Competitive tendering in a housing company: comparing bids properly

Imagine the board has received three bids for the same repair: €87,000, €104,000 and €119,000. Before choosing the cheapest, you need to make sure that all three are offering the same work: the same materials, work stages, protection, documentation, guarantees and project management. The cheapest bid may well be the best one. But if the comparison rests on the bottom line alone, the €87,000 bid can end up costing more than the €104,000 one.

It all starts with the invitation to tender

A contractor who receives a vague invitation to tender has to work out for themselves what the bid should include. As a result, one bid includes scaffolding and another does not, or one covers waste removal and final cleaning while another invoices them separately. You end up with three acceptable bids with different contents, and their prices are not comparable.

If the housing company does not know precisely enough what needs repairing, three contractors may solve the problem in three different ways, and the board ends up comparing three different solutions. For significant technical projects, the necessary survey or design is therefore commissioned first, and bids are requested only after that.

What to check behind the price

1. Scope. What has actually been written into the bid? Compare it with the invitation to tender and the plans, not with assumptions.
2. Exclusions. Look for phrases such as “not included”, “client’s responsibility”, “as additional work if required” and “to be agreed separately”. A good bid states its exclusions openly, but excluded work can later turn into additional work.
3. Materials. What matters is suitability for the building, service life, ease of maintenance and compliance with the plans, not price as such.
4. Additional and variation work. A very low base price combined with unclear terms for additional work makes the final price hard to predict. Agree in advance how changes are decided and how they are priced.
5. Contract terms. Payment instalments, schedule, penalties for delay, securities, guarantees, the handover procedure and documentation all affect the overall picture.
6. Who does the work. Subcontractors are common in construction. Find out who is responsible for the whole and how site supervision and quality assurance are organised.
7. Supervision. In larger projects, the client’s own supervision is an important part of risk management. This is covered in the article on supervising a housing company renovation.

An example of a false saving

Two bids are received for a facade repair: A at €420,000 and B at €455,000. A excludes one necessary work stage that is included in B. If the missing work later costs €45,000, the price order is reversed.

The example is simplified, but the pattern is familiar: the saving made at the moment of decision is gradually eaten up by additional work. The contractor has not necessarily done anything wrong; the cause lies in how the original procurement was scoped.

For technical equipment, it is also worth comparing life-cycle costs: energy consumption, maintenance needs, availability of spare parts and service life. The calculations are estimates, but they bring out costs that the purchase price does not reveal.

What the law says

The Procurement Act does not usually apply to a housing company. An ordinary limited liability housing company is not a contracting entity within the meaning of the Act on Public Procurement and Concession Contracts (1397/2016), and does not have to follow public procurement procedures. The exception is a procurement for which the company receives public support of more than half of its value: in that case it may be a contracting entity for that particular procurement. Check the terms of any grant before inviting tenders.

Authority. The board needs a decision of the general meeting for actions that are unusual or far-reaching in view of the company’s size and operations, or that significantly affect the use of the apartments or the shareholders’ payment obligations. Without a general meeting decision, the board may take such action only if waiting for a decision would cause significant harm to the company. Who has the power to decide on a significant procurement therefore depends on the project and on what the general meeting has already decided.

Equal treatment. The general meeting, the board or the property manager may not make a decision that is likely to give a shareholder or another party an undue advantage at the expense of the company or another shareholder.

Disqualification. A board member may not take part in a contractual matter between the company and a third party if they can expect a significant benefit from it that may conflict with the company’s interests. This is important to recognise if a member has a financial or other connection with a bidder. Merely knowing someone does not automatically disqualify a member; the matter is assessed case by case.

The law contains no rule that a housing company must choose the cheapest bid, and there is no general “three bids rule”.

Practical advice

Make a comparison table. Break the bids down into the same components: total price, scope, exclusions, materials, schedule, payment terms, guarantee, principles for additional work, documentation, references and supervision. That way you are comparing content, not just totals.

Ask where the price difference comes from. There may be a perfectly sensible reason for the low price of the cheapest bid: a more efficient company, a different interpretation of the invitation to tender, a different material or method.

Record the reasons. When the board chooses a bid other than the cheapest, it is worth recording the reasons in the minutes. This improves transparency and helps future boards.

Checklist before deciding

1. Are all bidders offering the same package?
2. What is missing from each bid?
3. What costs might arise later?
4. Are the materials and technical solutions comparable?
5. How will additional and variation work be agreed?
6. Is the schedule realistic?
7. What are the payment terms and the guarantee?
8. How will quality be supervised?
9. What explains the price of the cheapest bid?

Once the choice has been made, the contract, the work, supervision, payment instalments, changes, handover and the guarantee period lie ahead. A careless contract can undo the benefits of good tendering, and weak supervision can undo a good contract. Tendering for maintenance services is covered in the article on choosing a maintenance company and decision-making in the article on decision-making in a housing company.

Frequently asked questions

Does a housing company have to put a renovation out to tender?

The law does not usually require it, but tendering is in practice the best way to find out the market price and the options. The exception is a procurement for which the company receives public support of more than half of its value.

Can the board choose a more expensive bid?

Yes. What matters is that the decision has been made carefully, in the company’s interests and by the right body. It is worth recording the reasons.

Why do bid prices differ so much?

The reasons may include the scope of the work, materials, exclusions, the companies’ cost structures, schedule, working methods, capacity and how risks are priced. A large price difference is worth investigating before deciding.

Sources: Limited Liability Housing Companies Act 1599/2009 (opens in a new tab) (chapter 1, section 10; chapter 7, sections 2 and 4); Act on Public Procurement and Concession Contracts 1397/2016 (opens in a new tab) (section 5), Finlex (in Finnish).

This article provides general information and does not replace case-specific legal or technical advice.