Governance Now Visionary Talks Series

New NHAI norms for project bidding

Bars a developer if failed to achieve financial closure of three or more projects

GN Bureau | February 16, 2010

The National Highways Authority of India (NHAI) has introduced new norms that bars a developer from bidding for new projects if the company has not been able to achieve financial closure of three or more projects, the Hindu Business Line reported on Tuesday.

The move will help prevent highway contractors and developers from bidding for more projects than what they can handle.

The companies likely to be hit by the move include HCC, IVRCL, KMC, IRB Infrastructure, Reliance Infrastructure and Sadbhav Engineering. They have won national highway projects in the last few months, with two-to-three awaiting financial closure, the report said.

“So, on any given day, in case a company has LoAs (Letter of Awards) for two projects for which it has not achieved financial closure, then it can bid for one more project,” the paper quoted an NHAI official as saying.

The new norms are expected to prevent aggressive bidding by some contractors who garner projects only to spruce up their order books, only to struggle later for funds, said another official.

“For one project, the best bidder has offered revenue share to the government, while the second best bidder has sought subsidy of over Rs.350 crore,” an unnamed source was quoted as saying.

In an amendment issued for several projects, whose bids are due February 19 onwards, NHAI has stated: “A bidder shall not be eligible for bidding if, as on bid due date, the bidder, its member or associate was, either by itself or as member of a consortium has been declared by the authority as the selected bidder for undertaking three or more projects and the bidder is yet to achieve financial closure. A bidder shall be considered as declared selected bidder for the projects of NHAI, where the letter of award (LoA) has been issued.”

The latest move is different from an earlier attempt to limit the number of bidders to the top four-five technically qualifying players, a move that was quashed.



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