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New 30% Threshold for Abnormally Low Bids: Finance Ministry OM Explained

New 30% Threshold for Abnormally Low Bids: Finance Ministry OM Explained

New 30% Threshold for Abnormally Low Bids: Finance Ministry OM Explained

The Department of Expenditure has amended the rules regarding "Abnormally Low Bids" (ALBs) in government procurement. Previously, procuring entities did not have a specific numerical baseline to determine when a bid should be treated as abnormally low. This article explains the new mandatory 30% threshold introduced by the Office Memorandum dated 9 November 2026, and what it means for Central Government employees serving on tender evaluation committees.

Official Order Details

Issuing Authority Ministry of Finance, Department of Expenditure (Procurement Policy Division)
Order Number No. F. 2/22/2026-PPD
Date of Issue 09.11.2026
Subject Amendment to provisions relating to Abnormally Low Bids in the Manuals for Procurement
Applicability All Central Government Ministries and Departments (Applies to procurement of Goods, Consultancy, Non-Consultancy, and Works)

Quick Summary

  • Mandatory Examination: Any bid quoting a price more than 30% below the estimated cost must now be mandatorily examined as a potentially Abnormally Low Bid.
  • Not an Automatic Rejection: Quoting more than 30% below the estimate is a trigger for scrutiny, not an automatic ground for rejecting the bid.
  • Clarifications Required: For bids crossing the 30% threshold, the Procuring Entity is required to seek written clarifications and detailed price analyses from the bidder.
  • Security Deposits Unchanged: The rules prohibiting Additional Security Deposits/Bank Guarantees for ALBs (except in compelling circumstances with higher authority approval) remain entirely unchanged.

Detailed Explanation of the Amendment

The 30% Mandatory Trigger

An Abnormally Low Bid (ALB) occurs when a bidder's price is so low that the evaluation committee doubts their capability to successfully deliver the contract. Under the newly amended rules, if a bidder quotes a price that is more than 30 per cent below the estimated cost, the Procuring Entity is legally required to flag and examine it as a potentially Abnormally Low Bid.

What Procuring Entities Must Do

When a bid crosses this 30% threshold, the Procuring Entity must take specific action. They must ask the bidder for written clarifications, which should include a detailed analysis of their price in relation to the tender's scope, schedule, allocation of risks, and other requirements. If a bid is 30% or less below the estimated cost, seeking these clarifications is optional ("may, if considered necessary"), but if it exceeds 30%, the examination becomes mandatory.

When Can a Bid Be Rejected?

The OM explicitly states that reaching the 30% threshold does not automatically disqualify the bidder. A bid can only be rejected if, after evaluating the bidder's clarifications and price analysis, the Procuring Entity determines that the bidder has substantially failed to demonstrate their capability to deliver the contract at the offered price.

What Has Changed?

Feature Previous Position (Extant Provisions) New Position (Amended Provisions)
Identification of ALB No numerical threshold was prescribed for identifying a potentially Abnormally Low Bid. A firm threshold of more than 30% below the estimated cost is prescribed as a mandatory trigger.
Seeking Clarifications The Procuring Entity "may" seek written clarifications in suspected cases. For bids >30% below estimate, examination is mandatory. For other bids, the entity "may" seek clarifications if necessary.
Rejection Rules Bid could be rejected if bidder failed to demonstrate capability. No change. Bids >30% below estimate cannot be automatically rejected; they can only be rejected if capability is not demonstrated.

Note: The comparison above is drawn directly from the text of the uploaded official document.

Practical Implications for Employees

For Central Government officers involved in finalizing tenders, this amendment removes ambiguity. Previously, evaluation committees had to use their own judgment to decide when to initiate the ALB verification process. Now, the math dictates the initial step:

  • Check the Estimate: Accurate calculation of the "estimated cost" is now more critical than ever, as it directly dictates the 30% trigger.
  • Paperwork for >30% Bids: If the lowest bidder (L1) is more than 30% below the estimated cost, the committee cannot simply award the contract. They must initiate the formal written clarification process and document the bidder's price analysis.
  • Standard Applicability: Employees should note that this amendment applies across the board—it amends the Manuals for Procurement of Goods (2024), Consultancy Services (2025), Non-Consultancy Services (2025), and Works (2025).

Frequently Asked Questions (FAQs)

1. Does an L1 bid get automatically rejected if it is 35% below the estimated cost?
No. The order clearly states that the >30% threshold shall not, by itself, constitute a ground for automatic rejection. It only triggers a mandatory examination.
2. Should we ask for an Additional Security Deposit if a bid crosses the 30% threshold?
No. The existing rules (Sub-para 3) remain unchanged. Tender documents should not contain provisions for Additional Security Deposits or Bank Guarantees for ALBs. Such deposits can only be requested under compelling circumstances, and only with the explicit approval of the next higher competent authority or the Secretary of the Ministry.
3. What if a bid is exactly 30% below the estimated cost, or 25% below?
The mandatory examination applies to bids "more than 30 per cent below the estimated cost." For bids at or above this cut-off, the Procuring Entity still has the discretion to seek clarifications if they feel the price raises material concerns about the bidder's capability.
4. Which procurement manuals does this affect?
The amendment updates the specific ALB paragraphs in all four major manuals: Procurement of Goods (2024), Consultancy Services (2025), Non-Consultancy Services (2025), and Works (2025).
Source Note: This article is based on Office Memorandum No. F. 2/22/2026-PPD issued by the Ministry of Finance, Department of Expenditure (Procurement Policy Division) on 09.11.2026.
Disclaimer: This article is prepared for general informational and educational purposes only. It is a simplified explanation of the official document identified above and is not a substitute for the original order or applicable official instructions. Every effort has been made to maintain accuracy, but errors or omissions may occur. Readers should consult the original government document and their competent administrative authority for clarification or decisions affecting their individual circumstances. The website does not guarantee any particular benefit, entitlement, or outcome and accepts no liability to the extent permitted by applicable law.

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