2026 PLP 357 (CLC)

ANWAAR HUSSAIN, J.

Through this single judgment, the present as well as the connected constitutional petition, bearing W.P. No.76292/2024, are being decided simultaneously, as common questions of law are involved that pertains to the manner in which the respondent-Metropolitan Corporation, Lahore ( MCL ) is carrying out the impugned procurements.

2. The petitioner in present as well as connected petition are the engineering contractors, holding licenses in terms of Construction and Operation of Engineering Works Byelaws, 1987 ( the Byelaws, 1987 ) of Pakistan Engineering Council ( PEC ). Both the petitioners have been issued licenses in respect of Category C-6 , which entitles them to participate in bidding process of the projects valuing upto Rs.25 million. Respondents Nos. 4 to 6 (officials of the MCL) have published various tender notices totalling 68 in number, forming subject matter of the present and connected petition, in which at least three different nature and types of works advertised have been clubbed together; consequently, the collective value of the projects has reached beyond the ceiling of Rs.25 million. It has been alleged that combining different types of work in one project is illegal and the MCL is obligated to split the same. Report and para-wise comments on behalf of the respondents were filed in which it has been contended that in terms of Rule 9 of the Punjab Procurement Rules, 2014 ( Rules 2014 ), there is a prohibition against the splitting of contracts and the grouping was done with the approval of the Competent Authority, hence, no illegality has been committed.

3. Malik Sultan Amir Awan, Advocate, learned counsel for the petitioners submitted that by combining different type/nature of the works, bid value of the impugned tenders has exceeded Rs.25 million, which is impermissible under the law, and as a corollary, the petitioners and other similarly placed contractors, falling under Category C-6 , have been debarred from participating in the tenders, which amounts to discrimination and/or mis-procurement.

4. Conversely, learned counsel for the MCL as well as Mr. Mohammad Osman Khan, Assistant Advocate General, submitted that this petition is not maintainable as alternate remedy, in terms of Rule 67 of the Rules 2014 is available, before the Grievance Redressal Committee ( GRC ), which has been duly constituted and the petitioners should approach the said forum before invoking the constitutional jurisdiction of this Court. Mr. Iftikhar Ahmed Mian, Advocate, learned counsel for the MCL further submitted that the procurement has been carried out on the special initiative of the Government of Punjab, for improving the quality of civic amenities in the city and the Planning and Development Department ( P&D Department ), along with other stakeholders including Local Government and Community Development Department, approved the scheme in meeting dated 02.08.2024, under an umbrella scheme, at a total cost of Rs.3,677/- millions and different schemes in Lahore City were approved, hence, the MCL was obligated not to split the works in respect of which tenders were issued and bids were accordingly invited. Mr. Imran Khan, Assistant Advocate General also argued the case and submitted that Rule 4 of the Rules 2014 spells out the principles of the procurement and also stipulates that the object of the procurement is to bring value for money for procuring agency in an efficient and economic manner and the Rule ibid has been held to be the Grund Norm of the procurement laws

1. Adds that subject to Rule 9 of the Rules 2014, the procuring agency is the best judge to determine the cost and the scope of work to be tendered in a tendering process.

5. Considering the importance of legal questions involved, Syed Shahab Qutab, Advocate Supreme Court, was appointed as amicus curiae. He submitted that generally, the Constitutional Courts decline to interfere in procurement and planning decisions made by the procuring agencies and only where there is a patent mis-procurement, constitutional jurisdiction can be exercised. He added that sets of the rules and regulations that apply to the tenders in question are the Rules 2014, the Punjab Local Governments (Works) Rules, 2017 ( Rules 2017 ), and the Punjab Procurement Regulations, 2024 ( Regulations 2024 ). Further contended that in terms of Rule 4 of the Rules 2014, procuring agency shall ensure fair and transparent approach bringing value for money while carrying out the procurements process and in terms of Rule 9, the procuring agency shall announce in an appropriate manner the procurement for each financial year and shall proceed in accordance with law without any splitting or re-grouping of the procurement so planned. Adds that in the instant case, the MCL appears to be justified that there is an express prohibition under the Rules 2014 against splitting of the contract and therefore, once the approval of P & D Department and the other stakeholders is available, no illegality appears to have been committed. As regards discrimination, learned amicus submitted that grouping of works in the impugned tenders does not offend Article 18 read with Article 25 of the Constitution of the Islamic Republic of Pakistan, 1973 ( the Constitution ) as the freedom of trade, business or profession under the former provision of the Constitution is not absolute right but is subject to certain qualifications as prescribed under the relevant law and hence, combining the works does not offend Articles 18 and 25 of the Constitution. In support of his contentions, learned amicus has placed reliance on multiple reported judgments

2. Concluded that if the procuring agencies opt to combining or grouping different works or splitting the same, reasons are to be given and in this regard, reference to the provisions of UK s Procurement Act, 2023 and EU Directives has been made.

6. Arguments heard. Record perused.

7. Following questions require adjudication by this Court: i. Whether the present petitions are maintainable and this Court, in exercise of its constitutional jurisdiction, can examine the validity of the impugned tenders? ii. Whether the impugned tenders violate the principles of procurement contemplated under the applicable procurement laws in respect of openness, transparency, competition and impartiality? iii. Whether the impugned tenders violate Article 25 of the Constitution, being discriminatory as well as the petitioners fundamental right to freedom of trade, business and profession under Article 18 of the Constitution? iv. Whether there is any prohibition in the law against the splitting of works in a tender or the procuring agency is under an obligation to consider the division of the tendered works into smaller contracts and if the procuring agency has chosen to club or bundle different works in different sites, in one contract, is it obliged to give reasons for doing so?

8. Adverting to the maintainability of the petitions, it is by far settled principle of law that judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favoritism and is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any collateral purpose as held in case of Messrs Mohammad Ramzan and Company.3 In case of Muhammad Ramzan supra, it has been further held that the Government undertakings and statutory bodies should have a free hand while framing terms and conditions of a tender and the Courts ought not to interfere with the same unless there is material on the record to demonstrate that they are arbitrary, discriminatory, mala fide, or actuated by bias. A Court cannot interfere with the terms and conditions of a tender because it feels that some other term in the tender would have been fair, wiser or logical. However, at the same time, Courts cannot be a silent bystander if it transpires that a procuring agency is acting in an arbitrary or discriminatory manner in relation to the public procurement. This view has been endorsed by the Sindh High Court

4. In particular, the Courts have stepped in to prevent violations of public procurement rules where such violations were apparent from the record. The Islamabad High Court5 emphasized the role of public procurement rules in ensuring transparency and fairness in the award of public contracts and the fundamental duty of the public authorities to ensure that there is maximum competition in the process of awarding such contracts by highlighting the importance of the concept of a level playing field in the public procurement process which was essential for purposes of Articles 9, 18 and 25 of the Constitution. In cases where there was lack of openness and transparency, the contracts were declared void

6. The Indian Supreme Court7 also held as under: "36. level-playing field" is an important concept while construing Article 19(1)(g)... when Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level-playing field"... In the world of globalization, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)(g) of the Constitution. This is because the said doctrine provides space within which equally placed competitors are allowed to bid so as to sub-serve the larger public interest... Decisions or acts which result in unequal or discriminatory treatment, would violate the doctrine of "level-playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14, which refers to the principle of "equality" should not be read as a standalone item but it should be read in conjunction with Article 21, which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the afore-stated doctrine of "level playing field". According to Lord Goldsmith, commitment to the "rule of law" is the heart of parliamentary democracy. One of the important elements of the rule of law is legal certainty. Article 14 applies to government policies and if the policy or act of the government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional." This Court is of the view that the Articles 9, 18 and 25 of the Constitution when conjunctively read create the right to a level -playing field to be ensured by the state or its instrumentalities when it comes to citizens and private entities competing within the domain of public procurement. This constitutional right to a level-playing field is protected by the principle of transparent and open competitive bidding enshrined within the procurement rules. Therefore, this Court is of the opinion that since important questions regarding interpretation of the Rules and Regulations is involved, therefore, alternate remedy in present circumstances is not an efficacious remedy, and the constitutional petitions are maintainable and in exercise of its constitutional jurisdiction, this Court can examine the validity of the impugned tenders.

9. Before examining whether the impugned tenders have been issued in violation of the applicable rules and settled principles of the public procurement, it will be appropriate to browse the sets of rules and regulations that apply to the tenders in question. Tendering by local government is governed by the Rules 2017, however, the impugned tenders do not refer to the Rules 2017. Rule 6 of the Rules 2017 provides for the preparation and approval of an annual development plan by the local government, which shall specify the particulars for various works as well as the order in which these will be undertaken and an explanation whether the works will be undertaken by a contractor or an agency. Rule 8 provides for the enlistment of the contractors and states that such contractors shall fulfill the criteria laid down by the P & D Department of the government whereas Rule 8(4) contemplates that the categories of the contractors according to the cost of the project for the enlistment and its renewal shall be in accordance with Schedule I. Rule 8(6) states that the contractors of various categories may tender for works in all local government departments according to the field of specialization. Rule 9(3) states that the tendering process and procurement shall be in accordance with the public procurement rules, i.e., Rules 2014. Significantly, Rule 19(2) states that in case of any conflict between the Rules 2017 and the Rules 2014, the provisions of the Rules 2014 shall prevail. Furthermore, Rule 19(3) states that the contract for the repair or maintenance of roads, sewage, water supply etc., shall be made in accordance with the Rules 2014.

10. In so far as scope of Rules 2014 is concerned, Rule 4 contemplates the fundamental principle of procurement in the terms that a procuring agency while making any procurement shall ensure that it is made in a fair and transparent manner, brings value for money to the procuring agency and the procurement process is efficient and economical . Rule 8 thereof provides that a procuring agency shall within one month of the start of a financial year devise an annual plan for all proposed procurements. Rule 9 states that procuring agency shall announce in an appropriate manner all procurements for each financial year and shall proceed accordingly without any splitting or regrouping of the procurements so planned. Rule 10 provides protection against tailored bids and states that the specifications in a tender should be such that it allows for the widest possible competition and does not favour any single contractor or puts others at a disadvantage. However, this rule is focused on the specifications for the work including elements such as brand names catalogue numbers etc., but not the grouping or splitting of works under a contract. Rule 16(6) allows the P & D Department to shortlist individual from the consultants, companies etc., and in terms of Rule 16(9), the procuring agency may invite bids from such shortlisted companies or firms etc. Apparently, it is pursuant to the aforesaid provision of Rules 2014 that the bids have been invited from particular categories of contractors registered with the PEC. Rule 23 of the Rules 2014 states that the procuring agencies shall engage in open competitive bidding. Rule 34 of the Rules 2014 is significant as it contemplates that no procuring agency shall introduce any condition which discriminates between bidders or which is difficult to meet. The explanation to Rule ibid states that in determining whether a condition is discriminatory or difficult reference shall be made to the ordinary practices of that trade or construction business.

11. In so far as Regulations 2024 are concerned, these are specifically referred to in the impugned tenders and provide for e-procurement through the e-PADS system, which has been adopted in the impugned tenders. Regulation 5 pertains to the Annual Procurement Plan of a procuring agency, as provided in Rule 8 of the Rules 2014, which is to be uploaded on e-PADS. Regulation 6(1) contemplates that the tenders must be published in accordance with Rule 12 of the Rules 2014 on e-PADS. Regulation 6(3) states that the procuring agency may, as per its requirements create LOTS or specify whether the transaction of procurement is to be made as a whole or item-wise. In terms of Regulation 7, registration with the e-PADS system is mandatory to participate in e-procurement where per Regulation 17, the Rules 2014 shall apply to procurements made through e-PADS.

12. The above analysis of the Rules 2014 as well as the Rules 2017 reveals that there is no specific provision thereof that regulates the manner in which a procuring agency is to organize the works that it chooses to tender. In terms of Rule 6 of the Rules 2017, the local government has discretion to formulate its annual development plan. Similarly, in terms of Rule 8 of the Rules 2014 the procuring agency has discretion to decide on its procurement plan for a particular year. It is Regulation 6(3) of the Regulations 2024, which provides that a procuring agency may, as per its requirements, create LOTS or specify whether the transaction of procurement is to be made as a whole or item-wise. Hence, it is well evident that the decision is left to the discretion of the procuring agency keeping its requirements in view. However, this does not mean that such discretion of the procuring agency is unfettered. Both the Rules 2014 as well as Rules 2017 contemplate a number of important principles governing such discretion, inter alia, the widest possible competition, should not favour any single contractor (Rule 10 of Rules 2014), and not to split or regroup the contracts that is different from the proposed procurement for that year (Rule 9 of Rules 2014), which are meant to prevent any tailored bids to favour a particular contractor or a group of particular contractors.

13. In determining whether the grouping of works in a particular tender is contrary to the aforesaid principles of procurement, one would have to start by assessing whether the organization of the works under the impugned tenders is meant to promote favouritism. On Courts query as to whether the impugned tenders have been published in line with the annual procurement plan of the MCL, it was apprised that procurement is part of the project that has been carried out on the special initiative of the Government of Punjab for improving the quality of amenities in the city and the P & D Department along with other stakeholders approved the scheme at a total cost of Rs.3,677/- million, hence, the MCL was obligated not to split the works in respect of which impugned tenders have been published. The stance is duly supported by the documents brought on record. Therefore, the grouping of the works is not illegal.

14. At this juncture, it is important to note that in the impugned tenders, different categories of contractors have been specified for different tenders such as C-3, C-4, C-5 and even C-6. As per the data provided by the MCL, there are 946 contractors registered in the C-3 category, 1728 contractors in the C-4 category, 1642 contractors in the C-5 category. This Court is of the opinion that considering the large number of the contractors who will be eligible (as per the respondent local government) to participate in the tenders for each category, there does not appear to be any direct evidence of favouritism or limitation on the competition. There is no specific allegation or evidence that the impugned tenders or any specific tender is tailored to favour any particular contractor. As such there is no material on record to reach the conclusion that there is any favouritism. Similarly, in order to show that the impugned tenders are discriminatory or that those do not provide a level playing field, the petitioners were obligated to show that these treat similarly placed contractors in a different manner. That is not the case. In fact, the petitioners entire case is that they are being deprived of the opportunity to participate in these works because the MCL has failed to split the tender into smaller lots that would enable the contractors in the petitioners category to qualify and be eligible for the award. This is not a ground for discrimination since the petitioners can only claim discrimination if the contractors in the same class, as the petitioners, were treated dissimilarly. Suffice to observe that in the prayer clause, the petitioners have neither assailed the contractor categorization system nor the applicable rules, including Rule 16 of the Rules 2014 or Rule 8 of the Rules 2017, therefore, no case of discrimination is made out.

15. As regards the grouping of works in the impugned tenders implicating Article 18 of the Constitution in so far as the petitioners right to freedom of trade and profession is concerned, it is pertinent to observe that the right to freedom of trade, business or profession under Article 18 of the Constitution is not an absolute right but is subject to qualifications and restrictions prescribed by the law. The Courts have held that such restrictions have to be reasonable and the Courts are competent to review such restrictions on the touchstone of reasonability. This Court in case of Messrs 3n-Lifemed Pharmaceuticals supra held as under: 7. ...Now the question is that whether the policy decisions, whereby certain conditions/requirements were incorporated to pre-qualify the idders/applicants attracts exceptional situation, requiring indulgence by courts. Courts normally proceed to adjudged review policy decision/directives, if same violates constitutional limits or legal limits, or found to be patently mala fide or discriminatory. Unless such exceptions are available, this court is not inclined to exercise judicial review jurisdiction and delve to adjudge relevancy, rationality, and sufficiency of the requirements, which probe is otherwise unwarranted when the condition of seeking approvals/certifications was incorporated to ensure that medical devices/drugs procured, meet desired standards of public health and human safety.

8. Incorporation of the conditions of pre-qualification, prescribing fiscal limits for prospective firms / bidders, to ascertain their financial capability to honour potential commitments undertaken, are not unreasonable. Placement of condition of showing strong financial position - meeting desired business/financial turnover benchmarks - is otherwise not violative of Article 18 of the Constitution of Islamic Republic of Pakistan, 1973 - which too permits lawful qualifications upon conduct of trade or business. The condition imposed is a policy decision, relevance, rationality and effectiveness thereof cannot be reviewed or adjudged by invoking judicial review jurisdiction- unless it is shown that policy decision or conditions prescribed do infringe any of the constitutionally provided fundamental rights, found deficient in meeting legislative competence test or manifest erroneous assumption and exercise of powers/ jurisdiction. (Emphasis supplied)

16. Regarding splitting of the tendered works, under the law in vogue to allow small and medium enterprises (SMEs) to participate in the bidding process, it is imperative to note that in terms of the applicable Rules, there is no specific provision casting such obligation upon the procuring agency. On the contrary, there is a prohibition against the splitting of works or regrouping of works that will change the procurement planning for the year, if any, done by the procuring agency per Rule 9, of the Rules 2014.

17. At this juncture, it is also worth mentioning that while browsing legislation from other jurisdictions as well as internationally accepted principles of procurement, it transpires that the splitting of a contract for purposes of avoiding the application of procurement regulations by reducing the value of each of the split components of the contract has been identified and flagged as a potential means of committing procurement corruption. Therefore, in academic literature on this point authors have identified that more often than not contract splitting is motivated by favouritism than efficiency promoting motives

8. At the same time legal commentators also recognize that splitting contracts into lots would promote competition while also facilitating SME participation in public procurement. There is no one-size-fits-all solution and the decision has to be made on a case to case basis depending on the specific characteristics of the market involved. However, the decision to split or not to split requires a careful consideration of several factors including the number of economic operators in the market, the role of new entrants, the risk of collusion and the trade off between potential competition gains and efficiency losses

9. A 2014 Directive by the EU obliges contracting authorities to consider at the planning stage whether to divide a contract into lots. However, the Directive also includes rules that stipulate that contracts must not be artificially split in order to avoid the application of public procurement rules. Article 46 of 2014 EU Directive states that the contracting authorities are free to decide whether to divide a contract into lots

10. However, where contracting authority decides not to divide a contract into lots it must provide the reasons for its decision. This is called the divide or explain rule. It is imperative to observe that in many cases it may not be practical or appropriate to split a contract because dividing the contract between different economic operators could create unacceptable operational risks. If a decision to divide the works into lots is taken then the same could be taken on the basis of geographical division as well as service type division combined with a value division. The aforesaid principle is also incorporated in the UK in terms of Section 18 of the UK s Procurement Act, 202311, which states that before publishing a tender notice in respect of a public contract a contracting authority must consider whether the goods, services or works to be supplied under the contract could reasonably be supplied under more than one contract; and if it does consider it to be possible, then it should either arrange for the contract to be awarded by reference to lots or provide reasons for not doing so. This is again an incorporation of the principle of divide or explain that is already present in the EU Directive.

18. While there is no such express provision under the Rules 2014, Regulation 6(3) of Regulations 2024 does empower the procuring agency to create LOTS and to specify whether the procurement transaction is to be made as a whole or item-wise as per its requirements . In any event, this Court is of the view that the duty to consider whether the works proposed to be tendered through a contract could be supplied under more than one contract is implicit in the obligation under the Rules 2014 to ensure the widest possible competition.

19. In view of the above discussion, this Court is of the opinion that the MCL has not committed any mis-procurement. The present as well as the connected petition are without any force. However, the above discussion propels this Court to make following observations/directions, to all the procuring agencies, across the province, for the purpose of bringing transparency and fairness in the procurement process: (i) It is imperative in terms of Regulation 5 of the Regulations 2024 and Rule 8 of the Rules 2014, that annual development plan by each procuring agency with respect to the procurement to be carried out in that fiscal year is devised within one month of the beginning of fiscal year and the same must be made public. This would rule out possibility of tinkering and/or manipulation in any tender at the time of inviting bids; (ii) There is an administrative and executive discretion vested in the procuring agency to formulate and design the procurement plan by grouping and/or splitting the works for the purposes of ensuring widest possible competition and obviating the possibility of favouritism, however, once the said discretion is exercised, through an annual development plan, the procuring agencies are obligated to adhere to the same without splitting and/or regrouping the same in terms of Rule 9 of the Rules 2014; (iii) Adherence to Rule 8 of the Rules 2014 as to announcement of proposed annual procurement plan in a financial year is a legal obligation which stands as a bar and check upon the procuring agency to arbitrarily split and/or regroup the subject matter of procurement to tailor-make the same to extend favouritism; and (iv) A procuring agency should at least, at the planning stage, consider splitting of the work when it is tendering the same that are comprised of different geographical locations and different types of services/activities; and if it still decides to group them together in one contract then it should, at a minimum, state its reasons for doing so. This should be encouraged as a best practice amongst the procuring agencies to avoid any such challenges during the procurement process.

20. Disposed of in above terms.

21. A copy of this judgment be sent to Managing Director, Punjab Procurement Regulatory Authority to ensure compliance of directions of this Court.

22. Before parting with the judgment, I wish to acknowledge the wonderful assistance rendered by Syed Shahab Qutab, Advocate/Amicus Curiae. MH/G-4/L Order accordingly. 1 Kitchen Cuisine (Pvt) Ltd v. Pakistan International Airlines Corporation and others (PLD 2016 Lahore 412). 2 Messrs Muhammad Hanif and Co. through Authorized representative and another v. Chief Engineer North, Pak PWD and 3 others (2023 CLC 443) and Messrs 3N-Lifemed Pharmaceuticals v. Government of Punjab through Primary and Secondary Healthcare Department and others (2023 CLC 948). 3 Messrs Mohammad Ramzan and Company v. Federation of Pakistan through Secretary Ministry of Communication, Islamabad and 4 others (2024 CLC 1394). 4 Adam Sugar Mills Limited v. Federation of Pakistan through Secretary Ministry of Commerce and 2 others (2012 CLD 1734). 5 Muhammad Ramzan supra. 6 In the Alleged Corruption in Rental Power Plants etc. (2012 SCMR 773). 7 Reliance Energy Limited and another v. Maharashtara State Road Development Corporation Ltd. and others (2007) 8 SCC 1). 8 Contract splitting in public procurement (Filipe B. Caires, Susana Peralta, Diogo Mendes)-2024 https: // papers. ssrn. com/ sol3/ papers. cfm? abstract_id=4599419 (Date accessed 05.02.2025). 9 Division of Contracts into Lots - a Joint Initiative by OECD and the EU Brief 36 (September 2016). 10 Directive 2014/24/EU on Public Procurement. 11

18. Duty to consider lots (1) Before publishing a tender notice in respect of a public contract, a contracting authority must consider (a) whether the goods, services or works to be supplied under the contract could reasonably be supplied under more than one contract, and (b) whether such contracts could appropriately be awarded by reference to lots. (2) If the contracting authority considers that the goods, services or works could reasonably be supplied under more than one contract and such contracts could appropriately be awarded by reference to lots, the authority must (a) arrange for the award of the contract or contracts by reference to lots, or (b) provide reasons for not doing so.