Road ministry imposes additional performance security on low bids
The ministry of
road transport
and highways has imposed additional
performance security
on
bidders
of road projects for bids lower than the estimated cost of the project while also doing away with the earlier criteria of imposing additional security on a case-to-case basis.
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The move, which will increase the cost of projects for the bidders, is aimed at doing away with the trend of
abnormally low bid prices
in
national highway projects
.
'The matter has been reviewed considering the trend of abnormally low bid prices in national highways projects and it has been decided that, henceforth, additional performance security will be taken from select bidder for low bid,' the ministry said in a circular dated 30 April, 2025.
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As per the circular, additional performance security will be 0.1% for every percentage of bid price below 10% of the project cost in case the bid price is below 10% but not less than 20% and this will be applied on the bid price.
In cases where the bid price is 20% or more below the project cost, the additional performance guarantee percentage shall be incremented by 0.2% for every percentage of bid price in addition to 1% of the bid price, it said.
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'The additional performance security shall be treated as part of performance security,' it added.
The changes will be effective from the date of the notification.
'Cost impact on the bidder will be higher if he bids below 10% of the project cost which will be an additional performance guarantee to be kept with the authority,' Jagannarayan Padmanabhan, senior director and global head, consulting,
CRISIL Market Intelligence
and Analytics said.
Until now, the additional performance security was limited to 3% of the bid price offered by the selected bidder and was levied only when the bid price was below 20% and after the approval of the road secretary on a case-to-case basis.
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