Cancellation of Tender After Allotment: Most Horrible Deed

Cancellation of Tender after its Allotment

Queryasked by Gharpedia

Cancellation of Tender after Allotment: What to do when Construction tenders get cancelled even after completion & allocation to bidders.

Solutionby Gharpedia

Every tender is a unique way to expand or boost your business volume. But what if a tender gets cancelled? Every bidder knows that it is a common phenomenon and literally an irrevocable situation. But really can’t we do anything? Let’s explore! Yes, it is true that legally you cannot do anything when the owner does not give you an order even though your offer is the lowest one! i.e. L1 in fact, the owner can cancel the bid or may not accept any bid at all. Not only you will lose your time and money spent in the process of bidding including interest on Earnest Money Deposit (EMD) it may break your confidence also. Most of the time while inviting bids, the owner writes explicitly that the authority reserves the rights to accept or reject all the bids without assigning any reason at all. Hence, neither you have any choice nor any option to do much about it, except not responding to such owners in future if you can afford. Please note that as per Indian Contract Act (1872), you do not enter into a contract unless you respond to the bid. Officially, a tender notice is a mere invitation to bid and there is no certainly of doing confirmed business against it.

Also Read: Pros & Cons of Hiring Contractor on Labour Contract!

The situation cancellation of tender gets really negative particularly when the owners act casual or it becomes evident that they are inviting bids with some other hidden agenda or purpose rather than the actual execution of the proposed projects.

It’s really difficult to decipher logically why paying Earnest Money Deposit along with bid has become mandatory for the contractors. Similarly, paying security deposit in terms of Cash / FDR etc., has become an industry standard. It is commonly explained as this security money is kept in reserve in case the performance of contract gets compromised or if after for one or two years even after completion of work any liabilities or defects start surfacing, but is it a realistic approach at all? It’s controversial but ultimately the contractors suffer as their money get blocked. Let’s look at the issue from a different angle. Suppose you are going to buy a car or a machine as a buyer. In that case the seller or the supplier (suppose here the manufacturer or company like Maruti or Samsung is acting as the seller) will ever give you an EMD, or will they ever keep any deposit as a security deposit with you assuring you about the satisfactory performance of the product for any unforeseen defect liabilities after the purchase is done? You have to avail the warranty feature or you may have to approach the consumer courts at your cost without any assurance of success at your favour. Then why construction contractors are being treated in a different way? If practices as applied in building or in the construction industry are applied to companies like Maruti or Samsung, they should also give an EMD or get agreed to keep security deposit as performance guarantee with their buyers like you and me who are common citizens. But neither that is expected nor does it happen, but why? Don’t you think there is a big discrepancy in the system? Why has such practice come into force? Who is to be blamed? There are many unprofessional contractors who keep on violating the deadline, compromise on work quality, and fail to keep their promise in terms of project completion. Often these contractors bring the issues like volatile market and the negative effect of inflation on costing etc. which bring trouble in the path of a project completion. They do not honour contract. Sometimes they abended and leave the works half way or additional more one way or other way. However, this is not a fair scenario either. Besides demanding for fair and relaxed contract clauses, construction contractors should take care of their performance and related work procedure too. At the same time, they should maintain their work integrity in a transparent way so that people start paying advance when they want to build a house without any inhibition.

Also Read: Important Clauses That the Tender Must Have or Must Not Miss!

However, there are incidents of paying mobilization advance to the contractors against Bank Guarantee in many cases, but these deals are mostly limited between the big companies and reputed contractors. But this should happen as a standing rule which unfortunately is not happening around in general cases. To come out of this non transparent image problem, it’s high time that contractors’ fraternity should brainstorm, introspect and come up with realistic solutions and win the confidence of the society as a whole. Of course this is tough but if initiated today, someday it will happen positively.

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