An abnormally low bid is one whose price, read with the rest of the bid, is so low that it raises material concerns about whether you can do the work at that price. That is the definition in para 6.4.8 of the central Manual for Procurement of Works, Second Edition 2025, and it sets no fixed percentage below the estimate. The department may ask for a written price analysis, and may reject you only if you substantially fail to show you can deliver at your rate. If it does, it can go to the next bidder at that bidder’s own rate, or re-tender. Many state and PSU tenders add a 15% band that triggers additional security, so read your own tender’s clause before you quote deep.

In May 2026 an Odisha works department rejected a contractor’s bid that was 32.70% below the estimate and put the work out to tender again. The contractor had told the committee he ran his own quarry, his own tippers and his own machines. In August the Orissa High Court quashed both the rejection and the new tender, because the committee had looked at the size of the discount and not at the explanation.

That case is the whole subject in one file. A low bid is allowed. A bid you cannot explain is not.

What counts as an abnormally low bid

The Department of Expenditure’s Manual for Procurement of Works, Second Edition 2025 replaced the 2022 manual, and its para 6.4.8 carries the rule. Three parts of the definition matter:

  • The price is read “in combination with other elements of the Bid”, so a bid with a credible plan and a low price is judged differently from a bare low number.
  • The concern is about your capability to perform the contract at the offered price, not about the department’s estimate being right.
  • The manual says it is “not advisable” to fix a percentage below the estimate that would automatically make a bid abnormally low. The Goods Manual 2024 (para 7.6.7) and the Non-Consultancy Services Manual 2025 (para 7.4.8), which covers many machine-hiring tenders, say the same.

The manual’s foreword says it is written mainly for ministries without their own engineering wing. Departments such as CPWD, MES, the Railways and NHAI may keep their own procedures, and state works departments follow their state codes, so the clause that binds you is the one in your tender document.

No fixed percentage, except in many tenders

The central manuals avoid a number. Plenty of tender documents do not:

Where What the rule said Source
Central works, goods and services No normative percentage; capability test on a price analysis Works Manual 2025 para 6.4.8
Odisha works (from 3 Jan 2026) Old 14.99% negative-bid cap abolished; scrutiny of low bids plus stepped additional security Works Dept OM, as recorded by the Orissa High Court, Aug 2026
PMGSY road bid document (Assam case) Additional security for rates 15% above or below Gauhati High Court, Feb 2023
Coal PSU machine-hiring tender on GeM Additional security if the bid is more than 15% below the justified cost, equal to the gap between 85% of that cost and the bid Jharkhand High Court, Jul 2025

The pattern is the same everywhere. A band like 15% triggers scrutiny or extra security. It is not, by itself, a ground to throw the bid out.

The price analysis: what you will be asked for

When a department has concerns, para 6.4.8 lets it seek written clarifications, “including detailed price analyses” of your price in relation to scope, schedule, resource mobilisation, allocation of risks and responsibilities, and anything else the tender asks for. No central text fixes how long you get to reply or what format to use, so the department’s letter sets both. Answer inside its deadline.

For a machine owner, the strongest answers are the ones the Odisha bench named: “The availability of one’s own source of raw material, machinery and transportation facilities is plainly capable of having a bearing upon the cost of execution.” In practice that means:

  • A rate build-up per major item: labour at no less than the minimum wage, materials at your landed cost, and machine hours at your own operating cost rather than hire rates.
  • Proof of what you own: registration papers for the machines and tippers, the quarry lease or consent to operate, any supply agreements.
  • A deployment plan against the schedule: which machine goes where, and when.
  • How you carry risk: the cash you will run the job on before the first measured bill is paid.

When a low bid can be rejected

The manual allows rejection only if, after evaluating your price analysis, the department finds you have “substantially failed to demonstrate” that you can deliver at the offered price. Courts have held departments to that sequence. In the Odisha case the bench said the bid being 32.70% below “could not, by itself, furnish a valid basis for rejection”, and that the committee’s conclusion came “from the disparity between the Petitioner’s rates and the departmental estimates” rather than from any real failure on his part. The matter went back for a fresh look.

The other side of the line is just as clear. In Jagdish Mandal v. State of Orissa (Supreme Court, December 2006), a bidder quoted Rs 20 per cubic metre for concrete canal lining that the department had estimated at Rs 2,020.50, the last item of work and nearly a fifth of the job. The court upheld rejection, because a contractor could finish the well-priced items, then walk off or raise disputes on the one he could not do. Loading your rates so that one item is near zero is the bid the rule is aimed at.

What happens after rejection

The 2025 manual added a line the 2022 version did not have: after rejecting an abnormally low bid, the department evaluates the next higher bidder “at his/ their own quoted rate”, and does not offer that bidder the rejected low rate. Para 6.4.7 also lets it reject all bids and re-tender. If it does, para 6.4.11 asks for reasons in writing, sent to every bidder, and the old offers cannot be revived. How that plays out for bidders is covered in tender cancellation and retender, and the order of award in how L1, L2 and L3 are decided.

Being L1 is not a right to the contract either. The Orissa bench said so in terms, even while ruling for the bidder.

Additional security instead of rejection

Many departments prefer to award the low bid and hold extra security against it. The central position is restrictive: the Department of Expenditure’s OM of 12 November 2020 says tender documents should carry no standing clause for additional security on abnormally low bids, and that it may be taken only in compelling circumstances with the approval of the next higher authority or the Secretary, whichever is lower. The 2025 manual repeats this.

State and PSU documents often go the other way, and courts generally enforce the clause if you bid on it without challenging it. The Gauhati High Court upheld a PMGSY demand in 2023, noting that the work was still awarded to the bidder. The formulas in use, and what they do to your cash, are worked through in additional performance security.

Abnormally low bids on GeM

GeM’s general terms carry no abnormally low bid rule. The buyer must satisfy itself that the selected price is reasonable and may reject any bid, including the lowest. The low-bid test and any additional security therefore sit in the buyer’s own additional terms and conditions, which is where the 15% clause in the Jharkhand coal case came from. Read the ATC of every machine-hiring bid before you price it.

Before you quote far below the estimate

Write the price analysis before you submit, not after the department asks. If you cannot show where the saving comes from on paper, the committee will not find it either. Check the tender for a percentage band and an additional security clause, and if one applies, budget for the bank guarantee; it lands before your first bill. Keep every item rate workable, because a near-zero item is the one thing both the manual and the Supreme Court treat as a warning sign.

The bottom line

An abnormally low bid is a capability question, not a percentage. Quote low if your own machines, quarry or transport make the rate real, and be ready to prove it in writing. Find works and machine-hiring bids to price on government tenders and opportunities, and if a low bid needs a bank guarantee or working capital behind it, compare options on equipment and business finance.

Procurement manuals, office memoranda and tender conditions change, and each department and state may follow its own rules. Paragraph numbers and case holdings here are as published on the dates shown. Confirm the current clause in your tender document, or with the procuring department or a contracts adviser, before deciding. DesiMachines is not liable for decisions taken on information that may have changed after publication.