Bid Capacity Calculator

Bid capacity is a ceiling. It is the largest value of work a buyer will let you bid for on this tender, worked out from your own past turnover on works and the commitments you are already carrying. The tender document may call it assessed available bid capacity, bidding capacity, work execution capacity or residual bid capacity. They are the same idea.

The clause sits in the qualification criteria, usually near the turnover and similar-work clauses, and it normally comes with an annexure listing your works in hand. The evaluator computes your capacity from the figures you declare and compares it with the estimated cost of the work put to tender. If your capacity is lower, the bid falls at the technical stage, and in a two-cover tender your price is never opened.

Not every tender has one. It appears mostly in works tenders, often only above a value threshold, and rarely in straightforward supply bids. You cannot tell from a listing either way: the public list feeds do not publish estimated value, EMD or eligibility criteria, so the clause has to be read out of the document. Avsar reads the document, extracts the eligibility clauses and cites the clause and page for every verdict.

• How to read a tender document
• The four eligibility clauses that decide a bid

The form written into most Indian works tenders is:

Bid capacity = (A x N x 2) minus B

Read the three terms exactly as the clause defines them, because each has a trap in it.

• A is the maximum value of works executed in any one year during the look-back period the notice sets, commonly the last five years. It is the best single year, not the average of them, and it is works, not total turnover. Where the clause says A is to be updated to the present price level, apply the annual factor the notice states before you multiply.
• N is the number of years prescribed for completion of the work being bid for. It is the contract period, not the look-back period used for A. The same sentence carries two different spans of years and they are routinely mixed up.
• B is the value of existing commitments and ongoing works to be completed during the next N years. It is the balance remaining, not the original order book value, taken as on the date the notice specifies.

Compute A x N x 2, subtract B, and compare the result with the estimated cost of the work. Everything you type into the calculator above is computed in your browser and never leaves it.

• Average annual turnover, and which years count

There is no national bid capacity formula. No central statute prescribes a multiplier. The clause comes from a department's works manual or from the tender document itself, which is why the same three letters produce different answers across two tenders opening in the same week.

The variants in live documents include:

• (A x N x 2) minus B, the most common form, and the one this calculator defaults to.
• (A x N x 1.5) minus B, which appears in tender documents including bids run through GeM.
• (A x N x 2.5) minus B and other multipliers set by a particular buyer.
• Formulas that drop N altogether, such as (7 x A) minus B, where A is defined instead as the average annual turnover of the best three years out of the last ten.

The multiplier also gets revised by order. Telangana's G.O. Rt. No. 579 of 19 September 2017 changed the state's formula from 2AN minus B to 4AN minus B. A formula copied from an old document, or from a spreadsheet a colleague built three tenders ago, is not evidence of what this notice says. Set the multiplier and N in the calculator from the clause in front of you.

Almost every wrong bid capacity comes from one of five places.

• Using average turnover as A. In the A x N x 2 family, A is the single best year in the window. A firm that averages when the clause says maximum understates its own capacity and walks away from tenders it could have bid for.
• Using total turnover as A. A is turnover from works executed. Trading income, service income and other income do not count towards it unless the notice defines A more widely.
• Ignoring the updating clause. Where the notice requires A to be brought to the present price level at a stated annual factor, a five-year-old best year left un-updated costs you real capacity.
• Putting the look-back years into N. N is the completion period of the tendered work. Entering five because the clause mentions the last five years inflates the answer by a wide margin.
• Understating B. B is the balance to be executed over the next N years across every live contract, including your share of any joint venture and, where the notice says so, work you hold as a sub-contractor. Understating it is a false declaration in a document you sign.

• Joint venture bidding, and how figures are aggregated
• Average annual turnover calculator

The calculation is yours; the evidence is what the committee actually assesses. Two documents carry it.

The works in hand statement. Most notices provide the format: each ongoing contract with its award value, date of award, value executed to date, balance to be executed and scheduled completion date. Some notices require each line to be certified by the client department on its letterhead, which takes days to collect and is the part bidders start too late.

A certificate for A. Where the notice asks for a chartered accountant's certificate of works turnover, it will normally need to carry a UDIN, and the figures on it have to agree with your audited profit and loss account and your income tax return. Where the notice instead asks for completion certificates, the value of works executed has to agree with those.

Evaluators cross-check the three sets of figures against each other. A works turnover figure that does not reconcile with the audited accounts, or a works in hand statement that omits a contract visible in the buyer's own award records, is treated as a discrepancy rather than a typing error.

• Completion certificate against work order
• Documents required for a government tender

Bid capacity is an eligibility screen computed from historical values. It is not an opinion on whether you can execute the work, and it is not a cash position.

A firm can clear a bid capacity of several crore and still be unable to fund the contract. The formula knows nothing about the earnest money held until award, the margin money your bank locks against the performance guarantee for its full life, the retention deducted from every running bill, or the gap between doing work and being paid for it. Those are the constraints that actually cap how many bids a contractor can run at once.

It is also only one clause. Clearing it does you no good if the similar-work threshold, the registration class, the plant requirement or the key-personnel requirement is not met, and each of those is assessed separately on the same bid.

• EMD calculator
• Bank guarantee cost calculator
• EMD and working capital planning
• What similar work means, and how it is judged
• Contractor registration classes

There are honest moves and there is one dishonest move. The dishonest one is inflating A or trimming B, and it is a false declaration in a signed document. The consequences run past rejection to forfeiture of earnest money and to debarment.

The honest moves:

• Recheck the inputs. A best year left out of the window, an updating factor not applied, or look-back years entered as N are common enough to be worth five minutes.
• Wait for B to fall. B is the balance remaining on live contracts, so it reduces as you execute. Capacity that fails this month can clear the next comparable tender with nothing else changed.
• Bid a smaller package where the work is tendered in parts.
• Form a joint venture where the notice permits one, on the aggregation rules that notice sets out rather than on assumption.
• Raise it at the pre-bid meeting if the clause is ambiguous. An answer issued as a corrigendum binds every bidder, not only the one who asked.

On exemptions, be precise. Micro and small enterprises are exempt from earnest money and the cost of the tender document under the Public Procurement Policy for Micro and Small Enterprises 2012, which is not an exemption from a bid capacity clause. The General Financial Rules 2017 separately permit a buyer to relax prior turnover and prior experience criteria for startups and micro and small enterprises, but that is a discretion the buyer states in the notice, not something you can claim after bids open.

• Pre-bid meeting questions worth asking
• Blacklisting and debarment
• The bid or no bid decision