1.1
Introduction:
Procurement
in public services is special, as it requires transparency, economy and efficiency.
All procurements are required to be done by following due process which is not
elaborate and there are several concerns in the minds of the purchase managers.
Organizations look forward to attain best value for money taking into account
principles of efficiency, economy and transparency. Best value for money
implies the use of optimum criteria which incorporates total cost of ownership
of the goods necessary to satisfy the long term goals of the organization,
along with satisfactory performance in use. A better procurement process is
expected to provide:
(i) Robust
contract monitoring and control mechanisms to ensure effective assessment of
all the options in specified circumstances throughout the life of the contract.
(ii) Transparent
and fair Procurement process facilitating optimum competition possible in
procurement of goods.
(iii) Providing
sufficient notice & opportunity to bidders and hence provide equal
opportunity to market players to do business with the organisation.
(iv) Ensuring
proper diligence and accountability in all procurement decisions.
(v) Achieving
a uniform, systematic, efficient and cost-effective procurement process. The
process should also be in accordance with the applicable rules &
regulations of the Government.
1.2
Canons
of Financial Propriety
There are fundamental canons of Financial Propriety for competent
financial authorities (CFA) in Government and Public Sector that they must pay
due regard to the following principles, while sanctioning financial
expenditure: -
(i) The expenditure should not
prima facie be more than the occasion demands, and that every CFA should
exercise the same vigilance in respect of expenditure incurred from public
moneys as a person of ordinary prudence would exercise in respect of his own
money.
(ii) No authority should exercise
its powers of sanctioning expenditure to pass an order, which will be directly
or indirectly to its own advantage.
(iii) Public moneys should not be
utilised for the benefit of a particular person or section of the community
unless –
a) The amount of expenditure
involved is insignificant; or
b) A claim for the amount could
be enforced in a Court of Law;
c) The expenditure is in
pursuance of a recognised policy or custom;
(iv) The amount of allowances,
such as travelling allowances, granted to meet expenditure of a particular
type, should be so regulated that the allowances are not on the whole, a
sources of profit to the recipients.
2.1
Basic Aim of the Procurement Function
The basic
aim of the procurement function is to ensure five essential parameters in every
procurement decision (these are called the 5 R’s of Procurement):
(i) Right quality
(ii) Right quantity
(iii) Right ‘price & value' for money
(iv) Right ‘Time & Place' of delivery
(v) Right source of supply.
2.2
Laws/Guidelines
governing Procurement
While India
(i)
Constitution of India
(ii)
General Financial Rules
(GFR),2005, Government of India
(iii)
Ministry of Finance, GOI,
Manual for Procurement of Goods and Services, 2006
(iv)
Indian Contracts Act, 1872
(v)
Sale
(vi)
Arbitration and Conciliation
Act, 1996
(vii)
Competition Act, 2002 as
amended with Competition (Amendement) Act, 2007
(viii)
The Information Technology
Act, 2000 (IT Act, regarding e-Procurement and e-Auction, popularly called the
Cyber Law)
(ix)
Export Import Policy of
Government of India
(x)
Foreign Exchange Management
Act (FEMA) and FEMA (Current Account Transactions) Rules, 2000
(xi)
Central Vigilance Commission
(CVC) guidelines related to public procurement
(xii)
Right to Information (RTI) Act 2005
These guidelines and directives have been
studied, and appropriately incorporated into this manual.
2.3
Special
obligations of Public Procurement
Over and above the principles of Procurement, Public Procurement
places onerous obligations on the Public procurement Organizations – which
distinguish Public procurement from Procurements done by Private Organizations.
2.3.1
Equality
for Bidders
Right
of equality before law (Art. 14) and the Right to carry out any profession
(Art. 19 (1) g), are as follows:-
“FUNDAMENTAL
RIGHTS
Right to Equality
§14. Equality before law. - The State shall not deny to
any person equality before the law or the equal protection of the laws within the territory of India
Right
to Freedom
§19. Protection of
certain rights regarding freedom of speech, etc.-
(1)
All citizens shall have the right-
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions;
(d) to move freely throughout the territory of India
(e) to reside and settle in any part of the territory of India
(g)
to practise any profession, or to carry on any occupation, trade or
business.”
These have been interpreted by Courts in such a way,
so as to ensure that every citizen of India
2.3.2
Transparency
and Disclosures of Procurement Decisions
Under the Right to Information Act, 2005 (RTI Act);
every citizen has the right to demand transparency and information in Public
Dealings including Procurements. Thus a Public Procurement Organization should
be ready to provide Documented Record of its Procurement Process/ Decisions to
general public who may not be conversant with intricacies of Public
Procurement.
2.3.3
External
Accountability
Apart
from internal accountability to which even Private Sector Procurements are
subject to, Public Procurements are answerable and accountable to a number of
external organizations, like Parliament and Parliamentary Committees, CVC, CBI,
C&AG, Concerned
Ministries etc
2.4
Fundamental
Principles of Public Buying
Every authority delegated with the financial
powers of procuring goods in public interest shall have the responsibility and
accountability to bring efficiency, economy and transparency in matters
relating to public procurement and for fair and equitable treatment of suppliers
and promotion of competition in public procurement.
The procedure to be followed in making
procurement must conform to the following yardsticks:-
(i) The
specifications in terms of quality, type etc., as also quantity of goods to be
procured, should be clearly spelt out keeping in view the specific needs
without including superfluous and non-essential features, which may result in
unwarranted expenditure. Care should also be taken to avoid purchasing
quantities in excess of requirement to avoid inventory carrying costs;
(ii) Offers
should be invited following a fair, transparent and reasonable procedure;
(iii) The
procuring authority should be satisfied that the selected offer adequately
meets the requirement in all respects;
(iv) The
procuring authority should satisfy itself that the price of the selected offer
is reasonable and consistent with the quality required;
(v) At
each stage of procurement the concerned procuring authority must place on
record, in precise terms, the considerations which weighed with it while taking
the procurement decision.
3.1 Committees
3.1.1
Bid Opening
Committee (BOC)
Role & Mandate: Bid
Opening Committee (BOC) shall be responsible for opening of bids and ensure
that EMD, if required is there and bids are submitted in due format.
Composition: The
bid opening committee shall comprise of one purchase officer, one officer from
the Finance department and one officer from technical section. The day wise
(Tuesdays and Fridays) standing committees should be constituted for opening of
bids. The committee approved for a particular day shall open the bid due to be
opened on that day. Committee shall be approved for every quarter with the
approval of Head of Department.
3.1.2
Tender Evaluation
Committee
Role and Mandate:
Tender Evaluation Committee (TEC) members, wherever required shall be approved
by CFA. Approval shall be accorded on the recommendation of Purchase Officer. The
key role and mandate of the TEC will be as follows:
(i) The
TEC will check whether the participating bidders satisfy the eligibility
criteria in respect of the Tender Notice and declare the eligible parties
(responsive tenders). Bids of only the eligible bidders shall be processed for
evaluation thereafter. The evaluation criteria for evaluating the tender should
be predetermined, pre-disclosed and documented in the tender documents.
(ii) To
evaluate the techno-commercial responses of the bidders and ensure that they
meet user requirements in a comprehensive manner, in cases where two bid system
is used.
(iii) To
mark the scores of the bidders as per the tender terms and conditions of the
Tender Document.
(iv) To
rank the bids by scores/ marks awarded or prices and identify the preferred
bidder to be considered for approval by the competent authority.
(v) Make
comparative statement in case of both Technical and price/Financial Bid.
(vi) The
TEC shall have the mandate to carry out the evaluation of all eligible tenders
and select the preferred eligible bidder, duly monitoring compliance of laid
down purchase procedures in all stages of the tender, reasonability of
estimates and bids (e.g. ascertaining whether rates are fair or not) and, if
required, associated technical details of the tender.
(vii) To
prepare a report and forward its findings to the competent authority.
3.1.3
Condemnation
Committee (CC)
CC members, wherever required shall be approved by CFA.
Approval shall be accorded on the recommendation of Purchase Officer. Condemnation Committee will recommend disposal
of surplus/ obsolete items and condemning capital and security items.
Role & Mandate: The
key role and mandate of the Condemnation Committee (CC) are as follows.
(i) Evaluate
users’ request for disposal against available data on book value.
(ii) Decide
whether the goods recommended for disposal by competent authority or inventory
audit, should be disposed-off, or retained in inventory, and categorize
disposable goods into surplus/ unserviceable/ condemned/ obsolete/ unusable /
scrap with reasons for disposal.
(iii) The
Committee will recommend condemnation and CFA, on the basis of recommendation
of the committee issue Condemnation Certificate as acceptance to the condemnation
report.
3.2
Types
of Procurement
Seen from budgetary point of view, procurements can be
categorized into following types:
·
Capital Procurement
·
Revenue Procurement
·
Indigenous Procurement
·
Foreign Procurement (Import)
3.2.1 Capital
Procurement
Expenditure
of a capital nature shall be an expenditure with the object of increasing assets
of material and it should include charges for first construction and equipment
of a project as well as charges for immediate maintenance of the work while not
yet open for service.
3.2.2 Revenue
Procurement
Revenue
procurement should bear all subsequent charges for maintenance and all working
expenses; these include all expenditure on working and upkeep of operations.
The revenue procurement, therefore, is for items and equipment including
replacement equipment (functionally similar) assemblies/sub assemblies and
components to maintain and operate already sanctioned assets in the service,
the necessity of which have been established and accepted.
3.2.3 Indigenous
Procurement
Procurement
from indigenous sources is called indigenous procurement. Proper loading criteria for all taxes, duties
and other expenses involved in procurement of an item need to be applied to
provide level playing field to the indigenous manufacturers. Payments against
indigenous procurement are normally made in rupee terms.
3.2.4 Foreign
Procurement (Import)
For
such equipment and assets, which are of foreign origin, items required to
maintain and operate the equipment also need to be procured from suppliers
abroad. Payment against foreign procurement is made in foreign currency through
a Letter of Credit (LC) or Direct Bank Transfer (DBT)
3.3
Modes of Procurement
The following are the various mode of
procurement that can be resorted to, with details:-
·
Nomination Basis Tenders
o Proprietary
Article Purchase (PAC)
o Single
Tender
·
Open Tenders
o International
Competitive Bidding (ICB)
o National
Competitive Bidding (NCB)
·
Limited Tender Enquiry (LTE)
·
Purchase of Goods by
Purchase Committee (Local Procurement)
·
Rate Contracts (RC)
·
Repeat Orders
3.3.1
Proprietary Article Purchase
·
Certain items, particularly
equipment and spares, are the Proprietary product of a manufacturing firm. Such
items are only available with that firm or their dealers, stockist or
distributors as the detailed specifications are not available for others to
manufacture the item. In such situations, a Proprietary Article Certificate
(PAC) is issued in favour of the original equipment manufacturer (OEM) and
items procured on PAC basis from that particular firm or their authorized
dealers or distributors. While PAC is issued only in respect of the concerned
OEM, the item may be bought from any supplier listed in that particular PAC
provided supplies are accompanied by a proper manufacturer certification. PAC
once issued will be valid for one year from the date of issue unless cancelled
earlier.
·
PAC bestows monopoly and
obviates competition. Hence, PAC status must be granted after careful
consideration of all factors like fitness, availability, standardization and
value for money. Even if last
procurement was on PAC basis, the next PAC certificate may not be issued without
a fresh review.
·
It is clear that PAC
certificate will be given only when this item is manufactured only by the
recommended firm but there are two different circumstances:
(i) There
may be no other firm who manufactures similar or alternative items.
(ii) There
may be other firms manufacturing similar or alternative items but no other make/brand is considered to be suitable
for reasons that may be recorded. This also can be for two types of reasons:
(a) There
could be tangible reasons - like in case of spares for specialized Machines, it
is necessary to buy items from OEM only for reasons of warranty and so as not
to endanger the functioning of the machine.
(b) There
could be other reasons which may not be tangible.
3.3.2 Single
Tender
Invitation to one firm only is called
‘Single Tender’. Single Tendering for non PAC items may be resorted to only on
the grounds of existing or prospective emergency relating to operational or
technical requirements. The reasons for single tender enquiry (STE) and
selection of a particular firm must be recorded and approved by the CFA prior
to single tendering.
3.3.3 International
Competitive Bidding (ICB)
ICB procedures should be adopted in
following situations if any of the conditions mentioned below is true:
(i) Non-existence
of local representative of the global principal of the manufacturer/ supplier.
(ii) Requirement
for compliance of specific international standards in technical specifications.
(iii) Absence
of sufficient number of competent domestic bidders likely to comply with the
required technical specifications.
(iv) Goods
contracts exceeding the threshold of Rs Twenty Five (25) Crores.
(v) ICB
is similar to open tendering but involves participation of foreign firms in the
bidding process.
Terms & Conditions
(i) ICB
tenders shall be openly advertised and copy of the NIT should be sent to the
embassies of the prospective bidders and posted on website and the Indian Trade
Journal - ITJ. All bidders shall be allowed to submit bids, and after
pre-qualification shall be used to determine responsive tenders.
(ii) ICB
tender documents must be in English and express a freely convertible currency.
(iii) ICB
tender documents must contain technical specifications which are in accordance
with national requirements which are also based on an international trade
standard.
(iv) The
bidding period shall not be less than 6 weeks from the date of advertisement or
the date of availability of the tender document whichever comes later.
(v) Relevant
Inco Terms should be included in the tender
3.3.4 National
Competitive Bidding (NCB)
NCB procedures should be adopted for all
annual tenders in any of the following situations:
(i) All
common use items with clear technical specifications.
(ii) Items
which are ordinarily available in open market but it is found necessary to
evaluate competitive offers to decide the most suitable and economical option
available.
(iii) Goods
contracts exceeding the threshold of Rs twenty five (25) Lakhs.
Bidders already registered are also free
to participate in NCB. NCB is normally a two-stage bidding, first stage of
which evaluates credential of bidders.
Terms & Conditions
(i) All
interested parties should be allowed to bid for the tender, and after
pre-qualification shall be used to determine responsive tenders.
(ii) Invitations
to bid shall be advertised in at least one widely circulated national and local
newspaper of wide publication and on website.
(iii) Deadline
for submission of bids shall be at least thirty (30) days from the last date of
issue of the Tender Documents. Extension of deadline of submission shall not be
allowed without prior concurrence of Head of Department when:
(a) for
the first request from the bidders for extension if it is longer than eight (8)
weeks; and
(b) for
all subsequent requests from the bidders for extension irrespective of the
period;
(c) Re-tendering
shall not be carried out without the prior concurrence of the HoD.
3.3.5 Limited
Tender Enquiry (LTE)
LTE procedures should normally be
adopted, for procurements when estimated value of procurement is upto Rs.
Twenty Five (25) Lakhs. Copies of the bidding documents should be sent directly
by speed post/courier/e-mail to firms which are registered suppliers.
Prospective bidders for LTE should be
selected in a non-discriminatory manner from its registered bidders’ data-base
and it should also select a sufficient number of suppliers or contractors (at
least three) to ensure effective competition.
Terms & Conditions
(i) The
minimum number of suppliers to whom LTE should be sent is six. In case less
than six approved suppliers are available, LTE may be sent to available
approved suppliers with approval of the competent authority duly recording the
reasons.
(ii) In
case it is proposed to exclude any registered/ approved supplier, detailed
reasons like failure in supply should be duly recorded and approval of
competent authority be taken before exclusion.
(iii) Adequate
time should be given for submission of quotes, which should not be less than
three weeks. Longer period (six weeks) could be given in case of import of the
materials and in complex cases, if justifications are given and allowed.
(iv) In
limited tendering, suppliers or contractors should be selected from whom to
solicit tenders in a non-discriminatory manner and it shall select a sufficient
number of suppliers or contractors to ensure effective competition.
(v) Before
resorting to limited tendering it would be essential to ensure that the demand
is not split into small quantities for the sole purpose of avoiding the
necessity of taking approval of the competent authority required for
sanctioning the purchase of the original demand or for avoiding NCB mode of
Procurement.
3.3.6 Local Procurement: Purchase of Goods by
Purchase Committee
Purchase of goods upto Rs.1,50,000/-
only on each occasion may be made on the recommendations of duly constituted
local purchase committee consisting of three members as follows:
One member from the user department/ administration/
associated/affiliated, one member from finance and accounts department and one
member from purchase. Purchase department representative shall act as member
secretary of the committee. Such purchases shall be approved by concerned CFA
of the level as per delegation.
Terms & Conditions
(i) Quotations
shall be solicited from as many different suppliers as possible but in any case
not less than three.
(ii) Depending
on circumstances, quotations may be submitted via email, telex or fax if so
specified.
(iii) Before
resorting to local procurement, it would be essential to ensure that the demand
is not split into small quantities for the sole purpose of avoiding the
necessity of taking approval of the higher authority required for sanctioning
the purchase of the original demand or for avoiding LTE or NCB mode of
Procurement. If in any case it is essential to split the work than the
approving authority shall be same (who has given the approval for the work)
(iv) Annual
review of such procurement shall be done to ensure that in future procurements
are done by following open tender.
3.3.7
Rate Contracts (RC)
RC procedures should be adopted for
procurements in following situations:
(i) Commonly
used goods of low value needed on recurring basis by various user departments.
(ii) Goods
for which Rate Contract is convenient to operate economically.
However, RC should not be operated in
following situations:
(i) In
case of goods of low value and which are required by the users in very small
quantities, rate contracts should not be concluded.
(ii) Rate
Contract may not be resorted to for the scarce/ critical/ goods in perpetual
short supply.
Examples of RC based procurement are spares,
cartridges, Towels, Brooms etc.
Rate contract of DGS&D or any other
agency approved by Government such as Kendriya Bhandar and NCCF may also be
operated. In case items are not covered in such RCs or if it is decided to have
own RC then it should be finalized through open tendering adopting NCB procurement
procedures. As far as feasible termination period of different RC should be
fixed in such a way so that tax rate changes during annual budget of the
Government are avoided – since any adverse effect may frustrate the RC.
Moreover termination period of RCs of different items should be staggered so
that work load is evened out during the year. RC essentially is an agreement
with the supplier at a specified price and terms & conditions (as
incorporated in the agreement) during the period covered by the Rate Contract.
No quantity is mentioned nor is any minimum commitment guaranteed in the Rate
Contract. The Rate Contract is in the nature of a standing offer from the
supplier firm.
Terms & Conditions
(i) Rate
Contracts shall be awarded to the firms who are registered for the goods in
question and fulfill the laid down eligibility and qualification criteria
including availability of ISI mark, service centers across the country etc.
Suitable stipulations are to be incorporated in the tender enquiry documents to
this effect.
(ii) In
respect of new items being brought on rate contract for the first time where
there is no registered supplier (for the subject items), the requirement of
registration can be relaxed with the approval of competent authority. The award
of such rate contracts will, however, be subject to the suppliers’ satisfactory
technical and financial capability.
(iii) Some
of the bidders (who are otherwise registered for the subject goods) may also be
holding current rate contracts and/or held past rate contracts for the required
goods. Their performance against such earlier/current rate contracts shall be
critically reviewed before they are considered for award of new rate contracts.
(iv) Specific
performance and achievement criteria as on a selected cut-off date is to be
evolved for this purpose and incorporated in the tender enquiry document. The
bidders will be asked to furnish the relevant details (along with their
tenders). Their performance and achievement should be judged against the past/
current rate contracts. These criteria are to be evolved and decided by the
purchasing department during procurement planning stage for incorporation in
the corresponding tender documents.
(v) The
purchase department should post the descriptions, specifications and other
salient details of all the rate contracted goods, appropriately updated, on its
web site and forward a hard copy for use by the procuring user departments
3.3.8 Repeat
Orders
Repeat Orders is an extraordinary
exceptional process and is not normally resorted to. Repeat orders against a
previous order may be considered for approval by the respective CFA under
exceptional circumstances subject to the following stipulation, recording the
reasons for the same: -
(i) It
should be exercised only after exhausting the provisions for option clause in the
original contract and only in extra-ordinary unforeseeable cases of existing
and prospective emergency for which there is not enough time to procure the
material by processing the procurement case in the normal manner.
(ii) In
case of security items, if there is a delay in finalizing a tender due to
non-receipt of security clearance from relevant Govt. Deptt, a Repeat Order may
be exercised.
(iii) Concerned
items ordered have been delivered successfully, in the original contract.
(iv) Original
order did not cover urgent/emergent demand.
(v) It
is not placed to split requirement to avoid sanction of the next CFA.
(vi) That
there is no falling trend in prices for this item as evidenced from the fact
that in the intervening period neither orders have been placed at rates lower
than this contract nor any tender has been opened where such rates have been
received even though tender is not yet decided.
(vii) The
firm is prepared to hold the same prices terms and condition including delivery
schedule as per requirement.
(viii)The
requirement is for stores of identical nature/specification, nomenclature etc.
Minor improvements in spec(s) or phasing out of products due to obsolescence
should not be precluded from purview of repeat order.
(ix) It
is placed within 9 months (12 months in case of security sensitive machines/
items) from the date of last supply against previous order and only once.
(x) Repeat
order quantity is to be normally restricted to a maximum of 50% of last order
quantity, both in case of indigenous procurement and import orders. In case of
S.O/contract where option clause has been availed of, total of both option and
Repeat order quantities should not exceed 50% of the originally ordered
quantity.
(xi) The
original order placed should be on the basis of lowest (negotiated) price and
was not on delivery preference.
(xii) Repeat
Order should not be exercised in case of Development orders.
(xiii)This
provision could also be exercised in case of PAC/Single Vendor OEM case.
(xiv) However,
where multiple vendors are available, necessary care should be taken in
exercising Repeat Order so that the original tender decision of splitting
quantities and differential pricing is not upset or vitiated. Other things
being equal, repeat order should first be considered on the vendor with lower
rate.
Exercise of Repeat Order provision
should be a rare occasion. Since the circumstances of operation of Repeat Order
are unforeseeable, provision for repeat order should not be made as a matter of
course in the Tender as these clauses have an impact on price. In the absence
of a clause in the Tender, repeat order exercise may be treated as procurement
under PAC.
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