In the past year, India has faced significant infrastructure failures, including collapsing bridges and damaged airports, leading to public distrust and concerns about the quality of construction. The issues stem from various factors such as rushed project reports, inadequate (Manufacturers’) investigations, lax quality enforcement, and corruption, with contractors often taking shortcuts under financial and time pressures. The L1 bidding system, which awards contracts to the lowest bidder, further exacerbates these problems by prioritizing short-term savings over long-term quality. Engagement with over 40 stakeholders revealed the need for reforms such as improved project.
deeply entrenched mechanism
Planning, stricter prequalification, and adoption of best practices. A dedicated commission is proposed to facilitate discussions and implementation of practical recommendations, emphasizing the urgent need to reset the L1 approach for the construction industry in India. India’s infrastructure ambitions have scaled unprecedented heights over the past decade, yet one deeply entrenched mechanism continues to dominate public procurement, the L1 or “Lowest Price” bidding system. Originally designed to curb corruption and ensure fiscal discipline, the L1 model has increasingly been accused of creating more problems than it solves. As government spending on roads.
As railways, ports, energy, and urban infrastructure rise, stakeholders across the engineering and construction ecosystem are raising uncomfortable questions: Is awarding projects on price alone delivering value for money? Or is it quietly becoming the single biggest structural weakness in public sector execution? The guiding principle behind L1 was simple: select the bid that costs the least and ensure the most economical use of public money. In theory, it sounds flawless. In practice, the system has produced a dangerous race to the bottom. Contractors routinely underquote projects to win bids, knowing well that the quoted price is not viable.
engineering incompetence India
The damage does not become evident on Day One. It reveals itself later through stalled timelines, inferior materials, compromised safety standards, and endless disputes over contract revisions. More worryingly, many infrastructure failures can be traced back not to engineering incompetence, but to distorted incentives created by the procurement framework itself. India’s repeated experiences of abandoned projects, spiralling costs, and litigated contracts are symptoms of procurement stress. Execution failures are often blamed on contractors, but rarely on the system that selects them. When survival depends on quoting the lowest possible figure.
The bidder’s focus shifts from quality delivery to financial survival. This leads to aggressive value engineering, deferred maintenance, and worst of all, compromised structural integrity. Over time, the taxpayer ends up paying more, not less, either through renegotiation or premature rebuilding. Countries that have modernised their procurement frameworks no longer rely solely on price as the decisive factor. Institutions like the World Bank and the Organisation for Economic Co-operation and Development openly acknowledge that lowest-price selection frequently fails in complex infrastructure projects. Instead, these institutions encourage multi-criteria evaluation.
appropriate for simple procurements
Factoring in technical competence, financial capacity, lifecycle cost, sustainability measures, and past performance. India, despite being one of the world’s largest public buyers, remains stuck in a pricing philosophy that was appropriate for simple procurements, not for mega projects spanning decades. The impact of L1 is not limited to quality. It extends directly into the financial health of the construction sector. Recurrent losses on government contracts have created a fragile contractor ecosystem where firms struggle to service debt, invest in technology, or retain skilled talent. Payment delays, combined with squeezed margins, have triggered a wave of insolvencies.
That weakens the industry from within. This ultimately results in fewer credible bidders, reducing competition rather than improving it, ironically defeating the purpose of L1. There is also a governance paradox at the heart of the L1 system. While it was intended to reduce human discretion and corruption, it has ironically institutionalized financial manipulation. Unrealistic bidding incentivizes post-award variations, arbitration claims, and contractual loopholes. Instead of eliminating corruption risk, L1 simply shifts it from the bid stage to the execution stage. This creates exactly the conditions vigilance bodies seek to eliminate.
approaches reward engineering reliability
A more balanced procurement mechanism is no longer a luxury; it is a necessity. Alternative models such as QCBS (Quality and Cost Based Selection), performance-linked contracts, EPC scorecards, and hybrid annuity mechanisms provide more intelligent evaluations. These approaches reward engineering reliability, financial resilience, and track record rather than just pricing bravado. Agencies like the Central Vigilance Commission have already issued advisories recommending broader evaluation criteria in high-value procurements, yet implementation remains uneven and deeply conservative. The issue is not about abandoning financial discipline. It is about redefining.
What accountability looks like. Lowest cost does not equal best value. In long-life infrastructure assets, lifecycle cost matters more than initial cost. A bridge that lasts 40 years with minimal maintenance is cheaper than one that collapses after ten. True efficiency is measured in durability, reliability, and impact, not just invoice value. Policy think tanks, including NITI Aayog, have repeatedly advocated procurement reform as central to improving India’s infrastructure ranking globally. Meanwhile, the Ministry of Finance, India, continues to adjust General Financial Rules, but structural mindset change remains slow. The core challenge is that psychological decision-makers.
infrastructure markets succeed
Fear deviation from price-based selection because accountability remains backward-looking rather than outcome-driven If India aims to compete with developed economies, procurement laws must evolve accordingly. Developed infrastructure markets succeed not because they buy (MMRC) cheaply, but because they buy intelligently. Accountability must move from file-based justification to performance-based evaluation. Procurement officers must be judged by project outcomes, not just audit defensibility. The future of Indian infrastructure depends not on budget size, but on procurement quality. L1 may appear safe on paper, but it is proving expensive on the ground.
Q1: Why is the L1 bidding system criticised?
It prioritizes short-term price over long-term value, resulting in poor quality, delays, and hidden costs.
Q2: Does L1 actually save government money?
Not in most cases, renegotiations and repairs often cost more than selecting a capable bidder initially.
Q3: Is L1 followed globally?
No. Most developed nations use multi-factor models assessing quality, capacity, and price together.
Q4: What can replace L1?
QCBS, performance-based contracts, and lifecycle costing models are proven alternatives.
Q5: Is reform politically feasible?
Yes, but it requires shifting from procedural safety to outcome accountability.
