National Highways Authority of India (“NHAI”) vide policy circular no. 11.84/2026 dated

13th February 2026 (“Circular”) has introduced amendments to its standard bidding documents that recalibrate several financial and contractual safeguards. The changes

affect the frameworks governing bid security, additional performance security (“APS”/ “Additional Performance Security”), dispute resolution (“Disputes Resolution Mechanism”), and the admissibility of insurance surety bonds (“ISB”).

While procedural in form, these reforms have significant implications for legal risk allocation, commercial exposure, and contract administration across Operation and Maintenance (“O&M”) contracts, Non‑Regular Civil Works (NRCW), Engineering, Procurement and Construction (“EPC”) projects, and black spot rectification works that are sanctioned at the NHAI level. 

Taken together, the Circular signals NHAI’s continued push to strengthen contractual discipline and to align procurement structures with current market realities, particularly given aggressive pricing trends, the need for robust financial safeguards, and a shift towards institutionalized dispute management. Where a bid due date has already been fixed, the Circular mandates a seven‑day extension, and bids may be received only after the revised provisions are incorporated.

Following are the key highlights and amendments made under the Circular:

Mainstreaming ISBs: A key highlight of the Circular is the formal recognition of ISBs as valid instruments for furnishing both bid security and performance security.

Historically, bidders relied predominantly on bank guarantees for these obligations. With the introduction of ISBs, bidders now have an alternative security instrument that may ease banking limits and liquidity constraints.

Under the updated framework, ISBs must:

  1. Be issued only by insurers authorized by the Insurance Regulatory and Development Authority of India (“IRDAI”);
  2. Undergo verification through the specific online portal designated for the purpose of authentication; and
  3. Operate as irrevocable and unconditional undertakings.

In parallel, bank guarantees must comply with Structured Financial Messaging System (“SFMS”) norms, ensuring enhanced authenticity and traceability. The Circular expressly bars the submission of performance securities backed by third-party facilities, reinforcing NHAI's emphasis on accountability and primary obligor responsibility.

Additional Performance Security - A Recalibrated Approach to Low Bids: The Circular also overhauls the methodology for calculating APS in cases involving unusually low bids. The revised model introduces a more graduated and risk-sensitive formula:

  1. For bids priced more than 15% but up to 25% below the estimated cost, APS is calculated at 50% of the difference between the bidder’s quoted price and the 15% threshold.
  2. For bids exceeding a 25% discount from the estimated cost, APS comprises a fixed 5% of the estimated cost plus 100% of the difference between the bidder’s quoted price and the 25% benchmark.

Importantly, APS forms an integral part of the performance security, thereby providing NHAI with a consolidated security package rather than fragmented enforcement options. The continued prohibition of third‑party performance securities underscores NHAI’s intention to ensure that the contractor’s financial capacity is directly tied to contract execution.

Bid Security and Debarment - Emphasis on Compliance: The amendments impose greater rigour in the treatment of bid security. Failure to submit bid security in the prescribed form now results in automatic rejection of the bid as non‑responsive. While the traditional grounds for forfeiture remain in place, the updated provisions attach heightened consequences, such as potential debarment, where bidders withdraw their offers, reject permissible corrections, or fail to provide performance security in time. These changes reinforce NHAI’s signalling of strict compliance expectations within public procurement.

Dispute Resolution Mechanism - Movement Toward Institutional Processes: The Circular recasts the Dispute Resolution Mechanism with clear value‑based routing and a preference for institutional forums:

  1. Disputes below INR 10 crore:
      • Referred to either the Society for Affordable Redressal of Disputes (“SAROD”) or the India International Arbitration Centre (“IIAC”) for institutional arbitration;
      • The appointment of the Arbitral Tribunal, the conduct of the arbitrators, and the applicable fees shall be governed by the rules of SAROD or by IIAC;
      • The venue of arbitration shall be New Delhi, or such other place as may be determined by SAROD or IIAC;
      • The language of the proceedings shall be English;
      • Each Party shall bear its own costs;
      • The Arbitral Tribunal shall issue a reasoned and final award; and
      • Parties must continue performing their contractual obligations while the arbitration is underway.
  2. Disputes of INR 10 crore and above:
      • If not resolved through mechanisms available under the agreement, such disputes should be resolved by way of ‘Conciliation’ under the Arbitration and Conciliation Act, 1996;
      • The contractor and authority should agree that the settlement agreement or award should be enforced where the assets of the contractor or authority are situated;
      • The agreement remains fully binding during the pendency of any arbitration proceedings, and both parties must continue performing their obligations;
      • Once the Mediation Act, 2023 becomes operative, conciliation will be replaced by mediation as the applicable process;
      • Disputes of INR 10 crore or above shall not be referred to arbitration; and
      • All declaratory/non‑monetary disputes are expressly non-arbitrable, and parties remain free to seek relief before civil courts.

The above represents a decisive move away from ad hoc arbitration towards predictable, rules‑based procedures, with larger disputes channelled to conciliation/mediation and certain categories carved out of arbitration altogether.

EPC Contract-Specific Refinements: For EPC works approved at the NHAI level, the Circular introduces a notable deviation in the security structure, the baseline performance security requirement now stands at 3% of the bid price. This adjustment reduces the initial financial burden on contractors while maintaining effective risk protection through the revised APS regime.

Implementation Notes and Document Hygiene:

The Circular takes immediate effect. Where bid due dates were fixed, implementing authorities must extend the due date by seven days and receive bids only after integrating the revised clauses and the annexed security formats (for Bank Guarantees and ISBs) into the tender documents and e‑procurement platforms. All officers of NHAI HQ, Regional Offices (ROs), Project Implementation Units (PIUs), Corridor Management Units (CMUs) and Site Offices should also ensure that Fédération Internationale Des Ingénieurs‑Conseils (“FIDIC”) based item‑rate templates and NHAI‑adopted EPC templates reflect the updated security, APS, and Disputes Resolution Mechanism provisions in full.

Checklist:

  • Security Instrument Planning: The choice of security should be decided early between an ISB and an electronic Bank Guarantee:
  • If an ISB is being used, IRDAI authorization and portal verification are required;
  • If using an electronic Bank Guarantee, SFMS transmission to NHAI’s designated bank should be confirmed; and
  • Do not rely on third‑party facilities for performance security or APS.
  • APS Modelling: Build the two‑tier APS calculations into pricing and cash‑flow models; considering APS is part of performance security, enforcement would be consolidated.
  • Bid Hygiene and Timelines: Implement controls against bid withdrawal, manage arithmetical corrections proactively, and ensure timely agreement execution and performance security submission to avoid forfeiture and debarment.
  • Dispute Resolution Mechanism - Playbook:
  • Pre‑decide institutional preferences: SAROD or IIAC, for disputes below INR 10 crore;
  • Plan for conciliation (and later, mediation) for larger claims, prepare for a New Delhi venue and English proceedings; and
  • Maintain contemporaneous documentation to facilitate early neutral assessment.
  • Document Updates: Replace any legacy Bank Guarantee, ISB templates with the annexed forms from the Circular, verify that Request for Proposal (RFP) sections, O&M standard documents, FIDIC item‑rate sections, and EPC agreements incorporate the updated security, APS, and dispute resolution mechanism provisions.

Conclusion:

The Circular advances NHAI’s goal of pairing competitive bidding flexibility with financial prudence and procedural clarity. By integrating ISBs into the security toolkit, refining APS to curb unsustainably low bids, and promoting institutional dispute‑resolution pathways, with conciliation or mediation for high‑value matters and explicit non‑arbitrability carve‑outs, NHAI has reinforced predictability across the bid and contract lifecycle. The practical payoff for bidders will come from front‑end planning, rigorous document compliance, and disciplined execution.

Authors:

Jinal Shah

Associate Partner,

Juris Corp

Email: [email protected]

Palak Nenwani

Principal Associate,

Juris Corp

Email: [email protected]

Ronit Chopra

Associate,

Juris Corp

Email: [email protected]

Disclaimer:    

This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein.