Are Contractors Being Forced to Cut Corners Due to L-1 Bidding Policies? Seeking Fair Profit Guidelines

The Profit Dilemma in Contracting

As we all know, everyone in business aims to earn a profit, and contractors are no exception. What I mean to say is, if we expect contractors to fulfill all statutory compliances and pay wages to laborers as per the minimum wages fixed by the government, then don't you think the principal employer should ensure that a contractor makes a profit?

The Issue with L-1 Bidding

Currently, in most government establishments, due to cut-throat competition, contractors are quoting very minimal profits (up to Rs 1/- only) as the contract is awarded to the lowest bidder, i.e., the L-1 bidder. Because of this policy of awarding tenders to the L-1 bidder, contractors are not quoting a profit. Consequently, contractors start earning by paying lower wages to laborers and not fully meeting statutory liabilities.

Seeking Guidelines and Directives

Are there any guidelines or directives from the Central Vigilance Commission or any government authorities that govern tendering and authorize the principal employer (a government organization, defense, etc.) to ensure fair profit margins for contractors?

Regards,

As I was short on space, I am continuing. Are there any guidelines or directives from the CVC or any government authority that govern tendering? Do these guidelines give authority to government organizations like defense to prepare a benchmark rate (reasonable rate) by analyzing the market and include it in the tender conditions? This would mean that a bidder quoting below that benchmark rate would be disqualified, and a bidder quoting a reasonable rate would be awarded. This may help in preventing the exploitation of laborers, ensuring that contractors are forced to pay minimum wages and fulfill all compliances.

Thanks.

Regards,
Farukh

Yes, Mr. Ali. There is a circular, and I am uploading the same. It has been issued by the Ministry of Finance, Government of India. Please go through the last page of the circular in detail.