The National Highways Authority of India (NHAI) has recently fortified its bidding regulations for highway projects, specifically targeting the issue of unauthorized subcontracting by concessionaires. These new rules also include the imposition of strict penalties.
These significant changes were formally announced in August through a new policy circular that outlines updated qualification criteria for Engineering, Procurement, and Construction (EPC) projects.
Under the revised guidelines, any instance of unauthorized subcontracting, or subcontracting that exceeds the predefined permissible limits, will be categorized as an undesirable practice. This classification empowers the NHAI to forfeit and appropriate the bid security and performance security submitted by the defaulting bidders.
In an official press statement, the NHAI emphasized that such illicit practices represent a clear breach of contractual obligations. They not only jeopardize quality assurance but also cause significant delays in project timelines and weaken the overall regulatory oversight.
Furthermore, the NHAI has explicitly forbidden the practice of submitting security amounts that originate from third-party sources rather than directly from the concessionaire itself.
A crucial aspect of these reforms is a clarification regarding the “similar work” criterion used in bid qualification. This criterion has often been exploited by contractors who misrepresented minor activities, such as earthworks, to qualify for major highway construction tenders. The NHAI has now clarified that “similar work” will only be considered if it pertains to completed highway projects that encompassed all major components comparable to those required for the project currently under bidding.
The circular explicitly states, “Execution of work, which does not include all major components, shall not be considered as completion of similar work.” Additionally, bidders seeking to claim experience for similar completed projects must now provide an experience certificate in a standardized format, supplemented by a certificate from their statutory auditor or the client.
The NHAI believes these comprehensive measures will lead to superior infrastructure quality, ensuring projects are completed on schedule and public resources are utilized optimally. Ultimately, this initiative is expected to contribute significantly to the development of a more efficient and robust National Highway network across the country.
It is worth noting that issues surrounding subcontracting in highway development were previously highlighted by the Parliamentary Accounts Committee (PAC), then chaired by Congress MP K.C. Venugopal.
The PAC had noted that “unchecked layering of contractors and subcontractors, particularly in EPC, BOT (Build-Operate-Transfer), and HAM (Hybrid Annuity Model) projects, has led to diffusion of accountability, where the authority has limited leverage to enforce quality standards or timely delivery.” The committee further criticized how primary concessionaires often offload work to subcontractors at reduced costs, thereby profiting without undertaking direct execution or responsibility, which often results in project delays, substandard quality, and a severe lack of accountability.