An abnormally low bid cannot be rejected without reasoned evaluation of the bidder’s price analysis.

The Petitioner, an ‘A’ Class Engineer Contractor, challenged the rejection of his bid for the work of “Flood Protection Work on right flood bank of river Vansadhara near village Bainaguda in Rayagada District,” submitted pursuant to e-Procurement Notice No. ACE, VNB-03/2025-26.

Since the bid was substantially below the estimated cost, the authorities sought detailed item-wise justification and price analysis. The Petitioner furnished explanations and supporting documents concerning his quarry, machinery, vehicles, manpower and other resources, and later submitted further material on 16.04.2026.

His bid, quoted 32.70% below the estimated cost, was scrutinised by a Departmental Technical Committee and rejected under Clause VI of the Office Memorandum dated 03.01.2026 on the ground that he had not demonstrated the capability to execute the work at the offered price.

The rejection order dated 06.05.2026 was followed by a fresh tender notice dated 06.06.2026 for the same work, both of which were challenged in the writ petition.

1. Whether the Petitioner’s bid could be rejected merely because it was substantially below the estimated cost, or whether the authorities were required to evaluate his detailed price analysis and determine whether he had substantially failed to demonstrate his capability to perform the contract at the quoted price under Clause VI of the Office Memorandum dated 03.01.2026.

2. Whether the reasons recorded by the Departmental Technical Committee regarding the cost of stones and transportation, labour, and zinc-coated PVC hexagonal mesh gabion boxes constituted a sufficient and reasoned basis for rejecting the Petitioner’s bid.

3. Whether the rejection of the bid and the consequential fresh tender notice were legally sustainable.

The Court applied the principles governing judicial review of tender decisions: courts ordinarily should not substitute their commercial assessment for that of the tendering authority and should interfere only where the decision is grossly or palpably erroneous, arbitrary, mala fide, or contrary to public interest, as stated in Tata Motors Ltd. v. Brihan Mumbai Electric Supply & Transport Undertaking, 2023 SCC OnLine SC 671, relying on Air India Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617, and Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517.

Under the Office Memorandum dated 03.01.2026, abolition of the earlier 14.99% negative bid cap meant that a bid could not be rejected merely because it was quoted below a specified percentage of the estimate.

A bid may be treated as abnormally low when, in combination with other elements, it raises material concerns regarding the bidder’s capability; however, after seeking clarification and price analysis, rejection is permissible only where the bidder has substantially failed to demonstrate the ability to perform the contract at the offered price.

The Court held that the Petitioner’s 32.70% lower quotation, by itself, was not a valid ground for rejection under the revised Office Memorandum.

Although the authority was entitled to verify the Petitioner’s claims regarding his quarry and resources, the Committee did not adequately consider the quarry lease, Consent to Operate, availability of his own machinery and tippers, or the manner in which those resources reduced execution costs.

Similarly, the explanation that mechanisation reduced manual labour while minimum wages would nevertheless be paid, and that the gabion boxes could be procured directly from the factory at the quoted rate, required substantive consideration.

The Committee failed to explain why these responses were inadequate or how they demonstrated that the work could not be executed according to specifications at the quoted price.

The decision therefore appeared to rest principally on a comparison between the Petitioner’s rates and departmental estimates, rather than on the specific statutory and administrative test of substantial failure to establish feasibility.

The Court clarified that it was not substituting its own commercial assessment for that of the authority, but was intervening because the decision-making process lacked a sufficiently reasoned evaluation.

The order was quashed, and the subsequent tender notice dated 06.06.2026 for the same work was also set aside.

The matter was remitted for fresh consideration of the Petitioner’s bid, including his price analysis and supporting documents, by an authority or committee other than one chaired by Opposite Party No.3, preferably within four weeks of communication of the judgment.

The Court expressly clarified that the Petitioner, merely by being L-1, acquired no indefeasible right to the contract and that the competent authority remained free to decide the bid’s ultimate commercial viability in accordance with law and the applicable tender conditions.

The writ petition was accordingly allowed.