Rejection of the Lowest Bidder: When Procurement Discretion turns into Litigation Risk

by Shraddha Sharma, Advocate, Infrastructure and Commercial Disputes

Public procurement is fundamentally a State-driven process. From eligibility criteria and technical specifications to timelines and evaluation methods, the entire framework is predetermined by the procuring authority. Bidders participate on a take-it-or-leave-it basis and must operate strictly within these predefined rules. Once bids are opened and evaluated, the lowest responsive bidder (L-1) is identified purely on compliance and price, leaving little commercial autonomy for the bidder thereafter.

At this stage, the L-1 bidder’s role is largely passive, awaiting administrative decisions without scope for renegotiation or alteration of terms. However, authorities often extend bid validity repeatedly, delay finalisation for prolonged periods, or even cancel tenders after the L-1 bidder has been identified. This structural imbalance raises critical legal questions about fairness, legitimate expectation, and constitutional safeguards in public procurement.

What the Law Actually Permits

Legally, being declared the lowest bidder does not grant an enforceable right to receive the contract award. Procurement authorities retain discretion to reject bids, cancel tenders, or initiate re-tendering, provided such decisions are justified in public interest. Judicial review does not replace administrative judgment; instead, courts examine whether State action adheres to constitutional principles, particularly non-arbitrariness under Article 14.

Courts intervene only when decisions are arbitrary, irrational, mala fide, or an abuse of power. While administrative discretion is broad, it is not absolute and remains subject to constitutional scrutiny, especially when the tender process has advanced to a decisive stage.

Why Procurement Decisions Become Legally Exposed

Legal disputes frequently arise after the L-1 bidder is identified. Repeated extensions of bid validity without genuine intent to conclude the process, cancellations without any change in circumstances, re-tendering on identical terms, abrupt termination after selective engagement, and prolonged administrative silence often attract judicial scrutiny. When such actions occur after bidders have lost bargaining power, administrative discretion begins to resemble unfairness, triggering the need for judicial oversight.

Doctrinal Safeguards for the L-1 Bidder

Despite lacking a vested contractual right, L-1 bidders are protected through certain legal doctrines. Legitimate expectation arises when authorities repeatedly extend bid validity and engage with the bidder, creating a reasonable anticipation that the process will conclude fairly. This expectation stems from State conduct rather than contractual entitlement.

Similarly, estoppel can restrain authorities from acting inconsistently with their prior representations when bidders have relied on such conduct. Courts also exercise control over arbitrary cancellations, requiring objective justification, proportionality, and absence of extraneous considerations. Procedural transparency is equally vital, and any modification of tender conditions must be formally notified through proper corrigenda with adequate notice.

Common Misconceptions in L-1 Tender Disputes

Contractors often misconstrue disputes as claims to enforce contract award; however, courts do not grant such relief. Judicial intervention focuses on correcting an unfair or unlawful process rather than conferring contractual entitlement. On the other hand, procuring authorities sometimes rely on clauses permitting cancellation at any stage, assuming immunity from scrutiny. Courts have clarified that such clauses do not override constitutional obligations of fairness, transparency, and rational decision-making.

Conclusion

Although public procurement is entirely State-designed and L-1 bidders lack commercial autonomy, they are not legally defenceless. Courts consistently maintain that discretionary State action must conform to principles of fairness, non-arbitrariness, and legitimate expectation. Judicial review does not undermine administrative prerogative; rather, it ensures that discretion is exercised responsibly and within constitutional bounds.

Where authorities advance a bidder to an irreversible stage through sustained engagement and repeated extensions, they cannot arbitrarily abandon the process. Procurement law thus strikes a careful balance between administrative freedom and constitutional discipline, protecting bidders from unfair State action while preserving the State’s decision-making authority.

Shraddha Sharma has over a decade of experience in litigation and arbitration involving infrastructure and commercial disputes. She advises developers, contractors, and public authorities on contract structuring, risk management, and dispute avoidance.