Percentage Rate Tender for Works

A Percentage Rate Tender for Works is a procurement method in which the government prices all BOQ items using its official Schedule of Rates (SoR) and asks bidders to quote a single percentage premium or discount on the total estimated amount. A bidder quoting -3% is offering to execute all the work at 97% of the SoR rates; a bidder quoting +5% will charge 105% of the SoR rates. The bidder with the lowest percentage (highest discount or lowest premium) is L1 and wins the contract.

What is a Percentage Rate Tender for Works in government procurement?

Percentage rate tendering simplifies the bid process significantly: instead of pricing 300-500 individual items, the bidder makes one decision, what percentage to bid. This makes preparation faster and reduces scope for the item-level pricing strategies (like rate imbalancing or front loading) that are possible in item rate contracts.

CPWD uses percentage rate contracts for a large proportion of its routine maintenance, small capital works, and repair contracts. State PWDs use a similar approach for standard building and road works within defined value thresholds. The percentage rate method is also used for Annual Maintenance Contracts (AMCs) where the scope is defined by the SoR and the contractor is expected to maintain prices aligned with market SoR.

Because all items are paid at the same percentage premium/discount, a contractor who bids -2% gets paid at 98% of the SoR rate for earthwork, concrete, brickwork, and every other item equally. This removes the incentive to selectively underprice high-quantity items to win the bid (a risk in item rate contracts). However, it also means the contractor cannot benefit from specific cost advantages on particular items.

In percentage rate contracts, the SoR revision cycle has a direct commercial impact. If the SoR is revised upward between the time of bidding and the time certain items are executed, the contractor benefits (paying less than the SoR rate after applying their percentage). If the contractor bid +5% expecting the SoR to be revised, but no revision occurs, the margin assumption fails.

Why it matters for bidders

Percentage rate bidding requires a macro-level cost assessment: the bidder must judge whether, overall, the SoR rate schedule for the scope of work allows profitable execution at the proposed percentage. This is a portfolio judgment, not an item-by-item analysis.

Contractors should analyse the composition of the BOQ, which items dominate by value, and assess their cost relative to the SoR rate for those items. If the top 10 items (by value) are all items where the contractor's cost is above the SoR rate, bidding below the SoR percentage is financially dangerous even if other items are priced generously.

Example

A CPWD civil division issues a percentage rate tender for painting and maintenance of a residential colony covering 120 government quarters. The BOQ is based on CPWD SoR painting rates and estimated at Rs 28 lakh. Three contractors bid: +4%, +2%, and 0% (at par). The 0% bidder is L1 and is awarded the contract. Payments are made at the SoR rate (no premium, no discount) for each item as measured in the MB. The contractor must manage their cost to produce a margin within the SoR rates themselves.