Aniket Dani from Crisil Intelligence shares views on L1 Bidding System

While L1 emphasizes cost, technical capabilities, and financial health, ESG considerations are sometimes overlooked; however, large construction companies are increasingly initiating measures to promote sustainable practices.

Aniket Dani
Director
Crisil Intelligence

Impact on Project Quality and ESG Compliance

The L1 bidding system prioritizes the lowest quoted price. In certain projects, this focus on cost can compromise project quality and increase the risk of failures. It often encourages short-term cost savings while overlooking environmental, social, and governance (ESG) criteria. That said, before the lowest-cost evaluation, developers’ technical expertise and financial health are assessed by the authorities to ensure they meet all eligibility criteria, allowing only qualified developers to bid for the project.

At times, efforts by developers and raw material suppliers may not align, which can push deadlines and affect quality. This mismatch can impact the long-term performance of assets, leading to higher operation and maintenance costs, and occasionally causing time and cost overruns. Authorities have been actively taking measures to address such issues, and many projects proceed without facing these challenges.

While the bidding system emphasizes cost, technical capabilities, and financial health, ESG considerations are sometimes overlooked. However, large construction companies are increasingly aware of ESG compliance and have initiated measures to reduce carbon emissions and promote sustainable practices.