Is Charging One Paise Per Employee by Manpower Contractors Legal or Predatory? Seeking Insights

When we call for tenders for manpower, vendors charge just Re 0.01 per person as an administrative charge to win the contract. Can this be taken as predatory bidding? Can the bid be rejected legally? There is a fear that the vendor will then charge the engaged persons out of the money paid by the client to them.

If there are government guidelines on this (in India), kindly link them. Thanks.

Dear Member P,

Context of the bid for the contract

a) You are keeping people on the contractor's roll and paying a salary exactly as per the minimum wages.

b) You are keeping people on the contractor's roll where the salary is well above the minimum wages.

In case (a), there is no scope for a contractor to get a profit margin. However, he might be supplying the manpower since the manpower supplied is less compared with (b).

In case (b), as per the bid, the contractor does not have a profit margin; however, he could be taking money from the employees that he hires. He could take his cut and then pass on the remainder to the employees.

In either context, you may ask for a price breakup of his bid from the contractor. Ask for clarification on the administrative charges of Re 0.01, and how he will sustain the continuity of the operations.

Security deposit considerations

By the way, are you going to take a security deposit from the contractor? If yes, will you link the refund of the security deposit to the disruptions of his services?

Thanks,
Dinesh Divekar

Thanks for the quick reply. You have hit the issue right. However, the problem that the vendor has created is that he is undercutting others by charging 1 paisa. The one paisa thing came to notice when all bidders were asked to give the breakup. Since the government does not allow asking further questions after the opening of financial bids, he will have to be given the contract because others have asked for much more administrative charges beyond the mandatory minimum wages, contributions, and taxes. This vendor has done this trick since the tender had categorically said that 'NIL' charges by the vendor will not be accepted.

Government Orders and Guidelines

Are there any government orders, vigilance circulars, or competition commission guidelines that might have come to your notice, which allow the client to reject a bid where service charges are not 'NIL' but unsustainably low?

Addressing Concerns in Tender Mechanisms

As an honest citizen, your concern is appreciated. However, due to the fear of government circulars, such as CVC guidelines, the tender mechanism often points to choosing the lowest bidder. The CVC guidelines do not prohibit seeking clarifications or making negotiations, provided some benefit accrues to the government.

To stop such practices, we need to devise a procedure before floating a tender to determine the minimum percentage of administrative charges for manpower tenders. If any bidder quotes lower than the pre-decided minimum percentage, the bid shall be rejected. This procedure should be pre-approved by the Competent Authority.

Regards

Dear Sir,

There is no issue if the bidder is asking for 0.1 paisa. However, as a principal employer, you are accountable for ensuring the payment of minimum wages to contractual workers. If you are only paying the minimum wages to the contractor, there is a possibility that he will pay less to the workers. It is essential for you to monitor this situation closely.