Government Procurement Policies

• The manual outlines principles and policies for procuring goods by government entities like Ministries, Departments, Public Sector Enterprises (PSEs), and Autonomous Bodies to help them achieve their objectives.
• The procurement process must be uniform, transparent, and systematic.
• Government e-Marketplace (GeM) is mandatory for procuring common-use goods and services as per Rule 149 of GFR, 2017.

Hierarchy of Procurement Guidelines

• Statutory Framework: Constitution of India (Article 299) governs government contracts.
• General Rules: General Financial Rules (GFR), 2017 contains rules for financial transactions like procurement.
• Specific Policies: Make in India, MSME preferences, and Land Border Policies encourage local manufacturing and prevent hostile investments.
• Operational Manuals: Manual for Procurement of Goods, Works, and Services guides practical procurement implementation.
• Model Tender Documents (MTD): Tender Formats and Templates standardize tendering documents for consistency.
• The Procurement Policy Division (PPD), Department of Expenditure, Ministry of Finance revises and clarifies this manual and ensures updates align with new policies, court rulings, and global best practices.
• The manual applies to all procurements of goods by central government entities and organizations receiving substantial government funding.

Entities Covered:

• Central Government Ministries/Departments: Fully applicable.
• Autonomous Bodies: Applicable unless they have separate approved procurement guidelines.
• Public Sector Enterprises (PSEs): Applicable unless Board-approved deviations exist.
• Indian Missions and CPSE Units Abroad: Follow financial thresholds converted into local currency using IMF's Purchasing Power Parity (PPP) exchange rate.

Categorization of Procurements

• Common Use Goods and Services must be procured via GeM (Government e-Marketplace).
• Goods for Specialized Use are Procured via tenders, subject to technical specifications.
• Emergency Procurement has special provisions for natural disasters and urgent needs.
• Global Tender Enquiry (GTE) is allowed only with prior approval for procurements above ₹200 Crores, to promote domestic manufacturing.
• Reserved Items: Items reserved for MSEs, Khadi, Village Industries, Pharma CPSEs, etc.
• Procurement powers are delegated based on financial thresholds.
• Consultation with Financial Advisers (FA) is required for large-value procurements to ensure compliance.

Thresholds for Decision-Making Authority

• Up to ₹25 Lakhs: Head of the Department (HoD)
• ₹25 Lakhs - ₹5 Crores: Financial Adviser (FA) and Ministry-level approval
• Above ₹5 Crores: Ministerial/Committee-based decision

Basic Aims of Procurement - The Five R's:

• Right Quality: Goods must meet required specifications.
• Right Quantity: Avoid overstocking or shortages.
• Right Price: Competitive pricing through fair procurement processes.
• Right Place: Goods delivered to the designated location.
• Right Time: Procurement must be timely to meet operational needs.

Value for Money (VfM): Includes

• Life Cycle Cost (LCC): Total cost over the product's lifespan.
• Total Cost of Ownership (TCO): Includes maintenance, spares, and operational expenses.
• Whole-of-Life (WoL) Costing: Takes into account environmental and disposal costs.
• Fundamental Principles of Public Procurement: Ensures fairness, transparency, and efficiency.

Principles and Key Features

• Transparency: Open access to tender information via GeM and CPPP.
• Professionalism: Proper training and certification for procurement officers.
• Fair Competition: Equal opportunity to all bidders, prevents cartelization.
• Legal Compliance: Adherence to RTI Act, Prevention of Corruption Act, Competition Act, etc.
• Public Accountability: Officials accountable to CAG, CVC, and RTI requests.

Standards of Financial Propriety

• Government officials must ensure financial prudence, prevent wasteful expenditure, and avoid personal gains from procurement decisions.

Public Procurement Infrastructure at the Centre:

• Procurement Policy Division (PPD) issues procurement guidelines and manuals.
• Central Public Procurement Portal (CPPP) facilitates transparent e-procurement.
• GeM (Government e-Marketplace) is a platform for procurement of common-use goods and services.
• Certain goods/services are reserved for specific supplier categories:
• Make in India: Preference in public procurement for Domestic manufacturers.
• MSME Reservation: 25% of government procurement reserved for Micro & Small Enterprises.
• Pharma CPSES: Medicines from public sector pharma companies for Government healthcare programs.
• All procurement details must be disclosed on CPPP and GeM.
• Procurement decisions must withstand judicial and public scrutiny.
• The public procurement cycle involves need assessment, bid invitation, bid evaluation, contract management, and disposal of goods.

Key Steps in Need Assessment:

• Identifying Needs: The user department prepares an indent specifying the required goods.
• Justification for Procurement: Clearly state why the goods are needed (e.g., replacement, expansion, or new requirement).
• Determining the Quantity: Ensure the quantity is accurate to avoid excess inventory costs.
• Exploring Alternatives: Consider leasing, hiring, outsourcing, or Public-Private Partnership (PPP) options.
• Market Analysis: Identify available suppliers and potential cost estimates.

Guidelines for Need Expression:

• Use clear, unambiguous terminology to ensure fair competition, avoid references to specific brands or trademarks unless necessary, ensure compatibility and interoperability with existing infrastructure, and Record approvals for accountability and compliance.
• Technical specifications (TS) define the quality, performance, and design parameters of the goods to be procured, ensures transparency, standardization, and fair competition.

Components of Technical Specifications

• Scope of Supply: Defines the type and purpose of goods required.
• Performance Characteristics: Covers functionality, durability, and operational requirements.
• Material & Design: Specifies physical, chemical, and manufacturing standards.
• Inspection & Testing Requirements: Specifies quality assurance and compliance testing standards.
• Environmental Considerations: Addresses energy efficiency, emissions, and recyclability.
• Warranty & After-Sales Service: Defines the duration and coverage of warranty and service support.
• Best Practices for Technical Specifications: Base specifications on national (BIS) or international (ISO) standards, avoid overly restrictive specifications that limit competition, use metric units for measurements and dimensions, and ensure alignment with industry best practices for quality assurance.
• To proceed with procurement, the indent must be approved through technical sanction for specifications, administrative sanction for the procurement request, and budgetary sanction for fund availability.

Approval Process for Indents

• Preparation of Indent: User Department clearly defines requirements & quantity.
• Technical Review: Technical Team ensures correct specifications are used.
• Administrative Approval: Department Head sanctions as per delegation of authority.
• Budgetary Approval: Finance Division ensures funds are available.
• Submission for Procurement: Procurement Entity begins the procurement process.

Common Risks & Mitigation Strategies

• Artificial Demand Creation: Procurement of unnecessary goods mitigated by records and multiple stakeholders in decision-making.
• Delays in Need Assessment: Urgent procurement leads to non-transparent procedures, mitigated by early assessment and approvals in advance.
• Cost Underestimation: Low cost estimation leads to poor supplier response, mitigated by use of market surveys and historical pricing data.
• Tailored Specifications: Favoring a specific vendor, reducing competition, mitigated by use of standard specifications (BIS, ISO, etc.).

Importance of Procurement Planning

• Importance includes ensuring timely procurement, avoiding emergency purchases, and helping in budget forecasting.

Steps in Procurement Planning

• Identify Procurement Needs based on annual planning and inventory levels.
• Estimate Costs using past pricing data, market trends, and competitive benchmarking.
• Select Procurement Method: Choose between Open Tender, Limited Tender, or Single Tender.
• Packaging & Slicing balance bulk discounts vs. encouraging MSME participation.
• Establish a Timeline to ensure timely completion from tender publication to contract award.
• During procurement planning, efforts should be made to prevent cartelization (price-fixing by suppliers).

Common Anti-Competitive Risks & Preventive Measures

• Limited Supplier Competition: Very few suppliers leading to higher prices are solved by encouraging new vendor registration.
• Collusion Between Suppliers: Bidders agree to fix prices which is mitigated by reverse auctions and random supplier selection.
• Market Monopolies: Large firms dominating tenders are solved by setting MSME quotas and local supplier preferences.
• Supplier Relationship Management (SRM) refers to strategic engagement with suppliers to ensure compliance, fair competition, and efficiency in public procurement.

Key Objectives of SRM

• Ensuring Compliance: Suppliers must follow the Code of Integrity for Public Procurement (CIPP).
• Supplier Performance Monitoring: Regular tracking of supplier quality, delivery, and responsiveness.
• Supplier Development: Encouraging new vendors and ensuring fair competition.
• Risk Mitigation: Identifying and addressing supplier risks such as fraud or non-performance.
• Procurement is prone to corruption risks; therefore, CIPP enforces ethical behavior in public procurement, Officials and suppliers must sign declarations of integrity in procurement decisions.

Prohibited Practices under CIPP

• Corrupt Practice: Offering or accepting bribes, rewards, or gifts for unfair advantages.
• Fraudulent Practice: Misrepresentation of facts to gain undue financial or contractual benefits.
• Collusive Practice: Agreement between suppliers to manipulate competition.
• Coercive Practice: Threats or intimidation to influence procurement decisions.
• Conflict of Interest: Unfair advantage due to relationships with procurement officials.
• Compliance Mechanisms: Officials must sign integrity declarations, Suppliers must sign CIPP agreements, and Failure to comply can result in debarment, legal action, and financial penalties.
• The Integrity Pact (IP) is a binding agreement between procuring entities and suppliers, ensuring fair, transparent, and corruption-free procurement and must be included for large-value contracts.

Features of the Integrity Pact

• Pre-bid and Post-bid Compliance: Both procuring entities and suppliers must follow ethical guidelines.
• Independent Monitoring: Third-party agencies (e.g., CVC) may audit the procurement process.
• Conflict Resolution Mechanism: Grievance redressal provisions for suppliers and bidders.
• Suppliers must have an avenue to challenge procurement decisions if they believe they were treated unfairly.

Steps in the Grievance Redressal Process

• Submission of Complaint: Suppliers submit a written grievance within 5 days of procurement action.
• Review by Procurement Entity: The designated officer examines the grievance.
• Decision on Grievance: The entity provides a written response.
• Escalation (if unresolved): Suppliers may appeal to a higher authority.
• Procurement officials must avoid conflicts of interest, favoritism, and misuse of influence.

Ethical Risks & Mitigation Strategies

• Conflict of Interest: Officials favor known suppliers and are mitigated by a Declaration of conflicts and recusal from decision-making.
• Unethical Gifts & Hospitality: Suppliers offer gifts or personal benefits which is mitigated by Strict adherence to conduct rules.
• Influence in Supplier Selection: Manipulating tenders to favor a supplier is mitigated by Independent monitoring and audits.
• To encourage competition and efficiency, new suppliers must be continuously identified and developed and registration ensures a transparent and fair supplier base.

Supplier Registrations Types and Purpose

• Open Registration: Any supplier can apply to be registered.
• Empanelment: A pre-qualified list for specific procurements.
• Pre-qualification: Ensures only technically capable suppliers bid for tenders.

Supplier Registration Process

• Application Submission: Supplier submits documents verifying eligibility.
• Evaluation of Capabilities: Financial, technical, and past performance checks.
• Approval & Registration: Supplier added to the approved vendor list.
• Debarment prevents non-compliant suppliers from participating in future procurements and suppliers can be debarred for fraudulent practices, failure to deliver goods as per contract, and breach of integrity.

Debarment Process

• Issuance of Show Cause Notice: Supplier is notified of the violations.
• Response Period: Supplier is given an opportunity to explain.
• Final Decision: Debarment order issued if violations are proven. Listing & Publication: Debarred suppliers are publicly listed.
• Consequences of Debarment: Removal from government tenders, financial penalties, and legal actions in case of fraud.
• Foreign suppliers dealing with government procurement must enlist an Indian agent.
• The Indian agent must be registered with the procuring entity, declare commission/fees received, and follow the Code of Integrity for Public Procurement (CIPP).

Supplier Relationship Management Summary

• Supplier Compliance: Must follow CIPP and Integrity Pact guidelines.
• Grievance Redressal: Suppliers can challenge unfair procurement actions.
• Supplier Registration: A transparent process to encourage competition.
• Debarment Policies: Non-compliant suppliers face penalties and bans.

Modes of Procurement and Tendering Systems

• Public procurement must balance competition, efficiency, and compliance.
• Various procurement modes exist to ensure the widest participation while minimizing procedural delays and selection depends on the nature/complexity, estimated value, market availability, and urgency.
• The modes of procurement are classified based on the level of competition and justification for limited competition.

Advertised Procurement Modes (Maximum Competition)

• These modes ensure broad supplier participation through public tenders:
• Open Tender Enquiry (OTE): Default mode for procurements above ₹50 lakh, Published on GeM, CPPP, and Ministry websites, No restriction on participation, Rule 161, GFR 2017.
• Global Tender Enquiry (GTE): Used when goods are not available domestically, Allows participation of foreign bidders, Approval needed if value is below ₹200 crores, Rule 161, GFR 2017.
• Rate Contracts (RC): Fixed-price agreement for standardized goods/services, Used for recurring procurements, Rule 146, GFR 2017.
• Electronic Reverse Auction (eRA): Online real-time competitive bidding, Used when price discovery is key, Lowest bid wins, Rule 160, GFR 2017.
• Pre-Qualification Modes (Selective Bidding): Shortlist vendors based on eligibility and capability before allowing them to bid.
• Pre-Qualification Bidding (PQB): Shortlists vendors before price bidding for high-value procurement, Used for complex procurements, Rule 162, GFR 2017.
• Approved Vendor Lists (AVL): Procurement limited to pre-approved vendors which ensures quality and reliability in strategic procurements, Rule 162, GFR 2017.
• Restricted Procurement Modes (Limited Competition): Used when few suppliers exits.
• Limited Tender Enquiry (LTE): Used when goods/services are available from a limited number of lakh, Applies to procurement up to ₹50 lakh, Must have pre-registered supplier list, Rule 162, GFR 2017.
• Special Limited Tender Enquiry (SLTE): Allowed for procurements above ₹50 lakh under exceptional circumstances, Must be approved by competent authority, Used in urgent cases, Rule 162, GFR 2017.

Nomination-Based Procurement (Single Source)

• Used when competition is not feasible due to technical or policy constraints:
• Proprietary Article Certificate (PAC): Used when only one vendor has exclusive rights over a product and requires a certificate justifying single-source procurement, Rule 166, GFR 2017.
• Single Tender Enquiry (STE): Used when only one supplier can fulfill the requirement and requires detailed justification and approval, Rule 166, GFR 2017.
• Shopping Modes (Small-Value Procurement): Used for low-value, routine, or emergency procurement.
• Direct Procurement without Quotation: Used for purchases up to ₹50,000₹1 lakh for scientific items, Based on market price verification, Rule 154, GFR 2017.
• Direct Procurement by Purchase Committee: Used for procurement between ₹50,000 - ₹5 lakh₹10 lakh for scientific items, Committee-based decision-making ensures fairness, Rule 155, GFR 2017.
• Tendering systems help achieve an optimal balance between price, quality, and compliance in procurement, and the selection depends on complexity, estimated value, competition, and regulatory considerations.

Primary Tendering Systems

• Single-Stage Tendering System: Bids are invited once, and evaluation is conducted in a single phase and is the default system for simple procurements where requirements are well-defined.
• Types of Single-Stage Tendering include Single Envelope System and Two Envelope System.

System Descriptions and Use Cases

• Single Envelope System: Technical, commercial, and financial details are submitted together, is used for simple, routine procurement where technical compliance is not critical, but has a risk of unqualified bidders.
• Two Envelope System - Bidders submit separate envelopes for technical/commercial and financial aspects, is used for technically complex procurements where quality is crucial and provides technical compliance, but is more more time consuming.

Two-Stage Bidding System

• Is used when the procuring entity lacks complete knowledge about technical solutions, market pricing, or the best procurement strategy. This method allows initial market exploration through Expression of Interest (EOI) and is for greenfield projects or complex procurements where technical specifications are unclear.

Components of the Two Stages:

• Stage 1 Expression of Interest (EOI): Suppliers provide broad technical solutions, helping define specifications.
• Stage 2 Final Bidding: Only shortlisted bidders from Stage 1 are invited to submit financial bids.
• Electronic Reverse Auction (eRA) in Tendering is an online competitive bidding method where suppliers continuously lower their prices in real-time for price-sensitive procurements and ensures increased price competition.
• In a reverse auction, pre-qualified suppliers enter a real-time online auction, initial bids are submitted, bidders revise their prices, and the lowest bid wins. Disadvantages include potentially leading to quality compromises and supplier dissatisfaction.
• E-Procurement is mandatory for all procurements above ₹2 lakh via GeM, CPPP, and State-specific portals, ensuring increased transparency and efficiency.

Comparative Analysis of Tendering Systems

• Single Envelope: Best for easy, simple procurements with risk of low quality suppliers.
• Two Envelope: Best when quality is important for complex items, with longer processing time.
• Two-Stage Bidding: Utilizes a market exploration for evolving specs, but lengthy process.
• Reverse Auction: Best for bulk orders where quality may be compromised to ensure lowest prices.
• The procurement mode and tendering system should be selected based on cost, complexity, and urgency.

Recommended Tendering Systems by Procurement Type

• Open tenders are recommended for low cost items, while global tenders are recommended for complex tech, as well as direct procurement for shopping and PA for single stage items
• Risk mitigation in procurement modes involved, using flexible criteria in open tender, prices adjustments in global and updating supplier database in limited
• Security measures are also needed in the eportal for these measures
• Digital procurement measures are also outlined for public tenders, as the use model tender for the ministry

Key components of the NIT

• This involves a summary, eligibility, the deadlines, specifications involved with the ITB for bidder compliance
• The distribution may be different based between the gem and CPPp portal, as publication of high values is needed. The participation can be ensured in many other modes

Bid submission steps

• Ensure rules are meet for all, for EMDS and any seals and markings of bids
• All bids must be conducted transparent and opened accurately
• The data must be protected if sensitive, and may require sensitive requirements

Mitigations in the BID

• There maybe biased and unqualified bids, but strict guidelines ensure fair competition

Evaluation steps

• There are a series of contracts that all stakeholders must meet for completion
• If a price variation is present. One must meet all aspects for completion of contract that is outlined
• In some rare events there is a set of conditions that may arise. Overall, certain mitigation factors must be approved.
• The first step in disposal involves obsolete and proper plans with guidelines

Key information on disposal

• They must all be fair, and follow all regulations and plans such as bidding etc to ensure fair competition
• There can be certain issues that can arise such a lack of bidder compliance in audits to assess if steps are met.
• In disposal steps are required to ensure safety, and for data
• There are steps in each category for completion, and must be followed accordingly