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9. The office memorandum of CVC, (No. 12.02.1 CTE-6 dated 17th December 2002) appears to have been framed as a result of certain complaints in regard to discriminatory pre-qualification criteria adopted in tendering processes. After observing that pre-qualification criteria is either not clearly specified or made very stringent/very lax to restrict/ facilitate the entry of bidders, the CVC formulated the parameters to be followed. Relevant extracts of the circular are extracted below:

"2. The pre-qualification criteria is a yardstick to allow or disallow the firms to participate in the bids. A vaguely defined PQ criteria results in stalling the process of finalizing the contract or award of the contract in a non-transparent manner. It has been noticed that organizations, at times pick up the PQ criteria from some similar work executed in the past, without appropriately amending the different parameters according to the requirements of the present work. Very often it is seen that only contractors known to the officials of the organization and to the Architects are placed on the select list. This system gives considerable scope for malpractices, favoritism and corruption. It is, therefore, necessary to fix in advance the minimum qualification, experience and number of similar works of a minimum magnitude satisfactorily executed in terms of quality and period of execution.

6. It is suggested that these instructions may be circulated amongst the concerned officials of your organization for guidance in fixing pre-qualification criteria. These instructions are also available on CVC's website/http//cvc.in."

10. The MCD avers that the fixing of pre-qualification eligibility conditions, based upon the CVC circular cannot be characterized as arbitrary or un-reasonable. It is also averred that the eligibility condition about similar work was laid down after due consultation within the MCD; that in response 8 concerns tendered, of whom only 5 fulfillled the criteria. Though, all five were issued with tender documents yet only two firms finally showed interest in carrying out the work and have quoted their rates.

26. In the light of the above principles, it is necessary to examine whether the impugned policy is fair, reasonable and non-arbitrary.

27. The process of determining pre-qualifuing conditions was taken up in March 2004. The record discloses that the MCD went by the guidelines of CVC. Those guidelines indicate that pre qualifying conditions are to be fixed in such a manner as to ensure precision in the eligibility criteria on the one hand and facilitate fair and competitive participation of the various concerns on the other. The guidelines note that complaints were received that pre-qualification criteria are often either not clearly specified or are made very stringent/very lax to restrict/facilitate the entry of bidders. The CVC also noted that the pre qualification criteria are often formulated by merely following the criteria from some similar work executed in the past without appropriately amending different parameters according to the work at hand. The guidelines notice six illustrative instances where the formulation of pre qualification criteria led to elimination of competition or other irregularities. The illustration at para 3 (i) may be usefully noticed at this stage. It reads as follows :-

(vii) The subsequent nothings and decisions in the file are silent about consideration of the factors pointed out as being necessary to revise the eligibility criteria in the light of actual estimates made available.

32. The guidelines of the CVC itself notice the formulation of pre- qualifying criteria have to be both precise and based upon relevant considerations. The illustration contained in that document particularly, para 3(i) show that an exaggerated or artificial basis for fixing the estimate for similar works would result in eliminating fair competition. The object of any criteria fixing exercise is, two fold. First, ensuring that only those concerns which have a proven track record with sufficient experience and sound financial standing are permitted to bid. Second, ensuring fair competition. Both these considerations are of paramount importance as per the guidelines of the CVC, and to our mind, also as facets of reasonableness, fairness and non-arbitrariness in the context of the tendering process.