The cancellation of eight Bengaluru elevated-corridor tenders has exposed a deeper problem than a delayed infrastructure package: the rules governing who could bid, how risks would be shared and how future changes would be priced were not anchored to an approved standard contract. According to the Urban Development Department’s tender-cancellation order, Bengaluru Smart Infrastructure Limited, or B-SMILE, used a common template that combined provisions from two standard documents and added more than 10 conditions that appeared in neither.
The immediate consequence is that a set of projects nearing the work-order stage must return to the tendering process. The longer consequence is institutional. The case shows how a special purpose vehicle can alter the commercial framework of a large public works programme without an established approval trail, creating uncertainty for bidders and exposing the public authority to disputes before construction begins.
The eight corridors were being tendered through B-SMILE, the special purpose vehicle responsible for the programme. The documents combined provisions from the K/W-4 contract and the Ministry of Road Transport and Highways’ Engineering, Procurement and Construction documents. The Urban Development Department found that the composite document had not received government approval.
This is important because a tender document is not merely an administrative formality. It sets the boundary of competition and distributes financial, construction and legal risk between the authority and the contractor. It also determines how bids can be compared. When a public agency combines clauses from different contractual systems without recording the rationale or securing approval, bidders may face requirements that are difficult to interpret or unevenly applicable.
The department’s order identified 13 conditions common to all eight tenders that deviated from both reference standards. Among them was the absence of a time limit for milestone payments and a provision for interest on delayed payments. The documents also removed the clause governing valuation of variations in the scope of work. That left no stated mechanism for pricing changes to the work after award, even though large urban infrastructure projects commonly encounter changes linked to utilities, traffic management, site constraints or design development.
The treatment of delay damages created another imbalance. The tenders limited damages to 10% of individual milestone payments rather than applying the limit to the total contract price. At the same time, contractors were made liable for delays caused by utility agencies. The supplied report does not establish how these provisions would have operated in a specific dispute, but together they show that the tender design placed significant execution risk on contractors while removing or narrowing some of the contractual mechanisms used to manage that risk.
The documents also removed arbitration provisions without setting out an alternative dispute-resolution mechanism. Contractors were not given a contractual right to terminate the agreement even if the authority defaulted. These are not peripheral clauses. They determine what happens when a project is delayed, when payment is disputed or when one party fails to perform. Their absence can make the contract less predictable for bidders and leave the authority without a clear process for resolving disagreements.
Maintenance provisions further complicated the financial structure. Maintenance was described as included in the estimated annual payment, but it was also specified as separately payable at 0.25% or 0.50% of the contract price each year. For the Sirsi Circle project, this separate amount was around ₹20.19 crore against an estimated maintenance cost of ₹4.01 crore, according to the report. The discrepancy raises a basic procurement question: whether the payment structure accurately reflected the service being purchased and whether bidders were comparing equivalent obligations.
The eligibility conditions produced a similar lack of consistency. The tenders did not permit joint ventures, although MoRTH permits them for projects valued above ₹100 crore. The documents also used a five-year period to assess technical capacity rather than the 10-year period prescribed in a MoRTH letter dated November 2, 2020, for stand-alone specialised projects. In the Minerva Circle tender, the flyover-length criterion was used to reject a bidder, the report said.
Financial capacity requirements varied sharply across the eight packages. Five tenders required contractors to have turnover equivalent to 200% of the estimated annual payment in two of the preceding five years and liquid assets equal to 33.33%, without a net-worth test. The other three adopted MoRTH requirements of 15% average turnover and 5% net worth. The report said no source or recorded rationale was provided for applying the two different financial models.
The contrast was particularly visible in the package values. The Pipeline Road corridor, valued at ₹327.46 crore, required turnover of ₹654.92 crore. The Sirsi Circle project, valued at ₹538.28 crore, required turnover of ₹80.74 crore. These figures do not by themselves prove that any bidder was unfairly excluded, but they demonstrate why the financial criteria became central to the department’s concerns. Requirements that do not follow a transparent relationship with the size and risk of a package can alter the field of competition before technical proposals are assessed.
The issue is therefore not simply that one tender included an unusually high turnover threshold. It is that the eight projects appear to have operated under a shared template while applying materially different financial and eligibility conditions. A common template can improve consistency when it is based on an approved standard and adapted through documented project-specific reasons. It can have the opposite effect when common clauses, imported clauses and newly created clauses are combined without an approval framework.
This matters particularly for urban elevated corridors, where the construction contract is only one part of the delivery system. Projects interact with existing roads, utility networks, traffic operations, land constraints and maintenance obligations. Each of those interfaces can create claims or variations. Contract provisions on payment timing, changes in scope, delays, dispute resolution and maintenance are the administrative infrastructure through which those problems are handled.
The B-SMILE case also highlights the governance tension created by special purpose vehicles. Such entities are often established to deliver projects with greater focus or speed than a conventional department. But operational autonomy does not remove the need for public approval when the entity changes the basis on which public works are bid. The Urban Development Department’s finding that approval had not been obtained for the hybrid document indicates a gap between the SPV’s procurement approach and the government’s oversight system.
The timing made the gap more consequential. The tenders were cancelled after Cabinet approval and when B-SMILE was on the verge of issuing work orders. That means the concerns were identified late in the procurement cycle, after bidders had responded and the projects had advanced towards award. Earlier scrutiny could have prevented the cost of preparing, evaluating and cancelling the tenders, although the supplied material does not quantify that cost.
A B-SMILE source told The Hindu that the standards had been “hybridised” to secure better contract conditions. The source also said that government approval would be obtained and the tenders would be floated again soon. That response establishes the stated administrative intention, but it does not explain which clauses will be retained, revised or removed, nor how the new tender documents will address the specific concerns listed in the cancellation order.
The next tender will therefore be more than a repeat procurement exercise. It will test whether B-SMILE can convert the department’s objections into a transparent and internally consistent contract framework. The key questions are whether the revised documents receive the required approval, whether the eligibility rules are supported by recorded reasons, whether joint ventures and technical-capacity requirements are treated consistently, and whether payment, variation, delay, maintenance and dispute clauses create a balanced allocation of risk.
The evidence presently confirms that Bengaluru’s elevated-corridor programme was halted because its tender conditions departed from two standard contract systems and included unapproved additions. It does not establish that the projects were permanently abandoned or that any particular bidder would have won. What it does show is that procurement design can determine the credibility, competitiveness and eventual cost of urban infrastructure well before a construction site opens. B-SMILE’s promised re-tender, following government approval, will reveal whether the procurement system has corrected the documented weaknesses or merely restarted the same process under a new set of papers.
