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76 Economic Survey 2021-22

a default, in most cases, the principle of Least Cost System, commonly known as ‘L1’ is the most
prevalent.

2.53 While the L1 system may be good for procurement of routine works and non-consulting
services, this method may not be able to cater to the need for innovation, quality, speed and
functionality for high impact, complex and technology-intensive procurements. Various
organisations including Central Vigilance Commission and NITI Aayog have advocated the
need for reforming the current procurement system over the last many years. They argued that
solely relying on L1 does not work well and there is a need to move from ‘one size fits all’
to ‘fit to purpose’ approach and various alternatives such as Value for Money, Rated Criteria
to consider non-price attributes should be included in the procurement methods. Chapter 6 in
Economic Survey 2020-21 (Volume 1) also argued for the need of going beyond L1 for public
procurement.

2.54 Alternative methods of procurement other than L1, which consider non-price attributes as
well, allow for choosing the contractor based on a certain amount of technical skills, previous
experience etc. This puts an indirect pressure on the contractors to perform well for being
eligible for future contracts, thus ensuring that contractors have ‘Skin in the game’. Evidence
suggests that contractors who have ‘Skin in the Game’ are more likely to make optimal long-
term decisions. Singh (2019) points out that the national highway projects executed by L1
7
combined with bundling contracts (commonly called PPPs) have lower project delays and better
quality, compared to the projects executed through traditional unbundling contracts, i.e., with
the standard L1 process, despite same environmental and regulatory conditions being faced by
both kinds of projects.
2.55 Keeping in mind the limitations of the earlier procurement strategy, the Government
issued new guidelines for procurement and project management in October 2021, which have
expanded the ambit of selecting bidders for executing government projects and procuring goods
and services. The key changes in the procurement process are as follows:

¾ QCBS for Works and Non-consultancy Services: As per the earlier procurement guidelines,
QCBS was allowed for only Consultancy Services. The revised guidelines now allow QCBS
for the selection of bidders for works and non-consultancy services as well (where estimated
value of procurement does not exceed `10 crore). The bidders would be scored both on cost
and technical parameters and one with the highest weighted combined score (quality and cost)
would be selected. The maximum weight for non-financial parameters is 30 per cent.

¾ Fixing of Evaluation/ Qualification and Scoring Criteria under QCBS for Works and Non-
consultancy Services: In order to ensure quality, the procuring entities now have the freedom to
amend the specifications based on their requirements and make any criteria used in evaluation
as mandatory. Any bid that does not meet the pre-requisite criteria need not be evaluated further.
Moreover, weightage may also be given for timely completion of past projects of similar nature
by the bidder. In the scoring criteria, marks for quality compliance have also been included.

7 Singh, Ram, Do Public Private Partnerships Deliver Better Outcomes? Delays and Cost Overruns in Highways Projects in India
(December 5, 2021)