CVC’s Guidelines on Public Procurement
The following details are based on CVC’s document “Common irregularities/ lapses observed in stores/ purchase contracts and guidelines for improvement in procurement system”, presentation of CTE on the CVC website and various CVC circulars.
1. Objectives of Public procurement
• Quality product
• Competitive price
• On right time
• Process of procurement to be fair and transparent
2. Provisioning
(a) The provisioning of the stores needs to be done with utmost care taking into account the available stock, outstanding dues / supplies, the past consumption pattern, average life of the equipment / spares. The requirements also need to be properly clubbed so as to get the most competitive and best prices. The requirements should not be intentionally bifurcated / split so as to avoid approval from higher authorities.
(b) One time purchase for projects or capital equipments / spares should be properly justified depending on the actual requirement usage, rate of return etc. Further, the obsolescence factor should also be taken into account i.e. the equipment to be purchased should conform to the latest specifications and technology available in the market.
3. Appointment of Consultants
The consultants need to be appointed only when it is felt absolutely essential. The appointment of consultants needs to be done in a transparent manner and after following the competitive tendering system. The consultant’s role should be well-defined. The consultant is meant to assist the departmental officers because of lack of expertise and, it should not mean that they takeover all the functions. The responsibilities relating to award of contract and execution of contract after appointment of consultant should not be abdicated completely by the organizations. Rather appropriate checks should be exercised at all stages of the execution of the contract. Penal clauses for deficiency in service should invariably be stipulated in the contracts/MOUs with the consultants.
4. Estimated Rates
The estimated rate should be worked out in a realistic and objective manner on the basis of prevailing market rates, last purchase prices, economic indices for the raw material/labour, other input costs, IEEMA formula, wherever applicable and assessment based on intrinsic value etc.
5. Types of tender
• Open
• Limited- only when purchase is for small value, urgent & repetitive – panel of venders should be appointed in a transparent manner.
• Single- only for proprietary item
• Tender on nomination basis- Supreme Court held it to be violative of Art 14 of Constitution [ Office Order 005/CRD/19 dated 5-7-07 ]
• SC Exception- natural calamities, emergency declared by govt., single source, tender called on several occasions, but no bid or reasonable bid.
6. Notice Inviting Tender
(a) In order to give wide publicity, generate enough competition and to avoid favouritism, as far as possible, issue of Advertised/Global tender inquiries should be resorted to and published in ITJ and selected National Newspapers. The copies of the tender notices should be sent to all registered/past/likely suppliers by UPC and also to the Missions/ Embassies of major trading countries in case of imported stores.
(b) With a view to having wider, fair and adequate competition, it is important that sufficient time of say 4 - 6 weeks in case of Advertised/Global tenders and 3 -4 weeks in case of limited tenders is allowed, except, in cases of recorded emergencies, wherein also, a reasonable time should be permitted and tenders should be sent by faster means like speed post /fax. The tenders should preferably be kept open for sale till the date of tender opening or just one day prior to the date of tender opening. With the widespread use of Information Technology, the tender notices should also be put on the website and e-mail address of the organization should be indicated in the tender notice.
(c) It is imperative that the purchase on Single tender basis be made with the detailed justification in its support and with the approval of Competent Authority, including associated finance.
7. Tender/ Bid Document
(a) The important clauses relating to Earnest money, Delivery Schedule, Payment terms, Performance/Warrantee Bank Guarantee, Pre-despatch inspection, Arbitration, Liquidated Damages/Penalty for the delayed supplies and Risk- purchase etc. need to be incorporated in the bidding documents so as to fully safeguard the interest of the Govt. and, for evaluation of bids on equitable and fair basis and in a transparent manner.
(b) The terms & conditions should clearly stipulate that the offers without Earnest Money Deposit would be considered as unresponsive and rejected. The Earnest Money Deposit in case of two-bid system needs to be incorporated as a fixed and reasonable amount on the basis of estimated value of the purchase.
(c) In order to meet the project requirement, it would be prudent to incorporate an acceptable range of delivery period with the stipulation that no credit will be given for earlier deliveries and offers with delivery beyond the acceptable range will be treated as unresponsive. Within this acceptable range, for the purpose of evaluation, an adjustment per month say @ 2% could be added to the quoted prices of bidders offering deliveries later than the earliest delivery period specified in the bid documents.
(d) The Evaluation / Loading criteria with respect to the important terms like Payment terms, Delivery period, Performance Bank Guarantee etc. having financial implications need to be specified in unambiguous terms in the bid documents so that the evaluation of bids after tender opening could be made in a transparent manner without any subjectivity.
(e) The detailed generic technical specifications including performance parameters and the technical evaluation criteria, if any, need to be specified in the bidding documents in unequivocal terms.
(f) The Government instructions on reservation of items and price preference to SSI Units and purchase preference to PSUs need to be incorporated in bid documents.
(g) It needs to be ensured that the evaluation of tenders should not be based on such conditional discounts and suitable clause should be included in the bidding documents.
8. Receipt of Tenders
A proper arrangement for receipt of tenders at scheduled date and time through tender box needs to be adopted.
9. Postponement of Tender Opening
In order to give equal opportunity to all the bidders and to maintain sanctity of tendering system, it is of paramount importance that any change in the tender terms & conditions, specifications and tender opening date etc. be notified to all the bidders, sufficiently in advance of the revised tender opening date.
10. Opening of Tenders
(a) The opening of tenders in presence of trade representatives needs to be scrupulously followed. While, opening the tenders by the tender opening officer / committee, each tender should be numbered serially, initialed and dated on the first page. Each page of the tender should also be initialed with date and particularly, the prices, important terms & conditions etc. should be encircled and initialed in red ink by the tender opening officer / committee. Alterations in tenders, if any, made by the firms, should be initialed legibly to make it perfectly clear that such alterations were present on the tenders at the time of opening. Wherever any erasing or cutting is observed, the substituted words should be encircled and initialed and the fact that such erasing / cutting of the original entry was present on the tender at the time of opening be also recorded. The tender opening officer / committee should also prepare ‘on the spot statement’ giving details of the quotations received and other particulars like the prices, taxes, duties and EMD etc. as read out during the opening of the tenders.
(b) Further, in case of ‘Two bid’ system, in order to make the system fool proof, it needs to be ensured that not only the tender opening officer / committee should sign on the envelopes but the signatures of two trade representatives should also be obtained on all the envelopes containing the price bids. Thereafter, all the envelopes should be put in a bigger envelope / box and the same should be properly sealed duly signed by the tender opening officer committee and trade representatives
11.Post Tender Negotiations [ Circular No. 005/CRD/012 dated 3-3-07 ]
(i) As post tender negotiations could often be a source of corruption, it is directed that there should be no post-tender negotiations with L-1, except in certain exceptional situations. Such exceptional situations would include procurement of proprietary items, items with limited sources of supply and items where there is suspicion of a cartel formation. The justification and details of such negotiations should be duly recorded and documented without any loss of time.
(ii) In cases where a decision is taken to go for re-tendering due to the unreasonableness of the quoted rates, but the requirements are urgent and a re-tender for the entire requirement would delay the availability of the item, thus jeopardizing the essential operations, maintenance and safety, negotiations could be permitted with L-1 bidder(s) for the supply of a bare minimum quantity. The balance quantity should, however, be procured expeditiously through a re-tender, following the normal tendering process.
(iii) Negotiations should not be allowed to be misused as a tool for bargaining with L-1 with dubious intentions or lead to delays in decision-making. Convincing reasons must be recorded by the authority recommending negotiations. Competent authority should exercise due diligence while accepting a tender or ordering negotiations or calling for a re-tender and a definite timeframe should be indicated so that the time taken for according requisite approvals for the entire process of award of tenders does not exceed one month from the date of submission of recommendations. In cases where the proposal is to be approved at higher levels, a maximum of 15 days should be assigned for clearance at each level. In no case should the overall timeframe exceed the validity period of the tender and it should be ensured that tenders are invariably finalised within their validity period.
(iv) As regards the splitting of quantities, if, after due processing, it is discovered that the quantity to be ordered is far more than what L-1 alone is capable of supplying and there was no prior decision to split the quantities, then the quantity being finally ordered should be distributed among the other bidders in a manner that is fair, transparent and equitable. It is essentially in cases where the organisations decide in advance to have more than one source of supply (due to critical or vital nature of the item) that the Commission insists on pre-disclosing the ratio of splitting the supply in the tender itself. This must be followed scrupulously.
(v) Counter-offers to L-1, in order to arrive at an acceptable price, shall amount to negotiations. However, any counter-offer thereafter to L-2, L-3, etc., (at the rates accepted by L-1) in case of splitting of quantities, as pre-disclosed in the tender, shall not be deemed to be a negotiation.
(vi) In case L-1 backs-out, there should be a re-tender.
12. Technical Evaluation of Tenders
Once it has been established that the offers meet the laid down specifications, the question of ‘grading’ as well as any ‘pick and choose’ should not arise. The contract needs to be awarded to the lowest bidder meeting the laid down specifications.
13. Purchase Preference to Public Sector Enterprises
The instructions / guidelines circulated by Department of Public Enterprises for granting purchase preference to the Central Govt., Public Sector Enterprises / Joint Ventures need to be scrupulously followed as also brought out by CVC in the instructions circulated vide letter No. 98/Ord./1 dtd. 15.03.99.
14. Consideration of Indian Agents
The following aspects are important ones to examine the genuineness of the prices quoted by the Indian Agent, the nature of services which would be available from Indian Agent and compliance of Tax Laws by the Indian Agent and, to prevent leakage of foreign exchange:
i. Foreign Principal’s proforma invoice indicating the Commission payable to the Indian Agent, nature of after sales service to be rendered by the Indian Agent.
ii. Copy of the agency agreement with the foreign principal and the precise relationship between them and their mutual interest in the business.
iii. The enlistment of the Indian Agent with Director General of Supplies & Disposals under the Compulsory Registration Scheme of Ministry of Finance.
15. Reasonableness of Prices
It is very important to establish the reasonableness of prices on the basis of estimated rates, prevailing market rates, last purchase prices, economic indices of the raw material / labour, other input costs and intrinsic value etc., before award of the contract.
16. Advance Payment & Bank Guarantees [OM No. 4CC-1-CTE-2 dated 10-4-0]
(a) Decision to provide mobilization advance should rest at the level of Board (with concurrence of Finance).
(b) The Commission does not encourage interest free advance, but, if the Management feels its necessity in specific cases, then it should be clearly stipulated in the tender document and its recovery should be time based and linked to progress of work.
(c) Part Bank Guarantee against the advance should be taken in as many numbers as the proposed recovery instalments and should be equivalent to the amount of each instalment.
(d) There should be a clear stipulation of interest to be charged on delayed recoveries either due to late submission of bills by the contractor or any other reason.
(e) The amount of advance, interest to be charged, if any, its recovery schedule and any other relevant details should be explicitly stipulated in the tender document upfront.
(g) The advance should preferably be given in instalments and subsequent instalments should be released after getting satisfactory utilization certificate.
17. Performance Bank Guarantee
In order to safeguard the Govt. interest, it would be appropriate to take reasonable amount of Performance Bank Guarantee valid upto warranty period for due performance of the contract. The validity of the Bank Guarantees needs to be carefully monitored and whenever extension in the delivery period is granted, the validity of Bank Guarantee should also be appropriately extended so as to protect the Govt. interest. The genuineness of the BGs should be checked from the issuing bank.
18. Stipulation of delivery period in the contract
The specific delivery period for supply as per the terms of delivery such as FOR station of despatch / destination and for completion of installation with the necessary provision for Liquidated damages / Penalty clause in the event of delay in supplies/ installation needs to be incorporated in the contract.
19. Guarantee / Warranty Terms
Detailed guarantee/warranty clause embodying all the safeguards be incorporated in the tender enquiry and the resultant contract. It also needs to be ensured that in installation/commissioning contracts, the guarantee/ warranty should reckon only from the date of installation/commissioning.
20. Modification of contract terms / specifications
After conclusion of the contract, any relaxation in the contract terms / specifications should be severely discouraged. However, in exceptional cases where the modifications/amendments are considered to be absolutely essential, the same should be allowed after taking into account the financial implications for the same.
21. Post-contract Monitoring
It is essential to accord priority to the post contract follow up. The delivery period should be extended on bonafide request and not in a routine and casual manner. After expiry of delivery period, the consignees should be refrained from exchanging correspondence with the supplier. In case of delay in supplies by the supplier, the liquidated damages to the extent possible need to be recovered. Also in case of delay attributable on the part of the supplier, the L/ C extension charges should be to supplier’s account. In nutshell, there is a need to discipline the suppliers so that the non-performers could be weeded out and the suppliers which can be relied upon with consistent performance, in terms of quality and delivery schedule are encouraged.