Finmin defines ‘Abnormally Low Bid’ for government contracts

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Bids more than 30% below estimated cost will require detailed rationale; unsatisfactory response may lead to rejection without automatic disqualification

By Shishir Sinha

Updated - November 11, 2026 at 11:16 AM. | New Delhi

To curb the practice of very low bids in government contracts, the Finance Ministry has made changes in tender norms by defining ‘Abnormally Low Bid (ALB)’. Also, such a bidder will be asked to give detailed rationale behind such a quote and an unsatisfactory response could lead to rejection of the bid.

Amending the ‘Manual for Procurement of Goods’, an office memorandum of the Ministry defined ALB “as a proposal quoting a price more than 30 per cent below the estimated cost.” From such a bidder the Procuring Entity ‘shall’ seek written clarification from the Bidder, including “detailed price analyses of its Bid price in relation to scope, schedule, allocation of risks and possibilities, and any other requirements of the tender document.”

Further, if after evaluating the clarification and price analyses, the Procuring Entity determines that the Bidder has substantially failed to demonstrate its capability to deliver the contract at the offered price, it may reject the bid proposal and evaluate the next higher bidder, at his/their own quoted rate (if considered reasonable, and not by the counter offering rate of ALB), for the award of the contract.

Threshold for ALB “shall not constitute a ground for automatic rejection of the bid,” the OM said. Due care should be taken while formulating the specifications at the time of the preparation of the tender document to safeguard against the submission of abnormally low bids from the bidder, it added.

Meanwhile, there is no change in two provisions related to ALB. First provision says in the case of predatory pricing, the procuring entities may refer to existing consideration of abnormally low bids to assist themselves in the finalisation of tenders. Second, no provisions should be kept in the Tender Documents regarding the Additional Security Deposit/Bank Guarantee (BG) in case of ALB. “Wherever there are compelling circumstances to ask for an Additional Security Deposit/Bank Guarantee (BG) in the case of ALBs, the same should be taken only with the approval of the next higher authority competent to finalise the particular tender or the Secretary of the Ministry/Department, whichever is lower,” it said.

Earlier, the manual defined ALB as a bid in which the bid price, in combination with other elements of the bid, appears so low that it raises material concerns as to the capability of the bidder to perform the contract at the offered price. In such cases, the Procuring Entity may seek written clarifications from the bidder, including detailed price analyses, and may reject the bid where the bidder substantially fails to demonstrate its capability to deliver the contract at the offered price, it was said.

Now, the numerical threshold will mandatorily trigger the examination of a potential ALB. The mechanism will be the same for procurement of consultancy services and non-consultancy services.

Published on November 11, 2026

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