Why not re-bid?

To the government's credit, it seems to be trying to make sure that the privatisation of the Delhi and Mumbai airports is done right""even if it means committee after committee, and review after review. The danger that persists, however, is that it could still end with sub-optimal results because of a defective tendering process. So far, the announced procedure had been that a bidder had to get an 80 per cent rating on its technical bid in order to qualify to have its financial bid considered. Only two bidders qualified for the two airports, with one of them barely making the grade. Under suspicion that this bidder may have benefited from liberal marking on qualitative factors, a review was ordered. This seems to have substantiated the earlier suspicion, since the bidder's score has dropped below the qualifying mark. The end result: questions about the marking done by the AAI's external consultant, one bidder left in the game (the GMR group with Fraport), two airports, and a failed tender.

The Sreedharan committee suggested one way out: give Delhi airport to the lone qualifying bidder, and allow the Airports Authority of India (AAI) to develop Mumbai airport. Mumbaikars will feel cheated by this suggestion: if the AAI were capable of building and running a modern airport of international standards, it would have done so long ago. Also, there would be no competition at the stage of financial bidding for Delhi.

Perhaps because of this, the ministerial group has asked the Sreedharan committee to rank all bidders, without reference to the 80 per cent cut-off mark, and to select the top three or four for considering their financial bids. Assuming that no unsatisfactory bid gets approved through this process because the 80 per cent condition is waived (and this can only be the case if the hurdle is now determined to have been arbitrary and unjustified""which raises other questions), this could be one way forward. But the government's rules about choosing the lowest bidder come into play. For, it could then turn out that the bidder which ranked a poor third or even fourth in the technical round (and substantially below the 80 per cent mark that was till now considered necessary) might walk away with a contract by being fractionally cheaper than the next guy. No private sector company would give up (say) a 10 percentage point margin on the technical rating in order to save 0.5 per cent on cost""but that's the rule in the government, and the agreed procedure for this tender. Hence the risk of sub-optimal results and much post-tender bickering, if not litigation, about altered criteria.

One way out would be to open the financial bids of (say) the top three and to give weight in the final assessment to the combine that has scored better on its technical bid. But this would be a departure from the set procedure, and could therefore invite litigation. That eventuality can be prevented by getting the short-listed parties to agree at this stage itself that when financial bids are considered, some weighting can be given to those who score higher on the technical bids. After all, even the elimination of the 80 per cent cut-off limit is a significant departure from the announced procedure, and equally open to challenge.

The third alternative is to accept that the tender has been vitiated by defective process and questionable assessments, that changing the procedure now risks litigation, and therefore to ask all qualified bidders to submit fresh bids under a fresh set of conditions. The principal argument against this would be the loss of reputation for India if such a prestigious contract is seen to have been bungled, and the extra time it would take to go through a fresh bidding process. A third negative would be some bidders losing interest altogether, though it is also possible that some who had opted out earlier might now choose to come back. If the risks can be contained, fresh bids with a more transparent assessment procedure may well be the least contentious way forward.