GeM IT Products Pricing Trap – How Government Decides L1 Vendor
On the surface, GeM appears to reward the lowest price (L1). In reality, price is only the final filter, not the deciding factor. Thousands of IT vendors quote the cheapest rates yet never get selected—this is the GeM pricing trap.
The Biggest Myth: Lowest Price Always Wins
This is the most dangerous misconception.
Reality on GeM:
L1 means lowest among technically compliant bidders
Price comparison happens after technical filtering
Non-compliant lowest bids are auto-eliminated
Many vendors are rejected before price comparison even starts.
Stage 1: Technical Compliance Comes First
Before pricing is evaluated, GeM checks:
Exact model & configuration match
OEM authorization validity
Warranty & SLA compliance
Make in India / Local Content declaration
Buyer-added parameters
Fail even one parameter = price ignored entirely
Stage 2: Hidden Price Normalization
Even when prices are lowest, GeM may normalize pricing based on:
Quantity-based benchmarks
Past purchase price trends
Buyer’s estimated value
Unrealistically low (dumping) prices
Abnormally low quotes can trigger manual scrutiny or rejection.
Stage 3: L1 Is Calculated on Total Cost, Not Unit Price
Government evaluates total landed cost, including:
Base price
Installation & commissioning
AMC / warranty extensions
Taxes & statutory levies
Vendors quoting low unit price but high add-ons lose L1 position.
Reverse Auction: Where Vendors Destroy Their Own Margin
In IT hardware bids, Reverse Auctions (RA) are common.
Common RA mistakes:
Blind undercutting without cost control
Ignoring minimum sustainable pricing
Triggering OEM margin violations
Result:
Technically L1, commercially unviable
Order cancellation or execution failure
Long-term vendor rating damage
Make in India Pricing Preference
Price is not viewed equally for all vendors.
| Supplier Type | Pricing Impact |
|---|---|
| Class-I Local | Preference applied |
| Class-II | Conditional |
| Incorrect claim | Rejection / Blacklisting |
A higher-priced Class-I vendor can defeat a cheaper Class-II bidder.
Behavioural Scoring: The Invisible Factor
GeM tracks vendor behavior (not public):
Past order completion
Delivery delays
Rejection frequency
Buyer ratings
📉 Poor history = reduced visibility in L1 consideration.
Common Pricing Mistakes That Kill L1 Chances
Quoting without factoring OEM support cost
Ignoring post-order compliance expenses
Assuming RA = price war
Treating GeM like an open marketplace
These mistakes cost orders, margins, and reputation.
How Smart Vendors Actually Win L1 on GeM
Winning vendors:
Price after full compliance mapping
Benchmark against realistic government rates
Maintain OEM-aligned margins
Avoid predatory underpricing
Focus on execution capability, not just bid win
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