Para 7.4.7 - Bid Price Reasonableness | KartavyaDesk
Original Rule Text
7.4.7. Reasonableness of Overall Bid Price Received 1. In every recommendation of the TC for an award of contract, it must be declared that the overall bid price recommended is reasonable. If the overall Bid price received is considered abnormally low, action may be taken as per para 7.4.8 2. If the successful bid as per evaluation criteria, is considered to be unreasonably high, then price justification may be called from the bidder. If the price justification is not acceptable, then either negotiations as per para 7.4.10 or reissue of tender for the identical or similar Services as per para 7.4.11 may be considered. In case cartel is suspected action as per para 7.4.9 may be taken. 3. 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.
What This Means
Para 7.4.7 of the Manual for Procurement of Non-Consultancy Services focuses on ensuring that the price offered by a bidder is reasonable. This rule applies after the Technical Committee (TC) has evaluated the bids and is ready to recommend awarding the contract. The TC must declare that the recommended bid price is reasonable. This means the price shouldn't be suspiciously low or excessively high. This rule affects everyone involved in the procurement process, from the TC members to the bidders themselves, as it ensures fair pricing and prevents potential issues like poor quality work due to abnormally low bids or inflated costs due to unreasonably high bids.
If the price is too low, further investigation is required as per para 7.4.8. If the price is too high, the procuring entity can ask the bidder to justify their price. If the justification is not satisfactory, negotiations can be attempted, or the tender can be re-issued. The rule also cautions against relying solely on cost estimates for large value tenders and suggests using multiple estimation methods to arrive at a reasonable price. Suspected cartel activity should be addressed as per para 7.4.9.
In essence, Para 7.4.7 is a safeguard to protect public funds and ensure that the government receives value for money when procuring non-consultancy services. It promotes transparency and accountability in the procurement process by requiring a thorough assessment of bid prices before awarding a contract.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •The Technical Committee (TC) must declare the recommended bid price as reasonable.
- •If the bid price is abnormally low, action must be taken as per para 7.4.8.
- •If the bid price is unreasonably high, price justification can be requested, negotiations can be attempted, or the tender can be re-issued.
- •For large value tenders, multiple cost estimation methods should be used.
- •Suspected cartel activity should be addressed as per para 7.4.9.
Practical Example
The Ministry of Social Welfare issued a tender for providing housekeeping services in its offices. Three bids were received. Bidder A quoted ₹50 lakhs, Bidder B quoted ₹55 lakhs, and Bidder C quoted ₹30 lakhs. The TC, after evaluating the technical aspects, found all three technically qualified. However, they considered Bidder C's price of ₹30 lakhs abnormally low compared to the other bids and their own internal estimates. Following Para 7.4.7, the TC initiated an investigation as per para 7.4.8 to understand the reasons for the low price. They discovered that Bidder C was cutting corners on labor costs and using substandard cleaning materials.
On the other hand, if Bidder A had quoted ₹80 lakhs, the TC would have considered it unreasonably high. They would have asked Bidder A for a price justification. If the justification was not acceptable, they could have attempted negotiations to bring the price down or re-issued the tender.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What does 'reasonableness of overall bid price' mean?▼
What happens if the price justification provided by the bidder is not acceptable?▼
Is it mandatory to reject a bid if the price is abnormally low?▼
What are some methods of cost estimation that can be used to triangulate a reasonable price?▼
What action should be taken if cartel is suspected?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Test Your Knowledge
Question 1 of 3
According to Para 7.4.7 of the Manual for Procurement of Non-Consultancy Services, what declaration must the Technical Committee (TC) make in every recommendation for awarding a contract?
Related Rules
Need help understanding this rule?
Ask Niti — your AI assistant for Non-Consultancy Manual and other government rules