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Grammarly, like many grammar-checking tools, is highly effective but not always perfect, especially when it comes to context or more nuanced language structures. In this case, it might not have flagged the sentence because the error is relatively subtle. The sentence "We have reached out to them and awaiting an update" is understandable, and there is no glaring mistake that would immediately raise a red flag for a tool focused on basic grammar and spelling.

However, the issue is that the verb phrase "are awaiting" is missing the auxiliary verb "are" to make the sentence grammatically complete. This type of error can sometimes go unnoticed by grammar-checking tools, especially if the sentence is short and the intended meaning is still clear. Grammarly might prioritize simpler or more obvious errors, such as spelling or punctuation mistakes, and occasionally overlook more subtle issues like missing auxiliary verbs.

It's always a good idea to manually review your sentences for more complex issues or rely on context-based proofreading.