To limit unduly aggressive bids NHAI eyes trimming bidders’ list
The National Highways Authority of India (NHAI) is looking at ways to ensure against unduly aggressive bids with a large number of developers abandoning flagship projects — the GMR Group walked out of the Kishangarh-Ahmedabad project in FY13.
While the GMR Group had bid a first-year premium of Rs 636 crore for this project, the lowest bidder — L&T — had bid less than half that at Rs 303 crore.
IRB had bid R310 crore versus a mere R25 crore for the lowest bidder in the case of the Ahmedabad-Vadodara project. It doesn’t help that, as Crisil points out, as projected by many investors initially project returns in the sector are now in the 8-14% range, less than half the 22-26%.
NHAI should look at managing overenthusiastic and unrealistic bidding by limiting the number of bidders placing their price bids to just three to five players, as suggested in the draft report by the high-level committee on infrastructure financing chaired by Deepak Parekh.
“Several difficulties and delays have been led by Aggressive bidding. One of the major reasons that have led to aggressive bidding is the pre-qualification of a large number of bidders for each project. For the stage of bidding the international best practice is to pre-qualify and shortlist 3 to 5 bidders,” the draft for the second interim report of the committee said.
As the final round of bidding for any project requires significant investment in the time and resources for submission of competitive bids, the draft report suggested pre-qualifying and short listing three to five bidders for the final stage of bidding.
Vishwas Udgirkar, senior director, Deloitte India said,“The government is stuck since, if it does not accept the most aggressive bid, the CVC and the CAG will haul it up for violating the integrity of the bidding process and a possible loss to the government. For the government a change in the selection process should be priority.”
However, any short listing will be difficult to do. In one project put out for bidding this year, there were 62 bidders, and their net worth ranged from Rs 28,882 crore in the case of L&T Infrastructure to Rs 74 crore in the case of Eagle Infra. While some years ago one suggestion was mooted to use the length of roads constructed — or some other infrastructure development — as a means to shortlist bidders, this was shot down as an attempt to favor larger bidders. However, it is clear NHAI needs to find some way to get only serious bidders to participate in bids given the problems caused by ultra-aggressive bids.
Source: Financial Express
Aggressive bidding, Ahmedabad-Vadodara project, CAG, CRISIL, CVC, Deepak Parekh, FY13, GMR Group, Government, Interim report, IRB, Kishangarh-Ahmedabad, L&T Infrastructure, NHAI, Vishwas Udgirkar
