Highway Construction Agencies Grapple with Aggressive Low Bidding by Contractors
Highway construction authorities, including the National Highways Authority of India (NHAI), find themselves in a difficult position due to a concerning trend. Road contractors are increasingly submitting bids that are significantly lower than the estimated project costs, with reductions of up to 48%. This aggressive bidding strategy is primarily driven by intense competition in the sector and often has a direct impact on the quality of work delivered.
Recent Case Highlights Legal and Operational Challenges
In a notable recent incident, the road transport ministry was forced to cancel a tender for a project in Manipur. The contractor with the lowest bid had quoted 47% less than the ministry's estimated cost. The contractor subsequently challenged this cancellation in the Gauhati High Court, which granted an interim stay on the decision. An official commented, "This case is a classic example of how highway agencies are caught in the middle. Highway contractors are getting projects quoting low bids, arguing they have conducted detailed assessments."
Data Reveals Fierce Competition and Declining Project Numbers
Data collected since April 2023 indicates a sharp decline in the number of projects being offered, leading to fierce competition among bidders. For each tender, the number of bidders ranges from seven to 19, creating a highly competitive environment. Officials and industry insiders note that while the number of highway contractors has surged over the past 7-8 years, thanks to government initiatives that rolled out numerous projects and lowered qualification criteria, there has been a significant reduction in the number of works being bid on.
Financial Pressures Drive Low Bidding Practices
This imbalance has compelled contractors to submit low bids to ensure their manpower and machinery remain operational, avoiding idle resources. However, this practice exacerbates financial stress within the sector. Another official warned, "This trend will hurt the sector and quality of work as well, since we can't reject a lowest cost or L1 bid in construction works." The financial strain from such low bids can compromise project outcomes and sustainability.
Examples of Low-Quoted Bids Across States
Detailed examples from 2023-24 illustrate the extent of this issue:
- Madhya Pradesh: The four-laning project from Rahatgarh to Berkhedi was bid out at Rs 324 crore, which is 48.4% less than NHAI's estimated cost of Rs 627 crore.
- Maharashtra: The augmentation of an existing stretch in urban areas of Pune on the Pune-Satara section was bid out at Rs 321 crore, approximately 46% below the highway authority's project cost estimate.
- Himachal Pradesh: The work for four-laning from Dareota to Kalar Bala was tendered at Rs 435 crore against NHAI's project cost of Rs 734 crore this year, representing a reduction of around 41%.
These instances underscore the widespread nature of low bidding practices, posing significant challenges for highway construction agencies in maintaining quality standards while managing costs.
