News
Additional Performance Security for Abnormally Low Bids
In view of the increasing trend of abnormally low bid prices being quoted in road infrastructure projects, the Ministry of Road Transport and Highways (MoRTH) has reviewed and revised its guidelines on Additional Performance Security (APS) to safeguard project execution and ensure bidder accountability.
The earlier guidelines issued by MoRTH in 2022 vide the circular bearing reference no. NH 37015/01 /2022-H (Comp No. 208778) dated August 26, 2022, mandated the imposition of the APS when the selected bidder’s offer falls below 20% of the estimated project cost. According to the 2022 guidelines:
- The APS was calculated as 20% of the difference between the estimated project cost and the bid price offered by the bidder.
- The maximum APS was capped at 3% of the bid price.
- APS was treated as being a part of the overall performance security.
- Imposition of the APS required approval from the Secretary, MoRTH, with specific justification based on the bidder’s track record.
These guidelines were introduced in alignment with the Department of Expenditure’s circular bearing Reference No. DPE/7(4)/2017-Fin. (Part-I) dated November 19, 2020, which imposed restrictions on the imposition of the additional security deposit or bank guarantee in case of abnormally low bids.
In light of ongoing occurrences of low bid quotations in national highway projects, the MoRTH has updated the framework for determining APS vide circular bearing reference no. RW/NH-33044/34/2024-S&R (P&B) (Computer No. 246283) dated April 30, 2025 (the “Circular”), which would be effective immediately from the date of the Circular. The revised guidelines are as follows:
- Tier 1: For a bid price between 10% and 20% below the estimated project cost: An incremental APS at the rate of 0.1% would be applied for every percentage of the bid price below 10% of the project cost.
- Tier 2: For bid prices more than 20% but below the estimated project cost: An incremental APS of 0.2% would be applied for every percentage of the bid price below 20% of the project cost in addition to 1% APS on the bid price.
- The APS percentage shall be rounded off to the nearest whole number based on the decimal fraction. For example, the percentage would be rounded down if less than 0.5% or rounded up if more than 0.5 %.
- The APS shall continue to be treated as a part of performance security.
- For projects under the Road Wing, prior approval from the Director General (Roads Development) and Special Secretary, MoRTH, would be required for taking additional performance security.
