Govt no to additional performance security on abnormally low bids

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

SME Times News Bureau | 24 Nov, 2020
The government has decided not to seek additional performance security on abnormally low bids received on government contracts to provide relief to contractors already facing liquidity issues in the wake of the ongoing pandemic.

The finance ministry has asked all government ministries and departments not to ask for additional security deposit or bank guarantees in cases of low bids unless there is a compelling reason to do so.

Even in such cases, performance guarantee deposit should be taken only after approval from higher authority and properly assigning reasons, the ministry said in a recent circular on the issue.

Under the Atmanirbhar Bharat Abhiyan 3.0 announced earlier this month the government has relaxed regulations on earnest money deposit (EMD) and performance security on government tenders and reduced performance security on contracts to 3 per cent from a level 5-10 per cent now to boost construction and infrastructure development.

The relaxation from higher performance security on lower bids now will help contractors facing acute financial crunch on account of slowdown in economy due to the pandemic and prevent delays in execution of projects.

The industry had earlier represented that higher guarantee being sought on low bids may affect the ability of contractors to bid in tenders and hence reduce competition.

The finance ministry has noted that there is no provision of higher security deposit/ bank guarantee in general financial rule for procurement by government departments. So, it had said that no provision should be made unless approved by higher authorities.

The ministry has said that its instruction will be applicable for all kinds of procurements viz. Goods, Consultancy, Works, non-consulting Services etc.

As per the Manual for Procurement of Goods 2017 issued by the expenditure Department, an Abnormally Low Bid is one in which the bid price, in combination with other elements of the Bid, appears so low that it raises material concerns as for the capability of the bidder to perform the contract at the offered price.

Procuring Entity in such cases seek written clarifications from the bidder, inctuding detailed price analyses of its bid price in relation to scope, schedule, allocation of risks and responsibilities, and any other requirements of the bids document. If, after evaluating the price analyses, Procuring Entity determines that the bidder has substantially failed to demonstrate its capability to deliver the contract at the offered price, the Procuring Entity may reject the bid/ proposal.

However, the finance ministry has said it would not be advisable to fix a normative percentage below the estimated cost, which would be automatically be considered as an abnormally low bid. It has said that due care should be taken while formulating the specifications at the time of preparation of bid document so as to have a safeguard against the submission of abnormally low bid from the bidder. This would also prevent departments from seeking additional performance security at later stage.