Manual For Procurement Of Works (Updated June, 2022) PDF
Document Details
2022
Dr. T. V. Somanathan
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Summary
This document is a manual for procurement of works in India, updated in June 2022. It provides guidelines and procedures for government organizations to procure goods, works, and services. The manual was revised and issued and is a standard reference document for officials.
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Manual for Procurement of Works (Updated June, 2022) Government of India Ministry of Finance Department of Expenditure i ii iv FOREWORD 1. Government organizations procure a wide variet...
Manual for Procurement of Works (Updated June, 2022) Government of India Ministry of Finance Department of Expenditure i ii iv FOREWORD 1. Government organizations procure a wide variety of goods and services and undertake execution of works in pursuance of their duties and responsibilities. With a view to improving transparency in decision making in public procurement and reducing the scope for subjectivity, Department of Expenditure in 2006 had prepared a set of three Manuals on Policies and Procedures for Procurement of Goods, Works and hiring of Consultants, in conformity with the General Financial Rules (GFR), 2005. Over the years, these Manuals have served as a guide book for procurement. 2. In the last few years, the Government of India has issued new instructions in the domain of public procurement. Some of these important changes include introduction of Central Public Procurement Portal (CPPP), preference for domestic contractors, inclusion of integrity pact, etc. The GFR has been revised comprehensively in March 2017 covering inter-alia these set of new instructions. Consequently, the Manual of Procurement of Goods and Manual for Procurement of Consultancy & Other Services too have been revised. 3. The new Manual on Procurement of Works has been extensively revised in keeping with GFR 2017 and in consonance with the fundamental principles of transparency, fairness, competition, economy, efficiency and accountability. Efforts have been made to cover all major aspects of procurement in this Manual in a user-friendly manner. The manual is the outcome of extensive consultations with Ministries/ Departments/ PSUs and other organizations over a period of more than one year. 4. Manuals issued by this Department are to be taken as generic guidelines, which have to be necessarily broad in nature. Ministries/ Departments are advised to supplement this manual to suit their local/ specialized needs, by issuing their own detailed manuals (including customized formats); Standard Bidding Documents and Schedule of Procurement Powers to serve as detailed instructions for their own procuring officers. 5. I would like to acknowledge the efforts taken by Shri Sanjay Prasad, Joint Secretary (PF C-II), Shri Sanjay Aggarwal, Director (PPD), Shri Kotluru Narayana Reddy, Deputy Secretary (PPD) and Shri Girish Bhatnagar, Consultant (Public Procurement) in revision of this Manual. I would also like to thank the Ministries, Departments, other organisations and individuals who reviewed the drafts of the Manual and provided their valuable inputs. 6. I hope that this Manual would be useful to procuring officials working in various Ministries/ Departments as operating instructions and will bring about greater transparency and predictability in government procedures and help in improving the ease of doing business with the Government. (G. C. Murmu) Date : 06.06.2019 Secretary (Expenditure) v vi CAUTION While every care has been taken to ensure that the contents of this Manual are accurate and up to date till June 2022, the procuring entities are advised to check the precise current provisions of extant law and other applicable instruction from the original sources. In case of any conflict between the provisions stipulated in this Manual and in the original sources. Such as GFR or the prevailing laws, the provisions contained in the extant law and the original instructions shall prevail. vii viii Table of Contents FOREWORD...........................................................................................................................iii CAUTION...............................................................................................................................vii Table of Contents................................................................................................................... ix Abbreviations and Acronyms................................................................................................. xiii Procurement Glossary.......................................................................................................... xvii Chapter 1: Introduction to Procurement of Works................................................................... 1 1.1 Procurement Rules and Regulations; and this Manual............................................. 1 1.2 Clarification, Amendments and Revision of this Manual........................................... 8 1.3 Applicability of this Manual........................................................................................ 8 1.4 Basic Aims of Procurement – Five R’s of Procurement.......................................... 10 1.5 Fundamental Principles of Public Procurement...................................................... 10 1.6 Standards (Canons) of Financial Propriety............................................................. 10 1.7 Public Procurement Infrastructure at the Centre..................................................... 11 1.8 Legal Aspects Governing Public Procurement of Works........................................ 12 1.9 The Law of Agency – applicable to Procurement of Works.................................... 13 1.10 The Basic Principles of undertaking works:......................................................... 13 1.11 Processing of Public Works................................................................................. 15 1.12 Administrative Control and Powers to Sanction.................................................. 16 Chapter 2: Preparation of Estimates..................................................................................... 17 2.1 Perspective Planning for Works.............................................................................. 17 2.2 Preparation of Preliminary Project Report (PPR) or Rough Cost Estimate............. 17 2.3 Acceptance of necessity and issue of in-Principle Approval................................... 18 2.4 Preparation of Detailed Project Report (DPR) /Preliminary Estimates (PE)........... 18 2.5 Administrative Approval and Expenditure Sanction (A/A and E/S)......................... 20 2.6 Detailed Designs, Detailed Estimates and Technical Sanction............................... 20 2.7 Appropriation of funds............................................................................................. 21 2.8 Reference Documents used in preparation of Estimates........................................ 21 2.9 Procurement Planning............................................................................................. 21 Chapter 3: Agency for Procurement; Types of Contract, Bidding Systems and Modes of Procurement.......................................................................................................................... 22 3.1 Agency for Procurement......................................................................................... 22 3.2 Types of Contract.................................................................................................... 23 3.3 Bidding Systems..................................................................................................... 28 3.4 Electronic Procurement (e-Procurement)................................................................ 38 ix 3.5 Modes of Tendering................................................................................................ 39 Chapter 4: Preparing Bid Documents, Publication, Receipt and Opening of Bids................ 51 4.1 Bid Documents........................................................................................................ 51 4.2 Preparation of Bid Documents by Procuring Entity................................................. 53 4.3 Publication of Bid Documents................................................................................. 54 4.4 Issue/ Availability and Cost of tender documents................................................... 56 4.5 Eligibility and Qualifications of Bidders................................................................... 56 4.6 Clarification of Tender Documents.......................................................................... 57 4.7 Amendment of Tender Documents......................................................................... 57 4.8 Pre-bid Conference................................................................................................. 57 4.9 Submission of Bids by Bidders................................................................................ 58 4.10 Receipt and Opening of Bids............................................................................... 62 4.11 Bid Security/ Earnest Money Deposit (EMD)....................................................... 64 4.12 Performance Guarantee...................................................................................... 65 4.13 Security Deposit/ Retention Money..................................................................... 66 4.14 Sources and Verification of Bank Guarantees..................................................... 66 4.15 Safe Custody and Monitoring of Securities......................................................... 67 4.16 Goods and Services Tax (GST).......................................................................... 67 4.17 Risks and Mitigations- Preparing Bid Documents, Publication, Receipt and Opening of Bids................................................................................................................. 69 Chapter 5: Evaluation of Bids and Award of Work................................................................ 71 5.1 Evaluation of Bids................................................................................................... 71 5.2 Schedule of Procurement Powers (SoPP).............................................................. 71 5.3 Preparation of Comparative Statement and Briefing Note...................................... 72 5.4 Preliminary Examination......................................................................................... 72 5.5 Evaluation of Responsive Bids................................................................................ 74 5.6 Deliberations by the Tender Committee.................................................................. 76 5.7 Award of Work......................................................................................................... 82 5.8 Evaluation of Bids and Award of Contract - Risks and Mitigations......................... 86 Chapter 6: Execution and Monitoring of Works and Quality Assurance................................ 89 6.1 Execution and Monitoring of Work............................................................................... 89 6.2 Quality Assurance................................................................................................... 91 6.3 Design Approvals.................................................................................................... 91 6.4 Time Monitoring...................................................................................................... 91 6.5 Financial Monitoring................................................................................................ 93 6.6 Commissioning and Documentation.................................................................... 101 x 6.7 Closure of Contract............................................................................................... 102 6.8 Dispute Resolution Mechanism............................................................................. 103 6.9 Conciliation............................................................................................................ 104 6.10 Arbitration......................................................................................................... 104 6.11 Breach of Contract, Remedies and Termination............................................... 106 6.12 Preparation of Revised Project Report.............................................................. 107 Chapter 7: Registration/ Enlistment of Contractors and Governance Issues...................... 109 7.1 Contractor Relationship Management................................................................... 109 7.2 Code of Integrity for Public Procurement (CIPP).................................................. 109 7.3 Integrity Pact (IP).................................................................................................. 112 7.4 Development of New Sources and Registration/ Enlistment of Contractors......... 115 7.5 Debarment............................................................................................................ 118 7.6 Project Management............................................................................................. 121 ANNEXURE......................................................................................................................... 129 Annexure 1: Procurement Guidelines.................................................................................. 130 Annexure 2: Bid Opening Attendance Sheet cum Report................................................... 131 Annexure 3: Tender Committee Minutes Format................................................................ 132 Annexure 4: Invitation and Declaration for Negotiations..................................................... 134 Annexure 5: Format of Revised Offer in Negotiations......................................................... 135 Annexure 6: Letter (Notification) of Award (LOA) of Contract............................................. 136 Annexure 7: No Claim Certificate........................................................................................ 137 Annexure 8: A Sample MOU............................................................................................... 138 Annexure 9: Flowchart of Process of Procurement of Works.............................................. 146 Annexure 10: Additional Resources relating to Procurement of Works.............................. 148 Annexure 11: Format for seeking the approval of the Competent Authority for inviting Global Tender Enquiry for procurements less than Rs. 200 crores................................................ 149 Annexure 12: List of Medical Devices and IVDs, where local manufacturers are not available, as on 17.12.2021 (as verified with the Medical Devices Manufacturing Associations)....... 151 Annexure 13: Model Clause/ Certificate to be inserted in tenders etc. w.r.t Order (Public Procurement No.1).............................................................................................................. 154 Annexure 14: Example of Formula for Price Variation Clause............................................ 157 Appendix 1: Advanced Concepts of Value for Money and Fundamental Principles of Public Procurement........................................................................................................................ 159 1.0 The Concept of Value........................................................................................... 159 2.0 Total Cost of Ownership........................................................................................ 159 3.0 Value for Money.................................................................................................... 160 4.0 Fundamental Principles of Public Procurement.................................................... 160 xi Appendix– 2: Legal Aspects of Public Procurement............................................................ 170 1.0 Relevant Provisions of the Constitution of India.................................................... 170 2.0 Salient Features of the Indian Contract Act.......................................................... 171 3.0 Salient Features of the Indian Arbitration & Conciliation Act 1996 and Arbitration and Conciliation (Amendment) Act, 2015........................................................................ 176 4.0 Salient Features of Competition Act, 2002 relating to Anti-competitive Practices 180 5.0 Salient Features of the Whistle Blowers Protection Act, 2011 and the Whistle Blowers Protection (Amendment) Act, 2015.................................................................... 184 Appendix 3: Electronic Procurement (e-Procurement)........................................................ 187 1.0 Electronic procurement (e-procurement).............................................................. 187 2.0 Service Provider.................................................................................................... 187 3.0 Process................................................................................................................. 187 xii Abbreviations and Acronyms AAEC Appreciable Adverse Effect on Competition AITB Appendix to Instructions to Bidders (ITB, also named as BDS, sometimes, see below) BC (selling) Bill for Collection Selling (Foreign Exchange) Rate BDS Bid Data Sheet BG Bank Guarantee BIS Bureau of Indian Standards BOC Bid Opening Committee BOQ Bill of Quantities BRO Border Roads Organisation C&AG Comptroller and Auditor General (of India) CA Competent Authority CBI Central Bureau of Investigation CCI Competition Commission of India CEC Consultancy Evaluation Committee CIPP Code of Integrity for Public Procurement CMC Contract Management Committee CPO Central Purchasing Organizations CPPP Central Public Procurement Portal CPSE Central Public Sector Enterprise, see PSU also CPWD Central Public Works Department CV Curriculum Vitae CVC Central Vigilance Commission CVO Chief Vigilance Officer DFPR Delegation of Financial Power DG Director General DGS&D Directorate General of Supplies and Disposals DLC Defect Liability Certificate DLP Defect Liability Period DoE Department of Expenditure DPR Detailed Project Report DSC Digital Signature Certificate xiii DSPE Delhi Special Police Establishment Act, 1946 EC Evaluated Cost ECS Electronic Clearing System EIA Environmental impact assessment EMD Earnest Money Deposit EOI Expression of Interest (Tender) EPC Engineering, Procurement and Construction EPF Employee Provident Fund ESI Employee State Insurance FA Financial Advisor FBS Fixed Budget System FEMA Foreign Exchange Management Act FM Force Majeure FTP Full Technical Proposal GCC General Conditions of Contract GePNIC Government e-Procurement (System) of National Informatics Centre GFR General and Financial Rules, 2017 GOI Government of India GTE Global Tender Enquiry HOD Head of the Department HUF Hindu Undivided Family ICT Information & Communications Technology IEM Independent External Monitor IP Integrity Pact ISO International Organization for Standardization IT Information Technology ITB Instructions to Bidders (may in some instance be called Instructions to Tenderers - ITT) ITC Instructions to Consultants ITJ Indian Trade Journal JV Joint Venture (Consortium) L1 Lowest Bidder L2 Second Lowest Bidder L3 Third Lowest Bidder xiv LCC Life Cycle Cost LCS Least Cost System LD Liquidated Damages LEC Lowest Evaluated Cost LOA Letter of Acceptance LOI Letter of Invitation LTE Limited Tender Enquiry MB Measurement Book MES Military Engineering Service MoF Ministry of Finance MOU Memorandum of Understanding (of JV) MoUD Ministry of Urban Development MSTC Metal Scrap Trading Corporation NGO Non Government Organisation NIC National Informatics Centre NIT Notice Inviting Tender OTE Open Tender Enquiry PAN Personal Account Number PBG Performance Bank Guarantee POL Petroleum Oils and Lubricants PPD Procurement Policy Division PPP Public Private Partnership PPP-MII Public Procurement (Preference to Make in India), Order PPR Preliminary Project Report PQB Prequalification Bidding PQC Pre-qualification Criteria PSARA Private Security Agencies Regulation Act, 2005 (C)PSU/ PSE (Central) Public Sector Undertaking/ Enterprise PWO Public Works Organisations QA Quality Assurance QCBS Quality and Cost Based Selection (S)RFP (Standard) Request for Proposals (Document) RFQ Request for Qualification RTI Right to Information (Act) xv SBD Standard Bidding Document SCC Special Conditions of Contract SD Security Deposit SLA Service Level Agreement SoPP Schedule of Procurement Powers SOR Schedule of Rates SSS/ STE Single Source Selection/ Single Tender Enquiry STP Simplified Technical proposal TC Tender Committee also called Tender Purchase or Evaluation Committee (TPC/ TEC) or Tender Scrutiny Committee TCO Total Cost of Ownership TOC Taking Over Certificate TOR Terms of Reference URDG Uniform Rules for Demand Guarantees VAT Value Added Tax VfM (Best) Value for Money WOL Whole of Life (Cost) or Total Cost of Ownership TCO xvi Procurement Glossary In this Manual and in the ‘Procurement Guidelines’, unless the context otherwise requires: i) "Bid" (including the term ‘tender’, ‘offer’, ‘quotation’ or ‘proposal’ in certain contexts) means an offer to supply goods, services or execution of works made in accordance with the terms and conditions set out in a document inviting such offers; ii) "Bidder" (including the term ‘tenderer’, ‘consultant’ or ‘service provider’ in certain contexts) means any eligible person or firm or company, including a consortium (that is an association of several persons, or firms or companies), participating in a procurement process with a procuring entity; iii) "(Standard) Bid(ding) documents" (including the term ‘tender (enquiry) documents’ or ‘Request for Proposal Documents’ – RFP documents in certain contexts) means a document issued by the procuring entity, including any amendment thereto, that sets out the terms and conditions of the given procurement and includes the invitation to bid. A Standard (Model) Bidding Document is the standardised template to be used for preparing Bidding Documents after making suitable changes for specific procurement; iv) "Bidder enlistment document" means a document issued by a procuring entity, including any amendment thereto, that sets out the terms and conditions of enlistment proceedings and includes the invitation to enlist; v) "Bid security" (including the term ‘Earnest Money Deposit’(EMD), in certain contexts) means a security from a bidder securing obligations resulting from a prospective contract award with the intention to avoid: the withdrawal or modification of an offer within the validity of the bid, after the deadline for submission of such documents; failure to sign the contract or failure to provide the required security for the performance of the contract after an offer has been accepted; or failure to comply with any other condition precedent to signing the contract specified in the solicitation documents.; vi) “Central Public sector enterprise” means a body incorporated under the Companies Act or established under any other Act and in which the Central Government or a Central enterprise owns more than 50 (fifty) per cent of the issued share capital; vii) "Central Purchase Organisation" means a procuring entity which is authorised by the Government of India by an order, made in this behalf, to make procurement for one or more procuring entities or to enter into rate contracts or framework agreements for procurement by other procuring entities. However, Government can authorise other Organisations for specific categories of materials; viii)“Class-I local supplier” means a supplier or service provider, whose goods, services or works offered for procurement, meet the minimum local content as prescribed for ‘Class- I local supplier’ under the Public Procurement (Preference to Make in India), Order 20171; ix) “Class-II local supplier” means a supplier or service provider, whose goods, services or works offered for procurement, meets the minimum local content as prescribed for ‘Class- 1 Notified vide Order No. P-45021/2/2017-PP (BE-II) issued by Department of Promotion of Industry and Internal Trade dated 16.09.2020 xvii II local supplier’ but less than that prescribed for ‘Class-I local supplier’ under the Public Procurement (Preference to Make in India), Order 20172; x) “Competent Authority” or the “Competent Financial Authority” means the officer (s) who have been delegated the financial powers to approve the decision. xi) “Consultancy services” covers a range of services that are of an advisory or professional nature and are provided by Consultants. These Services typically involve providing expert or strategic advice e.g., management consultants, policy consultants or communications consultants, Advisory and project related Consultancy Services and include, for example: feasibility studies, project management, engineering services, Architectural Services, finance and accounting services, training and development. It may include small works or supply of goods or non-Consultancy services which are incidental or consequential to such services; xii) “e-Procurement” means the use of information and communication technology (specially the internet) by the procuring entity in conducting its procurement processes with bidders for the acquisition of goods (supplies), works and services with the aim of open, non- discriminatory and efficient procurement through transparent procedures; xiii) "Enlisted Contractor" means any contractor who is on a list of enlisted contractors of the procuring entity or a Central Purchase Organisation (Please refer to registration to appreciate the differentiation); xiv) “Enlisting authority” means an authority which enlists bidders for different categories of procurement(Please refer to registration to appreciate the differentiation); xv) “Enlistment” means including the name of the contractor in the list of after verification of credentials.(Please refer to registration to appreciate the differentiation) xvi) "Goods" includes all articles, material, commodity, livestock, furniture, fixtures, raw material, spares, instruments, machinery, equipment, industrial plant, vehicles, aircrafts, ships, medicines, railway rolling stock, assemblies, sub-assemblies, accessories, a group of machineries comprising an integrated production process or such other categories of goods or intangible products like software, technology transfer, licenses, patents or other intellectual properties purchased or otherwise acquired for the use of Government but excludes books, publications, periodicals, etc., for a library. The term ‘goods’ also includes works and services which are incidental or consequential to the supply of such goods, such as, transportation, insurance, installation, commissioning, training and maintenance; xvii) “Indenter” ( or the term ‘User (Department)’ in certain contexts) means the entity and its officials initiating a procurement indent, that is, a request to the procuring entity to procure goods, works or services specified therein; xviii) “Inventory” means any material, component or product that is held for use at a later time; xix) "Invitation to (pre-)qualify" means a document including any amendment thereto published by the procuring entity inviting offers for pre-qualification from prospective bidders; xx) "Invitation to Enlist" means a document including any amendment thereto published by the procuring entity inviting offers for bidder enlistment from prospective bidders; xxi) “Local Content” means the amount of value added in India which shall, unless otherwise prescribed by the Nodal Ministry, be the total value of the item procured 2 Notified vide Order No. P-45021/2/2017-PP (BE-II) issued by Department of Promotion of Industry and Internal Trade dated 16.09.2020 xviii (excluding net domestic indirect taxes) minus the value of imported content in the item (including all customs duties) as a proportion of the total value, in percent3. xxii) “Non-Local supplier” means a supplier or service provider, whose goods, services or works offered for procurement, has local content less than that prescribed for ‘Class-II local supplier’ under the Public Procurement (Preference to Make in India), Order 20174 xxiii) "Notice inviting tenders" (including the term ‘Invitation to bid’ or ‘request for proposals’ in certain contexts) means a document and any amendment thereto published or notified by the procuring entity, which informs the potential bidders that it intends to procure goods, services and/ or works.; xxiv) “Other Services” (including the term ‘Non-consultancy services’ in certain contexts) are defined by exclusion as services that cannot be classified as Consultancy Services. Other services involve routine repetitive physical or procedural non-intellectual outcomes for which quantum and performance standards can be tangibly identified and consistently applied and are bid and contracted on such basis. It may include small works, supply of goods or consultancy service, which are incidental or consequential to such services. Other Services may include transport services; logistics; clearing and Forwarding; courier services; upkeep and maintenance of office/ buildings/ Estates (other than Civil & Electrical Works etc.); drilling, aerial photography, satellite imagery, mapping and similar operations etc; xxv) “Outsourcing of Services” means deployment of outside agencies on a sustained long- term (for one year or more) for performance of other services which were traditionally being done in-house by the employees of Ministries/ departments (e.g. Security Services, Horticultural Services, Janitor/ Cooking/ Catering/ Management Services for Hostels and Guest Houses, Cleaning/ Housekeeping Services,.Errand/ Messenger Services, and so forth). Besides outsourcing, other services also include procurement of short-term stand- alone services. xxvi) "Pre-qualification (bidding) procedure" means the procedure set out to identify, prior to inviting bids, the bidders that are qualified to participate in the procurement; xxvii) "Pre-qualification document" means the document including any amendment thereto issued by a procuring entity, which sets out the terms and conditions of the pre- qualification bidding and includes the invitation to pre-qualify; xxviii) "Procurement" or "public procurement" (or ‘Purchase’, or ‘Government Procurement/ Purchase’ in certain contacts) means acquisition by way of purchase, lease, license or otherwise, either using public funds or any other source of funds (e.g. grant, loans, gifts, private investment etc.) of goods, works or services or any combination thereof, including award of Public Private Partnership projects, by a procuring entity, whether directly or through an agency with which a contract for procurement services is entered into, but does not include any acquisition of goods, works or services without consideration, and the term "procure" or "procured" shall be construed accordingly; xxix) "Procurement contract" (including the terms ‘Purchase Order’ or ‘Supply Order’ or ‘Withdrawal Order’ or ‘Work Order’ or ‘Consultancy Contract’ or ‘Contract for Other Services’ under certain contexts), means a formal legal agreement in writing relating to 3 Notified vide Order No. P-45021/2/2017-PP (BE-II) issued by Department of Promotion of Industry and Internal Trade dated 16.09.2020 4 Notified vide Order No. P-45021/2/2017-PP (BE-II) issued by Department of Promotion of Industry and Internal Trade dated 16.09.2020 xix the subject matter of procurement, entered into between the procuring entity and the contractor, service provider or contractor on mutually acceptable terms and conditions and which are in compliance with all the relevant provisions of the laws of the country. The term “contract” will also include “rate contract’ and “framework contract”; xxx) “(Public) Procurement Guidelines” means guidelines applicable to Public Procurement, consisting of under relevant context a set of – i) Statutory Provisions (The Constitution of India; Indian Contract Act, 1872; Sales of Goods Act, 1930; and other laws as relevant to the context); ii) Rules & Regulations (General Financial Rules, 2017; Delegation of Financial Power Rules and any other regulation so declared by the Government); iii) Manuals of Policies and Procedures for Procurement (of Goods; Works; Consultancy/ other services or any for other category) promulgated by the Ministry of Finance and iv) Procuring Entity’s Documents relevant to the context (Codes, Manuals and Standard/ Model Bidding Documents); xxxi) "Procurement process" means the process of procurement extending from the assessment of need; issue of invitation to pre-qualify or to enlist or to bid, as the case may be; the award of the procurement contract; execution of contract till closure of the contract; xxxii) "Procuring Entity" (including Procuring Authority or Employer) means any Ministry or Department of the Central Government or a unit thereof or its attached or subordinate office to which powers of procurement have been delegated; xxxiii) “Project” means one-time, short-term expenditure resulting in creation of capital assets, which could yield financial or economic returns or both. A project may comprise one or more related but independent task-oriented ‘Works’. Projects may either be approved as individual projects within an approved scheme envelope or on a stand-alone basis. They may be executed through budgetary, extra-budgetary resources, or a combination of both. xxxiv) "Prospective bidder" means anyone likely or desirous to be a bidder; xxxv) "Public Private Partnership" means an arrangement between the central, a statutory entity or any other government-owned entity, on one side, and a private sector entity, on the other, for the provision of public assets or public services or a combination thereof, through investments being made or management being undertaken by the private sector entity, for a specified period of time, where there is predefined allocation of risk between the private sector and the public entity and the private entity receives performance-linked payments that conform (or are benchmarked) to specified and predetermined performance standards, deliverables or Service Level agreements measurable by the public entity or its representative; xxxvi) “Registration” means simply registering the bidder/ supplier/ service provider/ contractor, without any verification, say on a website etc. (Please refer to enlistment to appreciate the differentiation). xxxvii) "Reverse auction" (or the term ‘Electronic reverse auction’ in certain contexts) means an online real-time purchasing technique utilised by the procuring entity to select the successful bid, which involves presentation by bidders of successively more favourable bids during a scheduled period of time and automatic evaluation of bids; xxxviii)"service" is defined by exception as any subject matter of procurement other than goods or works, except those incidental or consequential to the service, and includes physical, maintenance, professional, intellectual, training, consultancy and advisory services or any other service classified or declared as such by a procuring entity but does xx not include appointment of an individual made under any law, rules, regulations or order issued in this behalf. It includes ‘Consultancy Services’ and ‘Other (Non-consultancy) Services’; xxxix) "Subject matter of procurement" means any item of procurement whether in the form of goods, services or works or a combination thereof; xl) "Works" refer to any activity, sufficient in itself to fulfil an economic or technical function, involving construction, fabrication, repair, overhaul, renovation, decoration, installation, erection, excavation, dredging, and so on, which make use of a combination of one or more of engineering design, architectural design, material and technology, labour, machinery and equipment. Supply of some materials or certain services may be incidental or consequential to and part of such works. The term “Works” includes (i) civil works for the purposes of roads, railway, airports, shipping-ports, bridges, buildings, irrigation systems, water supply, sewerage facilities, dams, tunnels and earthworks; and so on, and (ii) mechanical and electrical works involving fabrication, installation, erection, repair and maintenance of a mechanical or electrical nature relating to machinery and plants. xxi Chapter 1: Introduction to Procurement of Works 1.1 Procurement Rules and Regulations; and this Manual i) Various ministries, departments, attached and subordinate offices, local urban bodies, public sector enterprises and other government (including autonomous) bodies (hereinafter referred as ‘Procuring Entities’) spend a sizeable amount of their budget on procurement of goods, works and services to discharge the duties and responsibilities assigned to them. ii) The Ministries/ Departments have been delegated powers to make their own arrangements for procurement of works under the Delegation of Financial Power Rules, which have to be exercised in conformity with the ‘Procurement Guidelines’. iii) To ensure that these procurements are made by following a uniform, systematic, efficient and cost-effective procedure and also to ensure fair and equitable treatment of bidders/ contractors, there are statutory provisions; rules; financial, vigilance, security, safety, counter- trade and other regulations; orders and guidelines of the Government on the subject of public procurement (hereinafter referred as ‘Procurement Guidelines’) which provide framework for the public procurement system. iv) At the apex of the statutory framework governing public procurement is Article 299 of the Constitution of India, which stipulates that contracts legally binding on the Government have to be executed in writing by officers specifically authorized to do so. The Constitution also enshrines Fundamental Rights (In particular Article 14 – Right to Equality before law and Article 19 (1) (g) – Right to carry on a Profession) which have implications for Public Procurement. Further, the Indian Contract Act, 1872 and the Arbitration and Conciliation Act, 1996 (as amended in 2015) are major legislations governing contracts for procurement (both private and public) in general. There are in addition guidelines issued by Central Vigilance Commission (CVC) relating to Governance issues which are applicable to Public Procurement also. There is no law exclusively governing public procurement. v) However, comprehensive Rules and Regulations in this regard are available in the General Financial Rules (GFR), 2017, Delegation of Financial Powers Rules (DFPR); Public Procurement (Preference to Make in India), Order 2017 and the guidelines issued by the Central Vigilance Commission to increase transparency and objectivity in public procurement. vi) Without purporting to be a comprehensive compendium of all such ‘Procurement Guidelines’, this Manual is intended to serve as a portal to enter this vast area and draw attention to basic norms and practices governing public procurement. These guidelines would not be applicable to projects funded by World Bank and other International Funding Agencies, as, such external aid/ loans etc. received are covered under the applicable policies/ legal agreements executed as permitted under Rules 264 of GFR 2017. 1.1.1 Preference to Make in India 1 To encourage ‘Make in India’ and promote manufacturing and production of goods and services in India with a view to enhancing income and employment, Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Government of India, issued Public Procurement (Preference to Make in India), Order 20175. The order is issued pursuant to Rule 153 (iii) of GFR, 2017. The Order is applicable on the procurement of Goods, Works and Services. For the purpose of this Order:- a) ‘L1’ means the lowest tender or lowest bid or the lowest quotation received in a tender, bidding process or other procurement solicitation as adjudged in the evaluation process as per the tender or other procurement solicitation. b) ‘Margin of purchase preference’ means the maximum extent to which the price quoted by a “Class-I local supplier” may be above the L1 for the purpose of purchase preference. It has been fixed as 20 (twenty) percent. c) ‘Nodal Ministry’ means the Ministry or Department identified pursuant to this order in respect of a particular item of goods or services or works. d) ‘Procuring entity’ means a Ministry or department or attached or subordinate office of, or autonomous body controlled by, the Government of India and includes Government companies as defined in the Companies Act. e) ‘Works’ means all works as per Rule 130 of GFR- 2017, and will also include ‘turnkey works’. (i) Eligibility of ‘Class-I local supplier’/ ‘Class-II local supplier’/ ‘Non-local suppliers’ for different types of procurement a) In procurement of all goods, services or works in respect of which the Nodal Ministry/ Department has communicated that there is sufficient local capacity and local competition, only ‘Class-I local supplier’, shall be eligible to bid irrespective of purchase value. b) Only ‘Class-I local supplier’ and ‘Class-II local supplier’, shall be eligible to bid in procurements undertaken by procuring entities, except when Global tender enquiry has been issued. In global tender enquiries, ‘Non-local suppliers’ shall also be eligible to bid along with ‘Class-I local suppliers’ and ‘Class-II local suppliers’. In procurement of all goods, services or works, not covered by sub-para (i)(a) above, and with estimated value of purchases less than Rs. 200 Crore, in accordance with Rule 161(iv) of GFR, 2017, Global tender enquiry shall not be issued except with the approval of competent authority as designated by Department of Expenditure. c) For the purpose of this Order, works includes Engineering, Procurement and Construction (EPC) contracts and services include System Integrator (SI) contracts. (ii) Purchase Preference a) Subject to the provisions of the Order and to any specific instructions issued by the Nodal Ministry or in pursuance of the Order, purchase preference shall be given to ‘Class-I local supplier’ in procurements undertaken by procuring entities in the manner specified here under. 5 Latest revision to the Order notified vide OM No. P-45021/2/2017-PP (BE-II) issued by DPIIT, dated 16.09.2020 2 b) n the procurements of goods or works, which are covered by para (i)(b) above and which are divisible in nature, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-II local supplier’ as well as ‘Non-local supplier’, as per following procedure: 1. Among all qualified bids, the lowest bid will be termed as L1. If L1 is ‘Class-I local supplier’, the contract for full quantity will be awarded to L1. 2. If L1 bid is not a ‘Class-I local supplier’, 50 (fifty) percent of the order quantity shall be awarded to L1. Thereafter, the lowest bidder among the ‘Class-I local supplier’ will be invited to match the L1 price for the remaining 50 (fifty) percent quantity subject to the Class-I local supplier’s quoted price falling within the margin of purchase preference, and contract for that quantity shall be awarded to such ‘Class-I local supplier’ subject to matching the L1 price. In case such lowest eligible ‘Class-I local supplier’ fails to match the L1 price or accepts less than the offered quantity, the next higher ‘Class-I local supplier’ within the margin of purchase preference shall be invited to match the L1 price for remaining quantity and so on, and contract shall be awarded accordingly. In case some quantity is still left uncovered on Class-I local suppliers, then such balance quantity may also be ordered on the L1 bidder. c) In the procurements of goods or works, which are covered by para (i)(b) above and which are not divisible in nature, and in procurement of services where the bid is evaluated on price alone, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-II local supplier’ as well as ‘Non-local supplier’, as per following procedure: 1. Among all qualified bids, the lowest bid will be termed as L1. If L1 is ‘Class-I local supplier’, the contract will be awarded to L1. 2. If L1 is not ‘Class-I local supplier’, the lowest bidder among the ‘Class-I local supplier’, will be invited to match the L1 price subject to Class-I local supplier’s quoted price falling within the margin of purchase preference, and the contract shall be awarded to such ‘Class-I local supplier’ subject to matching the L1 price. 3. In case such lowest eligible ‘Class-I local supplier’ fails to match the L1 price, the ‘Class-I local supplier’ with the next higher bid within the margin of purchase preference shall be invited to match the L1 price and so on and contract shall be awarded accordingly. In case none of the ‘Class-I local supplier’ within the margin of purchase preference matches the L1 price, the contract may be awarded to the L1 bidder. 4. “Class-II local supplier” will not get purchase preference in any procurement, undertaken by procuring entities. (iii) Applicability in tenders where contract is to be awarded to multiple bidders In tenders where contract is awarded to multiple bidders subject to matching of L1 rates or otherwise, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-II local supplier’ as well as ‘Non-local supplier’, as per following procedure: a) In case there is sufficient local capacity and competition for the item to be procured, as notified by the nodal Ministry, only Class I local suppliers shall be eligible to bid. As such, 3 the multiple suppliers, who would be awarded the contract, should be all and only ‘Class I Local suppliers’. b) In other cases, ‘Class II local suppliers’ and ‘Non local suppliers’ may also participate in the bidding process along with ‘Class I Local suppliers’ as per provisions of the Order. c) If ‘Class I Local suppliers’ qualify for award of contract for at least 50 (fifty) percent of the tendered quantity in any tender, the contract may be awarded to all the qualified bidders as per award criteria stipulated in the bid documents. However, in case ‘Class I Local suppliers’ do not qualify for award of contract for at least 50 (fifty) percent of the tendered quantity, purchase preference should be given to the ‘Class I local supplier’ over ‘Class II local suppliers’/ ‘Non local suppliers’ provided that their quoted rate falls within 20 (twenty) percent margin of purchase preference of the highest quoted bidder considered for award of contract so as to ensure that the ‘Class I Local suppliers’ taken in totality are considered for award of contract for at least 50 (fifty) percent of the tendered quantity. d) First purchase preference has to be given to the lowest quoting ‘Class-I local supplier’, whose quoted rates fall within 20 (twenty) percent margin of purchase preference, subject to its meeting the prescribed criteria for award of contract as also the constraint of maximum quantity that can be sourced from any single supplier. If the lowest quoting ‘Class-I local supplier’, does not qualify for purchase preference because of aforesaid constraints or does not accept the offered quantity, an opportunity may be given to next higher ‘Class-I local supplier’, falling within 20 (twenty) percent margin of purchase preference, and so on. e) To avoid any ambiguity during bid evaluation process, the procuring entities may stipulate its own tender specific criteria for award of contract amongst different bidders including the procedure for purchase preference to ‘Class-I local supplier’ within the broad policy guidelines stipulated in sub-paras above. (iv) Exemption of small purchases: Notwithstanding anything contained in paragraph (i), procurements where the estimated value to be procured is less than Rs. 5 lakhs shall be exempt from the Order. However, it shall be ensured by procuring entities that procurement is not split for the purpose of avoiding the provisions of this Order. (v) Minimum local content: The ‘local content’ requirement to categorize a supplier as ‘Class-I local supplier’ is minimum 50 (fifty) percent. For ‘Class-II local supplier’, the ‘local content’ requirement is minimum 20 (twenty) percent. Nodal Ministry/ Department may prescribe only a higher percentage of minimum local content requirement to categorize a supplier as ‘Class-I local supplier’/ ‘Class-II local supplier’. For the items, for which Nodal Ministry/ Department has not prescribed higher minimum local content notification under the Order, it shall be 50 (fifty) percent and 20 (twenty) percent for ‘Class-I local supplier’/ ‘Class-II local supplier’ respectively. (vi) Requirement for specification in advance: The minimum local content, the margin of purchase preference and the procedure for preference to Make in India shall be specified in the notice inviting tenders or other form of procurement solicitation and shall not be varied during a particular procurement transaction. 4 (vii) Government E-marketplace: In respect of procurement through the Government E- marketplace (GeM) shall, as far as possible, specifically mark the items which meet the minimum local content while registering the item for display, and shall, wherever feasible, make provision for automated comparison with purchase preference and without purchase preference and for obtaining consent of the local supplier in those cases where purchase preference is to be exercised. (vii) Verification of local content: a) The ‘Class-I local supplier’/ ‘Class-II local supplier’ at the time of tender, bidding or solicitation shall be required to indicate percentage of local content and provide self- certification that the item offered meets the local content requirement for ‘Class-I local supplier’/ ‘Class-II local supplier’, as the case may be. They shall also give details of the location(s) at which the local value addition is made. b) In cases of procurement for a value in excess of Rs. 10 crores, the ‘Class-I local supplier’/ ‘Class-II local supplier’ shall be required to provide a certificate from the statutory auditor or cost auditor of the company (in the case of companies) or from a practicing cost accountant or practicing chartered accountant (in respect of suppliers other than companies) giving the percentage of local content. c) Decisions on complaints relating to implementation of this Order shall be taken by the competent authority which is empowered to look into procurement-related complaints relating to the procuring entity. d) Nodal Ministries may constitute committees with internal and external experts for independent verification of self-declarations and auditor’s/ accountant’s certificates on random basis and in the case of complaints. e) Nodal Ministries and procuring entities may prescribe fees for such complaints. f) False declarations will be in breach of the Code of Integrity under Rule 175(1)(i)(h) of the General Financial Rules for which a bidder or its successors can be debarred for up to two years as per Rule 151 (iii) of the General Financial Rules along with such other actions as may be permissible under law. g) A supplier who has been debarred by any procuring entity for violation of the Order shall not be eligible for preference under the Order for procurement by any other procuring entity for the duration of the debarment. The debarment for such other procuring entities shall take effect prospectively from the date on which it comes to the notice of other procurement entities, in the manner prescribed under paragraph (h) below. h) The Department of Expenditure shall issue suitable instructions for the effective and smooth operation of this process, so that: 1. The fact and duration of debarment for violation of the Order by any procuring entity are promptly brought to the notice of the Member-Convenor of the Standing Committee and the Department of Expenditure through the concerned Ministry /Department or in some other manner; 2. on a periodical basis such cases are consolidated and a centralized list or decentralized lists of such suppliers with the period of debarment is maintained and displayed on website(s); 3. in respect of procuring entities other than the one which has carried out the debarment, the debarment takes effect prospectively from the date of uploading 5 on the website(s) in the such a manner that ongoing procurements are not disrupted. (viii) Specifications in Tenders and other procurement solicitations: a) Every procuring entity shall ensure that the eligibility conditions in respect of previous experience fixed in any tender or solicitation do not require proof of supply in other countries or proof of exports. b) Procuring entities shall endeavour to see that eligibility conditions, including on matters like turnover, production capability and financial strength do not result in unreasonable exclusion of ‘Class-I local supplier’/ ‘Class-II local supplier’ who would otherwise be eligible, beyond what is essential for ensuring quality or creditworthiness of the supplier. c) Procuring entities shall review all existing eligibility norms and conditions with reference to sub-paragraphs (viii) (a) and (b) above. d) Reciprocity Clause 1. When a Nodal Ministry/Department identifies that Indian suppliers of an item are not allowed to participate and/ or compete in procurement by any foreign government, due to restrictive tender conditions which have direct or indirect effect of barring Indian companies such as registration in the procuring country, execution of projects of specific value in the procuring country etc., it shall provide such details to all its procuring entities including CMDs/CEOs of PSEs/PSUs, State Governments and other procurement agencies under their administrative control and GeM for appropriate reciprocal action. 2. Entities of countries which have been identified by the nodal Ministry/Department as not allowing Indian companies to participate in their Government procurement for any item related to that nodal Ministry shall not be allowed to participate in Government procurement in India for all items related to that nodal Ministry/ Department, except for the list of items published by the Ministry/ Department permitting their participation. 3. The stipulation in (2) above shall be part of all tenders invited by the Central Government procuring entities stated in (1) above. All purchases on GeM shall also necessarily have the above provisions for items identified by nodal Ministry/ Department. 4. State Governments should be encouraged to incorporate similar provisions in their respective tenders. 5. The term 'entity' of a country shall have the same meaning as under the FDI Policy of DPIIT as amended from time to time. e) Specifying foreign certifications/ unreasonable technical specifications/ brands/ models in the bid document is restrictive and discriminatory practice against local suppliers. If foreign certification is required to be stipulated because of non-availability of Indian Standards and/or for any other reason, the same shall be done only after written approval of Secretary of the Department concerned or any other Authority having been designated such power by the Secretary of the Department concerned. f) “All administrative Ministries/Departments whose procurement exceeds Rs. 1000 Crore per annum shall notify/ update their procurement projections every year, including those of the PSEs/PSUs, for the next 5 years on their respective website.” 6 (ix) Action for non-compliance of the Provisions of the Order:In case restrictive or discriminatory conditions against domestic suppliers are included in bid documents, an inquiry shall be conducted by the Administrative Department undertaking the procurement (including procurement by any entity under its administrative control) to fix responsibility for the same. Thereafter, appropriate action, administrative or otherwise, shall be taken against erring officials of procurement entities under relevant provisions. Intimation on all such actions shall be sent to the Standing Committee. (x) Assessment of supply base by Nodal Ministries: The Nodal Ministry shall keep in view the domestic manufacturing / supply base and assess the available capacity and the extent of local competition while identifying items and prescribing the higher minimum local content or the manner of its calculation, with a view to avoiding cost increase from the operation of this Order. (xi) Increase in minimum local content: The Nodal Ministry may annually review the local content requirements with a view to increasing them, subject to availability of sufficient local competition with adequate quality. (xii) Manufacture under license/ technology collaboration agreements with phased indigenization a) While notifying the minimum local content, Nodal Ministries may make special provisions for exempting suppliers from meeting the stipulated local content if the product is being manufactured in India under a license from a foreign manufacturer who holds intellectual property rights and where there is a technology collaboration agreement / transfer of technology agreement for indigenous manufacture of a product developed abroad with clear phasing of increase in local content. b) In procurement of all goods, services or works in respect of which there is substantial quantity of public procurement and for which the nodal ministry has not notified that there is sufficient local capacity and local competition, the concerned nodal ministry shall notify an upper threshold value of procurement beyond which foreign companies shall enter into a joint venture with an Indian company to participate in the tender. Procuring entities, while procuring such items beyond the notified threshold value, shall prescribe in their respective tenders that foreign companies may enter into a joint venture with an Indian company to participate in the tender. The procuring Ministries/Departments shall also make special provisions for exempting such joint ventures from meeting the stipulated minimum local content requirement, which shall be increased in a phased manner. (xiii) Powers to grant exemption and to reduce minimum local content: The administrative Department undertaking the procurement (including procurement by any entity under its administrative control), with the approval of their Minister-in-charge, may by written order, for reasons to be recorded in writing, 1. reduce the minimum local content below the prescribed level; or 2. reduce the margin of purchase preference below 20 (twenty) percent; or 3. exempt any particular item or supplying entities from the operation of this Order or any part of the Order. 7 A copy of every such order shall be provided to the Standing Committee and concerned Nodal Ministry / Department. The Nodal Ministry / Department concerned will continue to have the power to vary its notification on Minimum Local Content. (xiv) Directions to Government companies: In respect of Government companies and other procuring entities not governed by the General Financial Rules, the administrative Ministry or Department shall issue policy directions requiring compliance with this Order. (xv) Standing Committee. A standing committee is hereby constituted with the following membership: Secretary, Department for Promotion of Industry and Internal Trade-Chairman Secretary, Commerce-Member Secretary, Ministry of Electronics and Information Technology-Member Joint Secretary (Public Procurement), Department of Expenditure-Member Joint Secretary (DPIIT)-Member-Convenor The Secretary of the Department concerned with a particular item shall be a member in respect of issues relating to such item. The Chairman of the Committee may co-opt technical experts as relevant to any issue or class of issues under its consideration. (xvi) Removal of difficulties: Ministries /Departments and the Boards of Directors of Government companies may issue such clarifications and instructions as may be necessary for the removal of any difficulties arising in the implementation of the Order. (xvii) Ministries having existing policies: Where any Ministry or Department has its own policy for preference to local content approved by the Cabinet after 1st January 2015, such policies will prevail over the provisions of the Order. All other existing orders on preference to local content shall be reviewed by the Nodal Ministries and revised as needed to conform to this Order, within two months of the issue of this Order. (xviii) Transitional provision: The Order shall not apply to any tender or procurement for which notice inviting tender or other form of procurement solicitation has been issued before the issue of this Order. (Rule 153 of GFR 2017) 1.2 Clarification, Amendments and Revision of this Manual For revision, interpretation, clarification and issues relating to this manual, the Procurement Policy Division, Department of Expenditure, Ministry of Finance would be the nodal authority. 1.3 Applicability of this Manual i) Works: This manual is applicable to procurement of Works is defined as “any activity, sufficient in itself to fulfil an economic or technical function, involving construction, fabrication, repair, overhaul, renovation, decoration, installation, erection, excavation, dredging, and so on, which make use of a combination of one or more of engineering design, architectural design, material and technology, labour, machinery and equipment. Supply of some materials or certain services may be incidental or consequential to and part of such works. The term “Works” includes (i) civil works for the purposes of roads, railway, airports, shipping-ports, bridges, buildings, irrigation systems, water supply, sewerage facilities, dams, tunnels and earthworks; and so on, and (ii) mechanical and electrical works involving fabrication, installation, erection, repair and maintenance of a mechanical or electrical nature relating to machinery and plants”. 8 ii) Classification of Works: The civil works are classified in GFR 2017 (Rule 130) into three categories: (a) Original Works (b) Minor Works and (c) Repairs Works. “Original works” means all new constructions, site preparation, additions and alterations to existing works. It also includes special repairs to newly purchased or previously abandoned buildings or structures, including remodelling or replacement. “Minor works” mean works which add capital value to existing assets but do not create new assets. “Repair works” means works undertaken to maintain building and fixtures. Expenditure on Repair Work does not add to the value of the asset and only restores the functionality of the asset. Repair Work can be further categorized as (i) Annual repairs covering routine and yearly operation and maintenance work on buildings and services (ii) Special repairs, which are undertaken as and when required, covering major repairs to existing buildings or services. Some types of the Special repairs may qualify to be categorised as ‘Original Work’ as mentioned earlier. iii) Procurement Entities Procurement Entities which can benefit from this manual include ministries, departments, or a unit thereof, or an attached or subordinate offices/ units; any other body (including autonomous bodies) substantially owned or controlled by or receiving substantial financial assistance from the Central Government. It can still be utilised, if these procurement entities outsource the procurement process or bundle the procurement process with other contractual arrangements or utilise the services of procurement support agency or procurement agents to carry out the procurement on their behalf. But these procurement guidelines would not apply to procurements by these procuring entities for their own use from their subsidiary companies including Joint Ventures in which they have controlling share. Major Works procuring Ministries/ Departments like the Central Public Works Department (CPWD); Military Engineering Service (MES); Border Roads Organisation (BRO); Ministries of Railways; Information & Broadcasting and Departments of Posts, and Space etc. already have their own detailed guidelines tailored to unique individual requirements, e.g. Manuals or Procedure Orders, which will continue to be applicable to these organizations. This manual for procurement of works is more specifically addressed to those Ministries/ Departments and their attached and subordinate offices, as well as autonomous bodies (except to the extent the bye laws of an autonomous body provides for different provisions, which have been approved by the Government) which don’t have in-house capabilities to execute Works and assign most of the procurement of works to third parties (Public Works Organisations or PSUs). This Manual is also useful for directly execution of repair works by these agencies up to 6Rs. thirty lakh. iv) For procurements financed by Loans/ Grants extended by International Agencies: The Articles of Agreement with the International Agencies like the World Bank, Asian Development Bank etc. stipulate specific procurement procedures to be followed by the borrowers. The procurement procedures, as finalized and incorporated in the 6 Rule 133(1) of GFR, 2017 9 Agreements after consideration and approval of the Ministry of Finance are to be followed accordingly. 1.4 Basic Aims of Procurement – Five R’s of Procurement In every procurement, public or private, the basic aim is to achieve just the right balance between costs and requirements concerning five parameters called the five R’s of procurement. The entire process of procurement (from the time that need for an item, facility or services is identified till the need is satisfied) is designed to achieve following basic aims. Although couched in jargon of procurement of Goods, it’s equally applicable to procurement of Works. The term ‘Right’ is used here in the sense of being optimal: i) Right quality; ii) Right quantity; iii) Right price; iv) Right time and place; and v) Right source. (For more details on basic aims of procurement, please refer to Chapter 1 of the Manual for Procurement of Goods 2017 – reproduced in Appendix 1. Please refer to Broader obligation principle under Appendix 1 for instructions related to registration of bidders belonging to countries sharing land border with India, and Annexure-13). 1.5 Fundamental Principles of Public Procurement Over and above the basic aims of procurement, the obligations of procuring authorities can be grouped into following five fundamental principles of public procurement, which all procuring authorities must abide by and be accountable for: i) Transparency principle; ii) Professionalism principle; iii) Broader obligations principle; iv) Extended legal principle; and v) Public accountability principle. (For more details on basic aims of procurement, please refer to Chapter 1 of the Manual for Procurement of Goods-reproduced in Appendix 1). 1.6 Standards (Canons) of Financial Propriety Public Procurement like any other expenditure in Government must conform to the Standards (also called Canons) of Financial Propriety. It may be useful to refer to the relevant provisions in the General Financial Rules, 2017 “Rule 21. Standards of financial propriety: Every officer incurring or authorizing expenditure from public moneys should be guided by high standards of financial propriety. Every officer should also enforce financial order and strict economy and see that all relevant financial rules and regulations are observed, by his own office and by subordinate disbursing officers. Among the principles on which emphasis is generally laid are the following:- 10 i) Every officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money. ii) The expenditure should not be prima facie more than the occasion demands. iii) No authority should exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its own advantage. iv) Expenditure from public moneys should not be incurred for the benefit of a particular person or a section of the people, unless - i) a claim for the amount could be enforced in a Court of Law, or ii) The expenditure is in pursuance of a recognized policy or custom. The amount of allowances granted to meet expenditure of a particular type should be so regulated that the allowances are not on the whole a source of profit to the recipients.” 1.7 Public Procurement Infrastructure at the Centre i) Procurement Policy Division Procurement Policy Division (PPD) in Department of Expenditure; Ministry of Finance has been created to encourage uniformity and harmonisation in public procurement processes by setting guidelines, dissemination of best practices, providing guidance, oversight and capacity building and issuing of procurement manuals. However, Centralisation of procurement or involvement in procurement processes is not the intended purpose of creation of PPD. ii) Central Public Procurement Portal Central Public Procurement Portal (CPPP) has been designed, developed and hosted by National Informatics Centre (NIC, Ministry of Electronics & Information Technology) in association with Dept. of Expenditure to ensure transparency in the public procurement process. The primary objective of the Central Public Procurement portal is to provide a single point access to the information on procurements made across various Ministries and the Departments. The CPPP has e-publishing and e-procurement modules. It is mandatory for all Ministries/ Departments of the Central Government, Central Public Sector Enterprises (CPSEs) and Autonomous and Statutory Bodies to publish on the CPPP all their tender enquiries and information about the resulting contracts. CPPP provides access to information such as documents relating to pre-qualification, Bidders’ enlistment, Bidding documents; details of bidders, their pre-qualification, enlistment, exclusions/ debarments; decisions taken regarding prequalification and selection of successful bid. GFR 2017 (Rule 160) makes it mandatory for Ministries/ Departments to receive all bids through e- procurement portals in respect of all procurements. Ministries/ Departments which do not have a large volume of procurement or carry out procurements required only for day-to-day running of offices and also have not initiated e-procurement through any other solution provided so far, may use e-procurement solution (CPPP) developed by NIC. Other Ministries/ Departments may either use e-procurement solution developed by NIC or engage any other service provider following due process. In the latter case, data on tenders are to be published on CPPP as well through web-service. iii) Government e-Marketplace (GeM) 11 To ensure better transparency and higher efficiency an online Government e-Marketplace (GeM– an e-commerce marketplace) has been developed for common use goods and services. In GeM product or services are offered by a number of eligible sellers and all the eligible buyers can view/ compare all the product/ services and select the product/ services offered by any one of the seller. In general, because online marketplaces aggregate product/ services from a wide array of providers, selection is usually wider, availability is higher, and prices are more competitive than in vendor-specific online retail stores. The procurement process on GeM is online and electronic - end to end from placement of supply order to payment to suppliers. The registration of suppliers on GeM is online and automatic based on ID authentication etc. The procuring authorities have to assess the reasonability of rates. Buyer’s transactions are processed by the GeM portal and then product/ services are delivered and fulfilled directly by the participating sellers. Tools of reverse bidding and e-auction are also available which can be utilised for the procurement of bulk quantities. More details are available in Rule 149, GFR, 2017. The Procurement of Goods and Services by Ministries or Departments are mandatory for Goods or Services available on GeM. Ministries/ Departments are expected to work with GeM in making available on the GeM platform as many products/ services by making available such Goods and Services which are regularly procured by them. 1.8 Legal Aspects Governing Public Procurement of Works A public procurement contract, besides being a commercial transaction, is also a legal transaction. There are a number of laws that may affect various commercial aspects of public procurement contracts. A public procurement professional is expected to be generally aware of the implications of following basic laws affecting procurement of works; however, he or she is not expected to be a legal expert. In different contexts of the scope of work, an additional set of laws may be relevant. i) The Constitution of India; ii) Indian Contracts Act, 1872; iii) Arbitration and Conciliation Act, 1996 read with The Arbitration and Conciliation (Amendment) Act, 2015; iv) Competition Act, 2002 as amended with Competition (Amendment) Act, 2007; v) The Information Technology Act, 2000 (IT Act, regarding e-procurement and e-auction, popularly called the Cyber Law); vi) Right to Information (RTI) Act 2005; vii) Central Vigilance Commission Act, 2003; viii) Delhi Special Police Establishment Act, 1946 (DSPE – basis of the Central Bureau of Investigation); ix) Prevention of Corruption Act, 1988; x) Code of Criminal Procedure, 1973 (Sections 195(1) and 197(1)); xi) Various labour laws applicable at the works’ site; xii) Various building and safety acts, codes, standards applicable in the context of the scope of work; and 12 xiii) Various environmental and mining laws, codes, standards applicable in the context of the scope of work. (For salient features of laws applicable to public procurement, please refer to Appendix 2). 1.9 The Law of Agency – applicable to Procurement of Works In addition to Laws which are applicable to Public Procurement of Works mentioned above, the Law of Agency (Section 182 to section 238, of the Indian Contract Act, 1872) implies that Contractor would be an Agent of the Procuring Entity, to execute the works on its behalf. Hence, there exists a Principal/ Employer and Agent relationship between Procuring Entity and such Contractor. As per this law, the employer is vicariously legally and financially liable for actions of its Agents. For example, a violation of certain labour laws in deputing staff for Procuring Entity’s contract by the agents may render the Procuring Entity legally and financially liable for such violations, under certain circumstances. The Procuring Entities need to be aware of such eventualities. Standard Bidding Documents should take care of this aspect. 1.10 The Basic Principles of undertaking works: i) No new works should be sanctioned without i) Careful assessment of the assets or facilities already available and time and cost required to complete the new works. ii) A concept plan/ preliminary drawing have been approved by the Authority competent to accord sanction. While designing projects to the extent possible, principles of Life Cycle Costing may also be considered; ii) As budgetary resources are limited and granted on annual basis, adequate provisions should be ensured for works and services already in progress before new works are undertaken. iii) No project or work will be split up to bring it within the sanctioning powers of a lower authority. 7 iv) For purpose of approval and sanctions, a group of works which forms one project, shall be considered as one work. The approval or sanction of the higher authority for such a project which consists of such a group of work should not be circumvented by resorting to approval of individual works using the powers of approval or sanction of a lower authority. 8If the component parts of a project are mutually independent of each other and are not dependent on the execution of one or more such component parts, each such part should be treated as a separate project. In case the functioning of a project is dependent on the execution of one or more other projects, the entire group of such projects should be taken as a single scheme/ project and provision made accordingly. If however, a scheme consists of revenue component, capital expenditure and loan content, etc. the provision for which is required to be exhibited separately under respective Heads of Account, there is no objection to the provision being made in the relevant Heads of Account; but the authorities concerned should ensure that the sanction of the Competent Authority is obtained for the integrated scheme as a whole 7 Rule 137, GFR, 2017 8 MoF OM No. F.1(26)-E-II(A)/66 dtd 04/01/1967 & 27/10/1967 13 depending on the total cost of the scheme. It will not be permissible in such cases to split up a scheme treating each part as a scheme in order to avoid the sanction of a higher authority. 9 v) Any anticipated or actual savings from a sanctioned estimate for a definite project, shall not, without special authorisation, be applied to carry out additional work not contemplated in the original project. 10 vi) Any development of a project considered necessary while a work is in progress, which is not contingent on the execution of work first sanctioned, shall have to be covered by a supplementary estimate. vii) The construction period and sanctioned cost stipulated in the sanction of Project will not be exceeded as far as possible. 11 viii) Ministry or Department shall put in place, as far as possible, empowered project teams for all large value projects and these teams should be tasked only with project execution and not given other operational duties. ix) The competent financial authority according administrative approval should be kept informed of the physical and financial progress of the work till their completion through regular periodical reports. 12 x) Subject to the observance of these general rules (Rule 130 – 141, GFR, 2017), the initiation, authorization, procurement and execution of works allotted to a particular Ministry or Department shall be regulated by detailed rules and orders contained in the respective departmental regulations and by other special orders applicable to them. The detailed procedure relating to expenditure on such works shall be prescribed by departmental regulations framed in consultation with the Accounts Officer, generally based on the procedures and the principles underlying the financial and accounting rules prescribed for similar works carried out by the Central Public Works Department (CPWD). 13 xi) No works shall be commenced or liability incurred in connection with it until:- i) Feasibility Study Report / Preliminary Project Report (PPR) has been be prepared in case of works of substantial value ii) A proper Detailed Project Report (DPR) has been prepared by a competent agency; iii) Administrative approval (A/A) has been obtained from the appropriate authority, in each case; iv) Expenditure Sanction (E/S) to incur expenditure has been obtained from the competent authority; v) Technical approval has been obtained of the detailed and coordinated design of all the Architectural, Civil, Electrical, Mechanical, Horticulture and any other 9 Rule 138, GFR, 2017 10 Rule 136(3), GFR, 2017 11 Rule 135(2), GFR, 2017 12 Rule 135(1), and 139(i), GFR, 2017 13 Rule 136(1) and 139(vi), GFR, 2017 14 services included in the scope of the sanction and of the Detailed Cost Estimates containing the detailed specifications and quantities of various items prepared on the basis of the schedule of rates maintained by CPWD or other Public Works Organizations. vi) Funds to cover the work, which will be executed, at least during the current year, have been provided by competent authority. vii) Tenders have been invited and processed in accordance with rules. viii) Award of work and execution of Contract Agreement; ix) A work order has been issued. x) Time taken in grant of statutory and other clearances also contributes to the time and cost overrun in public projects. These clearances are required to achieve specific objectives like concern for the environment, aviation safety, preservation of national heritage, conservation of forest and wildlife etc. Public Authorities/ Project Executing Authorities should plan for obtaining all necessary clearances quickly and proper efforts be made for the same, which also should be duly recorded. The progress regarding follow up of obtaining the statutory clearances should be closely monitored. xi) The process of land acquisition shall be started by the Procuring Entity, well ahead and completed entirely, or at least substantially, before the work is started. Availability of auxiliary services has been ensured - like roads/access, power, water, solid & liquid waste disposal system, street lighting and other civic services shall be ensured. It is desirable to have 100% of the required land in possession before award of contract; however, it may not always be possible to have the entire land due to prevailing circumstances. Also, it may not be prudent to put the entire process of award of contract on hold for want of the remaining portion of land, which in the assessment of public authority or the project executing authority, could possibly be acquired in a targeted manner after award of the contract, without affecting progress. Minimum necessary encumbrance free land should be available before award of contract. The minimum may be determined based on the circumstances of each case or general guidelines, issued by the concerned authorities. Such land, non-availability of which, will prevent essential components of work from execution, should be insisted upon. Public Authorities/ Project Executing Authorities should plan for acquiring balance land quickly and proper efforts be made for the same, which also should be duly recorded. The progress regarding land acquisition should be closely monitored. 1.11 Processing of Public Works Following are the stages in planning, sanctioning and execution of work. i) Perspective Planning for works; ii) Preparation of Preliminary Project Report (PPR) or Rough Cost Estimate; iii) Acceptance of necessity and issue of in-Principle Approval; iv) Preparation of Detailed Project Report (DPR) or Preliminary Estimate (PE); 15 v) Administrative Approval and Expenditure Sanction (A/A&E/S) or ‘Go ahead’ Approval; vi) Detailed Design, Estimate and Technical Sanction; vii) Appropriation/ re-appropriation of funds; viii) Preparation of Bid documents, Publication, Receipt and Opening of Bids; ix) Evaluation of Bids and Award of Work; x) Execution and Monitoring of works and Quality Assurance. Note: For repair works up to Rs. 30 (thirty) lakh, expenditure sanction may be given on the basis of Preliminary Project Report itself. Annexure 9 shows the above mentioned process of procurement of Public Works as a flow- chart. 1.12 Administrative Control and Powers to Sanction 14 i) Administrative control of works includes.— i) assumption of full responsibility for construction, maintenance and upkeep; (b) Proper utilization of buildings and allied works; (c) Provision of funds for execution of these functions. 15 ii) Powers to Sanction Works: The powers delegated to various subordinate authorities to accord administrative approval, sanction expenditure and re-appropriate funds for works are regulated by the Delegation of Financial Powers Rules (DFPR) and other orders contained in the respective departmental regulations.The powers of the Department relating to works are detailed in Rule 133 (1) and 133(2) of GFR, 2017 (Refer para 3.1.1 and 3.1.2 for details). 16 iii) Work under the administrative control of the Public Works Departments- Works not specifically allotted to any Ministry or Department shall be included in the Grants for Civil Works to be administered by Central Public Works Department. No such work may be financed partly from funds provided in departmental budget and partly from the budget for civil works. 14 Rule 131, GFR, 2017 15 Rule 132, GFR, 2017 16 Rule 134, GFR, 2017 16 Chapter 2: Preparation of Estimates 2.1 Perspective Planning for Works Each Ministry/ Department shall prepare a perspective plan for undertaking different types of works. There shall also be a provision for annual review of the plan for making modifications, if any. 2.2 Preparation of Preliminary Project Report (PPR) or Rough Cost Estimate 2.2.1 In case the work is to be executed under its own arrangement by the Ministry/ Department, a preliminary project report (PPR) or Rough Cost Estimate shall be prepared by the Works Committee based on Land, Site Details, functional and space requirements (or Various Facilities, Special Requirements/ Features and Broad Specifications for specialised Equipment and Plants), Layout Plans etc, with the technical details/ documents mentioned below being prepared by (or under the guidance of) the technical member(s) of the Works Committee (please refer to Para 3.1.4 (iv) below. In case of execution of Work through Public Works Organisation (PWO) or the Public Sector Undertaking (PSU – refer Para 3.1 below), on requisition from Ministry/ Department for procurement of works, PWO or the PSU to whom work is entrusted for execution shall prepare such PPR or Rough Cost Estimate and submit it to the requiring Department/ Ministry. Based on PPR and Rough Cost Estimate, the competent authority in Administrative Ministry/ Department grants in Principle approval indicating approval of the concept and scope of the project at the rough cost assessed. Ministry of Finance (DoE) has issued detailed instructions regarding appraisal and approval of Public Funded projects/ schemes17. 2.2.2 The preliminary project report shall provide the following details: i) Background of the work/ project justifying the need for the work ii) Details of scope of the project iii) Exclusions (if any) - This will cover part of the work, which is not included in this particular project estimate. iv) Availability of land - There should be a clear indication about the availability of land required for completion of whole project. The land shall be made available free of all encumbrances. v) Availability of auxiliary services - like roads, power, water, solid & liquid waste disposal system, street lighting and other civic services shall be ensured. vi) Reference to Concept Plans/ Preliminary Drawings, if any and their acceptance - This shall indicate the details of Concept Plans/ Preliminary Drawings prepared and their approval by the requisitioning authority. vii) Agency of Procurement – through direct procurement, outsourcing to PWO/ PSUs or otherwise (Refer Para 3.1 below). 17 No. 24(35)/PF-II/2012 dtd 05/08/2016 (where Schemes refers to a collection of Projects/Works of either Central Sector Schemes or Centrally Sponsored Schemes and Project refers to work which can be standalone or part of a scheme). The OM can be downloaded from: http://doe.gov.in/sites/default/files/GuidelinesAppraisal_Approval_Schemes_Projects.pdf 17 viii) Rough Cost Estimate: Ministries/Department may carefully assess alternative technological options, their area requirements and obtain Rough Cost on the basis of prevailing Plinth Area rates (or any other reliable basis) without preparation of drawings to enable the competent authority to accord in principle approval. ix) If relevant, Cost benefits analysis of the project, including evaluation of options for cost sharing/ recovery (user charges) for infrastructure/ services. Principles of Life Cycle Cost may also be considered, to the extent feasible. x) Cash flow: This will show year-wise requirement. xi) Source & availability of funds - The manner of transferring the fund to the executing agency to be spelt out. xii) Appendices: i) Requisition of the Department/ Ministry; ii) Concept Plans/ Preliminary Drawings; iii) Reference to approval of Concept Plans/ Preliminary Drawings. xiii) Any other relevant documents. xiv) A presentation on the findings of the feasibility study/ PPR may be made by a team (which may include engineers/ consultants/ outside experts, finance officers etc.) before the public authority/ or designated competent authority. This is to provide an opportunity to the public authority to have an overall assessment of the situation, appraisal of various options as well as likely challenges and mitigation measures. In the case of very large projects, such presentation may be made to the head of the public authority. The record of discussions during the presentation may become part of the Detailed Project Report (DPR) and tender file/ project record. 2.3 Acceptance of necessity and issue of in-Principle Approval Approval of competent financial authority for accepting the necessity of works and its Scope should be sought on the basis of PPR or Rough Cost Estimate and in Principle Approval of the concerned Ministry/ Department shall be made available for preparation of Detailed Project Report or Preliminary Estimates. 2.4 Preparation of Detailed Project Report (DPR) /Preliminary Estimates (PE) 2.4.1 On receipt of in-Principle Approval of the project, the procuring entity shall finalize the Detailed Project Report giving reference to the documents mentioned below. The DPR should provide a level playing field to the bidders and should ensure as far as feasible, the widest possible competition: i) Reference to Concept plan/ preliminary drawings and their acceptance - This shall indicate the details of Concept plan/ preliminary drawings prepared and their approval by the requisitioning authority; ii) Details of scope
