The Andhra Pradesh High Court has directed the Defence Research and Development Organisation (DRDO) to review abnormally low bids in defence procurement before allowing contracts to proceed. According to The Economic Times, the court stated that defence authorities cannot mechanically accept an abnormally low quote and must first assess whether the bidder can execute the contract at the quoted price under DRDO's procurement rules. The ruling came in a petition filed by Jaykay Enterprises challenging the award of a DRDO development contract to Apollo Micro Systems for the development and supply of a processor-based moored mine-next generation (PBMM-NG).
The ruling came in a petition filed by Jaykay Enterprises challenging the award of a DRDO development contract to Apollo Micro Systems for the development and supply of a processor-based moored mine-next generation (PBMM-NG). As reported by The Economic Times, Jaykay had alleged that Apollo's bid was so low that it did not cover even the basic material costs required to manufacture the mines. The court, however, did not hold that the tender was invalid merely because the winning bid was unusually low.
The court directed authorities to evaluate the L1 and L2 bids in accordance with Clause 6.42(b)(ii) of the DRDO Procurement Manual, 2025. According to The Economic Times, if the bidders satisfy the prescribed requirements after the review, the existing tender award and financial approval can stand. If they do not, the authorities have been directed to proceed under the applicable procurement framework. The court specifically referred to a procedural failure on the part of DRDO, as it had not conducted a pre-award scrutiny for an abnormally low bid, as mandated under the DRDO Procurement Manual, 2025. Under the procurement manual, when a bid appears abnormally low, the procuring authority is required to seek written clarifications, obtain a detailed price analysis and examine the bidder's ability to execute the contract.
The court rejected the argument that the tender was defective because it did not prescribe a fixed minimum price or cost floor. As reported by The Economic Times, the court noted that the DRDO procurement framework follows a case-by-case approach to abnormally low bids rather than an automatic percentage threshold below the estimated cost. The court emphasized that a rigid mathematical threshold could potentially exclude a genuinely efficient bidder, stating that low price by itself is not sufficient to invalidate a tender. The ruling can have far-reaching consequences for the defence industry, as it establishes that contracts cannot be mechanically awarded to the lowest bidder when the quoted price is so low that it raises doubts about the company's ability to deliver.
The case relates to DRDO's development-cum-production partnership (DCPP) model, under which private companies are invited to jointly develop weapon systems. According to The Economic Times, such contracts can create particular incentives for companies to quote aggressively, as the initial development phase involves substantial engineering, testing and certification costs while quantities may be relatively small. The court noted there have previously been instances of unusually low bids in DCPP competitions, including a case where a company quoted just ₹1 for prototype development. The ruling comes at a time when the defence sector is witnessing increased private sector participation in weapon development, with companies willing to absorb part of the initial expenditure or even incur losses at the development stage in expectation of larger follow-on orders.
