Govt tightens procurement rules, mandates scrutiny of bids 30% below estimated cost

The move aims to prevent unusually low quotes from compromising the quality and timely execution of government projects.

NEW DELHI: The finance ministry has directed government agencies to scrutinise bids quoting prices more than 30 per cent below the estimated cost of a project or contract, tightening checks on unusually low offers to prevent compromises in quality and timely execution.The department of expenditure has defined such offers as Abnormally Low Bids (ALBs) and made it mandatory for procuring entities to examine them as potentially unviable. Agencies will have to seek written explanations from bidders when concerns arise over their ability to deliver the work at the quoted price."A bid quoting a price more than 30 per cent below the estimated cost shall mandatorily be examined as a potentially ALB," the department said in an office memorandum, as quoted by PTI.The bidder may be asked to provide a detailed price analysis in relation to the scope of work specified in the tender document. The procuring agency will assess whether the quoted amount is sufficient to meet the contract requirements.However, the new threshold does not mean that every bid priced more than 30 per cent below the estimate will be rejected. The department clarified that the threshold would not be grounds for "automatic rejection" and that bidders would be given an opportunity to explain how they intend to execute the contract at the offered price.

A bid may be rejected if the bidder fails to adequately demonstrate its ability to complete the work at the quoted rate. In such cases, the agency can consider the next higher bidder, provided its price is found reasonable.The move addresses a gap in earlier procurement rules, which did not prescribe a fixed numerical threshold for identifying abnormally low bids. Government agencies largely relied on their own assessment of whether an unusually low quotation posed a risk to the execution of a contract.

The department has also advised procuring entities to frame tender specifications carefully to guard against such bids. The revised framework is intended to bring greater uniformity and transparency to the process while allowing genuine price competition.Government agencies invite bids from companies and contractors through a tender process to procure goods, services or carry out projects. Interested bidders submit their technical proposals and price quotations, which are evaluated against the conditions specified in the tender. While a lower price can make a bid more competitive, an unusually low quote may raise questions about whether the bidder can meet the required quality standards and complete the contract within the agreed cost.