Newly laid roads develop cracks, portions of under-construction flyovers give way, and bridges collapse within days of inauguration; this has been the woeful story of India's public works, where enormous amounts of money are presumably spent on infrastructural development.

High-level committees constituted to probe such tragedies invariably blame the poor quality of the work carried out, with the agencies awarded the contract for executing the projects facing the heat. But has anyone learned any lessons from such infrastructural disasters? Hardly so.

The collapse of bridges and flyovers is said to have become a routine affair in Bihar, even though it is among the country's most rapidly developing states today. Not that the situation is any different when it comes to public works in other parts of the country!

For that matter, the entire gamut of government contracts is mired in controversies, with alleged cuts and kickbacks as much a part of the proceedings as the work itself.

Let us, however, leave this subject for future deliberation.

An L1 is a contract awarded to the lowest bidder in the tendering process. When bidding for a contract, a bidder must carefully consider factors like the project scope, estimated costs, timeline, potential risks, their own capabilities, competition, compliance requirements, profit margin, and the client's needs to ensure they submit a realistic and competitive bid that aligns with their business objectives.

Now, let us consider the bidding process for project contracts here. A tendering and bidding process for a project involves an organisation issuing a tender document, which invites potential contractors to submit proposals (bids) outlining their ability to complete the project, with the organisation then evaluating the bids and selecting the most suitable one to award the contract to."

But do organisations genuinely subscribe to a stringent selection process? Essentially, it is a competitive process where companies compete to win a project by presenting their best offer. It has always been a practice to award contracts to the bidder with the lowest price (L1).

Now, this is where the crux of the whole problem lies! By quoting unreasonably low rates, bidders who win the contract have often given evidence of their inability to execute the works as specified.

With such 'unrealistic' rates, knowing that the work will be substandard requires no second guess. Cutting costs to increase profits leads the contractor to engage in unethical practices.

A healthy competition is always good for any business as it encourages embracing change and innovation. But with the sort of cut-throat completion we are witnessing today, where even a fraction of a percentage tilts the balance in favour of one's competitor, winning the bid is all that matters.

However, e-tenders floated for providing integrated facility management services in public sector undertakings follow a different pattern. With all 'constants', such as labour costs and consumables charges, remaining specified in all such tenders, the 'service charge' quoted by the bidders remains the sole criterion for winning the bid.

Undercutting the established 'base price' is very rare in such cases as it invites automatic disqualification. But do the base prices set by the 'buyer' reflect true market trends and requirements?

Clients expecting the best services without understanding the 'economics' of such arrangements are usually oblivious to the 'mischiefs' played by the contractual agencies. They need to realise that without a decent 'service charge' to work with, the quality of services rendered is bound to suffer. Besides, complying with the statutory compliances, which constitute an important part of the contract, is essential to maintaining a responsible business operation.

With the awarding of the contract and signing of the agreement, clients assume their role to have come to an end. On the contrary, without periodic checks and physical verification of the works in progress, they are doing a great disservice to themselves.

With profit margins being the prime consideration, it is difficult to believe that anyone would vie for a contract and bid unreasonably low to satisfy one's ego. Nor would they be nurturing any philanthropic ideas!

This implies that even after bidding so low, the vendor aims to profit from the whole business. Would this not necessitate the clients thoroughly scrutinising the rates quoted and conducting a feasibility study?

Instead, believing that competitive bidding helps get the best price and contract terms for their proposals, the clients fail to familiarise themselves with the fundamentals of business outsourcing.

However, they are being lured into a false sense of assurance, as they will have to contend with a working style that is nowhere near the standards that they expected.

Hence, prospective clients must conduct a thorough evaluation to understand the prevalent market rates and incorporate them as the base rates—in this case, the 'Service Charges' component. Of course, this is the general impression derived. Opinions may differ!

Invariably, the 'L1' fixation has also been responsible for the slipshod nature of works carried out for government project contracts. The practice of undercutting competitors' prices to quote a rate that cannot possibly give the bidder a chance to make a profit needs to be shunned.

However, the bidding process has followed a similar pattern over the years, and clients do not seem to be in too much of a hurry to change it. It is all the more exasperating that even establishments in the private sector subscribe to similar procedures while awarding contracts.

Calling for three quotations and handing over the work to the lowest quote or negotiating with either one of those who have quoted higher to match the rates of the lowest is a common practice in private companies.

The author knows of an instance in a multi-national company where, after awarding a particular contract to the lowest quote, the company had to redo the job after faults began to surface barely two months after the job was completed.

Whether it be service contracts, projects, or construction contracts, zeroing in on the lowest bid to reach an agreement for the execution of the works cannot always be a foolproof way of getting jobs done.

The awarding of contracts to L1 has recently begun to invite criticism. Experts recommend pre-qualifying vendors after the notice of the tender to ensure that there is a sufficient number of vendors to ensure healthy completion.

The prerogative for laying down the criteria for prequalification for different types of contracts rests squarely with the clients.

In any case, let us understand that evaluating the bids and awarding the contract is the most important part of the tendering process. A strict adherence to the bare essentials will save a thousand glitches later.
The saga of crumbling infrastructure works in our country is a testimony of the glaring anomalies in the system.