic is different.<\/p>\n\n\n\n The article on lump-sum versus unit-price contracting<\/a> details these differences.<\/p>\n\n\n\n Relevance may result from:<\/p>\n\n\n\n A purely financial analysis may overlook the component that actually threatens performance.<\/p>\n\n\n\n\n Underestimated labor is one of the classic causes of fragile bids. The analysis needs to verify wages, benefits, charges, working hours, additional compensation, productivity, and crew composition.<\/p>\n\n\n\n In SINAPI, Social Charges follow a specific methodology, with groups and incidences that vary according to hourly or salaried employment status, locality, and regime. A private bid does not need to copy the benchmark percentage, but it must cover all applicable obligations.<\/p>\n\n\n\n The content on SINAPI Social Charges<\/a> details the composition and application precautions.<\/p>\n\n\n\n During due diligence, it is advisable to compare:<\/p>\n\n\n\n Higher productivity may offset a higher hourly cost; a wage below the applicable floor cannot be justified by productivity.<\/p>\n\n\n\n An equipment or material quotation is only part of the equation. Effective cost may include freight, insurance, taxes, unloading, storage, losses, assembly, accessories, testing, commissioning, and warranty.<\/p>\n\n\n\n For imported equipment, the analysis may require additional attention to exchange rates, manufacturing lead time, international logistics, taxes, customs clearance, and validity of the manufacturer’s offer.<\/p>\n\n\n\n When the bidder claims advance purchasing or existing inventory, the Administration may assess evidence of availability and technical compliance. Inventory of a similar material that does not meet the specification does not support feasibility.<\/p>\n\n\n\n\n Owning equipment may reduce rental cash outflow, but it does not make its use free. There are fuel, operator, maintenance, wear, mobilization, insurance, economic depreciation, and opportunity costs.<\/p>\n\n\n\n A mature due diligence does not require the company to use the same cost methodology as the Administration, but it tests whether the claimed advantage is real. If equipment is owned and fully depreciated, part of the capital cost may be lower. Even so, operating and availability costs must remain compatible with execution.<\/p>\n\n\n\n A very low BDI may be legitimate or may conceal omitted costs. The analysis should distinguish components that may vary according to the company’s structure from those that necessarily apply to the contract.<\/p>\n\n\n\n The content on BDI for engineering works and services<\/a> presents the main components and criteria.<\/p>\n\n\n\n During due diligence, the following should be verified as applicable:<\/p>\n\n\n\n Low profit or even an aggressive commercial strategy, by itself, does not prove unfeasibility. The problem arises when unavoidable costs are simply omitted or when the mathematics depends on recovering margin through future addenda, quantity changes, or noncompliance with requirements.<\/p>\n\n\n\n\n Public works often fail the feasibility test not because of cement or steel, but because indirect implementation costs were poorly sized.<\/p>\n\n\n\n Due diligence should compare the execution plan with expenses for:<\/p>\n\n\n\n If the worksite is hundreds of kilometers from the company’s operating base, the absence of compatible logistics needs to be explained. If local infrastructure is already installed under another contract, that advantage may be demonstrated.<\/p>\n\n\n\n Feasibility is not only the sum of costs. There is also the time value of money.<\/p>\n\n\n\n A bid may be positive overall and still be unviable in cash-flow terms if it requires large outlays before the first measurements. Long-lead materials, intensive mobilization, and approval cycles may create a significant working-capital requirement.<\/p>\n\n\n\n The analysis should consider:<\/p>\n\n\n\n The physical-financial schedule<\/a> is one of the main instruments for testing coherence between price and execution strategy.<\/p>\n\n\n\n The Administration should not require a specific cash level without a legal or bidding-document basis. However, when the bidder itself relies on a particular financial structure to demonstrate feasibility, that assumption must be technically coherent.<\/p>\n\n\n\n\n When a relevant portion of the price depends on a third party, due diligence should identify the degree of certainty of that commercial condition.<\/p>\n\n\n\n An informal quotation does not carry the same evidentiary weight as a valid formal proposal, framework agreement, supply agreement, or purchasing history. This does not mean an advance contract must always be required, but the evidence needs to be qualified.<\/p>\n\n\n\n It is also necessary to verify whether subcontracting is permitted and whether the limits, responsibilities, and requirements in the bidding documents were considered. An economic demonstration based on transferring part of the scope to a third party is not valid when the bidding instrument prohibits or restricts that transfer.<\/p>\n\n\n\n The bid must reflect the risks assigned to the contractor. If the matrix transfers a particular geotechnical, logistics, currency, or productivity risk to the private party, due diligence may verify how the company considered it.<\/p>\n\n\n\n This does not mean requiring an explicit reserve for every risk. Companies price risk in different ways. The question is whether the bid depends on an assumption incompatible with the contractual allocation.<\/p>\n\n\n\n The risk-allocation matrix in engineering contracts<\/a> needs to be read together with the estimate and the contracting strategy.<\/p>\n\n\n\n One of the most concerning situations occurs when the price is viable only if the Administration effectively assumes risks that the bidding documents allocated to the contractor. This type of assumption creates fertile ground for claims and addenda after signature.<\/p>\n\n\n\n\n Some responses appear complete but do not resolve the feasibility question.<\/p>\n\n\n\n Stating that the company \u201cassumes full responsibility for the price\u201d does not demonstrate that the price covers execution. Contractual responsibility exists in any event. Due diligence seeks economic evidence, not mere formal reaffirmation.<\/p>\n\n\n\n Claiming a \u201csupplier partnership\u201d may be valid, but it should be substantiated when that advantage is decisive to make the bid economically consistent.<\/p>\n\n\n\n No demonstration may depend on the expectation of an unplanned contractual change. The bid must perform the tendered scope under the known conditions and allocated risks.<\/p>\n\n\n\n A low price obtained by excluding a required test, documentation, responsibility, mobilization, warranty, or service is not efficiency. It is a bid for a different scope.<\/p>\n\n\n\n The existence of other low prices is useful market information, but it does not by itself prove the feasibility of a specific company. The analysis needs to consider costs, scope, and evidence.<\/p>\n\n\n\n\n A useful practice is to consolidate the due diligence in a traceability matrix. It does not need to be complex; it needs to allow another person to reconstruct the decision.<\/p>\n\n\n\nThe 75% threshold does not eliminate the need for technical analysis<\/h3>\n\n\n\n
Due diligence must preserve equal treatment and adherence to the bidding documents<\/h3>\n\n\n\n
When to Open a Feasibility Due Diligence<\/h2>\n\n\n\n
What Due Diligence Can Request Without Turning the Bid Into a Different One<\/h2>\n\n\n\n
Price-formation memorandum for critical items<\/h3>\n\n\n\n
Quotations, contracts, and commercial conditions<\/h3>\n\n\n\n
Evidence of productivity and execution method<\/h3>\n\n\n\n
Technical Feasibility Due Diligence Procedure in 7 Steps<\/h2>\n\n\n\n
1. Reconstruct the procurement baseline<\/h3>\n\n\n\n
2. Quantify where the discount is concentrated<\/h3>\n\n\n\n
3. Classify the doubts by nature<\/h3>\n\n\n\n
4. Formulate objective questions<\/h3>\n\n\n\n
5. Verify the internal consistency of the response<\/h3>\n\n\n\n
6. Test execution scenarios<\/h3>\n\n\n\n
7. Provide the rationale for the decision<\/h3>\n\n\n\n
How to Analyze the Total Price Without Ignoring Relevant Unit Prices<\/h2>\n\n\n\n
Relevant unit prices are not only the most expensive ones<\/h3>\n\n\n\n
Labor and Social Charges<\/h2>\n\n\n\n
Materials and equipment: purchase price is not delivered cost at the site<\/h2>\n\n\n\n
Owned Equipment and Opportunity Cost<\/h2>\n\n\n\n
BDI, taxes, and indirect expenses<\/h2>\n\n\n\n
Mobilization, Site Administration, and Logistics<\/h2>\n\n\n\n
Physical-financial schedule and working-capital requirements<\/h2>\n\n\n\n
Subcontracting and Strategic Suppliers<\/h2>\n\n\n\n
Risk matrix and feasibility<\/h2>\n\n\n\n
What Should Not Be Accepted as Sufficient Demonstration<\/h2>\n\n\n\n
Generic statement of responsibility<\/h3>\n\n\n\n
Commercial discount without a demonstrable basis<\/h3>\n\n\n\n
Future recovery through a contract addendum<\/h3>\n\n\n\n
Omission of an obligation in the bidding documents<\/h3>\n\n\n\n
Comparison only with other bids<\/h3>\n\n\n\n
How to Record the Analysis: Evidence Matrix<\/h2>\n\n\n\n