Elevated corridor tenders: B-SMILE conditions may have restricted competition

The tenders for Bengaluru Smart Infrastructure Limited’s (B-SMILE) eight elevated corridors, which have now been cancelled, were based on a common template that combined provisions from two standard contract documents while also introducing additional conditions found in neither, according to the Urban Development Department’s (UDD) tender-cancellation order. The report noted that no government approval had been obtained for this hybrid or composite document.

According to the report, the tender documents combined provisions from the K/W-4 contract and the Ministry of Road Transport and Highways’ (MoRTH) Engineering, Procurement and Construction (EPC) documents, while also adding more than 10 conditions that were not part of either standard.

Fair competition?

The report flagged key eligibility criteria that deviated from MoRTH norms, raising questions about bidding conditions and fair competition. It also highlighted inconsistencies in contractual provisions, eligibility criteria and financial requirements.

The report identified 13 conditions common to all eight tenders that deviated from both standards. These included the absence of a time limit for milestone payments and interest on delayed payments, as well as the deletion of the clause governing the valuation of variations in the scope of work, leaving no provision for changes in scope. The tenders also limited delay damages to 10% of individual milestone payments rather than the total contract price.

Further, while maintenance was stated to be included in the estimated annual payment, it was also specified as separately payable at 0.25% or 0.50% of the contract price annually. For the Sirsi Circle project, this amounted to around ₹20.19 crore against an estimated maintenance cost of ₹4.01 crore, the report noted.

Other concerns included making contractors liable for delays caused by utility agencies, the absence of a contractual right for contractors to terminate the agreement even in the event of the authority’s default, and the removal of arbitration provisions without providing an alternative dispute-resolution mechanism.

The B-SMILE tenders did not permit joint ventures, whereas MoRTH allows them for projects valued above ₹100 crore. The report also flagged the use of a five-year period to assess technical capacity, instead of the 10-year period prescribed in a MoRTH letter dated November 2, 2020, for stand-alone specialised projects. It noted that the flyover-length criterion was used in the Minerva Circle tender to reject a bidder.

Financial model

To qualify for bidding, five tenders required contractors to have turnover equivalent to 200% of the estimated annual payment in two of the preceding five years and liquid assets of 33.33%, without a net-worth test. The remaining three adopted MoRTH’s requirements of 15% average turnover and 5% net worth.

Thus, the requirement ran opposite to the size of the work, the report said. It cited the Pipeline Road corridor, valued at ₹327.46 crore, as requiring a turnover of ₹654.92 crore, while Sirsi Circle, valued at ₹538.28 crore, required a turnover of ₹80.74 crore. It noted that no source or recorded rationale had been provided for adopting the 200% turnover model for five projects and a different financial model for the remaining three.

With these tender conditions flagged, the UDD directed the SPV to cancel the tenders, although B-SMILE was on the verge of issuing work orders after Cabinet approval.

‘Will refloat tenders’

A B-SMILE source told The Hindu that they had “hybridised” standards to secure better contract conditions, but approval had not been obtained. “We will get government approval and then refloat the tenders soon,” the source said.