Cutting Corners, Costing More

 

Cutting Corners, Costing More

“India’s infrastructure future depends on shifting from price-driven contracts to modern tendering systems that prioritize technical competence, safety, sustainability and lifecycle performance.

Peerzada Mohsin Shafi

I

nfrastructure development is the backbone of any nation’s growth and prosperity. Projects such as tunnels, ports, airports, highways and hydro power facilities are not merely constructions but the temples of the modern world. These projects have a direct impact on the lives of citizens by improving connectivity, providing employment, enhancing energy availability and raising living standards. They also play a crucial role in stimulating the overall economy by facilitating trade, improving efficiency and attracting investment.

Every infrastructure project begins with a planning phase, which lays the foundation for all subsequent activities. Once planning is complete, the project moves into execution, but only after completing all necessary documentation including administrative approvals, financial clearances, technical verifications, tendering and award of work. The scope, rates, quality requirements, technical specifications and methodologies are all documented in the detailed project report prepared by consultants. These reports are rigorously verified and revised to ensure accuracy and feasibility.

Despite this structured approach, the tendering and contract award system in India remains largely outdated. Most tenders are still advertised and awarded based on either a single cover or double cover system under the lowest-bidder criterion. In the single cover system, only the financial bid is considered and the contract is awarded to the bidder quoting the lowest price. In the double cover system, also called the two-envelope system, technical qualifications are first checked before opening the financial bid. In theory, these systems ensure fairness and competitiveness, but in practice they are often inadequate and prone to manipulation. This issue is particularly significant for regions like Jammu and Kashmir, where infrastructure projects are executed in challenging mountainous and seismic conditions. Roads, tunnels, hydropower projects and urban infrastructure in such terrain demand higher technical competence, stricter safety standards and long-term durability. In these conditions, awarding contracts solely on the basis of the lowest bid often magnifies risks, leading to delays, cost overruns and compromised structural integrity.

It is common for contractors to quote as low as half the advertised cost in order to win projects, sometimes even lower. Very few tenders receive bids above the estimated project cost. This practice severely affects the quality of work and creates systemic inefficiencies. While some large-scale projects such as hydro power plants or complex tunnels implemented under EPC contracts use variable Performance Bank Guarantee percentages to mitigate risk, these guarantees serve only as temporary security until the construction or defect liability period ends. They do not ensure project quality, timely completion or long-term durability.

As a result, India frequently witnesses project failures, structural collapses and poor-quality work. There is hardly a day when news of construction accidents, damages or defects does not appear in the media. The root cause of these failures is the over-reliance on the lowest-bidder system, which prioritizes cost over competence, technical capability or project safety. In contrast, most developed countries follow FIDIC rules, established by the International Federation of Consulting Engineers. FIDIC provides standardized contracts and tendering procedures that emphasize transparency, fairness, risk management, technical competence, innovation and long-term value. Under FIDIC, contracts are awarded based on overall ability to deliver quality projects efficiently and sustainably rather than the lowest initial price. FIDIC principles promote life-cycle performance, balanced risk allocation, value for money and accountability for all stakeholders involved.

Modern tendering methods inspired by FIDIC principles have been widely adopted internationally and are increasingly relevant for India. These methods prioritize technical competence, project value, sustainability and innovation while maintaining financial accountability. One of the most widely used methods is Quality and Cost Based Selection (QCBS). Under QCBS, bidders are first evaluated on technical criteria such as experience, methodology, personnel, past performance and innovation.  Another modern approach is the Most Economically Advantageous Tender (MEAT), also called the Best Value method internationally. MEAT evaluates multiple criteria, including technical competence, cost, delivery schedule, sustainability, operational efficiency and innovation. Unlike the lowest-bidder system, MEAT selects the bid that provides the best overall value. This approach encourages contractors to propose creative solutions, adopt sustainable construction methods and optimize operational efficiency.

Life-Cycle Costing (LCC) takes the evaluation further by considering the total cost of ownership throughout a project’s life. This includes construction, operation, maintenance, energy consumption, and eventual disposal. LCC recognizes that a slightly higher initial investment can lead to significant long-term savings in maintenance and operational costs. It also encourages the use of durable materials, energy-efficient technologies, and sustainable practices. By assessing the entire life cycle of a project, LCC ensures that infrastructure is cost-effective, safe and environmentally responsible.

Performance-Based Contracts (PBCs) represent another modern approach, where payments and incentives are tied to measurable outcomes rather than simply completing project outputs. Performance metrics may include safety standards, durability, environmental compliance, functionality and timely completion. Linking financial rewards to project performance motivates contractors to maintain quality, accountability and efficiency throughout the project duration.

To address the shortcomings of the traditional lowest-bidder system, the most viable option, India should adopt a Modified QCBS system for complex and high-value projects. Under this system, no financial bid is submitted. Contractors are evaluated based purely on their technical expertise and the highest Performance Bank Guarantee (PBG) they can provide. Technical evaluation ensures that only the most competent contractors are considered, while the PBG acts as a financial assurance of performance, safety and accountability. This shifts the focus from low cost to quality, risk management, and reliability, reducing the likelihood of underbidding and compromised project execution.

With India rapidly expanding its infrastructure across highways, metro systems, urban development, energy and industrial corridors, the adoption of Modified QCBS is essential. The country continues to face delays, quality issues, structural failures and safety hazards in projects executed under the lowest-bidder system. Modified QCBS ensures that projects are executed efficiently, safely and sustainably, focusing on the technical capability and financial reliability of contractors rather than just the initial cost.By integrating modern tendering practices such as QCBS, MEAT, LCC, competitive dialogue, negotiated procedures and performance-based contracts, India can align its infrastructure development with international best practices. These methods emphasize transparency, accountability, innovation, and long-term value creation. They also reduce disputes, encourage contractor responsibility and ensure that investments yield sustainable benefits.

India’s future infrastructure must not only meet immediate needs but also stand the test of time. Roads should remain durable, bridges should remain safe, metro systems should remain operational, and power projects should continue to supply energy efficiently. By moving away from an outdated lowest-bidder approach and adopting modern tendering systems grounded in FIDIC principles, India can ensure that its infrastructure is reliable, cost-effective and capable of supporting the nation’s long-term economic growth.

Modern tendering methods represent a shift from short-term cost considerations to long-term quality, safety and sustainability. They encourage technical excellence, financial prudence and innovation, ensuring that India’s infrastructure serves its citizens efficiently and effectively. Adopting these systems is no longer optional but essential for a country seeking to secure its future through robust and world-class infrastructure.