Govt Re-Introduces Additional Performance Security For Highway Projects To Curb Aggressive Bids

The Union Road Transport and Highways Ministry has ordered highway builders to give additional performance security to curb bidders that bid abnormally low to win tenders.

The performance security is an upfront amount that winning bidders have to pay. This sum will be forfeited if the project commitments aren't honoured.

The latest directive has been issued to the National Highways Authority of India (NHAI), Border Roads Organisation (BRO), National Highways and Infrastructure Development Corporation (NHIDCL) and all the state governments as well.

The Union Finance Ministry had done away with the additional performance security in November 2020 to support highway developers amidst the Covid-19 pandemic.

In road projects, the performance security was cut down to merely 3 per cent of the contract value till 31st March 2023.

However, this has led to highly aggressive bidding in national highway EPC projects in the last few quarters. The winning bid has been 30-40 per cent lower than the project's estimated cost.

"In view of the trend of quoting very low bid price by the bidder, it has been decided to maintain a uniform approach in dealing with the situation of seeking additional performance security that in the compelling circumstances where the quote of selected bidder is lower than 20 per cent of the estimated project cost put to tender," the order mentioned above from the Road Transport Ministry read, as reported by The Economic Times.