- 23 May 2022
- ICICIdirect Research
GOVERNMENT REINTRODUCES ADDITIONAL PERFORMANCE SECURITY FOR HIGHWAY PROJECTS
News: The Union Road Transport and Highways Ministry has ordered highway builders to give additional performance security to curb bidders that bid abnormally low to win tenders. The Ministry had done away with the additional performance security in November 2020 to support highway developers amid the Covid-19 pandemic. Now, additional performance security has to be provided where the quote of selected bidder is lower than 20% of the estimated project cost put to tender
Views: The performance security in roads projects was reduced from 5-10% in pre-pandemic instances to 3% of the value of the contract, till March 31, 2023. However, this has led to highly aggressive bidding in national highway projects in the last few quarters. Therefore, the higher performance security can ensure that non-serious players who are interested only in building their order book will be dissuaded
Impact: Positive