New bidding rules to improve road projects

New Delhi

India’s Ministry of Road Transport and Highways (MoRTH) has tightened its bidding rules to reduce intense competition in road projects. According to ICRA, this move will help improve quality and bring more discipline to how projects are awarded.

Earlier, relaxed rules caused heavy underbidding. Many companies quoted prices much lower than estimated, leading to a 25 percent median discount between January 2024 and March 2025. The new rules remove the 3 percent cap on additional performance security (APS), now linking the security to how low the bid is.

ICRA’s Ashish Modani said the new policy promotes serious bidding. It discourages unrealistic pricing, which often causes delays and quality issues. However, smaller contractors with limited bank guarantee limits may face challenges. They now need to provide cash margins for extra guarantees, increasing their working capital needs and finance costs.

The April 2025 guidelines say APS applies if a bid is more than 10 percent below estimated cost, compared to 20 percent earlier. If bids are very low—more than 20 percent below—the APS rate becomes even higher, using a tiered formula.

While it may strain small firms, the policy is expected to attract strong, financially stable builders in the long run. This should lead to better quality roads and fewer delays.

India’s national highways have grown 60 percent since 2014, from 91,287 km to 146,195 km by end-2024. High-speed corridors also jumped from 93 km to 2,474 km during the same period. The new rules are part of efforts to ensure this growth continues with quality and efficiency.