Para 7.6.6 — GOODS_MANUAL

7.6.7 Consideration of Abnormally Low Bids 1. An Abnormally Low Bid (ALB) is one in which the Bid price, in combination with other elements of the Bid, appears so low that it raises material concerns as to the capability of the Bidder to perform the contract at the offered price. The procuring Entity may, in such cases, seek written clarifications from the Bidder, including detailed price analyses of its Bid price in relation to scope, schedule, allocation of risks and responsibilities, and any other requirements of the tender document. If, after evaluating the price analyses, the procuring entity determines that the Bidder has substantially failed to demonstrate its

7.6.6 Reasonableness of Prices 1. In every recommendation of the TC for an award of contract, it must be declared that the rates recommended are reasonable. If the rates received are considered abnormally low or unreasonably high, action may be taken as per para 7.6.7 and 7.6.9, respectively, or as per para 7.6.11, reject any or all Bids; abandon/ cancel the Tender process and issue another tender for the identical or similar Goods. 2. In large value tenders, blind reliance on the cost estimate is not recommended for assessing reasonableness. More than one method of estimation of cost may be used to triangulate a reasonable price. For more details on judging the reasonableness of prices, please see para 2.1-2-f) above. 3. Where there is no estimated cost, a comparison with the Last Purchase Price (LPP - the price paid in the latest successful contract) is the basis for judging the reasonableness of rates. The following points may be kept in mind before LPP is relied upon as a basis for justifying rate reasonableness: a) The basic price, taxes, duties, transportation charges, Packing and Forwarding charges should be indicated separately, and the comparison should be on basic price. b) Where the firm holding the LPP contract has defaulted, the fact should be highlighted, and the price paid against the latest contract placed prior to the defaulting LPP contract, where supplies have been completed, should be used; c) Where the supply against the LPP contract is yet to commence, that is, delivery is not yet due, it should be taken as LPP with caution, especially if the supplier is new; the price paid against the previous contract may also be kept in view; d) Where the price indicated in the LPP is subject to variation or if it is more than a year old, the updated basic LPP as computed in case of the Price Variation Clause (PVC) may also be indicated; e) In the case of wholly imported stores, the comparison of the last purchase rate should be made with the net CIF value at the current foreign exchange rate; f) It is natural to have marginal differences in prices obtained at different cities/offices for the same item due to their different circumstances. The prices obtained are greatly influenced by quantity, delivery period, and terms of the contract; these may be kept in view, and g) Prices paid in emergencies or prices offered in a distress sale are not accurate guidelines for future use. Such purchase orders and TC proceedings should indicate that “these prices are not valid LPP for comparison in future procurement.”

Chapter 7: Bid Evaluation and Award of Contract capability to deliver the contract at the offered price, the Procuring Entity may reject the Bid/ Proposal and evaluate the next higher bidder (and so on), at his/ their own quoted rate (if considered reasonable, and not by the counter-offering rate of ALB), for the award of contract. However, it would not be advisable to fix a normative percentage below the estimated cost, which would automatically be considered an abnormally low bid. Due care should be taken while formulating the specifications at the time of preparation of the tender document to safeguard against the submission of abnormally low bids from the bidders.

2. In the case of predatory pricing, procuring entities may refer to the above consideration of abnormally low bids to assist themselves in the finalization of tenders110.

3. No provisions should be kept in the Tender Documents regarding the Additional Security Deposit/ Bank Guarantee (BG) in case of Abnormally Low Bids. Wherever there are compelling circumstances to ask for an Additional Security Deposit/ Bank Guarantee (BG) in the case of ALBs, the same should be taken only with the approval of the next higher authority competent to finalise the particular tender or the Secretary of the Ministry/ Department, whichever is lower111.