India's Infrastructure Tender System: A Critical Analysis of Accountability and Reform

India's public procurement system, particularly for infrastructure projects, is facing intense scrutiny. What was intended to be a mechanism for transparency and cost-efficiency—the 'lowest bidder' or L1 system—has instead become a fertile ground for corruption, significant cost overruns, and the pervasive issue of crumbling infrastructure across the nation.

This Insight article delves into the systemic flaws inherent in India's infrastructure tendering process. It examines how a focus on the lowest initial cost often leads to higher long-term expenses, compromised quality, and a culture of commissions. Through an analysis of recent corruption allegations and project failures, we highlight the urgent need for comprehensive reform.

For policy analysts, journalists, and governance researchers, this analysis provides a critical examination of these challenges and explores potential pathways toward a more accountable, value-driven procurement framework that prioritizes national assets and citizen welfare over mere cost suppression.

Download the original PDF (Friday 14 August 2026.pdf)

The Architecture of Failure: Beyond the Lowest Bid

India's public procurement system operates on the principle of awarding contracts to the lowest bidder among technically qualified participants—the L1 system. While effective for standardized, low-value purchases, this model has proven disastrous for complex infrastructure projects. Infrastructure represents long-term national assets, crucial for economic efficiency and citizen welfare, yet the L1 system incentivizes aggressive under-quoting. This often results in substandard execution, time and cost overruns, frequent repairs, and outright project failures.

Fiscal prudence at the procurement stage paradoxically leads to higher life-cycle costs. Poor-quality infrastructure necessitates repeated maintenance, disrupts economic activity, and burdens public finances. The L1 system shifts focus from value creation to mere cost suppression, an approach that frequently proves more expensive in the long run.

The issue is amplified in consultant selection, where intellectual services demand expertise and innovation. Awarding such contracts to the lowest bidder discourages high-quality firms and stifles professional excellence, as there is little incentive to invest in research or skill development.

The Anatomy of Corruption: A Pattern, Not an Exception

The year 2026 has brought to light numerous tender-related corruption allegations, revealing a consistent pattern across states and sectors: contractors colluding with government officials to manipulate the tendering process, secure inflated contracts, and extract commissions.

Bihar: The Tender Fixer and the Commission Model

• May 2026: Rishu Shree, a high-profile contractor, was arrested for alleged tender manipulation and money laundering.
• Allegations: Shree influenced various departments and manipulated tender processes for major projects through bribery.
• Commission Model: Investigations revealed Shree charged up to 3.5% commission for processing files and up to 7% for fixing tenders. He cultivated an ecosystem with senior IAS officers, influencing their transfers.
• Evidence: An excel sheet detailing “Departmental Expenses” (bribes) was discovered.
• June 2026: A 4,000-page charge sheet was filed, implicating seven, including absconding IAS officer Sanjeev Hans. Bribes were paid through middlemen, tenders managed via commissions, and official positions misused.
• Case Example: The Koshi Barrage construction, sanctioned for ₹69 crore, was inflated to ₹94 crore with Hans's connivance. Hans received ₹50 lakh directly and gave ₹90 lakh to a female associate.
• Recoveries: ₹2.3 crore in jewelry, ₹53 lakh cash, and 61 property deeds were seized from Shree's premises.

Shillong: Crony Capitalism in Water Projects

• June 2026: Congress alleged massive corruption in the PHE department’s tendering process.
• Allegations: Projects worth nearly ₹1,900 crore were allocated to a single Hyderabad-based firm, BAC Infratech Pvt Ltd, suggesting deliberate manipulation of tender parameters.
• Local Contractors: Local PHE contractors claimed competence if stringent eligibility criteria were relaxed.
• Criticism: Opposition parties labeled it “crony capitalism” and “monopolization,” citing RTI findings that the firm, incorporated in 2014, secured a dominant share despite a limited track record.

Delhi: The Bicycle Scam

• August 2026: AAP alleged a ₹90 crore corruption in a bicycle procurement tender by the Delhi government.
• Allegations: Tender conditions were allegedly framed to favor a pre-selected company.
• Discrepancy: Bicycles matching specifications were available for ₹4,100, but the tender fixed the price at ₹6,923.
• Concerns: Complaints indicated conditions were set to limit participation to three selected companies.

Telangana: The ₹18,000 Crore Road Scam

• March 2026: BRS leader T. Harish Rao alleged an ₹18,000 crore scam in Hybrid Annuity Model (HAM) road projects.
• Allegations: Accusations included releasing excess mobilization advances and manipulating tenders.
• Inflated Bids: Tenders previously finalized below estimates were now awarded at 15-20% above projected costs.
• Manipulation: The tender process bypassed the Committee of Tenders and removed the 5% cap on premium bids.
• Syndication: Only two bidders participated in many projects, suggesting a contractor syndicate.

The Cost of Failure: When Infrastructure Crumbles

The visible consequences of this flawed system are evident in crumbling infrastructure and massive project cost escalations across the country:

• Lucknow-Kanpur Expressway: Contractor facing disqualification due to slippage in 2 weeks.
• Dimapur-Kohima Rail Link: Sevenfold increase in cost, with physical progress below 25%.
• Polavaram Project: Resettlement costs soared to ₹2,19,346 crore, leading to indefinite delays.
• JPNIC & Purvanchal Expressway: Cost increased from ₹200 crore to ₹864 crore, remaining incomplete.
• Barapullah Road (Delhi): Hundreds of crores spent, with a 10-year delay.

The “Theka” System: A Culture of Commission

The term theka, meaning “contract” or “monopoly,” has become synonymous with the endemic corruption in India’s infrastructure sector. This system operates on a simple premise: contractors pay commissions to officials at every level to secure projects, which they then recoup through inflated bills and substandard work.

The infamous “40% commission system” in Karnataka is not an isolated incident but a logical outcome of a system where contracts are awarded based on connections rather than competence or value. In February 2026, a Karnataka minister’s comments on commissions in public works ignited a major political controversy, especially as the Congress had campaigned against the previous administration’s “40% commission” system.

The e-Khata scandal in Bengaluru further illustrates how even digital systems, designed to curb corruption, can be subverted. In March 2026, senior BJP leader R. Ashoka alleged widespread corruption, pointing to unfilled potholes and poor road conditions despite large budget allocations. He claimed municipal officials were accepting bribes via PhonePe for e-Khata applications.

The Regulatory Vacuum: Abnormally Low Bids and Administrative Advice

Another critical challenge is the issue of Abnormally Low Bids (ALBs). In an L1 system, an unusually low bid raises concerns about the bidder’s capacity to deliver the contract. In India, such bids can hint at unviable pricing or hidden collusion.

The current regulatory framework is inadequate:

• The General Financial Rules do not address ALBs.
• Procurement manuals contain procedures for ALBs, but these lack statutory backing.
• While bidders are mandated to break down costs, the final decision on ALB maintainability rests with procurement authorities, subject to technical review.

These provisions are merely administrative advice, not legislated law. This regulatory vacuum allows authorities arbitrary power to accept or reject low bids, creating room for manipulation and discretion. A statutory framework with clear, objective criteria for evaluating ALBs is urgently needed to protect the integrity of the procurement process.

Reform: From Lowest Cost to Best Value

India is gradually acknowledging these challenges, with fragmented moves towards Quality-and-Cost-Based Selection (QCBS) and relaxation of rigid L1 norms in some sectors. However, a unified policy framework is missing.

A fundamental shift from lowest-cost to best-value procurement is imperative:

1. Structured Evaluation: Implement a framework where price is one component alongside technical quality, life-cycle cost, and performance track record. For complex projects, quality should significantly outweigh cost.
2. Strengthen Technical Evaluation Committees: These committees must include domain experts capable of assessing complex proposals beyond checklist compliance.
3. Independent Verification & Performance-Based Contracting: Enhance accountability through these mechanisms.
4. Life-Cycle Approach: Focus on maintenance, durability, and long-term performance, not just upfront costs.
5. Digital Platforms: Utilize comprehensive digital platforms like GeM to eliminate human bias, create tamper-proof audit trails, and ensure equal access.
6. Independent Oversight: Establish strict anti-collusion measures and oversight bodies to monitor the procurement cycle, prevent bid rigging, and ensure accountability.

Conclusion

India's infrastructure tender system is fundamentally flawed, prioritizing the lowest cost over best value and fostering a culture of commissions and corruption. The L1 system, the absence of statutory backing for ALB provisions, and fragmented e-procurement systems have created a fertile ground for corruption. The consistent pattern involves politically connected contractors manipulating processes, delivering substandard work, and absconding with funds, leaving taxpayers and citizens to bear the cost of crumbling infrastructure.

The 2026 tender scams in Bihar, Shillong, Delhi, Telangana, and Goa are not isolated incidents but symptoms of a deeper pathology. Reform is achievable, but it demands more than superficial procedural tweaks. It requires a fundamental shift from a checklist-driven, lowest-cost model to a competence-driven, best-value framework. Institutional strengthening, independent oversight, and an unwavering commitment to transparency and accountability are crucial. Without these changes, the theka system will continue to generate commissions, cost overruns, and collapsing infrastructure, with the taxpayer ultimately paying the price.