Sandeep Singh from Tata Hitachi shares views on L1 Bidding System

The system’s focus on L1 bidding makes it difficult to adopt advanced or innovative equipment across government projects.

Sandeep Singh
Managing Director
Tata Hitachi

Government vs. Private Projects: Cost Trumps Quality

We deal with two broad categories of customers: private clients and government departments. Within government, we work with both state and central agencies, as well as the mining sector, and the approach differs widely.

For state and central government projects, the focus is almost entirely on cost based on being L1. Factors such as advanced technologies, productivity etc. often take a backseat. Further, in mining factors like machine uptime, fuel efficiency, durability, and reliability play a very important role in minimizing cost of operations & end raw material cost. These parameters are often considered while deciding on procurement of machines by private players, rather than only cost of the machine.

The challenge is that advanced technology comes at a higher initial cost, which makes it difficult under the L1 system. However, there have been progress with some organizations in this direction. Constant engagement with Coal India has resulted in them appreciating the importance of technology in mining equipment and some of the suggestions have been incorporated in the tender requirements.

Further, increasing privatization in mining may create opportunities for procurement that prioritizes quality and performance over the lowest bid.

Competing in a Cost-Driven Market

To compete with low-cost manufacturers, we have to reduce costs without compromising core quality. In line with this requirement, we have often optimized features retaining essential ones in operating the machines. This allows us to remain competitive and stay in the race.

Despite these adjustments, the system’s focus on L1 bidding makes it difficult to adopt advanced or innovative equipment across government projects. Even in sectors like defense and mining, there is little or no flexibility to prioritize technology and performance over upfront price.

Reform Needed: Quality and Longevity Must Count

Policymakers need to give proper weight to factors such as equipment longevity, efficiency, uptime, and maintenance cost, rather than just price. DPRs should specify the right technology and machinery needed for better project execution.

A points-based evaluation system could be introduced, where marks are assigned for machine uptime, fuel efficiency, and productivity. Many countries already follow such practices, giving significant weight to these parameters. In India, however, this aspect is still largely missing, limiting opportunities for better technology, performance-driven procurement.