Financial Bid Evaluation in Nepal: From Opened Price to Award Decision

A price is read out at bid opening. That does not make it the evaluated price, and it does not tell you which bidder should receive the contract.

Nepal's procurement framework now has two distinct construction-bid ranking routes:

the Average Bid Price method for the ordinary one-envelope and two-envelope procedures under sections 25(5क) and 25(7क) of the Public Procurement Act; and
a new 50:50 technical-financial weighted method for specified large and complex construction works under section 25(9), Rule 26क and Rules 65ख to 65छ.

The Public Procurement (Second Amendment) Act, 2083 placed the average method in the Act itself. The Public Procurement (Sixteenth Amendment) Regulations, 2083, published on 3 Bhadra 2083, then added the detailed weighted-evaluation procedure and revised the treatment of abnormally low, unbalanced and front-loaded rates.

This article explains both routes, shows where they apply and follows each calculation from opened price to award decision.

Important: Do not mix the two methods. An ordinary works tender is not converted into a 50:50 quality-and-cost competition merely because it uses two envelopes. The weighted method applies only when the legal conditions are met and the bidding document expressly assigns the technical and financial weights.

What changed in 2083

The amended framework makes the following points explicit:

Issue	Amended position
One-envelope works evaluation	Determine the average of the bid amounts that pass the examination, then identify the bid closest to that average and not substantially above the cost estimate. Qualification of the identified bidder is then checked.
Two-envelope works evaluation	Open only the financial proposals of technically successful, substantially responsive bidders; determine the average and identify the bid closest to it and not substantially above the estimate.
More than 30% below estimate	Remove the bid from the evaluation process.
Equal distance above and below average	Select the bid below the average.
Equal bid amounts at the average	Select by drawing lots.
Large and complex works using weights	Technical weight = 50 and financial weight = 50; select the highest combined score.
Equal highest combined score	Select by drawing lots.
Ordinary performance security	Five percent of the accepted bid amount under amended section 27(4).
Unsatisfactory rate-analysis basis	Take additional performance security equal to eight percent of the quoted amount under amended Rule 65.

These are award rules, not suggestions for the evaluation committee. The committee must first identify the procurement route stated in the approved and issued bidding document.

1. Identify the correct evaluation route first

Route A: Average Bid Price

The Average Bid Price method applies under the amended Act to:

one-envelope bidding, through section 25(5क); and
two-envelope bidding, through section 25(7क).

For two-envelope procurement, technical proposals are evaluated first. Only the financial proposals of technically successful and substantially responsive bidders are opened and taken forward.

Route B: 50:50 technical-financial scoring

The weighted method is a special route. Rule 26क applies it to:

construction works determined to be complex by the Public Procurement Monitoring Office; and
large construction works with an approved cost estimate exceeding NRs. 1.5 billion.

The bidding document must state the technical and financial weights. Under Rule 26क, the two weights total 100 and are fixed at:

Technical proposal: 50 points
Financial proposal: 50 points

The office should not apply this formula to a routine tender that does not meet the stated legal conditions.

2. The opened price is not yet the comparison price

At financial opening, the committee records the bidder's name, quoted amount, offered discount, difference between figures and words, signature status, corrections or overwriting, and other matters required by the bidding document.

That opening record protects transparency, but evaluation still requires the committee to:

correct arithmetic errors;
resolve differences between figures and words;
apply a discount that was properly offered and recorded;
apply the comparison basis and other factors stated in the bidding document;
remove bids that fail a mandatory legal test; and
use the resulting figures in the correct ranking formula.

The price read aloud can therefore differ from the amount used in the average or financial-score calculation.

3. Correct arithmetic errors before ranking

Rule 65च provides the core correction sequence for the weighted procedure, while the issued bidding document supplies the full correction rules for the particular procurement.

Unit rate and total differ

Where a mathematical error creates a difference between the unit rate and total, the unit rate normally governs and the total is corrected accordingly.

Words and figures differ

Where the quoted amount in words differs from the amount in figures, the amount in words governs.

Notify the bidder

The public entity must inform the concerned bidder of the corrected error within five days.

Apply the offered discount

If an offered discount is recorded in the financial-opening minute, the committee adjusts the amount in accordance with the offered method. Clarification cannot create a new discount or permit rebidding.

For an ordinary Average Bid Price procurement, follow the arithmetic-correction and discount clauses in the issued SBD and BDS. Use the corrected and properly adjusted comparable amount, not an uncorrected opening figure.

4. Use the same comparison basis for every bid and the estimate

The issued bidding document controls whether VAT, Provisional Sums, Dayworks and other components are included or excluded for comparison.

The evaluation worksheet should identify at least:

amount read at opening;
VAT treatment;
Provisional Sum treatment;
competitively priced Daywork, if applicable;
arithmetic correction;
valid discount;
quantifiable adjustment allowed by the bidding document;
final amount used for ranking; and
the approved cost estimate on the same basis.

Do not compare an evaluated bid excluding VAT and Provisional Sums with an estimate that includes both. A 30-percent test is meaningful only when the numerator and benchmark use the same documented basis.

5. Apply mandatory exclusions before calculating the average or financial score

More than 30 percent below the approved estimate

Section 25(7ख) requires removal of a bidder quoting more than 30 percent below the approved cost estimate. Rule 65च(4)(a) repeats the same exclusion in the weighted procedure.

Let:

E = approved cost estimate on the comparison basis
P = corrected and adjusted bid amount

The rejection condition is:

P < 0.70 × E

The phrase is more than 30 percent below. A bid exactly 30 percent below is not more than 30 percent below, although all other responsiveness and reasonableness checks still apply.

Substantially above the approved estimate

A bid that is substantially above the approved estimate cannot be selected merely because it is closest to the average or obtains a high technical score. The evaluation report must state the basis for deciding substantial excess; the committee should not invent an undisclosed percentage.

Only the prices that remain legally eligible should enter the Average Bid Price or financial scoring.

6. Average Bid Price method: the calculation

After corrections, adjustments and exclusions, let the comparable bid amounts be:

P1, P2, P3, ... Pn

Then:

Average Bid Price = (P1 + P2 + P3 + ... + Pn) / n

For each bidder:

Distance from average = |Bid Amount - Average Bid Price|

Subject to the cost-estimate condition and all other requirements, the bid with the smallest absolute distance is identified for acceptance.

Example 1: the lowest bid does not win

Assume the comparable, eligible bids are:

Bidder	Evaluated amount, NRs. million	Distance from average
A	74.00	18.60
B	82.00	10.60
C	91.00	1.60
D	105.00	12.40
E	111.00	18.40

Average:

(74 + 82 + 91 + 105 + 111) / 5 = 92.60 million

Bidder C is closest to the average. Bidder A is the lowest but is not selected by the average method.

If the approved comparison estimate is NRs. 100 million, Bid A is 26 percent below the estimate and therefore is not removed by the more-than-30-percent rule in this example.

7. Exactly two responsive bids: the lower bid is selected if prices differ

Assume exactly two eligible evaluated amounts remain:

Lower bid = L
Higher bid = H

Their average is:

A = (L + H) / 2

Each price is the same distance from that average:

A - L = H - A = (H - L) / 2

Section 27(1ख) resolves the tie: when prices below and above the average are equally close, the bid below the average is selected. With exactly two different prices, that is always the lower price.

Example 2

Bidder	Evaluated amount, NRs. million	Position	Distance
A	96.00	Below average	6.00
B	108.00	Above average	6.00

Average = NRs. 102 million. Both are equally close, so Bidder A is selected, subject to all remaining checks.

The evaluation report should still calculate and record the average. It should not jump directly to the lower price without showing the statutory tie logic.

If both bid amounts are equal

If two or more bidders quote an amount equal to the average, section 27(1क) requires selection by drawing lots. The below-average tie rule does not resolve equal prices because neither bid is lower than the other.

8. Equal closeness with more than two bids

The below-average rule is not limited to the two-bid case.

Assume four eligible amounts:

NRs. 80 million
NRs. 90 million
NRs. 100 million
NRs. 110 million

Average = NRs. 95 million.

NRs. 90 million and NRs. 100 million are both NRs. 5 million from the average. Section 27(1ख) selects NRs. 90 million because it is below the average.

9. One-envelope and two-envelope procedures are not identical

Step	One-envelope route	Two-envelope route
Initial action	Examine the bid under section 23.	Open and evaluate the technical proposal first.
Price set used	Bids that pass the required examination.	Financial proposals of technically successful, substantially responsive bidders only.
Main ranking	Closest to the average and not substantially above estimate.	Closest to the average and not substantially above estimate.
Qualification timing	Check the qualification of the bidder identified by the average method under section 25(5ख).	Qualification and technical responsiveness are addressed before or during technical evaluation as required by the issued document.

Two submitted bids are not automatically two eligible bids. The special two-bid result applies only when exactly two comparable prices remain after the applicable examination, technical evaluation, corrections and exclusions.

10. The new weighted method for large and complex works

For a procurement that meets Rule 26क and assigns the 50:50 weights, price is not compared to the average. The committee calculates a technical score, a financial score and a combined score.

Technical evaluation: 100 raw points

Rule 26क distributes the raw technical score as follows:

Technical group	Maximum raw points
Performance approach and methodology	5
Past performance	75
Proposed key personnel	10
Availability of equipment	10
Total	100

The 75 points for past performance cover the stated recent similar contracts, timely completion, blacklisting status, liquidated-damages record and court or arbitration decisions. The bidding document must reproduce the applicable subcriteria and evidence requirements.

Each evaluation-committee member evaluates independently. The committee calculates the average of the members' marks. It may form a three-member subcommittee including relevant specialists to support the technical evaluation. The financial proposals must remain unopened until the technical evaluation is complete.

Weighted technical score

Weighted Technical Score = Raw Technical Score × 50 / 100

Financial score

Among the technically successful financial proposals that remain after correction and mandatory exclusions, let:

L = the lowest evaluated bid amount
P = the evaluated amount of the bidder being scored

Then:

Financial Score = L × 50 / P

The lowest bid receives the full 50 financial points. Every higher bid receives a proportionately lower score.

Combined score

Combined Score = Weighted Technical Score + Financial Score

The bidder with the highest combined score is selected, provided its bid is not substantially above the approved estimate and all other requirements are met.

11. Worked 50:50 example from the amended Rules

Assume three technically successful bidders:

Bidder	Raw technical score	Weighted technical score	Evaluated financial amount, NRs.	Financial score	Combined score
A	90.0	45.00	450,000	46.67	91.67
B	85.0	42.50	430,000	48.84	91.34
C	80.0	40.00	420,000	50.00	90.00

Financial scores:

A: 420,000 × 50 / 450,000 = 46.67
B: 420,000 × 50 / 430,000 = 48.84
C: 420,000 × 50 / 420,000 = 50.00

Bidder A has the highest combined score and is selected even though A submitted the highest price of the three. This is the central difference between the weighted method and both the lowest-price and average-price approaches.

Equal highest combined score

If two or more bidders obtain the same highest combined score, section 27(1क) requires selection by drawing lots.

12. Technical-result notice and financial opening under the weighted method

Rules 65घ and 65ङ add a controlled opening sequence:

Notify technically successful bidders of the place, date and time for financial opening.
Provide at least seven days for national bidding and fifteen days for international bidding.
Return the financial proposal of an unsuccessful technical bidder within five days, together with the reason for non-selection.
Where the bid was submitted through the electronic procurement system, physical return of that financial proposal is not required.
Open the successful financial proposals at the stated time. Absence of a bidder or representative does not prevent opening.

The opening minute should record the technical score as well as the financial amount because both feed the final ranking.

13. If all financial proposals are substantially above the estimate

Under Rule 65च(5), where all technically successful financial proposals are removed because they are substantially above the approved estimate, the public entity may negotiate with the lowest bidder before cancelling the procurement.

The negotiation is limited to an across-the-board lump-sum discount percentage that brings the amount within the approved cost estimate. Under amended section 26(1घ), the entity cannot agree to reduce specifications or quality.

If the bidder does not agree to the required lump-sum discount, Rule 65च(6) requires cancellation of the procurement action.

This is not ordinary price bargaining with all bidders. It is a narrow statutory route triggered by the stated condition.

14. Unbalanced, front-loaded and unreliable rates after the 16th Amendment

Amended Rule 65 requires the committee to examine whether:

BOQ unit rates are reliable;
early-work items contain abnormally high rates;
an item believed to be underestimated carries an abnormally high rate;
the overall amount is so low that satisfactory completion is doubtful; or
the bidder misunderstood the scope or technical specification.

Where these concerns arise, the committee requests a clarification supported by rate analysis. It must compare that analysis with the bidder's stated execution method, technology and management approach, as well as prevailing norms and rates.

The report must explain whether the work can realistically be completed at the proposed rates and give its basis and reasons.

If the analysis does not establish a satisfactory basis for performance, amended Rule 65(3) requires the committee to recommend acceptance after taking additional performance security equal to eight percent of the quoted amount.

That additional security:

must remain valid for at least one month beyond the defects-liability period; and
is returned after the work reaches 50 percent physical progress and the unbalanced or abnormal-rate items are satisfactorily completed and certified.

This additional eight percent is separate from the ordinary five-percent performance security under section 27(4).

15. If the selected bidder fails to sign

The amended Act preserves the original ranking rather than restarting the calculation.

Under the Average Bid Price route, proceed to the next bid closest to the already determined average.
Under the weighted route, proceed to the next-highest combined score.

Do not recalculate the average after removing the first selected bidder. Recalculation can change the competitive result and is not the sequence stated in amended section 27(5) and (6).

16. Recommended evaluation worksheets

Average Bid Price worksheet

Field	Record
Price read at opening
Arithmetic correction
Corrected amount
Valid discount
Comparable evaluated amount
Percentage above/below approved estimate
More than 30% below?	Yes/No
Substantially above?	Yes/No, with basis
Included in average?	Yes/No, with reason
Average Bid Price
Absolute distance from average
Position above/below average
Final ranking

Weighted-method worksheet

Field	Record
Raw technical score from each member
Average raw technical score
Weighted technical score, × 50/100
Price read at opening
Arithmetic correction and discount
Evaluated financial amount
30% and substantially-above checks
Lowest eligible financial amount
Financial score, L × 50/P
Combined score
Final ranking

Each number should link to a bid page, BOQ item, opening minute, clarification, committee score sheet or cost-estimate comparison. An unexplained spreadsheet is not a defensible evaluation report.

17. Common mistakes after the amendment

Mistake	Correct approach
Applying 50:50 scoring to every two-envelope tender	Use it only for the Rule 26क large/complex route stated in the bidding document.
Using the average method for a weighted tender	Calculate technical, financial and combined scores under Rules 65ख to 65छ.
Averaging all prices opened	Use only corrected, comparable and eligible amounts after mandatory exclusions.
Including a bid more than 30% below estimate	Remove it before the average or financial-score calculation.
Selecting the lowest bid automatically	Apply the method stated by the amended Act and issued bidding document.
Drawing lots between two different prices equally close to average	Select the price below the average under section 27(1ख).
Recalculating the average when the first bidder fails	Keep the original average and move to the next closest bid.
Treating an old SBD as sufficient without checking later law	Check the Act, 16th Amendment, BDS and any later PPMO revision together.
Treating additional 8% security as the ordinary security	Record the ordinary 5% and additional 8% separately.
Negotiating specifications to reach the estimate	Only a lump-sum discount may be agreed; quality and specifications cannot be reduced.

18. Final decision sequence

Before recommending award, confirm:

Which legal route applies: average method or 50:50 weighted method?
Does the bidding document state that method and the required criteria?
Were only eligible financial proposals opened and evaluated?
Were arithmetic errors corrected and the bidder notified?
Were discounts applied exactly as offered and recorded?
Are bids and the approved estimate on the same comparison basis?
Was every bid more than 30 percent below the estimate removed?
Was the substantially-above-estimate condition addressed?
For the average route, was the final average and every distance calculated accurately?
For the weighted route, were the 50:50 scores calculated using the statutory formulas?
Was the correct tie rule applied?
Were unbalanced and front-loaded rates examined through rate analysis?
Were ordinary and additional performance securities identified separately?
Does the report allow another evaluator to reproduce the result?

Bottom line

Financial bid evaluation in Nepal can no longer be explained by a single sentence such as "the lowest bid wins" or even "the bid closest to the average wins."

For ordinary one-envelope and two-envelope works procurement, the amended Act uses the bid closest to the Average Bid Price, subject to the estimate, responsiveness and qualification conditions. With exactly two different eligible bids, the lower bid is selected because both are equally close and the law chooses the below-average price.

For specified large and complex works above the Rule 26क threshold, the amended Regulations use 50 percent technical and 50 percent financial scoring, and the highest combined score wins.

The defensible sequence is:

Identify the route -> complete technical and eligibility screening -> correct and normalize prices -> apply exclusions -> calculate the average or combined score -> apply the tie rule -> review rate risk and securities -> recommend award.

Sources and legal references

Legal basis used: amended Act sections 10(2ख), 25(5क), 25(5ख), 25(7क), 25(7ख), 25(9), 26, and 27; amended Regulations Rule 26क, Rule 65, and Rules 65ख to 65छ.

Update note: This article was revised on 30 August 2026 to incorporate the Public Procurement (Second Amendment) Act, 2083 and the Public Procurement (Sixteenth Amendment) Regulations, 2083. The Gazette text controls in case of inconsistency. Always apply the issued bidding document, BDS, amendments and prevailing law for the specific procurement.