Unicon Builders and Contractors vs State of Uttarakhand and others

SUDHANSHU DHULIA, J. (ORAL)

The petitioner was one of the many persons who made a bid in response to a tender notice invited by respondent no. 3 for “execution of

reconstruction and improvement work of Dasaithal Khairmandey Motor Road Pithoragarhâ€. He was admittedly the L-1. The bid of the petitioner

was accepted by the respondent department by letter dated 23.09.2017, however, by the said letter the petitioner was asked to deposit additional

performance guarantee. This additional performance guarantee the petitioner could not give and sought reasons as to why the additional performance

guarantee is being sought from him. Ultimately, the petitioner agreed to give the additional performance guarantee as well by his letter dated

14.10.2017 by submitting that he has already applied for bank guarantee and the bank has requested 15 days’ time to complete the internal

process. However, prior to this, the bid of the petitioner was cancelled and the security amount deposited by the petitioner was forfeited. Hence, the

petitioner has filed the present writ petition.

According to the learned counsel for the petitioner, in case the lowest evaluated bid price is seriously unbalanced or substantially below updated

estimates in the opinion of the employer, then the employer may require the bidder to produce detailed price analyses (with breakdown of unit rates) or

any or all items of the Bill of Quantities, to provide justification for the quoted prices and to demonstrate the internal consistency of those prices with

the construction methods and schedule proposed. The reference is of clause 40.1 of the Instructions to Bidders, which reads as under:

“40.1. If the bid, which results in the lowest Evaluated Bid Price, is seriously unbalanced, front loaded or substantially below updated estimates in

the opinion of the Employer, the Employer may require the Bidder to produce detailed price analyses (with breakdown of unit rates) for any or all

items of the Bill of Quantities, to provide justification for the quoted prices and to demonstrate the internal consistency and justification of those prices

with the construction methods and schedule proposed. After evaluation of the price analyses, taking into consideration the schedule of estimated

contract payments, the Employer may require that the amount of the performance security be increased at the expense of the Bidder to a level

sufficient to protect the Employer against financial loss in the event of default of the successful Bidder under the Contract.â€​

Learned counsel for the petitioner would argue that though the employer is always at liberty to enhance the performance guarantee but before

doing that he must seek reasons from the petitioner as per clause 40.1 of the instructions to bidders.

Learned State Counsel, on the other hand, would argue that clause 40.1 gives a discretion to the employer, as the word is “may†and it is not

necessary to seek explanation. Moreover, learned State Counsel relies upon a Government Order dated 12.06.2017 where it says as under:

“(i) No additional performance security for items up to 5% below the estimated rates.

(ii) From 5% below to 15% below the estimated rate an additional performance security of 0.50% of the estimated cost of the item for every 1%

below the estimated rate.

(iii) For more than 15% below the estimated rate, an additional performance security of 1% of the estimated cost of the item for every 1% below the

estimated cost.â€​

The aforesaid Government Order though fixes the rate in terms of the percentage of increase of performance guarantee in such matters, but in all

fairness when the petitioner was the lowest bidder, at least the petitioner should have been called to explain as to why the bid is so low, even if one of

the options for the employer to cancel his bid, under the circumstances. This has not been done. Though the words used are “may†but a bare

reading of the same shows that it will always be fair if explanation is sought.

Writ petition is therefore disposed with the direction to the respondent authorities to consider the case of the petitioner in terms of clause 40.1 of the

Instructions to Bidders. The petitioner shall give an explanation within one week from today. In case the petitioner submits an explanation within one

week from today, the employer shall pass an order therein, in accordance with law. If the employer comes to the conclusion that the bid price of the

petitioner is extremely low and work cannot be done, the employer would always be at liberty either to ask for the additional performance guarantee,

or to cancel the bid and go for fresh bid, after explaining the changed circumstances in terms of public policy.