The government is changing the way large infrastructure projects have been awarded and is in the process of creating a new transparent bidding process that will be used for all future public-private partnership ventures.
The new bidding format involves a selection based purely on financial considerations in the last round. It will help avoid delays in large infrastructure projects arising from ambiguity in bidding documents and the selection process, and the consequent litigation that is resorted to by losing bidders.
The privatization and modernization of New Delhi’s airport was delayed because of this. Almost all large infrastructure projects the government has in mind involve public-private partnerships, the collaboration of the private sector with government-owned entities.
Apart from making the bidding and selection process more transparent, the new format ensures that the nodal ministry in charge of the infrastructure project (such as the power ministry in the case of a power project) will not be able to influence the selection criteria, said a senior government official close to the development, who did not want to be identified.
The format, which has been finalized by an inter-ministerial group headed by the expenditure secretary, will soon be tabled before the Prime Minister’s committee on infrastructure, the official added.
The new criteria incorporates the technical criteria a bidder will have to satisfy in the pre-qualification stage. Companies that clear this stage (by meeting these criteria) can make a financial bid and the project will be awarded only on the basis of this. And selection of the successful bidder will be made only on the basis of their financial bids for a project.
Ambiguities in the old format have led to litigation and eventually delayed several road projects that the government had awarded the private sector.
And the government’s showpiece power-generation project, located at Sasan, Madhya Pradesh, is threatening to unravel on account of ambiguities in the bidding process.
Several projects end up in courts as no detailed project reporta (DPR) are prepared by the government before calling for bids, said a lawyer who did not want to be identified. The bidding becomes messy, for lack of a DPR, he added.
The new bidding format has the support of the industry, one of whose representatives claimed that it was just what companies wanted. “We want a two-part bid,” said Vinayak Chatterjee, chairman, Feedback Ventures, an infrastructure consulting firm and a member of the infrastructure committee of the Confederation of Indian Industry, an industry lobby.
“In the first part, we want the government to satisfy itself on the technical front. We have asked them to clear everything at this stage, and also make it transparent through weightages. Once the first part is over, the entities that qualify should make a financial bid. In this case, there should be absolutely no subjectivity. One single financial number should determine who is the winner.”
In the case of the Delhi airport modernization project, Reliance Airport Developers Pvt. Ltd, one of the losing bidders, challenged in the Delhi high court the award of the contract to the GMR group-led consortium, which had met all technical criteria and was offered an option to match the highest financial bid (which it did). The Supreme Court eventually rejected the petition.
The government official said the new format would involve two well-defined stages. In the first stage (which would involve a RFQ or request for qualification), he added, the emphasis would be on technical criteria. The track record of the bidder would matter more in this stage, he explained, than its net worth.
In the second stage, the official said, the bidder would respond to a request for proposal (RFP) with a financial bid. Under the existing format the RFP stage includes both technical and financial criteria.
(Sanjiv Shankaran contributed to this story.)