OFBPM 2018 Procurement Procedure PDF

 TABLE OF CONTENTS Para No. Topic/subject Page No. Chapter 1 - Introduction and Basic Principles of Procurement 1. Introduction 12 1.1 Challe...

 TABLE OF CONTENTS Para No. Topic/subject Page No. Chapter 1 - Introduction and Basic Principles of Procurement 1. Introduction 12 1.1 Challenges in Procurement 12 1.2 Terminology and Abbreviations 12 1.3 Present Manual 13 1.4 Scope of Manual 14 1.5 Definition of Goods 14 1.6 Transparency in Purchase 14 1.7 Salient feature of Bids Solicitation 15 1.8 e-Procurement 16 1.9 Consideration of Purchase Quantities 17 1.10 Timely Procurement 17 1.11 Competent Financial Authority (CFA) 17 1.12 Consultations with Finance 18 1.13 Responsibility of the Competent Financial Authority (CFA) 19 1.14 Difference of opinion in TEC/TPC 19 1.15 Exemptions/relaxation from some tender conditions to certain 19 supplier 1.16 Development of Micro, Small and Medium Enterprises 20 1.17 Development of Start-ups 20 1.18 Procurement from Defence Public Sector Undertakings 21 1.19 Standard Tender Documents 21 1.20 Time Frames for Processing 21 1.21 Amendments to the Manual 21 1.22 Applicability 22 Chapter 2 – Procurement Procedure 2. Procurement Procedure 23 2.1 a) Need for Procurement 23 b) Procurement of items ex-import 2.2 Make or Buy Decision 23 2.3 Authority for Procurement 24 2.4 Specifications 24 i) Proprietary Articles specification 24 ii) Branded Product specification 24 iii) Industrial specifications 25 iv) Defence specifications 25 v) Indigenized item specifications 25 3  vi) Ad-hoc specifications 25 vii) As per Sample specification 25 viii) Common Use items specifications 26 2.5 Store Holders Inability Sheet 26 2.6 Quantity to be purchased 27 2.7 Procurement Lead Time 29 2.8 Stockpile 30 2.9 Channels of Procurement 32 2.10 Deciding the mode of purchase from trade 32 2.11 IFD on Sister Factories 32 2.12 RC concluded by OFB/Ordnance Factories 33 2.13 Purchase from Trade without inviting Quotation 33 2.14 Purchase from Trade through Purchase Committee 33 2.15 Purchase from Trade by obtaining Tenders 34 2.16 Advertised Tenders (OTE/GTE) 34 2.17 Limited Tender Enquiry (LTE) 34 2.18 Single Tender Enquiry (STE) 36 2.19 Proprietary Article Procurement 37 2.20 Procurement from a Single Known Source 38 2.21 Cash and Carry Procurement 38 2.22 Government e-Marketplace (GeM) 38 2.23 Electronic Reverse Auction 39 2.24 Classification of Goods/Stores 39 2.25 Procedure for COTS items (other than MTO items) 40 2.26 Procedure for Made-to-Order items 41 2.27 Public Procurement (Preference to Make in India) Order, 2017 47 2.28 Identification of Suppliers 47 2.29 Registration of Firms 48 2.30 Vendor Selection (VSL) 49 2.31 Single Bid System 49 2.32 Two Bid System 49 2.33 Evaluation of Technical Bids 50 2.34 Evaluation of Financial Bids 52 2.35 Discounted Cash Flow Technique for Evaluation of Price Bids 53 2.36 Resultant Single Tenders 54 2.37 Option and Repeat Order Clause 55 2.38 Retendering 57 2.39 Cartel Formation / Pool Rates 58 2.40 Placement of Order on more than one firm in a tender 59 2.41 Samples 59 2.42 Entire and Severable Contracts 59 4 2.43 Pre-contract Integrity Pact 60 2.44 Import Regulation 60 2.45 Ground Rent 60 2.46 General Instructions to Bidders 61 2.47 Instructions to Purchase Officers 62 Chapter 3 – The Tender Process 3. The Tender Process 65 3.1 Tendering 65 3.2 Publicity in Advertised Tenders 65 3.3 Notice Inviting Tender 66 3.4 Sale of Tender Documents 66 3.5 Despatch of Tender Documents 67 3.6 Format of Tender 67 3.7 Time for Submission of Bids 67 3.8 Amendments / Modifications to Tenders 67 3.9 Extension of Tender Opening Date 68 3.10 Prequalification in Advertised Tenders 69 3.11 Pre-bid Conference 69 3.12 Receipt and Custody of Tenders 70 3.13 Reference to Brands in TE 70 3.14 Opening of Tenders under Single Bid System 70 3.15 Opening of Tenders under Two Bid System 71 3.16 Late Tenders and Unsolicited Offers 71 3.17 Force Majeure 72 Chapter 4 – Inspection and Delivery 4. Inspection and Delivery 73 4.1 Inspection 73 4.2 Inspection at Supplier’s Premises 73 4.3 Acceptance of Stores against Supplier’s Inspection Report and 74 Warranty 4.4 Inspection at Consignee’s Premises 75 4.5 Inspection after Installation & Commissioning at Site 75 4.6 Inspection Procedure 75 4.7 Inspection of Goods offered at the fag-end/on the Last Date of the 75 Contract Delivery Period 4.8 Purchaser’s Right of Rejection 76 4.9 Acceptance of goods vis-à-vis Warranty Provisions 76 4.10 Joint Inspection against complaints relating to quality of goods 76 4.11 Outside Testing Laboratories 76 5 4.12 Delivery Period 76 4.13 Terms of Delivery 78 4.14 Relationship between the Terms of Delivery and the Date of 78 Delivery 4.15 INCOTERMS 79 4.16 Air Consignment 79 4.17 Insurance 79 4.18 Failure to deliver within the Contract DP 80 4.19 Re-fixation of Delivery Period 80 4.20 Extension of Delivery Period 81 4.21 Risk and Expense Purchase 82 4.22 Performance Notice 83 4.23 Despatch of Goods after Expiry of Delivery Period 83 4.24 Packaging and Dispatch for Imports 83 4.25 Warranty Claims for Imports 84 4.26 Short Deliveries 84 4.27 Correspondence with the Supplier after Breach of Contract 84 4.28 Cancellation of Contract for Default 85 4.29 Termination of Contract for Insolvency 85 4.30 Termination of Contract for Convenience 85 4.31 Signing of Contracts / Placing of Supply Orders 86 4.32 Amendment to Contract 86 Chapter 5 – Commercial Aspects 5. Commercial Aspects 87 5.1 Price and Payment Terms 87 5.2 Currency 87 5.3 Earnest Money Deposit 88 5.4 Performance Security Deposit 89 5.5 Firm Price via-a-vis Variable Price 92 5.6 Exchange Rate Variation 93 5.7 Mode of Payment 94 5.8 Standard Payment Terms to Domestic Vendors 95 5.9 Payment Terms for Foreign Vendors 96 5.10 Stage / Part Payments 97 5.11 Advance Payment to Suppliers 98 5.12 Bank Guarantees 98 5.13 Direct Bank Transfer 99 5.14 Letter of Credit 99 5.15 Liquidated Damages 100 5.16 E-Payment 101 6 5.17 Estimating the Cost of Procurement 101 5.18 Evaluation of Price Bids 102 5.19 Basis for Cost Comparison 102 5.20 Comparative Statement of Tenders 103 5.21 Negotiations 104 5.22 Bench Marking 104 5.23 Last Purchase Price 105 5.24 Indices for Assessing Price Movements 106 5.25 Deduction of Income Tax etc at Source from Payments to Suppliers 107 5.26 Payment of Air Freight Charges 107 5.27 Documents for Claiming Payment 107 5.28 Refund from Supplier 107 5.29 Verification of Bank Guarantees 108 5.30 Safe Custody / Monitoring of EMDs and PSDs 108 5.31 Duties & Taxes on Domestic Goods 108 5.32 Custom Duty on Imported Goods 109 5.33 Taxes & Duties on Raw Materials 109 5.34 Procurement governed by General Contracts 109 Chapter 6 – Rate Contracts and Long-term Agreements / Contracts 6. Rate Contracts and Long-term Agreements/Contracts 110 6.1 Items suitable for Rate Contract 110 6.2 Rate Contract Definition 110 6.3 OFB Rate Contracts 110 6.4 Competent Financial Authority 111 6.5 Estimate/Indent/Requisition 111 6.6 Selection of Firms 111 6.7 Price Negotiation 112 6.8 Conclusion of a Rate Contract 112 6.9 Conclusion of Parallel Rate Contract 112 6.10 Operating RCs 112 6.11 Special Conditions applicable for RC 112 6.12 Fall Clause 113 6.13 Performance Security 114 6.14 Renewal and Extension 114 6.15 Termination and Revocation of RC 114 6.16 Payment Terms 115 6.17 Paying Authorities 115 6.18 Long-term Umbrella Agreement/Contracts 115 6.19 Processing Long-term Umbrella Contracts by Nodal Factory 116 6.20 Long-term Product Support 117 7 6.21 Long-term Contract for Transportation in case of Import through 117 Ocean/Sea Route Chapter 7 – Contracts 7. Contracts 118 7.1 Elementary Law 118 7.2 Contract 118 7.3 Proposal or Offer 118 7.4 Acceptance of the Proposal 118 7.5 Agreements are Contracts 119 7.6 Competency of Parties 119 7.7 Parties to the Contract 119 7.8 Contracts with Individuals 119 7.9 Contracts with Partnerships 119 7.10 Contracts with Limited Companies 120 7.11 Corporation other than Limited Companies 120 7.12 Parties to Contracts entered into by Ordnance Factories 120 7.13 Consent of Both Parties 121 7.14 Free Consent of the Parties 121 7.15 Consent given under Mistake 121 7.16 Mistake of Fact and Law 121 7.17 Consideration 122 7.18 Lawfulness of Object 122 7.19 Communication of an Offer or Proposal 122 7.20 Communication of Acceptance 122 7.21 Completion of Communication of Acceptance 122 7.22 Acceptance to be identical with Proposal 123 7.23 Withdrawal of an Offer or Proposal 123 7.24 Withdrawal of Acceptance 123 7.25 Signing of Contracts 123 7.26 Acceptance of the Contracts 124 7.27 Stamping of Contracts 124 7.28 Types of Contract 124 7.29 General Principles of Contracting 124 7.30 Changes / Amendments to a concluded Contract 125 7.31 Enhancement in Rates 125 7.32 Vetting of Price Variation Clause 125 7.33 Imposition of LD while granting Extensions 126 7.34 Liability on account of Taxes & Duties on grant of Extension of 126 Delivery Period 7.35 Consultation with IFA 126 8 7.36 Termination of Concluded Contract 126 7.37 Contract Effective Date 126 7.38 Conditions of Contract 127 7.39 General Conditions of Contract 127 7.40 Special Conditions of Contract 127 7.41 Applicability of GCC to Supply Orders 127 7.42 Applicability of all terms and conditions 128 7.43 Amplification of the terms and conditions 128 7.44 Effective Date 128 7.45 Arbitration 129 7.46 Appointment of Arbitrators through Court 129 7.47 Settlement of Disputes 129 7.48 Buy Back Offer 130 7.49 Fall Clause 130 7.50 Penalties 130 Chapter 8 – Procurement of Consultancy 8. Procurement of Consultancy 131 8.1 Requirement for engaging consultants 131 8.2 Procedure for engagement of Research Assistance 131 8.3 Conflict of Interest 131 9  ANNEXURES Annexure No. Subject Page No. Annexure -1 List of acronyms used in this Manual 132 Annexure -2 Definitions 135 Annexure -3 Format for Proprietary Article Certificate 137 Annexure -4 Format for Single Known Source Certificate 138 Annexure -5A Format for Pre-Contract Integrity Pact 139 (for cases valuing above Rs. 100 Cr) Annexure -5B Format for Pre-Contract Integrity Pact 146 (for cases valuing above Rs. 5 Cr and up to Rs. 100 Cr) Annexure -6A Time Frame for Purchase Case (Single Commercial Bid) 152 Annexure -6B Time Frame for Purchase Case (Two Bids - Tech/Commercial) 153 Annexure -7 Procedure for Acquisition of Contract Services for R&D 154 Annexure -8 INCOTERMS 2010 162 Annexure -9 Letters related to decentralisation of shipping arrangements in 166 respect of ocean transportation of cargoes under the control of Government/PSUs Annexure-10 Letters related to Relaxations of Norms for Startups Medium 173 Enterprises in public procurement regarding Prior Experience - Prior Turnover Annexure-11 Settlement of disputes/claims arising out of the contracts 176 through arbitration/court-procedure Annexure-11A Demand Note to firm when Arbitral award is in favour of 185 Purchaser Annexure-11B Demand Note to firm when Arbitral award is against the 186 Purchaser and it has been decided not to go for appeal Annexure-11C Format for Arbitration Clause - Indigenous Private bidders 187 Annexure-11D Format for Arbitration Clause - CPSUs/DPSUs 188 Annexure-11E Format for Arbitration Clause - Foreign bidders 189 Annexure-12 Guidelines of the Ministry of Defence for Penalties in Business 191 Dealings with Entities vide MoD I.D No. 31013/1/2016-D (Vig) Vol.II dated 21.11.2016 Annexure-12A Amendment to the guidelines of the MoD for Penalties in 198 Business Dealings with Entities vide MoD I.D No. 31013/1/2016-D (Vig) Vol.II dated 30.12.2016 Annexure-13 Public Procurement (Preference to Make India), Order 2017 - 199 Revision; regarding Annexure -14 Standard Tender Enquiry/RFP for Stores procurement 206 Annexure -15 Compliance Statement (OTE) 246 Annexure -16 Compliance Statement (LTE/STE) 249 10 Annexure -17 Important T&C to be decided by VSL TPC before floating of TE 251 Annexure -18 Model ECS Mandate Format 252 Annexure -19 Bank Guarantee Format for furnishing EMD 253 Annexure -20 Performance Bank Guarantee Format 254 Annexure -21 Certificate of Conformity format 255 Annexure -22 Quantity Claim Format 256 Annexure -23 Quality Claim Format 257 Annexure-24 Supply Order Format 259 Annexure-25 Acknowledgment Of Acceptance Of Tender 263 Annexure-26 Standard Form for Intimating Firms regarding Rejection of 264 their Offer Annexure-27 Closure of Supply Order 265 Annexure-28 Inter Factory Demand 266 Annexure-29 Format for Bank Guarantee for Advance Payment 267 Annexure-30 Guidelines on confirmation of Bank Guarantee of Foreign 269 Banks by Indian Banks Annexure-31 Form of Letter to be addressed to Bank for Verification of Bank 270 Guarantee Annexure-32 Format for Refund of Security Deposit 271 Annexure-33 Performance Notice for not submitting Advance Sample 272 Annexure-34 Format for Performance Notice 273 Annexure-35 Correspondence with seller after breach of contract 274 Annexure-36 Short Closure and Cancellation of Supply Order 275 Annexure-37 Letter for Final Payment 276 Annexure-38 Public Procurement Policy for MSEs Order 2012 277 Note: All SOPs (updated time to time) related to OFBPM 2018 have been uploaded on OFB Comnet / OFB Internet Website. 11 Chapter 1 INTRODUCTION AND BASIC PRINCIPLES OF PROCUREMENT 1. Introduction 1.1 Challenges in procurement a) Maintaining an uninterrupted and reliable flow of material of the requisite quality is an inescapable necessity for seamless manufacturing. Indian Ordnance Factories, being engaged in manufacture of military hardware, has to adhere to this inescapable necessity. The challenges in material procurement in Ordnance Factories are as follows: (i) Major parts of the inputs required for production of military hardware are of very stringent specifications that are normally not applicable in commercial settings, and therefore are available only as Made-to-Order. (ii) Low quantity requirement and demand fluctuations restrict the interest of potential suppliers. (iii) Specifications of Inputs are mostly governed by JSS, GOST and other defence specifications, and do not have scope for use in other fields of application. (iv) Diverse product range with common procurement procedure. (v) The requirements of Ordnance Factories are not always adequate for vendors to keep the production lines customised for a unique product range, running throughout the year. b) The above indicated fundamental necessities and challenges comprise of the basic fabric of the procurement policy and govern the procurement decisions in ordnance factories. c) It is imperative that material purchase be made following systematic, efficient and cost effective way, in compliance with laid down procedure in this Manual, while ensuring timely positioning of the material. 1.2 Terminology and Abbreviations a) Standard terminologies have been adopted in the Manual. Important acronyms used in this Manual are listed as Annexure for ready reference. b) In certain areas, there may be two or more widely used terminologies bearing the same meaning as mentioned below: 12  Tender, Bid, Quotation Offer received from a supplier Tenderer, Bidder, Vendor An entity who seeks to supply goods by sending tender/bid/offer. Tender Enquiry Document, Tender Detailed document issued by the Document, Bidding Document purchaser specifying his needs and the requirements that a potential tenderer/bidder must meet. Notice Inviting Tenders, Request for Advertisement containing brief Proposal (RFP), Invitation for Bids details of the requirement Earnest Money Deposit, Bid Security Monetary guarantee furnished by a bidder along with its tender Security Deposit, Performance Monetary guarantee furnished by the Security successful bidder for due performance of the contract concluded with it Bid, Offer, Quotation Offer from a vendor in response to a tender 1.3 Present Manual a) MOD while finalizing DPM 2009 that guides procurement of revenue items by Defence Units has kept OFB out of the purview of the DPM considering the pressing needs of a manufacturing industry to position material in a time bound manner. This Manual has been formulated within the ambit of DPM 2009 (or amended from time to time), GFR 2017(or amended from time to time) as also other policies/guidelines/instructions issued by MoD, DIPP, MoF, MoMSME, CVC and ATN on CAG observations keeping in view the specific requirements of production and to ensure availability of material for continuity of production. b) If any instance of variance with GFR 2017 (or amended from time to time) is noticed, the matter should be referred to MoD for clarification. However, the ongoing procurements may not be stopped pending receipt of the clarification, if there is operational urgency in going ahead with the production or delay is likely to have adverse implications to meet production targets. c) Stores procurement by the Ordnance Factory Board and its Factories/Units/ Establishments shall be governed by the provisions of this Manual. 13 d) All related SOPs, guidelines, instructions, orders, etc. issued by Ordnance Factory Board and its units may be deemed to have been modified by the provisions of this Manual, to the extent the former is not in conformity with this Manual. Accordingly in case of any inconsistency, the provisions of this Manual shall prevail in the context of procurements covered under the scope defined in paragraph 1.4. These SOPs, guidelines, instructions, orders, etc., shall be updated in line with the provisions of this Manual. 1.4 Scope of the Manual Procedures detailed in the Manual are applicable for purchase of: (i) Inputs and aids for production such as all articles, material, commodity, livestock, furniture, fixtures, raw materials, spares, instruments, equipment, medicines, components, assemblies, sub-assemblies, tools, gauges, jigs, accessories, process materials, production consumables, indirect consumables, IT products/items, software, technology transfer, licences, patents or other intellectual properties purchased or otherwise acquired for the use of Govt.etc. but excludes books, publications, periodicals, etc. for a library. (ii) Maintenance aids, including spares, tools & tackles, etc. (iii) Services (production related) which are incidental or consequential to the supply of such goods, i.e. conversion, job-work, packing, unpacking, preservation, transportation, insurance, delivery, maintenance support, technical assessment, consultation, system study, software development, maintenance conservancy, etc. 1.5 Definition of Goods/Stores/Items The term goods/stores/items used in this Manual are interchangeable and applies to all items mentioned at 1.4 above. 1.6 Transparency in Purchase Procurement by the Ordnance Factory Board and its units are Public Procurement, and accordingly, should be conducted in a transparent manner to bring competition, fairness and eliminate arbitrariness in the system. 14 1.7 Salient Feature of Bids Solicitation (i) The tender document should be comprehensive, unambiguous, and relevant to the objective of the purchase. The right and commonly used technical and industrial parlance need to be used. (ii) The specifications of the required goods should be framed giving adequate details. The specifications must be broad-based and meet the essential requirements, without including superfluous or non-essential features, which may result in unwarranted expenditure. (iii) The tender document should clearly mention the eligibility criteria such as minimum level of production experience, past performance, technical capability, manufacturing facilities, financial position, ownership or any legal restriction, etc. that need to be made by the bidders. (iv) Eligibility criteria should conform to extant Government policies (which includes the provisions of this Manual) and be judiciously chosen so as not to stifle competition amongst potential suppliers. (v) All aspects pertaining to tender preparations, submission, deadlines, acceptance, evaluation, ranking and conclusion of contract should be unambiguously and explicitly detailed. (vi) Offers should be invited following a fair, transparent and reasonable procedure. Tender enquiries (and subsequent amendments etc., if any) shall be given wide publicity, including display at the OFB official website and mirrored at the Central Public Procurement Portal (CPP Portal). (vii) Sufficient time should be allowed to the bidders to prepare and submit their tenders. Suitable provisions should be kept in the tender document allowing the bidders a reasonable opportunity to enquire about the tender conditions, tendering process, and/ or rejection of its tender and the settlement of disputes, if any, emanating from the resultant contract. (viii) Bidders must not be permitted to alter or modify their tender responses after the expiry of their deadlines for submission; such modified bids will be summarily rejected. 15 (ix) Tenders should be evaluated only as per the evaluation details provided in the tender documents. No new condition, which was not incorporated in the tender document, should be brought into consideration while evaluating the tenders. (x) Negotiations with the bidders must be avoided. However, under some circumstances, where price negotiations are considered unavoidable, they may be resorted to only with the lowest evaluated responsive bidder, with the approval of the CFA only after duly recording reasons for such action. (xi) At every stage of procurement the procuring authority must place on record, in precise terms, the considerations which weighed with it while taking the procurement decision. (xii) The name of the successful bidder to whom the contract is awarded should be appropriately notified for the information of general public, through the OFB and Central Public Procurement portal. Wherever display in website is prescribed in this manual, it shall also imply mirroring at the Central Public Procurement Portal (CPP Portal). 1.8 e-Procurement (i) The e-procurement system, available at www.ofbeproc.gov.in, will be used for all procurement processes in excess of Rs. 2 lakh (or revised time to time). The maximum threshold value of the procurement would be determined based on the estimated value (landed cost) of the procurement duly considering the option quantities also, if any. The system supports all modes of tendering like OTE, LTE, GTE, and STE. There may be instances where considering the type of product (or services)/procurement, e-procurement may not be the appropriate procurement process, in such cases manual tendering process may be followed with the prior approval of the Operating Member of OFB, in consultation with finance and duly recording the reasons for the same. (ii) The basic procurement procedures (unless repugnant to the context or not relevant in e-procurement being system performed) shall remain as contained in this manual even if procurement is through e-procurement. (iii) Procurement will be processed through e-procurement portal for cases above the threshold limit, except LPC and cash and carry procurements. 16 1.9 Considerations for Purchase Quantities (i) Purchase quantities in excess of requirement is not permitted. (ii) A demand should not be split into small quantities for the purpose of avoiding the necessity of taking approval of the higher authority required for sanctioning the purchase of the original demand. 1.10 Timely Procurement (i) To reduce delays, the time-frame stipulated for each stage of procurement should be adhered to. (ii) Contract should be concluded within the original validity of the tenders. Extension of tender validity must be discouraged and resorted to only in absolutely unavoidable, exceptional circumstances. 1.11 Competent Financial Authority a) Financial powers have been delegated to various authorities in Ordnance Factory Board and its units, through the DFP. These powers are to be used within the framework of laid down procedures, canons of financial propriety and amplificatory instructions. The powers so delegated also imply accountability; and the CFA must ensure that financial propriety and probity are observed in all cases. b) All financial powers are to be exercised by the appropriate CFA. Where financial powers have been delegated to more than one authority under the same item/ head of delegation, authority with next higher delegated financial powers will constitute the ‘next higher CFA’. c) The financial powers delegated by Ministry of Defence/ Ordnance Factory Board to various authorities in the Ordnance Factory Board and its factories/ units/ establishments cannot be further sub-delegated by the delegate. However, on the strict understanding that the sole responsibility rests on them, the authorities to whom financial powers have been delegated may authorize gazetted officer(s) to sign communications and financial documents on their behalf conveying the sanction of the original delegate provided that the name of the officer who is so authorized is communicated to the Audit Officer concerned. d) The current approved system for Ordnance Factory Board and its units is the CFA-in-committee i.e., TPC system. However, the recommendations of TPC will be concurred by IFA and approved by CFA in the same TPC. CFA is the Chairman of relevant TPC/TEC. In case of dissent note/different opinion (IFA or any other TPC/TEC member), the decision of CFA will be final. CFA can overrule IFA or any other TPC/TEC member after recording reasons for overruling as explained later on. 17 e) The constitution of the TEC/TPC shall be as notified in the DFP. However, the Chairpersons of these Committees(CFA), if necessary, may co-opt other relevant experts on the Committee. Reference in this manual to VSL TPC (Vendor Selection TPC) is to the appropriate TPC while performing initial activities for procurement (including vendor selection amongst other activities) indicated later on. f) The CFA will be decided taking into consideration, the value of the original quantity to be ordered plus the Option Clause quantity. In case of foreign procurements, the current Exchange Rate of SBI, Parliament Street Branch/ RBI as on Tender bid closing date, shall be taken into consideration for determining the CFA. For the purpose of cost reduction and convenience, number of items or group of items may be clubbed for tendering, provided the CFAs are defined in advance before floating the TE by VSL TPC i.e. individual item wise or all items together. g) In umbrella agreements of multi years (including RCs), CFA shall be decided on the basis of average annual requirement and not the sum of annual contracts. h) In respect of cases beyond the powers of Factory TPC-I that have been duly approved, unless specifically decided otherwise by the CFA, subsequent operation of OC shall be done by the Factory TPC-I after strictly complying with the provisions of this Manual. 1.12 Consultations with Finance a) Procurement above the prescribed threshold limit in the DFP shall be done only with the concurrence of the Integrated Finance at all the prescribed stages. Though Finance is an integral part of the TPC/TEC structure, a financial concurrence will also be required on the recommendations of the TPC prior to CFA’s approval in the same TPC. b) In case of disagreement/ non concurrence by the Integrated Financial Advisor, the CFA can overrule the IFA after recording reasons for overruling the views of the IFA. c) In all cases where the CFA has overruled the advice of IFA, the Secretary of the TPC shall send a copy of the TPC minutes to the Member/Finance of OFB. The CFA is accountable and responsible for her/his decision and accordingly, the decision of the CFA (although by overruling) shall stand. 18 1.13 Responsibility of the Competent Financial Authority a) CFA is the Chairman of relevant TPC/TEC. The CFA must consider all aspects of the case, including the quoted price, terms and conditions of the contract, delivery period, warranty, freight, insurance and other charges and the compliance with the technical specifications/QR before a purchase decision is taken. Conditional offers and those with specifications not in conformity with the tendered specifications (Essential QRs), normally should not be considered. However, in exceptional cases of any justifiable minor discrepancies, CFA (Chairman of relevant TPC/TEC) may take appropriate decision with recorded reasons. Wherever as per DFP, delegated powers are exercisable subject to financial concurrence, it shall be ensured before according sanction that the requisite financial consultations have been done at all the prescribed stages. b) While making the purchase decision, the CFA needs to satisfy himself/herself that (i) proper procedures have been followed at various stages of procurement, (ii) purchase policies of the Government have been complied with, and (iii) capacity and financial status of the firm have been checked. Purchase decisions should be communicated only through a formal order in a written form. 1.14 Difference of opinion in TEC/ TPC a) The designated CFA is accountable for all decisions taken by them while approving any measure involving Government funds. b) In case of disagreement/ non concurrence by the Integrated Financial Advisor, the CFA can overrule the IFA after recording reasons for overruling the views of the IFA. 1.15 Exemptions/ Relaxation from some Tender Conditions to Certain Suppliers Government of India has issued general directives on (i) mandatory/ preferential purchase of specified goods from specified suppliers (ii) extension of price preference (iii) exemptions/ relaxation from certain tender conditions like tender fee, EMD, PSD, etc., to certain categories of suppliers. In procurements attracting these general directives, the contemporary directives of the Government of India should be checked (from the relevant website) for necessary action. These contemporary directives shall apply in the procurement of Commercially-off-the-shelf (COTS) as well as Made-to-order (MTO) items. DDP may issue separate directives indicating the eligibility and nature of concession/relaxation in order to promote MSEs (Micro & Small Enterprises), Start-ups, Stand-ups etc. to be followed. 19 1.16 Development of Micro, Small and Medium Enterprises a) The Micro, Small and Medium Enterprises Development Act 2006 provides that “For facilitating promotion and development of micro and small enterprises, the Central Government or the State Government may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by micro and small enterprises, by its Ministries or departments, as the case may be, or its aided institutions and public sector enterprises”. b) Any order issued by Central Government in relation to Micro, Small or other sections of Industries relevant to procurement shall be followed by all units under OFB. Currently, one such Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 w.e.f 01.04.2012, is in force and should be strictly adhered to. The Public Procurement Policy shall apply to Micro and Small Enterprises registered with District Industries Centres or Khadi and Village Industries Commission or Khadi and Village Industries Board or Coir Board or National Small Industries Corporation or Directorate of Handicrafts and Handloom or any other body specified by Ministry of Micro, Small and Medium Enterprises (MSME). Declaration of Udyog Aadhaar Memorandum(UAM) number by the MSME vendors on CPPP/OFB e- procurement portal should be made. The MSE bidders who fail to submit UAM number will not be able to avail the benefits available to MSEs as contained in Public Procurement Policy for MSEs Order, 2012 issued by MSME for tenders invited electronically through CPPP/OFB e-procurement portal. 1.17 Development of Start-ups For Startups (whether MSEs or otherwise), prior experience and turnover requirement may be relaxed subject to meeting of quality and technical specification in accordance with relevant provisions of GFR 2017 (or revised time to time) as per Ministry of Micro, Small and Medium Enterprises Policy Circular No. 1(2)(1)/2016-MA dated 10th March 2016 and Ministry of Finance, Dept. of Expenditure O.M No. F.20/2/2014-PPD(Pt) dated 25th July 2016. Also as per MoF, Dept of Expenditure O.M. No. F.20/2/2014-PPD(Pt) dated 20th September 2016, the criteria of prior experience / turnover may not be relaxed for Startups, for procurement of items related to public safety, health, critical security operations and equipments etc., where vendors with prior experience are preferred and adequate justification is available. 20 1.18 Procurement from Defence Public Sector Undertakings a) Goods and Services may be procured from Defence Public Sector Undertakings through tender. Any items developed / manufactured by a Defence PSU specifically for the Defence Services, with transfer of technology or through design and development, should be procured from the concerned Defence PSU only. Similarly, Defence PSUs shall be approached for providing any service, such as repairs and overhauling, if facility for providing such services has been set up by a Defence PSU exclusively for the Defence Services. This cases will not be treated as STE/PAC procurements as per OFB DFP. Reasons for invoking this provision shall, however, be recorded. b) For cases other than category stated above, Defence Public Sector Undertakings will have to bid for contracts through a tendering process open to private sector enterprises, for supplying goods and services to OFs. 1.19 Standard Tender Documents Standard forms of tender are to be used as enquiry documents and contracts in line with the extant rules, regulations, directives, procedures etc. Deviations in the standard provisions of the standard documents may be permitted by an authority competent to grant waiver/ relaxation for the provision as per the DFP. Extent of deviation that may be permitted by the said competent authority shall be as per the powers available to him under the DFP for granting waiver/ relaxation. 1.20 Time Frame for Processing All activities must be undertaken expeditiously, and consultations/ advice rendered within a specified time frame. The time frame given in Annexure shall be adhered to in the procurement process to ensure that the bids are finalized within validity period. In case the prescribed time frame cannot be adhered to in any specific case, suitable extension of validity of the bids should invariably be asked for, after recording valid reasons justifying extension of the said validity. 1.21 Amendments to the Manual No modifications / amendments will be made to the OFB Procurement Manual 2018 (OFBPM 2018) without prior approval of Department of Defence Production, Ministry of Defence. However, changes in policies issued by MoD necessitating amendments in OFBPM 2018 may be implemented immediately under intimation to DDP. 21 1.22 Applicability This manual shall come into force with effect from 01st September 2018. However, all on-going procurements where tender has been issued prior to date of effect of this Manual may continue to be regulated by the provisions of the OFBPM 2010. *** 22 Chapter 2 PROCUREMENT PROCEDURE 2 Procurement Procedure 2.1 a. Need for Procurement The need for procurement of goods may arise for (i) catering to the annual production and allied activities (ii) building up authorized stocks (iii) repair and maintenance of assets. Similarly, the need for procurement of services may arise for (i) maintenance of equipment/ assets (ii) outsourcing work that can be economically performed in trade or where facilities are not available/ not adequate in-house (iii) for engaging experts and consultants. b. Procurement of Items Ex-Import An item already established by any of the Ordnance Factory or indigenized, should normally not be imported. However, decision to import can be taken considering the in-house production capacity, delivery timelines, the product mix, availability of manpower, condition of plant & machinery etc. and after duly recording specific reasons with the approval of General Manager. While initiating the case, at the time of taking decision for placement of order as well as taking all subsequent decisions like extension/re-fixation of delivery period etc., all relevant aspects like capacity of ordnance factories, availability of indigenous sources, capacity and reliability of indigenous sources, cost of indigenous supplies v/s the import cost etc. should be kept in view. The supply position of indigenous sources should be ascertained at every stage of procurement. In order to promote import substitution, the norms detailed in this chapter shall be adopted. 2.2 Make or Buy Decision (i) Policy on make or buy (including import substitution) decision should be such that it not only promotes optimum utilization of in-house capacity in Ordnance Factories but also lays equal emphasis on cost of production being reasonable. After weighing all facts, an appropriate make or buy decision shall be taken by the GM on the advice of the Make & Buy Committee of the factory or the operating Member in consultation with Member (P&MM), in case of outsourcing items manufactured by ordnance factories. The constitution of Make or Buy Committee at factory shall be (i) Sr.GM/GM as a Chairman, (ii) AGM/Jt.GM(Plng), (iii) AGM/Jt.GM(MM), (iv) AGM/Jt.GM(User). 23 (ii) Non-core activities should as far as possible be outsourced, if cheaper options can be found outside OFB & resources thus released should be utilised for core activities. 2.3 Authority for Procurement Indent/ Letter of Intent/Roll-on-Indent/Roll-on-Plan/Extract/IFD/ SWOD/ Supply Plans issued by Ordnance Factory Board/ Purchase Requisition raised by user section are the required authority for procurement. Annual Supply plan supported by Roll-on-plan issued with approval of Member/Operating Division may also be an authority for procurement. 2.4 Specifications All procurements have to meet the stringent specifications prescribed. In addition to qualitative requirements, the specifications indicate the detailed qualitative requirements of the item being procured and shall indicate all relevant requirements/ parameters like (i) material composition (ii) physical (iii) dimensional (iv) performance (v) tolerances (if any) (vi) manufacturing process (where applicable) (vii) test/ inspection schedule (viii) acceptance criteria (ix) preservation & packing (x) transportation requirements (especially relevant for chemicals), etc, without any superfluous requirements that may have the effect of stifling competition or increasing expenses. AHSP/ Specifications promulgating authority should periodically forward copies of specifications/ amendments to all agencies concerned to ensure that goods of current specification are purchased. Various types of specifications relevant to the defence items are: i) Proprietary Article Specification These are available only with the proprietary firm and are protected by the intellectual property rights. PAC specifications are normally not available with the purchaser and therefore these stores may be accepted based on the firm’s certificate of quality. ii) Branded Product Specification The specifications for branded commercial product are not available with the purchaser or the inspecting agency and these are to be accepted on the firm’s guarantee / warranty. 24 iii) Industrial Specifications There are standard industrial specifications like the IS, BS, DIN and GOST available for sale in the market. In the case of medical stores standard specifications are issued by WHO, FDA, CE etc. Every procuring and inspecting agency should acquire such specifications for reference to ensure quality- standard of the product being procured. iv) Defence Specifications There are defence specifications for specialist items for use by the defence departments, particularly the defence services. These are Joint Services Specifications, Milspecs, etc. Copies of such specifications should be available with the procuring agency, inspecting authority and the AHSP. v) Indigenized Item Specification The manufacturing agency, QA agency, DRDO, OFB and Service Headquarters, involved in the indigenization efforts often successfully indigenize some items as import substitutes. In such cases, the specifications, including the drawing and other details, are formulated by these agencies in consultation with the Ordnance Factory Board, manufacturing firms, QA agency, Design agency, Service Head Quarters (as the case may be) to guide future production. Such specifications should be available with the purchase agency as well as the inspecting authority so as to ensure conformity with the required quality standards of the items being supplied. vi) Ad-hoc Specifications There may be items for which neither the industrial nor the defence specifications are available. In such cases, the Indentor must indicate the general parameters, normally the dimensions, mechanical parameters, chemical composition, performance parameters, etc. to enable procurement and inspection. Such ad-hoc specifications must be broad enough to permit wider participation by the suppliers and should not be restrictive. vii) As per Sample Specification There are occasions when items, normally PAC products, cannot be procured from the original manufacturer and have to be procured from another manufacturer as per sample in the absence of detailed specifications or drawing. For such items, the supplier prepares detailed specifications as well as the drawing and gets it approved by purchaser. The purchaser and the inspecting authority should acquire such specifications and drawings and retain with them to guide future production and inspection. 25 viii) Common Use Items Specification There are a large number of items used in the ordnance factories which are common-use items, freely available in the open market. As in the case of ad-hoc specifications, specifications of common use items should also be broad enough to permit wider participation by the suppliers and should not be restrictive to stifle competition. 2.5 Store Holders Inability Sheet a) For procurement of any item a Store Holder Inability Sheet/Material Planning Sheet shall necessarily be prepared, duly indicating the requirement, present stock, dues and the net requirement. The Store Holders Inability Sheet and the Material Planning Sheet together provide the complete details of the computation of quantities to be procured. Normally the annual requirement is taken into consideration for preparation of SHIS/MP Sheet. The reference to annual requirement in respect of direct material shall include the requirement for the first quarter of the subsequent year. SHIS for multiple year requirements can also be generated wherever relevant. Attention shall be paid to the shelf life (where relevant) of the item to eliminate avoidable losses in storage. In such cases staggered deliveries should necessarily be resorted to. b) If valid labour estimate exists in the factory for the item (or operation) being procured (or outsourced) from trade then justification for the procurement (or outsourcing) shall be recorded, and the factory shall ensure that payments for the same work (or operations) are not claimed for departmental labour also. c) (i) The SHIS/MP Sheet has to be vetted by QC/Pattern Office for the technical specification to ensure that material is procured as per the latest drawings/ technical specifications. (ii) Direct material SHIS is not required to be vetted by LAO but to be signed by Group ‘A’ officer. (iii) SHIS/MP Sheet will have a life of six months (i.e SHIS generation to issue of tender) and will need revalidation by Sr. GM/GM thereafter. d) The cases where indents are delayed or existing supply orders not likely to fructify, then to save time, procurement action can be initiated on provisional SHIS and can be processed up to Tender opening stage with the approval of Operating Member. 26 2.6 Quantity to be Purchased a) Normally the Annual Supply Plans issued by the Ordnance Factory Board shall be the basis for procuring direct material. However, when Roll-on- Plans/ Roll-on-Indents/LoI (wherever applicable) are available, supply plans exceeding one-year time-horizon may be issued by Ordnance Factory Board to improve material availability at the factories. Such multi-year supply plans can also be the basis for procuring direct material for the period specifically authorised. Prior approval of the Member of Operating division shall be taken for initiating multi-year proposals for procurement. Availability of such multi-year plans does not imply that all procurements are to be necessarily made in one go for the entire multi-year period. The VSL TPC shall, as a part of due diligence, after considering the nature of the store and the lead-time & difficulty involved in procuring the store, take an appropriate decision as to whether it would be advantageous to procure (i) the annual requirement plus coverage for the first quarter of the subsequent year or part of annual requirement or (ii) the multi-year requirement. b) If procurement is made on multi Year basis, the following authorities may apply to determine time period of the contracts: i) Roll-on-Indents are available for 3 years or more. ii) Roll-on-Indents are available for 3 years and Roll-on-Plan for another 3 years or more. iii) Roll-on-Plan for 3 years or more. iv) Letter of Intent(LoI) wherever applicable. c) Multi Year Procurement Procedure (Long-term Umbrella Agreement/ Contracts for MTO items): i) Long-term Umbrella Agreement/Contracts may be concluded up to 5 years for MTO items. ii) The Long-term Umbrella Agreement/Contracts shall be with the condition that Supply Order will be placed under the agreement on annual basis or as and when required based on agreed delivery schedule/period commensurate with production program, only against firm indents. iii) Long-term Umbrella Agreement/Contracts may even be concluded at the same rate parallel with multiple vendors to ensure reliability, continuity and ease of supply. 27  iv) CFA in the Long-term Umbrella Agreement/Contracts shall be decided on the basis of average annual requirement, since the total value of the contract is the sum of annual contracts (i.e., Total tendered quantity divided by no of contract years). v) Supply Order may also be concluded with multiple vendors to ensure reliability, continuity and ease of supply. vi) The Long-term Umbrella Agreement/Contracts shall contain: o Indicative total quantity and annual off-take. o PV Clause, wherever feasible. o Delivery & Supply Schedule o Fall Clause o EMD and PSD as applicable. o Provision of Option Clause up to 25% of the annual contract quantity may be provided and operated only in case of source development failures or to meet unforeseen requirement from the indentor. vii) The Long-term Umbrella Agreement/Contracts does not make any binding for the purchaser to procure the indicated quantity of the tender. viii) Para 6.18 on Long-term Umbrella Agreement/Contracts of this manual may also be referred for further details. d) SHIS/ MP Sheet shall be prepared to work out the requirement. The procurement lead-time and the production throughput-time should also be kept in mind while working out the requirement. Procurement shall be made for the Net Deficiency worked out based on the annual requirement or multi- year requirement where relevant. Net Deficiency shall be computed, duly taking into reckoning the Supply Plan conveyed by Ordnance Factory Board, all stocks, WIP and dues. e) Staggered deliveries shall be insisted upon, especially when procurement is authorised for more than the annual requirement unless such staggering is not feasible or will result in additional expenditure with no specific benefits. f) IFD shall be placed for the firm/fixed quantity. Option clause / repeat order not relevant in case of IFD. g) Procurement of indirect materials (not required directly for production) shall be made on the basis of monthly average consumption during the preceding 24 months, duly making an allowance for relevant factors like the quantum of production, machines being utilised, product-mix, etc. For new indirect materials the necessity for procurement shall be approved by the Sr. General Manager/General Manager. 28 h) The Vendor Selection TPC shall also deliberate on the justification for the quantities proposed for procurement for all items. 2.7 Procurement Lead Time a) Timely procurement action should be initiated duly taking into account the procurement lead-time and the production throughput-time so that the end-product issue-plan matches with the requirement projected by the Indentor. Apart from initiating timely action, the case shall also be processed expeditiously at every stage of examination and the model time-frame indicated in the Annexure to the Manual shall be complied with. b) Prompt and timely action should be taken, for both indigenous as well as imported items, so that stock-out situations are avoided to ensure continuity of production while at the same time maintaining the overall SIH inventory within the authorised limit. The present authorised SIH inventory levels are: Group of Factories SIH inventory level Armoured Vehicles 6 Months except HVF HVF 12 Months Ordnance Equipment 3 Months Factories Other Factories 4 Months A higher SIH inventory holding can be authorised under exceptional circumstances by the operating Member in consultation with the Member (Finance). Stocking of COTS and Rate contract items are to be decided on the basis of contract terms and conditions. c) The authorised inventory level as indicated in the above table shall be reviewed at least once in a year by the Operating Member in consultation with the Member/P&MM and Member/Finance of Ordnance Factory Board to reduce the inventory carrying cost. Report of such exercise shall be sent to Secretary (DP) for his information in the month of April every year. After receipt of report, Secretary (DP) may have an external validation exercise through outside agency. 29 d) In the event of any Ordnance Factory holding inventory in excess of their authorised limit, the Factory shall work out a time-bound action plan for liquidation of the excess inventory. The Factory shall closely monitor & progress the action plan duly associating the LAO. The operating division concerned shall also monitor the progress of liquidation on quarterly basis. However, since procurement of stores is based on the SHIS with the deficiency being worked out after considering the stocks, WIP and dues, it will not result in the procurement resulting in holding stock of the item in excess of the requirement. e) Provisioning review shall be an annual exercise based on Supply Plan. Apart from this annual review, any change in production programme of any end product due to increase or decrease in demand or any other reason will necessitate midcourse review. f) The provisioning period comprises of (i) the lead time, intended to cover all actions right from assessment of net requirement up to completion of delivery by the supplier, and (ii) the period of utilisation, which is the production period during which the entire ordered quantity (including the stocks and dues existing at the time of the provisioning action) will be utilised for meeting the production target. Normally the period of utilisation is 12 months (plus the first quarter of the subsequent year), however, this would not be applicable to procurements done with respect to Roll-on-Indents/ Roll- on-Plans. 2.8 Stockpile a) Stockpile is an emergency reserve of imported and difficult to procure indigenous stores clearly identified as such, held for the purpose of enhancing the responsiveness of production units to unexpected demand surges and stock out situations. b) Once an item is identified for stockpiling and its quantity determined, the competent authority shall be approached for sanctioning the stockpile creation. Maximum permissible Stockpile for imported and difficult-to-procure indigenous stores is for 6 months and 3 months respectively, unless otherwise higher levels have been specifically authorised. The monthly requirement of stockpile items shall be determined with reference to the maximum achievable production capacity in the factory for the related end-product as evidenced by past performance. 30 c) Stockpile, being an emergency reserve held by a Factory, should be kept intact; however, it needs to be turned-over from time-to-time keeping in view the shelf-life/ preservation requirements for the item. Factories shall submit, to MM Division of Ordnance Factory Board, a half-yearly certificate that all items held in stockpile are in good condition and have been subjected to requisite care & preservative treatment. d) Stockpile shall be turned-over by transfer from stockpile-stock to working-stock, subject to the following: (i) Ordnance Factory Board approval should be obtained for withdrawal from stockpile. (ii) The withdrawal from stockpile will be first transferred to Stock Ledger and issued on Demand Notes. e) Stockpile referred to above will be entirely distinct from the regular or any other stocks that are referred to above. Each item of Stockpile shall be reviewed annually or as soon as it comes to notice that: (i) Indigenous production of imported items has developed or manufacturing capacity expanded adequately. (ii) Supply position of indigenous items has improved. (iii) Production of the relevant store has been discontinued (iv) Obsolescence/ phasing out/ reduction in demand of end-products (v) Change in specifications/ substitution. f) A database of stockpile items shall be maintained by each of the holding Factories and a centralised database of all Stockpile items shall be maintained at MM Division at Ordnance Factory Board. MM Division, in co-ordination with the concerned factories, shall carry out continuous review of Stockpile items. g) The cost of the Stockpile shall be capitalised, and a separate Store Ledger of Stockpile Items shall be maintained by the LAO. h) DDP is the competent authority for approving new stockpile items. All existing stockpile items may be reviewed by DDP annually. 31 2.9 Channels of Procurement Stores shall generally be procured by one of the following methods: (i) IFD on sister factories (ii) RC concluded by OFB/ Ordnance Factories (iii) Purchase from Trade (iv) Demand on other Government Department(s) (v) Govt e-Marketplace (GeM) (vi) Electronic Reverse Auction (vi) Any other approved procedure notified by Central Government. 2.10 Deciding the Mode of Purchase from Trade The Vendor Selection(VSL) TPC, after considering (i) the necessity for the procurement (ii) whether the store is COTS or MTO (iii) the quantity to be procured (iv) the value of the procurement (v) the period of supply and (vi) special terms & conditions (if any) for the procurement, shall decide the mode of procurement. It should also be ensured by the VSL TPC that the demand for the store is not divided into smaller quantities for making piece meal purchases for the sole purpose of avoiding the necessity of obtaining the sanction of a higher authority with reference to the estimated value of the total demand. 2.11 IFD on Sister Factories a) Indenting factory (user), after ensuring that the particulars mentioned in the IFD are correct, shall place IFD on the supplying factory in the prescribed form giving inter-alia, the following particulars: (i) Related Extract No. and Date (ii) Correct nomenclature of the stores demanded together with the relevant manufacturing particulars etc. (iii) Purpose for which the stores are required (iv) Delivery Schedule b) Indenting factory shall also provide the feeder factory with all particulars/ drawings/ specifications referred in the IFD and are required for execution of the IFD. Copies of IFDs should be endorsed, among others, to the concerned AHSP/ QA of indenting factory/ LAO of indenting & supplying factories for necessary action by these authorities. 32 2.12 RC concluded by OFB/ Ordnance Factories a) Ordnance Factory Board may, where feasible, conclude RCs through OTE on a 2- bids system for stores of standard type that are identified as common user items and are needed on recurring basis by various Ordnance Factories. RCs can be finalized through LTE with PSUs in respect of items which are known to be manufactured only by them. The Ordnance Factories, as Direct Demanding Officer, can procure the items under the RC concluded by Ordnance Factory Board. The Ordnance Factories can also conclude RCs under their delegated powers, if not covered RC of OFB. b) When RCs are concluded the specifications, prices and other salient details of the rate contracted items shall be posted on the COMNET, and appropriately updated, for use by all ordnance factories/ units under the Ordnance Factory Board. The RCs concluded by the Ordnance Factory Board/ Ordnance Factories shall be operated to the maximum extent possible. 2.13 Purchase from Trade without Inviting Quotation As provided in Rule 154 of GFR-2017(or amended time to time), the competent authority (as per DFP) may purchase stores (goods & services)up to the value of Rs. 25,000(Rupees twenty five thousand only) on each occasion without inviting quotations or bids, on the basis of a certificate to be recorded by him (or her) in the format given below. "I, ________, am personally satisfied that these goods/services purchased are of the requisite quality and specifications and have been purchased from a reliable supplier at a reasonable price." 2.14 Purchase from Trade through Purchase Committee As provided in Rule 155 of GFR-2017(or amended time to time), purchase of stores (goods & services) costing above Rs.25,000(Rupees twenty five thousand only) and up to Rs.2,50,000(Rupees two lakh fifty thousand only) on each occasion may be made on the recommendations of a duly constituted Local Purchase Committee consisting of three members of an appropriate level as decided by the Head of Department. The committee will survey the market to ascertain the reasonableness of rate, quality and specifications; and identify the appropriate supplier. Before recommending placement of the purchase order, the members of the committee will jointly record a certificate as under: "Certified that we, members of the purchase committee are jointly and individually, satisfied that the goods/services recommended for purchase are of the requisite specification and quality, priced at the prevailing market rate and the supplier recommended is reliable and competent to supply the goods /services in question, and it is not debarred by Department of Commerce or Ministry of Defence or DDP or OFB/OFs." 33 2.15 Purchase from Trade by Obtaining Tenders a) Procurement of stores by obtaining tenders shall be done by adopting the following standard methods. These standard methods shall also apply for procurement of services, subject to other instructions contained in this Manual being followed. (i) Advertised Tender Enquiry (OTE/ GTE) (ii) Limited Tender Enquiry (LTE) (iii) Single Tender Enquiry (STE) b) In stores procurement bids shall be obtained through e-procurement if the estimated value is above the prescribed threshold limit, else through conventional tender method, on single or two bid system (refer paragraphs 2.31 and 2.32, respectively). 2.16 Advertised Tenders (OTE/ GTE) a) Procurement by advertisement should normally be used for procurement of stores (other than MTO stores) with an estimated value more than Rs.25 lakh, subject to the exceptions prescribed in this Manual. OTE is the common advertised tender where only domestic sources participate. OTE procurement may also be with a prequalification requirement. OTE being the preferred mode for procurement, the CFA may resort to it even in those cases where other modes for procurement from trade have been prescribed in this manual. b) The source development OTE (SDOTE) is an OTE done to develop new sources for Made-to-order items. c) GTE is an advertised tender. When no established Indian source is available for required quality, quantity & specification etc, then GTE may be resorted. Indian firms may also participate in the GTE. GTE procurement may also be with a pre-qualification requirement. 2.17 Limited Tender Enquiry (LTE) a) LTE may be adopted (for other than MTO items) when estimated value of stores to be procured is up to Rs.25 lakh (including the OC quantity). Copies of the bidding document should be sent free of cost, directly by speed post/ registered post/ courier/ e-mail, simultaneously to all the firms, which are borne on the list of registered suppliers for the stores after due consideration of their past performance/ response, if any. The number of supplier firms in LTE should invariably be three or more. Efforts should be made to identify a higher number of approved suppliers to obtain more responsive bids on competitive basis. LTE can be issued to foreign vendors also. Sufficient time should be allowed for submission of bids in Limited Tender Enquiry cases. 34 b) Purchase through LTE may be adopted (for other than MTO items) when the estimated value of the procurement is more than Rs.25 lakh (including the OC quantity), in the following circumstances, with the approval of the next higher CFA: (i) The competent authority certifies that the demand is urgent and any additional expenditure involved by not procuring through advertised tender enquiry is justified in view of urgency. The competent authority should also put on record the nature of the urgency and reasons why the procurement could not be anticipated earlier. (ii) There are sufficient reasons, to be recorded in writing by the competent authority, indicating that it will not be in public interest to procure the goods through advertised tender enquiry. (iii) The sources of supply are definitely known and possibility of fresh source(s) beyond those being tapped is remote. (iv) The item to be procured is such that pre-verification of competence of firm is essential, hence requires registration of firms. (v) To prevent stock out situations, to cater unforeseen requirements of the Armed Forces/ MHA and on the ground of national security as per directive of MoD. The CFA shall certify and record justification. c) If the estimated value of the proposal for a MTO item, is up to Rs. 25 lakh (including the OC quantity), then the entire deficient quantity may be procured through LTE without insisting on SDOTE, provided there are minimum 3 established vendors with valid registration and no cartel is suspected (to be recorded after due diligence by the relevant TPC). If the number of established & registered vendors is less than 3, then, established & registered vendors for the same range of products/ goods/ services/ technology can also be included for the LTE. If the number of established vendors with valid registration for the same range of products/ goods/ services/ technology is less than three or cartel formation is suspected/ confirmed, then procurement shall be done as per the procedure detailed for MTO items in paragraph 2.26. 35 d) However, if (i) the MTO procurement is above Rs. 25 lakhs(including the OC quantity); or (ii) there are less than 3 established vendors with valid registration for the same range of products/ goods/ services/ technology or (iii) cartel formation is suspected/ confirmed, then procurement will be done as per the procedure detailed for MTO items in paragraph 2.26. Established source shall be as defined in paragraph 2.26. 2.18 Single Tender Enquiry (STE) a) Obtaining quotation against tender enquiry issued to an identified source amounts to purchase without generating competition. Therefore, this mode of purchase should be resorted to only in unavoidable situations. Purchase through STE may be adopted when: i) It is in the knowledge of the user department that only a particular firm is manufacturing the required goods. The reason for arriving at this conclusion is to be recorded and approval of the competent authority obtained. ii) In a case of emergency, the required goods are necessarily to be purchased from a particular source, subject to the reason for such decision being recorded and approval of the competent authority obtained. iii) For standardization of machinery or components or spare parts to be compatible to the existing sets of machinery/ equipment (on the advice of a competent technical expert and approved by the competent authority), the required goods are to be purchased only from a selected firm. b) The relevant Proprietary Article/ Single Known Source Certificate (in the format given at the end on this Manual) should be provided by the Sr. General Manager/General Manager (with the approval of the operating Member if the case exceeds the financial powers delegated to Sr. General Manager/General Manager) before procuring the goods from a single source under the provision of sub-paragraphs (i) & (iii) above as applicable. c) Suitable tender document, containing required terms & conditions are to be issued to the selected firm for preparing and sending its quotation. The question of ‘late tender’ as well as elaborate process of receipt & opening of tender, as applicable for advertised tenders and LTE will not apply in case of procurement through STE. 36 d) PAC/ SKS sources at times do not accept some of the standard tender conditions. In such cases the firms should be persuaded to comply with the standard terms & conditions. If they are still unwilling to accept the standard terms & conditions, then, since no other alternative source is available, Sr.GM/GM (for Factory level cases) & Chairman (for OFB level cases) can grant relaxation/ exemption. In such cases of SKS procurements the factory shall necessarily increase its efforts to develop alternate sources. 2.19 Proprietary Article Procurement a) Certain items, particularly equipments, are the propriety product of a manufacturing firm. Such items are only available with that firm or their dealers or distributors since detailed specifications are not available to others for manufacturing the item. Situations may also arise when, for standardization of machinery or ensuring compatibility of spare parts with the existing sets of equipment, goods and services have to be obtained from a particular source. In such situations, a Proprietary Article Certificate may be issued to the original equipment manufacturer (OEM) and items procured on PAC basis from that particular firm or its authorized dealers or distributors. While PAC is issued only in favour of the concerned OEM, the item may be bought from any authorised dealer or distributor specified in that particular PAC on the basis of the information provided by the OEM, provided the purchase is accompanied by a proper manufacturer certification. In such cases, tender documents can be issued to the OEM and (or) Authorised dealer(s)/distributor(s) specified by the OEM. However, the purchase will be made as per the DFP for PAC cases only. These provisions would also apply to repairs and servicing of equipment through the sole dealer/ servicing agency, authorized by the OEM. b) PAC bestows monopoly and obviates competition. Therefore, PAC status should be granted only after careful consideration of all relevant factors like fitness, availability, standardization and value for money. CFA for issuing PAC shall be as notified in the DFP. c) It is common for OEMs to outsource their components/ sub assemblies/ assemblies and not manufacture these themselves. Hence, such items may be available at a cheaper price with the actual manufacturers. The indenting/ procurement officers must, therefore, keep abreast of the probable sources and may procure items from the right source to protect the interest of the State. However, machinery spares should be sourced only from the OEM or OEM approved/ recommended manufacturers to make the OEM responsible for malfunctioning, if any, of the main equipment in which the spares will be fitted beyond warranty period. 37 2.20 Procurement from a Single Known Source New sources are to be developed through Open Tender Enquiry (OTE). At times OTEs may result in development of only one source. Pending development of more sources, 80% of requirement with 25% option clause may be procured on Single Known Source mode on the basis of an SKS Certificate to be issued in the prescribed format by the Competent Authority notified in the DFP. The balance 20% of the requirement may be procured through SDOTE, without option clause. 2.21 Cash and Carry Procurement Cash and carry purchase is resorted to in cases of extreme urgency or when the supplier is not willing to supply the required item on credit. Such procurement should be made only in exceptional cases. The cash payment is initially made from the Imprest fund of the unit and the same, on being claimed, is reimbursed by the paying authority after due audit of the transaction. 2.22 Govt E-Marketplace (GeM) Government of India has hosted an online Government e-Marketplace (GeM) for common use Goods and Services. As per Rule 149 of GFR 2017, GeM has been made mandatory for procurement of Goods and Services available on GeM. The procuring authorities will certify the reasonability of rates. The GeM shall be utilised by Ordnance Factories for direct on-line purchases as under:- (i) Up to Rs.50,000/- through any of the available suppliers on the GeM, meeting the requisite quality, specification and delivery period. (ii) Above Rs. 50,000/- and up to Rs. 30,00,000/- through the GeM Seller having lowest price amongst the available sellers, of at least three different manufacturers, on GeM, meeting the requisite quality, specification and delivery period. The tools for online bidding and online reverse auction available on GeM can be used by the Buyer if decided by the competent authority. (iii) Above Rs. 30,00,000/- through the supplier having lowest price meeting the requisite quality, specification and delivery period after mandatorily obtaining bids, using online bidding or reverse auction tool provided on GeM. 38 (iv) The invitation for the online e-bidding/reverse auction will be available to all the existing Sellers or other Sellers registered on the portal and who have offered their goods/services under the particular product/service category, as per the terms and conditions of GeM. (v) The above mentioned monetary ceiling is applicable only for purchases made through GeM. For purchases, if any, outside GeM, relevant provision of this Procurement Manual shall apply. (vi) The Government Buyers may ascertain the reasonableness of prices before placement of order using the Business Analytics (BA) tools available on GeM including the Last Purchase Price on GeM, Department’s own Last Purchase Price etc. (vii) A demand for goods shall not be divided into small quantities to make piecemeal purchases to avoid procurement through L-1 Buying / bidding / reverse auction on GeM or the necessity of obtaining the sanction of higher authorities required with reference to the estimated value of the total demand. (viii) The detailed SOP for procurement through GeM shall be issued by OFB/MM. 2.23 Electronic Reverse Auction (a) Electronic Reverse Auction means an online real-time purchasing technique utilized by the procuring entity to select the successful bid, which involves presentation by bidders of successively more favorable bids during a scheduled period of time and automatic evaluation of bids. (b) Reverse auction may be implemented by OFB after creating/arranging a web portal for the same. (c) Ordnance Factories/Units may procure items through Electronic Reverse Auction wherever feasible. 2.24 Classification of Goods/ Stores The revenue procurement is made for normal business activity as distinct from capital procurement made by a business for acquiring fixed assets. Revenue stores in the context of ordnance factories come under two broad categories: (i) Commercially-off-the-Shelf (COTS) stores are available commercially and have application in fields other than defence. These stores are generally available easily. Standard Procurement Procedures of the Government of India can be applied while procuring COTS items. 39 (ii) Made-to-Order (MTO) stores do not have commercial applications. They are made specifically for the ordnance factories, against specified drawings of ordnance factories/ collaborators/ design agency or JSS/ other defence specification. MTO items, therefore, have limited sources and are difficult to procure. Consequently for timely & reliable positioning of MTO items for production, special procurement procedures are necessary without compromising on transparency, competition or fair treatment of vendors. 2.25 Procedure for COTS items (Other than MTO Items) a) The standard procurement procedure contained in the preceding paragraphs shall apply while procuring other than MTO items. Advertised OTE shall be the preferred mode for procurement of common use items of generic or commercial specifications which are readily available in the market from a wide range of sources/ vendors. However, depending on the value of the procurement the appropriate mode of procurement i.e. OTE, LTE, STE, RC, CC and LPC as contained in the Manual may be followed within the financial limits therein specified. In procurement of direct material (falling in the category ‘other than MTO’) through LTE, only established vendors with valid registration as per the OFB SOP for vendor registration shall be allowed to participate. b) Under advertised tenders (OTE/ GTE), tenders will be issued to OEMs/ Manufacturers or their authorised dealers/ distributors; if, it is the policy the OEM/ Manufacturer to deal through their authorised dealers/ distributor or the OEM/ Manufacturer specifically authorises his dealer/ distributor to quote in the tender. c) In case of raw materials/ tools & gauges/ machinery spares/ COTS items, procured indigenously, tender may be issued to authorized dealers/ distributors of the OEMs/ Manufacturers. d) Similarly, in case of imported stores including raw material/ tools & gauges/ machinery spares, tender can be issued to authorised dealers/entities if the OEMs/ Manufacturers deal through them. e) The long term requirement, if known, shall be indicated in the tender notice/ tender to attract more firms to quote. f) Sometimes due to short shelf-life (e.g. shellac), high volatility (e.g. denatured spirit) or high storage losses, difficulties are experienced in procurement, and vendors also normally provide very short validity for their bids. These items being commercially available there are normally adequate 40 number of sources in the market. Therefore, there may not be a need for any special source development exercise. In such case procurement may be made from registered/ government licensed/ reputed vendors through LTE issued to minimum six vendors. Considering the shelf-life and storage losses, the VSL TPC, after duly recording reasons, shall decide the optimal frequency at which the procurement will be made. g) For limited tender enquiry of COTS items, para 2.17 (a) & (b) may be referred. 2.26 Procedure for Made-to-Order items The challenges faced in procurement of MTO items are given in paragraph 1.1. These challenges necessitate special procedure for MTO items to ensure delivery of quality end-products according to the targeted production program. The following procedure shall be followed for procuring Made-to-Order items: (i) Net deficiency shall be worked out as detailed in paragraph 2.6. (ii) MTO items are manufactured as per the specific requirements of ordnance factories and their sources are limited, therefore, to generate healthy competition, source development exercise shall necessarily be undertaken through Source Development OTE to develop adequate sources. Bearing in mind the significance of competition, SDOTE, where relevant, shall necessarily be issued to vendor with valid registration (excluding the established suppliers) along with the LTE. Advance Vendor registration for new vendors should be done twice in a year through open advertisement during 01st fortnight of January and July of every year. However, in addition, vendor can also apply for registration throughout the year. If no response received in AVR/AVR not floated due to non availability of requirement, then Factory may float SDOTE in two bids. (iii) Vendors become established source for a particular item after securing order by participation in a SDOTE for the item and successfully delivering at least 60% of ordered quantity against the supply order, and the same being accepted on conformity to the qualitative requirements. However, supplies against subsequent LTE orders shall be accepted subject to completion of the supplies under the SDOTE. Established vendors for aggregates, assemblies and sub-assemblies shall be considered as established vendors for components and sub-assemblies that go into making of the aggregate, assembly and sub-assembly. 41 (iv) The OC is provided in the LTE to take care of the eventuality of the SDOTE supplies not materialising in time for meeting the targeted production. Accordingly the OC shall be exercised when it becomes evident that supplies from SDOTE will not materialise in time for meeting the targeted production. The OC may also be exercised in case the supply plan/ indent have been enhanced from that considered while calculating the net deficiency. (v) If the value of the net deficiency worked out for a MTO item is up to Rs. 25 lakh (including the OC quantity), then without insisting on SDOTE, the entire net deficiency may be procured through LTE provided there are minimum 3 established vendors with valid registration and no cartel is suspected (to be recorded after due diligence by the relevant TPC). If the number of established vendors is less than 3, then registered vendors for the same range of products/ goods/ services/ technology can also be included for the LTE as provided in paragraph 2.17 (c). (vi) MTO items are specialised items that do not have commercial application. Therefore, keeping established sources active/alive is important. Established production lines in the trade remain alive when established sources get periodical orders to keep the facilities active. Thinning out orders on too many established sources has a potential risk of established sources dying out due to non-availability of adequate work to keep established facilities alive/active. To avoid such a situation, for MTO items more than Rs. 25 lakh (including option clause quantity), where 3 or more established sources is existing for an item, the VSL TPC, after approval of Empowered Committee/Fy TPC-I / next higher CFA for ‘A’, ‘B’ and ‘C’ category items respectively (as mentioned in paragraph 2.24(viii)) and necessary due diligence with recording reasons, may decide not to undertake further source development, provided the existing established sources are not acting in collusion/ cartel. In such case the entire net deficiency may be procured through LTE. (vii) For items other than those exempted from SDOTE, as decided by (a) Empowered Committee, (b) Fy TPC-I, (c) Next Higher CFA for ‘A’, ‘B’&‘C’ category items respectively, following provision shall prevail :- 80% of the net deficiency shall be procured, with a 25% option clause, through LTE issued to only established sources with valid registration. All the established sources, including sources developed by other factories for that particular item, shall be allowed to participate in the LTE. 42  Balance 20% of the net deficiency shall be procured, without option clause through SDOTE following a two-bid system where established sources shall not be allowed to participate. However, to prevent stock out situations and (or) cater to unforeseen requirements of the Armed Forces/MHA and on the ground of national security as per directive of MoD, LTE can be resorted to for even the balance quantity. In such cases, approval of Empowered Committee shall be obtained for resorting to LTE. With low volume/quantity, if considered necessary by VSL TPC, LTE of 50% quantity with 100% option clause and SDOTE with balance 50% quantity without option clause can be initiated. (viii) (a) EMPOWERED COMMITTEE may be set up at factory level to identify items/ material with adequate vendor base for ‘A’ category items. “Empowered Committee” may be constituted in each factory, consisting of GM/Sr.GM as Chairman of the Committee and DDG/Concerned Operating Division, Controller of Account (Fys), AGM/MM, AGM/Similar type of factory as member. For ‘B’ category items, Fy/TPC-I is empowered to identify items/material with adequate vendor base. For ‘C’ category items, next higher CFA is empowered to decide items/material on adequacy of vendor base on case to case basis. A, B & C category items should be as per standard norms for ABC Analysis of Inventory. (b) The above committees for ‘A’, ‘B’ & ‘C’ category items will be empowered to decide on adequacy of vendor base for exemption from SDOTE. Detailed guidelines shall be formulated through SOP by OFB/MM. (c) The scope of work of the committee is as follows: i) Every year committees may review the MTO items (‘A’ & ‘B’ category), having 3 or more (minimum 3) established and registered vendors & finalize the list of MTO items for exemption from SDOTE. The accepted list of the ‘A’ & ‘B’ category items may remain valid for 2 years. 43  ii) The Committees’ should consider the adequacy of the vendor base, projected requirement of the item, complexity of the system being developed, time required for development investment required to be made etc. while making such recommendation/decision. iii) Decision of 100% LTE for MTO items in case to prevent stock out situations and (or) cater to unforeseen requirements of the Arme