Time for Government to to bid adieu to age old Least cost selection L1 Tendering – Mr K K Kapila

The age old Least Cost Selection method or L1 which is the award of work to the lowest financial offer has been a prevalent procurement strategy for procurement of works by Contractors, Consultants and purchase of goods since long in the country.  This has often resulted in poor quality of works and goods.  This necessitates an urgent need to change the Selection Mechanism and move towards the concept of ‘’Workable Rates’’ Procurement Mechanism.

It’s high time for the Government to revisit and say goodbye to the age old conventional L1 tendering and procurement system in the country.

Experience in India has shown that officials in procuring departments and agencies, in order to maintain utmost probity and transparency, prefer to adopt the least cost principle for the award of contracts.  This in turn has resulted in bidders seeking to win contracts by putting in extremely low bids that are eventually found unworkable, leading to huge delays, cost overruns and disputes often ending in the termination of contracts.  It is necessary, therefore, to seriously examine our present procurement procedures to ensure that we achieve our objective of quality, timely completion of works contracts, within the stipulated costs.

Last year  the Central Vigilance Commissioner (CVC) had also called for revisiting the existing tendering system  as It is well founded that the current Contract tendering system by government and public undertakings based on Least Cost Selection method has shortcomings given the number of infrastructure and other projects facing concerns of delay,  quality and disputes, ultimately leading to time consuming arbitration and higher costs.

The Chief Vigilance Commission (CVC), while preparing a concept note, which was shared with the government, had stated that the L1 system was holding back India’s development and the time had come to replace it. .In the note, the CVC has recommended alternative tendering policies such as Quality-cum-Cost Based Selection (QCBS), Quality-Based Selection, Quality-cum-Least Cost Based Selection (QLCBS), and Procurement Based on Life Cycle Cost (LCC) .

The Changed Procurement System which offers various alternatives to derive workable rates in a transparent manner, will give opportunities to competent firms to plan a project or a bid on workable rates, thereby facilitating better management and execution which will reflect on quality and timelines. The L1 system which is plagued with delays of time and cost overruns will ultimately lead to time consuming arbitrations and higher costs’,

The change from L1 needs to be brought about as a matter of great urgency in the country.  How can we buy bullet proof jackets at L1?  How can we buy PPE Kits on L1? Do we need to secure our forward line or kill them because we refuse to bring the requisite change in the system?  Let us wake up to the immediate requirement of this essential change post haste and move forward if we have to achieve the mission of Atma Nirbhar Bharat

The heart of this change lies in creating awareness in the minds of the general public that the focus on ‘’Least Cost Factor’’ has resulted in compromises in achieving world class infrastructure or purchase of quality goods as well as services.

The country needs a public procurement mechanism which focuses on Quality and Cost in all activities in public domain.  Also to be considered is the need, in these times to prevent foreign companies from bidding too low with a view to prevent Indian companies from competing and with opportunity coming up.

The International Federation of Consulting Engineers (FIDIC), as an Institution is deeply interested in the processes used in the selection of Contractors, Consultants and Vendors of materials for different kinds of works, since the outcome and completion of contracts will ultimately reflect on the design, quality of material used and supervision effort of the engineers.  FIDIC has been advocating appropriate methodology of selection of Contractors and Consultants to ensure that the Client gets optimal value for his investment along with assured quality and timely completion of projects.

It is time to say goodbye to this age old system and wake up to the dire necessity of change which is inescapably required for moving towards ‘’Atma Nirbhar Bharat”.