Article by Dr Sheikh Akhter
The Government of India has introduced a significant change in public procurement policy by prescribing a mandatory examination threshold for Abnormally Low Bids (ALBs), bringing greater scrutiny to bids quoting prices more than 30% below the estimated cost of a tender.
Through an Office Memorandum dated 9 November 2026 (No. F.212/2026-PPD), the Ministry of Finance, Department of Expenditure, Procurement Policy Division, has amended the provisions governing Abnormally Low Bids in the Government’s procurement manuals.
The amendment is aimed at addressing concerns arising from unrealistically low pricing, protecting procurement quality and ensuring that bidders possess the financial and technical capability to fulfil contractual obligations at their quoted prices.
What Has Changed?
Under the revised provisions, any bid quoting a price more than 30% below the estimated cost will mandatorily be examined as a potentially Abnormally Low Bid.
The important distinction, however, is that crossing this threshold does not automatically disqualify a bidder.
Instead, the procuring entity must examine the bid and seek written clarification, including detailed price analysis where appropriate, to establish whether the bidder can deliver the contracted goods or services at the quoted price.
The evaluation may consider the relationship between the quoted price and the scope of work, delivery schedule, allocation of risks and responsibilities, and other tender requirements.
If the bidder substantially fails to demonstrate its capability to perform the contract at the offered price, the procuring entity may reject the bid and proceed to evaluate the next higher bidder, subject to the applicable procurement provisions.
Applicability Across Government Procurement
The amendment is not restricted to the procurement of goods. The Ministry has explicitly extended its applicability to:
• Manual for Procurement of Goods, Second Edition, 2024 – Para 7.6.7.
• Manual for Procurement of Consultancy Services, Second Edition, 2025 – Para 8.5.7.
• Manual for Procurement of Non-Consultancy Services, 2025 – Para 7.4.8.
• Manual for Procurement of Works, Second Edition, 2025 – Para 6.4.8.
This makes the amendment relevant across a wide spectrum of government procurement activities.
Implications for India’s Defence and Aerospace Industry
The policy change could have important implications for India’s defence manufacturing and aerospace ecosystem, particularly where procurement involves sophisticated equipment, specialised technologies, indigenous development and long-term maintenance commitments.
In sectors such as Unmanned Aerial Systems (UAS), counter-drone technologies, avionics, electronic warfare systems, surveillance equipment, defence electronics and aerospace components, pricing is often influenced by technology ownership, indigenous content, production scale, component sourcing, testing requirements and lifecycle support.
An excessively low quotation may create concerns about whether a manufacturer can sustain the required quality, delivery timelines, technical performance and post-sales support.
The revised provision creates a formal mechanism for examining such bids rather than relying exclusively on the lowest quoted price.
For Indian defence MSMEs, start-ups and emerging technology companies, this development is particularly relevant. Companies investing in R&D, indigenous manufacturing, certification, specialised testing infrastructure and skilled manpower often face competition from bidders adopting aggressive pricing strategies.
However, the 30% threshold should not be interpreted as protection from price competition or as a guaranteed advantage for established manufacturers. A company offering a genuinely competitive price, supported by demonstrable cost efficiencies and technical capability, can still qualify.
What It Means for Procurement Authority and Industry
The amendment places greater responsibility on procuring entities to examine the commercial and technical sustainability of unusually low bids.
For industry participants, it reinforces the importance of maintaining credible cost structures, transparent pricing assumptions, and documentary evidence to support quoted prices.
It also underlines the need for procurement specifications and estimated costs to be formulated carefully, particularly in technologically complex procurement programmes.
Importantly, the existing provisions relating to predatory pricing remain unchanged. The provisions concerning Additional Security Deposit/Bank Guarantee in cases of Abnormally Low Bids also remain unchanged, including the requirement for approval from the next higher competent authority or the Secretary of the Ministry/Department, whichever is lower, where exceptional circumstances justify such security.
A Shift Towards Sustainable Procurement
India’s defence manufacturing ambitions increasingly depend on a robust domestic industrial ecosystem capable of delivering advanced platforms, systems and subsystems at scale.
While competitive pricing remains an essential principle of public procurement, the lowest price does not necessarily translate into the best value, particularly in technology-intensive sectors where reliability, quality, certification and lifecycle support are critical.
The latest amendment introduces a measurable trigger for closer scrutiny while retaining the procuring authority’s responsibility to assess each bid on its merits.
For India’s aerospace, defence and emerging technology industries, the message is clear: competitive pricing must be supported by credible technical and financial capability.
The objective is not to discourage low bids, but to ensure that exceptionally low bids are examined before they compromise contract execution, quality or delivery commitments.
