Anand Sundaresan from Ammann India shares views on L1 Bidding System

As manufacturers, we feel a responsibility to provide our best equipment, but the rigid L1 system often prevents this. Smaller contractors, focused on cost over features, sometimes compromise on quality just to win the bid.

Anand Sundaresan
Director
Ammann India

Does L1 Bidding Limit Access to High-Quality Technology?

The L1 bidding system—where the lowest financial bid wins—continues to dominate government tenders, whether for civil contracts, equipment procurement, or other projects. While intended to ensure cost-effectiveness, this approach poses significant challenges for high-technology manufacturers. Since tenders are open to all bidders, many participants offer whatever equipment they have, regardless of quality or suitability. This makes it difficult for procuring agencies to source high-performance, high-productivity machinery.

This issue is especially critical for strategic or sensitive projects—such as those in defense or DGBR (Directorate General Border Roads)—where top-quality equipment is essential. As manufacturers, we are committed to delivering our best technology. However, the rigidity of the L1 system often prevents us from doing so.

In some encouraging instances, certain DGBR requirements have shown flexibility by engaging with us to understand their specific requirements. They’ve allowed us to customize our equipment and ask us to provide sample machines for field trials. This approach enables better alignment between the project’s technical demands and the solutions we can offer.

Contractor Preferences vs. Project Requirements

Our interactions with contractors reveal a distinct divide between small and large players. Smaller contractors tend to prioritize cost over quality, often opting for lower-priced machines with limited features just to secure a bid. On the other hand, larger contractors—especially those handling prestigious or critical projects—demand high-performance equipment and are uncompromising when it comes to quality, reliability, and after-sales support.

Even among major contractors, preferences vary depending on the nature of the project. For routine or less complex works, some may accept machines with fewer capabilities or from lesser-known brands. However, critical infrastructure projects always demand top-tier, fully equipped machinery.

This variability highlights a core issue: although L1 bidding is applied across the board, actual expectations for equipment quality differ significantly depending on the project and the contractor involved.

Bold Decisions Are Needed to Prioritize Quality

Government efforts—such as sending officials abroad to study global best practices—indicate a growing emphasis on delivering faster, higher-quality infrastructure. Policymakers must now act on these learnings by empowering departments to specify the quality and performance standards required, even if it means bypassing the lowest bidder in favor of the most suitable one.

Despite these intentions, procurement still largely follows the outdated L1 model. In some road projects, for example, smaller contractors have quoted prices 20–30% below estimated costs, raising serious concerns about feasibility. While authorities may counter this by demanding higher bank guarantees, these measures do not ensure the use of high-performance equipment—nor do they address the systemic flaws.

What’s needed is bold, decisive policymaking. For instance, in Tamil Nadu, the former Chief Minister directly awarded a stadium construction contract to Larsen & Toubro, recognizing that no other firm could deliver the required scale and quality. Similar direct awards for flyover projects were also completed successfully.

At the national level, we need that same level of conviction. Quality and performance must take precedence over simply awarding to the lowest bidder. Otherwise, the cost of compromising today will lead to far greater expenses and inefficiencies in the future.