Key Takeaways
- • The Department of Expenditure under India's finance ministry has made it mandatory for government procuring entities to scrutinise any bid priced more than 30 per cent below the estimated cost, per an office memorandum.
- • The 30 per cent threshold defines Abnormally Low Bids (ALBs) for the first time, replacing earlier procurement manuals that set no fixed numerical cutoff and left identification to procuring-entity discretion.
- • The threshold does not trigger automatic rejection; procuring entities must seek written clarifications and detailed price analyses before deciding whether a bidder can perform at the quoted price.
- • Bids that fail to demonstrate capability may be rejected, with the next higher bidder assessed at its own quoted rate if that price is considered reasonable.
Summary
The finance ministry has tightened checks on abnormally low bids in government procurement to safeguard the quality of services and products, according to The Economic Times. The Department of Expenditure has defined Abnormally Low Bids (ALBs) and made scrutiny of any bid quoting a price more than 30 per cent below the estimated cost mandatory. As the department stated in an office memorandum, "A bid quoting a price more than 30 per cent below the estimated cost shall mandatorily be examined as a potentially ALB."
Under the revised framework, procuring entities must seek written clarifications from bidders flagged under the threshold, including detailed price analyses relating the bid price to the scope of work in the tender document. Bids below the threshold may also be examined where, in combination with other bid elements, the price appears so low that it raises material concerns about the bidder's capacity to perform at the offered price.
A bid may be rejected if the bidder does not adequately demonstrate its capability to execute the contract at the quoted price. In that case, the procuring entity will assess the next higher bidder at its own quoted rate, provided that price is considered reasonable. The department emphasised that the threshold is not a ground for automatic rejection and advised procuring entities to frame tender specifications carefully to guard against ALB submissions.
Previously, procurement manuals prescribed no fixed numerical threshold, so identification of ALBs rested largely on individual procuring entities' assessment of risks to contract execution. The department said the standardised definition is intended to bring greater uniformity and transparency, addressing concerns that unrealistically low quotations could compromise quality, timely execution and overall project delivery, while avoiding discouragement of genuine price competition.
Under the revised framework, procuring entities must seek written clarifications from bidders flagged under the threshold, including detailed price analyses relating the bid price to the scope of work in the tender document. Bids below the threshold may also be examined where, in combination with other bid elements, the price appears so low that it raises material concerns about the bidder's capacity to perform at the offered price.
A bid may be rejected if the bidder does not adequately demonstrate its capability to execute the contract at the quoted price. In that case, the procuring entity will assess the next higher bidder at its own quoted rate, provided that price is considered reasonable. The department emphasised that the threshold is not a ground for automatic rejection and advised procuring entities to frame tender specifications carefully to guard against ALB submissions.
Previously, procurement manuals prescribed no fixed numerical threshold, so identification of ALBs rested largely on individual procuring entities' assessment of risks to contract execution. The department said the standardised definition is intended to bring greater uniformity and transparency, addressing concerns that unrealistically low quotations could compromise quality, timely execution and overall project delivery, while avoiding discouragement of genuine price competition.
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