Tender Conditions Based On Procurement Needs Can't Be Challenged By Suppliers Unable To Meet Them: AP High Court

The Andhra Pradesh High Court upheld State Government's order introducing centralized system for procuring dietary items and non-perishable goods for Kasturba Gandhi Balika Vidyalayas (KGBVs), holding that the procurement policy cannot be faulted because some suppliers were unable to satisfy prescribed eligibility conditions.

In doing so, the Court observed that the new procurement policy could not be said to override G.O.Ms.No.53 as the requirements under the new scheme were different.

For context, G.O.Ms.No.53, Social Welfare Department, prescribed procurement procedures at the State, District and Divisional levels for 21 non-perishable items required by KGBVs. The new procurement policy, however, covered 37 items and introduced zonal-level procurement to secure larger quantities, better quality and competitive prices.

A Division Bench of Chief Justice Lisa Gill and Justice Balaji Medamalli dismissed appeals challenging the Single Judge's order upholding the State's procurement policy and tender process.

The Court observed:

"The tender conditions are prescribed by the Employer based on its requirements, including the quantity and quality of the items to be procured and the proper execution of the work. Therefore, only those who can meet the prescribed requirements will participate in the tender process. The petitioners' inability to meet such requirements cannot be a ground to challenge the ECV or the quantity, quality or specifications of the items to be procured.

As stated above, procurement at the Zonal level would enhance the bargaining capacity of the authorities and enable procurement of better-quality products at competitive prices, thereby benefiting the exchequer. The procurement process is also intended to ensure the supply of quality products for the benefit of the student community. Therefore, the exercise undertaken by the authorities cannot be faulted, and no mala fides can be attributed."

The matter arose from a challenge to the State's decision to introduce centralized procurement of requirements for KGBVs. The challenge was directed against the memos permitting centralized procurement and constituting a procurement committee, as well as the consequential tenders issued for supply of non-perishable items, milk and eggs to KGBVs across Andhra Pradesh.

The appellants, who were suppliers and traders, challenged the new procurement system and the consequential tender conditions before the High Court. The Single Judge dismissed their writ petitions, following which they filed the present appeals.

They contended that the centralized procurement was contrary to G.O.Ms.No.53 and that the eligibility requirements, including turnover and past-performance conditions, were unreasonable and designed to exclude eligible suppliers.

They also challenged the corrigendum issued during the tender process, alleging that it altered the procurement requirements, restricted participation of prospective bidders and facilitated the participation of selected bidders. They further alleged that the revised tender conditions were tailor-made and vitiated by mala fides.

The State, however, submitted that G.O.Ms.No.53 prescribed procurement of 21 non-perishable items, while the new tender covered 37 items. It said the new policy was introduced to enable procurement of larger quantities at competitive prices, while ensuring better quality and bargaining capacity.

The State further submitted that the tender document permitted issuance of clarifications and amendments. It contended that the past-performance condition required the bidder to have supplied at least 50% of the total items and achieved 50% of the ECV under a single work order in any one of the three preceding years. It further submitted that 35 bids were received from 11 bidders, of which four were accepted, and that there was no material to establish any mala fides.

The Court underpinned that the scope of judicial review in tender matters is limited and that interference is warranted only where the decision-making process is vitiated by mala fides, arbitrariness or other legal infirmity.

Accepting the State's submission, the Court held that the two procurement schemes had different requirements and, therefore, the new policy could not be said to override G.O.Ms.No.53.

The Court further held that zonal-level procurement would enhance the authorities' bargaining capacity and enable procurement of better-quality products at competitive prices, thereby benefiting the exchequer and the student community.

It also rejected the challenge to the corrigendum issued after the pre-bid meeting. It noted that the tender document permitted such clarifications and amendments and that the deadline for submitting bids had been extended. It therefore found no illegality or irregularity in the issuance of the corrigendum.

The Court found no basis for the allegations of mala fides and tailor-made conditions. It noted that the persons against whom such allegations were made had not been made parties to the proceedings.

The Court further noted that some appellants had participated in the pre-bid process but did not submit bids, while others had not participated in the tender process at all. It held that such a course could not be permitted.

The Division Bench dismissed both appeals, finding no ground to interfere with the Single Judge's order.