Module II: Public Procurement Operations

1. Planning for Procurement

Let us analyse the case of two villages on the either bank of a river. The only mode of
connection between the two villages is by boats. We need to transport people and goods
across the river. Hence, there arises the need for a bridge

What do you think the village committee will discuss and finalize during the procurement
planning stage? They will decide whether they should go for solely public owned or
public private partnership. If you don’t do this kind of procurement planning, you may
end up with poor identification of needs.

Poor identification of needs leads to

• Inefficiencies
• Sub-optimal assets being procured.
• Loss of time, effort & cost
Proper Planning of needs helps in
• Evaluate all the options carefully
• Satisfy the need before finalizing the indent.

Various Operations in Procurement

1. Planning for Procurement

• Planning for procurement and procurement operations have the same relationship
that exists between foundation of a building and the building
• Planning for procurement has great leverage in procurement operations
• Amount of time & effort invested here would save multiple amounts of time &
efforts in subsequent operations.
• It will help in decide success or failure of the entire procurement operations.
Planning for procurement includes steps such as
a) Need Assessment
b) Developing Specification
c) Developing Procurement Plan
Need Assessment: Is the process in which details of requirement are assesses before an indent
is prepared. The process ensures optimization of
• Economy in quantity
• Scope in services
• Technical requirement
• Terms of reference in service
• Timeliness in procurement
Need assessment involves both commercial and technical aspects. Therefore, it should also
involve procurement and finance functions.
The important issue addressed during need assessment are:
• Expression of needs and methods of satisfying it
• Techno-economic evaluation of alternative methods and selection of a solution
• Compatibility and inter-operability with existing infrastructure or system
• Estimation of costs including Bill of Quantities (BOQ) in case of works
• Budgetary provisions and availability of funds
• Description of the selected solution
• Time-schedule and place of product, work or service delivery
• Sustainability criteria and legal requirements of environment or pollution control and
obtaining clearance from local authorities, if required.
• Obtaining technical, administrative and budgetary sanctions

Developing Specifications: Specifications are the detailed quantitative requirements of

procurement. Developing specifications has the greatest impact on Value-for-Money(VfM) in
procurement.

Attributes of Specifications
• Meet essential needs
• Be objective, functional, generic and measurable
• Set out required technical, quantitative and performance characteristics
• Provide a level playing field for prospective vendors
Types of Specifications

1. Proprietary Specifications:
• Patents or intellectual property rights to some specifications are owned by the
proprietary firms.
• These are protected by intellectual property rights
• These specifications are not available with the buyer
• Firm’s certificate of quality is accepted.
• Essential technical and performance characteristics required for inspection must be
mentioned in the specifications.
Examples: The patents of spare parts of certain locomotives are owned by certain manufacturers. In this
case, proprietary specification is used to procure these items

2. Brand or Trade Names:

• In public procurement, specifications by brand name is not allowed
• Using brand or trade names along with model number gives sufficient information
for procurement.
• The quality of branded product is generally reliable.
• Procurement of branded products cannot ensure Value-fir-Money(VfM)
• Manufacturer’s price list often includes heavy margin for wholesalers and retailers

However, in public procurement, if it is inescapable, specifications of brand name with “or

equivalent” has to be included.
Unless the alternatives in the market are nearly equivalent and comparable, the stipulation “or
equivalent” leads to intractable complications at the stage of evaluation of bid.
This is appropriate for commonly used items, where quality is more important that cost or when
it is not possible to make technical or performance specifications
Examples: Lubricants for locomotives are procured this way
 3. Tailored Technical Specifications:
• They give lot of details on how to achieve what is required
• Used when commercially available products do not meet the requirements even
with minor changes
• Requires the supplier to design a tailor-made product
• Limits the ability of supplier to offer more cost-effective solutions and puts the bulk
of performance risk on the buyer.
• If a supplier designs a tailor-made product, it leads to restricted competition and
added cost and time.
Tailored Technical Specifications are appropriate, when
a) Buyer has design expertise, which suppliers do not have
b) Procurement is of high value, critical and of complex nature
Examples: The space research Organisation of a country may need to procure a complex spare part for the
rocket

4. Tailored Performance Specifications:

• Describe only essential performance requirements and allow the supplier to
establish the best solution
• Gives value for money and widens the competition
• The supplier carries the bulk of performance risk
The Performance Specifications includes
a. What is to be performed and the required level of outputs
b. Operational and maintenance performance
c. Maximum costs
d. Rules for measuring performance
Tailored Performance Specifications are appropriate, when
a) Supplier possess greater design or functional expertise
b) Technology is changing rapidly in supplying industry
c) Innovation is important
Examples: The election commission of a country may lay down tailored performance specifications to
procure electronic voting machines. In this case, government depends on the different vendors to come up
with solutions
 5. External Technical & Performance Specifications:
• External standards enable buyers and sellers to communicate common parameters,
terminology or symbols
• Must be preferred is they meet the requirements adequately
• Helps offer wide competition and standardization of production, thereby giving
value-for-money and better lead times.
Different categories and sources of external standards include
a. Industry standards
b. National standards
c. International standards
Examples: Procurement of electrical motors by specifying the national and international standards.

6. Specifications Involving Samples:

• In public procurement of goods, purchase is done as per drawing, standard,
specification and so on.
• Purchase of goods as per sample is discouraged
• In national or international standards, for certain items, there are built-in sample
clauses.
• These clauses illustrate characteristics such as
a. Shade
b. Tone
c. Size
d. Make-up
e. Feel
f. Finish
g. Workmanship

Examples: Procurement of woolen dress materials for factory workers. The relevant national specification
lay down that the purchaser and supplier should come for an agreement on feel and finish of the cloth based
on agreed samples.
Developing Procurement Plans:
• It is true that if you fail to plan, then you plan to fail.
• Appropriate procurement strategies cannot be built for unplanned, ad hoc and emergency
procurements
• Advance procurement planning helps develop appropriate procurement strategies.
Steps to develop procurement plans

1. Develop organizational procurement plans:

• Procurement agencies must prepare organizational procurement plans of the
budgetary year. These plans set out
a. Procurement objectives
b. Finalisation of annual requirements
c. Identification of common use items for collaborative purchasing
d. Procurement profile of procurement agency
e. Procurement systems, processes and practices
f. Procurement strategies
g. Ways to fulfil social or development objectives of Procurement Policy
h. Procurement measures, targets and annual comparison against targets

2. Develop Individual Vital Category Procurement Plans:

• Vital category of procurement and common-use-items have significant impact on
goals of public procurement.
• Procurement agency must develop individual procurement plans for these items

3. Finalise Annual Requirements:

• In this step, annual requirement is finalized at the beginning of the year
• The parameters considered are
i. Performance target of the organisation
Demand forecasting is based on
• Historical data
• Estimation of requirement
• New projects
• Current stock
• Order levels
• Consolidation of requirements raised by all user departments

4. Review Procurement Plan:

• A mid-year review of annual procurement plan must be undertaken
• In this review, quantities procured are compared to actual consumption
• In case of discrepancy between actual consumption and the earlier forecast on
consumption, advancement and postponement of schedule delivery may become
necessary.

5. Review Procurement Plan:

• After finalisation of procurement plan. The mode of procurement for goods, works
or services must be decided
• The various modes of procurement are
a. Simple tender enquiries
b. Limited tender enquiries
c. National competitive bidding
d. International competitive bidding
• Any one mode of procurement is used depending on the nature and expected value
of procurement or type of requirement
Categorisation of Requirements
Let us consider the example of household expenditure, as shown below

Each category has different expenditure with a few of them having maximum share.
Categorising the items based on expenditure helps us plan the household budget.
Inventory and procurement can be categorized
• To decide buffer levels
• Permitted inventory levels
• Types or modes of procurement
ABC Categorisation
• Pareto Principle or the 80-20 rule is applied for categorisation of inventory or
procurement
• Its states that 20% of the item stocked or purchased contribute to 80% of value or cost of
inventory or procurement
• Based on this rule, items are classified in to A, B and C categories
• “A Category Items” are 20% of the total items but account for 80% of the total value.
• “B Category Items” are 30% of the total items but account for the next 15% of the total
value.
• “C Category Items” are 50% of the total items but account for the next 5% of the total
value.
 2. Bid Documents and Bid Opening

Consider this situation where the Government of India decides to connect different parts
of a large city through metro rail.

The purchase department will invite tenders for building overhead and underground
network of railway tracks and stations. It will also float tenders for buying train sets for
the metro, automation and control systems, training services for operations and
maintenance. Surely, the massive project poses several challenges related to procurement.

One of the primary task is to prepare the bid documents, publish it in newspapers and
other media and finally open the bids received.

Other than publication, receiving and opening of bids, the other processes involved in
bidding and evaluation are bid evaluation, negotiation and award of contract.

Preparing Bid Documents

Bid documents are analogous to the blueprint of the building. Before constructing a
building, it is important to make a proper blueprint for a building to show how the
structure will be supported.

If there is any error in the building document, it will result in a defective building.
Similarly, bid documents have same importance in procurement as a blueprint has for the
construction of a building. If bid documents are not prepared properly, it will ultimately
lead to defective procurement.

It is critical for any bidder to know about bid documents. It is critical for you also as
potential bid evaluators.
How are they prepared?
What are the different bidding systems?
What else is needed apart from bidding documents to participate and qualify in the
bidding process?
 Functions of Bid Documents
Bid documents are prepared to provide clear technical and commercial terms of reference
for the proposed procurement. Most organizations have standard formats for preparing
bid documents. These standard formats are called standard bid documents.

Types of Bid Documents

Under different circumstances of bidding, bid document is known by different names,
such as
1) Request for Information (RFI)
2) Request for Qualification (RFQ)
3) Request for Proposal (RFP)

1. Request for Information (RFI)

RFI or Expression of Interest or EOI is an open enquiry that scans the market seeking
broad data and understanding of a bid.
Examples:

2. Request for Qualification (RFQ)

• RFQ is an opportunity for potential suppliers to get pre-qualified or short listed for
subsequent procurement bid.
• RFQ lays down precise qualification criteria for shortlisting vendors to issue RFP

3. Request for Proposal (RFP)

RFP is the bid floated to target suppliers after the RFI or RFQ.
Standard Bid Documents
Standard bid documents contain certain invariable sections that are used without any changes.
The Invariable portions of standard bid document normally include
• General Instruction to Tenderers (GIT)
• General Conditions of Contract (GCC)
• Bid Form or Bid Cover Letter
• Price Schedule
• Bank guarantee form for EMD
• Bank guarantee form for performance security
• Formats to be filled by the bidder
Standard bid documents contain certain variable sections that are customized to suit the
special requirements of a procurement.
The Variable portions of standard bid document normally include
• Bid Notice or Notice Inviting Tender (NIT)
• Special Instructions to Tenderers (SIT)
• Special Conditions of Contract (SCC)
• List of requirements
• Technical specifications and quality control requirements
• Qualification or eligibility criteria
• Contract Form

Guidelines for Preparing Bid Documents

For preparing bid documents, we need to follow a few broad guidelines relating to the following
• Bid Notice or Notice Inviting Tender (NIT)
• General and Special Instruction to Bidders (GIT and SIT)
• Conditions of Contract (GCC and SCC)
• Qualification or Eligibility Criteria
• Bid Validity
• Agents of Supplier
 1) Bid Notice or Notice Inviting Tender (NIT)
Bid notice or Notice Inviting Tender (NIT) is published so that the prospective bidders
can decide whether they should participate in the bidding process. Therefore, it must
contain all relevant information to enable the prospective bidders to arrive at a decision.

A model format should be used to publish a bid notice. The invitation for bids specifies
the minimum acceptable for awarding the contract
• Functional Requirements
• Technical Requirements
• Contractual Requirements
• Evaluation Criteria
NIT should be brief. However, it should contain sufficient details for a prospective bidder to
decide whether to participate in the bid or not. If he decides to participate, he should know how
to go about it.
Examples:
 3. General and Special Instruction to Bidders (GIT & SIT)

• The General Instructions to Tender contains guidance

to the
• prospective bidders for preparation and submission of
a responsive bid
• It also states the qualification criteria
• The GIT clearly states the payment terms, date, time
and venue for obtaining, submitting and opening the
bids
In procurement of products, any changes warranted by special
circumstances must be indicated in Special Instructions to
Tenderers (SIT).
In procurement of services, such changes from GIT are mentioned in the Bid Data Sheet (BDS)
instead of the SIT
It is also indicated in the bid document that the provision in the SIT would supersede the
corresponding provision in the GIT

4. Conditions for Contracts (GCC & SCC)

• General conditions of a contract contain all the conditions that will be part of the
resulting contract.
• The general conditions of contract (GCC) are standard and should be used
unchanged with all types of contracts
• Any special contractual requirements relating to a particular procurement are added
in the special condition of the contract(SCC). This should be done depending upon
the need and with prior approval of competent authority
• It is also indicated in the SBD that the provisions in SCC will supersede the
corresponding provisions in GCC

5. Qualification or Eligibility Criteria

• Qualification/eligibility criteria of the bidders should be stipulated in the bid
documents.
• The bidder has to ensure that he provides convincing proof of having fulfilled the
eligibility criteria.
 6. Bid Validity

• The minimum period for which the bid should remain for acceptance is specified in
the bid document.
• It could be 90 days for One-way/ Single bid tender system (Both Technical &
Financial Proposal are submitted in one envelope)
• It could be 120 days for Two-way/ two bids system from the date of submission of
offer (Two envelops are submitted, 1st the technical proposal if accepted, then
financial proposal envelope is submitted)
Guidelines on Bid Validity
1. A bid valid for shorter period can be rejected as being non-responsive
2. In exceptional circumstances, the bidder’s consent may be requested for extension of bid
validity period.
3. The bid security provided should also be suitably extended
4. The bidder accepting the request and granting extension should not be permitted to
modify his bid
7. Agents of Supplier
The conditions for agents of suppliers also must be mentioned in the SBD
• The first condition: That one agent cannot represent two suppliers or quote on their
behalf in a particular bid enquiry.
• The second condition: That one manufacturer can authorize only one agent or
dealer.
• There can be only one bid from the
a) Principle Manufacturer directly or through an agent on his behalf
b) The Foreign principal or any of its branch or division
c) An agent on behalf of only one principal
Securities Bidders must Submit
There are two main securities the bidders must submit. They are
A. Earnest Money deposit (EMD)
B. Performance Security

A. Earnest Money deposit (EMD)

• Earnest Money Deposit(EMD) is also known as Bid Security
• In case of advertised or limited bid enquiry, EMD should be obtained from bidders along
with their bids. This is done to safeguard against withdrawal or alteration of bid during
bid validity period
• The EMD could be 2% of the estimated value of the goods to be purchased for bids of
smaller value or 1% for larger value.
• The bidders who are exempted from payment of earnest money are those who are
i. Currently registered with the procurement organisation,
ii. Registered with central procurement agency
iii. Continue to remain registered during the bid validity period
• If bidders fall in these categories, they should furnish certified copy of valid registration.
• Acceptable forms of earnest money deposit should be specified in Bid Data Sheet. It
could be
a) Account Payee Demand Draft
b) Fixed Deposit Receipt
c) Banker’s Cheque
• The EMD should remain valid for a specified period beyond the final bid validity period
(say 45 days)
Forfeiture of EMD
• A bidder may withdraw, amend, impair or derogate the bid in any respect within the
period of validity of his bid.
• After the period of validity, the bidder will forfeit the EMD
• If a successful bidder fails to furnish the required performance security within the
specified period, he forfeits the EMD
Refund of EMD
• The EMD furnished by all unsuccessful bidders should be returned to them without any
interest.
• It must be done at the earliest date after expiry date of the final bid validity period. For
example, within 30 days after conclusion of the contract.
• The EMD of successful bidder should be returned after receiving performance security
from him as mentioned in the contract.

B. Performance Security
• Performance security is also called performance bank guarantee or security deposits
• To ensure due performance of the contract, performance security should be obtained from
the successful bidder.
• The bank guarantee must be verified with the issuing bank
• Performance security should be specified as a percentage of the value of the contract (say
10%)
• Performance security should be furnished in the specified form. It can be account payee
demand draft or bank guarantee from the bank in an acceptable format.
• Performance security should be furnished by a specified date. Generally, it is 21 days
after notification of the award. It should remain valid for a specified period beyond the
date of completion of all contractual obligations of the contractor, say 60 days, including
warranty obligations.
• In the event of a breach of contract by the successful bidder, he forfeits the performance
security. This should be credited to the purchasing organisation’s account.
• If the bidder duly performs and completes the contract, it must be refunded without any
interest within 60 days of completion of all obligations.
Publication, Receiving and opening of bids
For publication of bids, we need to follow guidelines in
the key areas. They are
1. Clarification of bidding documents.
2. Amendment of bidding documents.
3. Modification, alternation and withdrawal of bids.
4. Pre-bid conference
5. Receipt and custody of bids
The organisation should ensure adequate publicity in National newspaper, its Website and
Central Public Procurement Portal.
The organisation should publish International Competitive Bidding(ICB) bids in international
press of wide circulation.
For international press, the organisation should publish the bids at least six weeks prior to the
deadline of submission of bids
Copies of the bid enquiry may be sent to the country’s embassies abroad as well as the foreign
embassies in the country. The selection of embassies depends on the availability of the required
goods or services in such countries.
In addition to publication of advertisements, the organisation should draw the attention of
i. Reputed suppliers
ii. Organisation’s Registered Vendors
iii. Past or current successful suppliers
In limited bidding, the organisation should send direct written enquiries along with detailed
specifications of requirements. It should send these by
a. Registered mail
b. Courier
c. Other recorded method to organisation’s registered bidders.
To avoid situations where some selected prospective bidders may not receive the bid documents
by post or courier, the organisation may put the bid notice on website with an explanatory note.

The organisation should collect the newspaper cutting in each case and keep on record as proof
of publicity. The should keep the printout of the bids published in the website in the file.
Clarification of bids documents
• A prospective bidder may require any clarification of the bid documents. He should
notify to the purchasing organisation in writing before the due date of submission of the
bids.
• The purchasing organisation should send in writing the response to the clarification prior
to the date of opening of bids.
• The organisation should send copies of the query and clarification to all prospective
bidders who received the bid documents.

Amendments of Bid Documents

• At any time prior to the date of submission of bids, the purchaser may modify bid
documents by amendments. This may be at his or her own initiative or in response to a
clarification requested by a prospective bidder.
• The purchaser should notify the prospective bidder in
a. Writing by registered or speed post
b. Fax
c. Telex
d. E-mail
• This should be followed by a copy of the same by registered post to all prospective
bidders
• The purchaser may, at his discretion, extend the deadline for submission of bids. This is
to allow prospective bidders a reasonable time to consider the amendment in preparing
their bids.
Modification, Alteration and Withdrawal of Bids
After submitting the bid, the bidder is permitted to submit alterations or modification to the bid.
However, these alterations or modifications should be received duly sealed and marked as
original bid, up to the date and time of receipt of bid.
• Any amendment or modification received after the prescribed date and time of receipt of
bids will not be considered
• The bidder may also withdraw his bid after submission. However, the written notice of
withdrawal should reach the organisation before the deadline prescribed for submission
of bids.
• The bidder may send a withdrawal notice by fax but followed by signed confirmation
copy by post not later than the bid submission deadline.
• A bid cannot be withdrawn during the interval between the submission of bids and
expiration of the period of bid validity specified. Withdrawal of a bid during this period
results in forfeiture of bidder’s bid security(EMD) and other sanctions
Pre-Bid Conference
If found necessary, where technical specifications are complex, the purchaser can fine-tune
technical specifications and techno-commercial conditions of the bid document in a pre-bid
conference.
Guidelines for Receipt and Custody of Bids
Some key guidelines should be followed for receipt and custody of bids.
• Receipt and custody of bids should be done in a transparent manner to maintain
credibility of the process
• Purchase department should maintain a bid box for receiving the bids to facilitate easy
access to bidders. The nominated competent authority should seal them
• Sometimes, bids are required to be submitted by hand, or the bids may be oversized so
that they cannot be dropped in to the bid box. Then, the organisation must mention the
names and designation of at least two officers to receive the bid document. This
information should be also displayed at the entrance or reception area.
• The officials authorized to receive the bid document should provide the receipt signed by
hem with date and time. He should also sign on the cover duly indicating the date and
time of receipt of the bid.
• Bid documents received by courier should be deposited in the bid box until the date and
time of bid opening. The officer who deposits these bids should sign on the cover, duly
indicating the date and time of receipt of the bids.
Procedure for Bid Opening
The Bid Opening Committee(BOC) must follow 14 steps. They are
1. Prepare a list of representatives.
BOC should also obtain their signatures on the same.
2. Collect bids from bid box.
This is done at the prescheduled time.
3. Check whether all envelopes are sealed, and all mandatory requirements are fulfilled.
• The BOC should open all the bids received on time in the presence of the BOC
members and bidders or their authorised representatives.
• They should open the bids at the prescribed time, date and place.
• The authorised representatives, who intend to attend the bid opening, must bring
with them letters of authorization from the corresponding bidders.
• BOC should ensure that bid envelopes are duly sealed and untampered.
• Before opening each bid, envelope should be held up for all participants to see that
it is sealed and in untampered condition.
• Ensure that all mandatory requirements, i.e., EMD, specific supporting documents
and so on as specified in the bid document are fulfilled.
 • However, the BOC does not reject any bid at the bid opening stage.
4. Open bids in the presence of bidders or authorized representatives.
The BOC should open all the bids received on time in the presence of BOC member and
bidders or their authorised representatives.
5. Announce the salient features of the bids.
The features could be description and specification of the goods, quoted price, terms of
delivery, delivery period, discount if any, whether EMD furnished or not and any other
special feature of the bid.
6. Number every bid serially, put initial and date on the first page.
This should be done by one of the officials authorised to open the bids.
7. Price schedule to be initialed with date.
Each page of the price schedule or letter attached to it should also be initialed with date,
particularly the price and delivery period. These should be circled and initialed with date.
8. Circle discounts, rebates, amounts, quantities and so on
• The BOC should circle the discounts and rebates.
• If there are no discounts, mention prominently – “No Discounts”
• The bid opening official should mark blank bids, if any accordingly
• The bid opening official should circle the amounts and quantities in the price
schedule mentioned only in figures and write them in words.
9. Mark original copies and duplicate copies, if any, in a bid set
[Link], if any, must be initialed with date and time and numbered serially.
The BOC official must initial the alterations, overwriting, use of whitener, columns left
unfilled in bids, if any
[Link] on-the-spot report with names of bidders and salient features of bids.
This is prepared by BOC as read out while opening the bids.
[Link] over on-the-spot report to the nominated purchase officer.
The BOC should hand over the opened bids and on-the-spot reports with list of
representatives attending the bid opening to the nominated purchase officer.
[Link] over money documents to representative of Financial Department.
This is done to ensure safe custody and monitoring.
[Link] proper codification on samples, if any
Late Bids
The purchaser should treat the bids received after the specified date and time as “LATE” bids
and ignore such bids
 3. Evaluation of Bids

After opening the bids, the process of evaluation of bids starts.

The process of bid evaluation comprises three steps. They are
1. Preliminary Examination
2. Scrutiny and evaluation of techno-commercial bids
3. Scrutiny and evaluation of financial bid

1. Preliminary Examination
Here are the steps for the preliminary examination of bids
• The Bid Opening Committee(BOC) should forward all the bids to Tender
Committee for further evaluation
• The Tender Committee(TC) should first scrutinize all the bids so received.
• TC should see whether the bids meet the basic requirements as incorporated in
the bid enquiry document
• TC should identify unresponsive bids, if any
• The TC must treat the bids that do not meet the basic requirements as
unresponsive and ignored
• The TC must consider ones that meet the requirements as good

The bid may be declared as unresponsive and ignored during the initial scrutiny when
1. The bid is unsigned, or bid validity is shorter than the required period
2. The bidder is not eligible as per the qualification criteria
3. Required EMD has not been provided
4. Bidder has not agreed to the given required performance security
5. The goods quoted are not meeting the required specification
6. The bidder has quoted for goods manufactured by a different firm without the required
letter of authorization from the proposed manufacturer
 7. The bidder has not quoted for the entire requirement as specified in that schedule against
a schedule in the List of Requirement
Example: The bidder fails to quote installation and commissioning, wherever required.
8. The bidder has not agreed to essential conditions having significant bearing on the cost,
utility or performance of the required goods
Example: Warranty Clause

Resolving Minor Discrepancy/Infirmity/Irregularity/Non-Conformity

Sometimes discrepancy, infirmity, irregularity or non-conformity in bids are observed. Here are
some examples.
a. Sometime, non-conformity or error in the quoted prices in figures and in words
Example: $50.20 as written as Five Dollars Twenty Cents
b. Sometimes, there can be discrepancies in the original copy and the other copies of the
same bid set. The Tender Committee should consider only what is indicated in the
original bid
Clarification of Bids
• During evaluation and comparison of bids, purchaser may ask the bidder for clarification.
• The request for clarification should be in writing
• In the request for clarification, neither change in price or substance of the bid should be
sought, offered or permitted, nor post bid clarification at the initiative of the bidder
should be entertained.
• From the time of submission of bid to the time of awarding the contract, if a bidder needs
to contact the purchaser for any reason relating to his bid, he should do so only in writing
Evaluation of Bids: Bidding System
Bids are evaluated based on the bidding system used. They are
1. Two stage bidding
2. Single bid(Envelope) system
3. Two bids(Envelopes) system

1. Two Stage Bidding:

As the name indicates, the two-stage bidding consists of two stages.
• Pre-qualification bidding (1st stage)
It helps in the selection of competent qualified bidders by using Pre-Qualification
Criteria(PQC)
• Invitations to tender (2nd stage)
Pre-qualified bidders from the first stage of bidding are issued: “Invitation to Tender”
for procurement
Guidelines for Two-stage bidding
Here are some guidelines that govern the two-stage bidding system
• Evaluation should be strictly done according to the criteria prescribed
• In case relaxation is considered necessary, re-tendering may be done
• Pre-qualification credentials and the data called should be verified
• However, this is not required when the offer does not meet the specified PQC, as per the
credentials submitted by the bidder himself.
• Decision of the Pre-Qualification Bidding must be conveyed to the successful as well as
unsuccessful bidders
• Reasons for disqualification should be communicated to unsuccessful bidders
• RFP is only issued to the qualified bidders

2. Single Bid(Envelope) System

• Single bid(Envelope) system is normally followed in the procurement of technically
simple requirements.
• Here the technical details of the offer and the price are submitted in the same
envelope
Example: Bulk purchase of printer
papers may require the bidders to
provide technical specifications of the
printer paper and their price
• The lowest price bid that meets
the technical requirements laid
down in the bid document is
declared as successful.

3. Two Bid(Envelopes) System

In procurement of technically complex and critical requirements, bidder need to bifurcate their
quotations in to two separately sealed parts
a) Techno-Commercial bid
• It contains the relevant technical details of the equipment offered by the bidders
• It contains reference to the specification and related technical details incorporated in
the bid enquiry documents.
• It also contains conformation to technical and commercial conditions.
• The techno-commercial bids are opened in the presence of willing bidders in the first
instance at the prescribed time and date by the Bid Opening Committee.
• The tender committee scrutinizes and evaluates techno-commercial bids with
reference to parameters prescribed in the bid documents.
• Bids that meet the technical parameters and commercial conditions are declared as
techno-commercially acceptable offers
 b) Financial Bid
• It includes the price quotation along with other related issues
• The tender committee opens the financial bids of only the techno-commercially
acceptable offers as decided in the first stage in the presence of bidders

➢ Earlier, they give them due notice about the date, time and venue of bid opening
➢ They return the unopened financial bids of unacceptable bidders to the respective bidders
➢ Based on the evaluation of technical bids, the purchaser defines the final specifications as
gathered from various technical bids
➢ Then, the purchaser examines the financial bids from all the bidders who have submitted
the technical bids
Evaluations of Price Aspects
Normally, the comparison of responsive bids is based on
• Cost
• Insurance and Freight
• CIF destination basis
• Duly delivered
• Commissioned
In case of goods manufactured in India or goods of foreign origin already located in India
➢ Sales tax and other similar taxes and excise duty and other duties are contractually
payable to the bidder on the goods if the contract is awarded to the bidder.
In case of goods of foreign origin offered from abroad
➢ Customs duty and other similar import duty or taxes should be contractually payable to
the bidder on the goods if the contract is awarded to the bidder.
As per policies of the Government from time to time
➢ The purchaser reserves his option to give price preference to small scale industries in
comparison to the large-scale industries.
➢ However, this price preference cannot be taken for granted. Such firms must make every
endeavor to bring down cost and achieve competitiveness.
In case the list of requirements contains more than one schedule
➢ The organisation should evaluate and compare responsive bids separately for each
schedule.
➢ They should not consider the bid for a schedule if the complete requirements prescribed
in that schedule are not included in the bid
Scrutiny, Evaluation and Ranking of Bids
• If the bids have been invited
based on variable price, the
bids should be evaluated,
compared and ranked based
on the price prevailing on
the day of bid opening.
• They should not be based on
any future date.
• Through the above process
of bid scrutiny and bid evaluation, the organisation should determine the eligibility of the
bidder to its satisfaction
• It should determine whether the bidder is eligible, qualified and capable in all respects to
perform the contract satisfactorily
Currency of Bidding and Payment
• The price in the quotation should be in the currency stipulated in the bid document
• The contract price should be normally paid in currency or currencies stated in the contract
Evaluation of Offers
Scrutiny and evaluation of offers involving shipping and foreign bidders
• For leveraging indigenous shipping industry, bids may be called based on Free on
Board(FOB) or Free Alongside Ship(FAS)
• Foreign bidders are normally required to quote based on FAS or FOB
• They also need to quote based on Cost and Freight (C&F) or Cost, Insurance and
Freight (CIF)
• They need to duly indicate the break-up of prices indicating freight, insurance.
• The purchaser reserves the right to order on either basis.
• They also need to indicate the Custom Tariff and the Custom Duty applicable in the
country
In the case of Free on Board(FOB) or Free Alongside
Ship(FAS) offers, the freight and insurance should be
added to make it CIF cost
➢ Port handling charges, custom duty, countervailing
duty and surcharges as applicable on the date of
opening of bids as well as clearing agency
charges, inland freight and octroy or entry tax as
assessed should be added over Cost, Insurance and
Freight to arrive at Free on Rail(FOR) and Free on
Truck(FOT) destination.
➢ Free on Rail(FOR) and Free on Truck(FOT)
destination price for domestic offers may be
calculated as in National Competitive
Bidding(NCB) bids
_____________________________________________________________________________
In case, bids with Letter of Credit (LC) payment, the
likely Letter of Credit charges (as ascertained from our
bankers) should be also be added.
In ICB bids, all offers are to be converted to the
country’s currency.
It should be based on the “BC Selling” exchange rate
of specified bank on the date of Bid Opening
(Financial Offer)

In case both indigenous and foreign bidders have quoted in the bid, the comparison of the
offers would be done on the basis of Free on Rail(FOR) and Free on Truck destinations.
• This should include all applicable taxes and duties on the principle of total outgo from
organisation’s pocket
• In case there are no domestic bidders, comparison of offers can be done on the basis of
CIF or landed costs. This is because the rest of costs would be same for all bidders
Reasonableness of Prices
Reasonableness of prices can be achieved through
1. Price Evaluation
2. Price Indices

1. Price Evaluation
The method of price analysis for “Estimated
Rate” in the indent or for Reasonableness of
Rates in the Bid are presented here
• Estimated Rate in the indent
• Last Purchase Price accepted as
reasonable or workable during last
purchase

The Prevailing Market Price is ascertained by

market survey or budgetary quotations from
one or more prospective suppliers or published
catalogues or MRP printed on the item
The user department should collect the
documents and authenticate the same.
It is also ascertained by costing analysis based
on costs of various components or raw
materials of the item
Price of a similar or nearly equivalent item
• For example, consider the prices of gold and silver. Both behave in a similar pattern
• Rough assessment of the price of the assembly or machine of which the item is a part or
vice versa
• Through Market Intelligence Cell(MIC) or External Expert Costing Agencies
• As a last resort, rough assessment of the opportunity cost of not using this item at all
Note:

• These methods are not mutually exclusive

• These methods can supplement with escalations to cater for inflation, price increases of
raw materials, labour, energy, statutory changes, price indices and so on, to make them
usable in conditions prevailing currently
• In case of various foreign currencies, the rate should be reduced to a common
denomination of the country’s currency

2. Price Indices

• The purchase officers or Render Committee should access the Internet for price
indices from important sites.
• They should access appropriate websites for the latest trends and price indices of
indigenous items
• For metals and other minerals, you may access websites of Minerals and Metals
Review, [Link] and [Link]
• Also, refer: The world Economic Outlook – a monthly report from IMF. It gives
inputs on price trends of different countries.
• London Metal Exchange gives price trends of non-ferrous details, which often shows
volatile trends
• Chamber of Commerce also publishes regular data on Price Indices and Price
Variations. We need to subscribe for this. Also, subscribe to important publications
like business/commercial newspapers
• A ready database of important price indices derived from above sources may be kept
updated for ready reference
 Negotiations

➢ Ideally, there should be no negotiation.

➢ Selection of contractors by negotiations should be a rare exception rather than the rule
➢ Organisation’s may resort to negotiation only in certain circumstances, such as
• The procurement is done on proprietary basis
• Items to be procured are supplied by only limited sources of supply
• Items where there is suspicion of cartel formation
Competent Authority’s Approval for Negotiation
✓ Before recommending negotiation, the Tender Committee should take adequate care to
recheck the rates received to avoid unwarranted negotiations
✓ The competent authority should decide after receiving recommendations of the TC
whether to invite fresh bids or to negotiate. If it has to negotiate, with whom it should
negotiate.
✓ After the approval, the Tender Committee should conduct the negotiations

Negotiation by Counter-Offers
In rare cases, the purchaser requests the most suitable bidder to accept a specific rate lower
than his or her offered price. This is called “Counter Offer”
Normally, all counter-offers are considered as negotiations. The principles of negotiations
should apply to such counter-offers
For example, to arrive at an acceptable rate, should amount to negotiation for giving counter-
offer to the most suitable bidder
However, it should not be considered as negotiation if there is any counter-offer to other less
preferred other suitable bidder at the rate accepted by most suitable bidder in case of splitting of
quantities, as pre-disclosed in the bid document
With Whom to Negotiate?
The negotiation should be held only with the most suitable bidder. He or she should be
• Techno-commercially responsive
• Approved for supply of bulk quantity
• To whom the contract would have been given as per the valuation criteria in the bid
document
Procedure for Negotiation
After the competent authority, has decided to call a specific bidder for negotiation, we need to
follow this procedure
1. The period of validity of the original offer must be extended, wherever necessary
• The bidder must be called for negotiations and should be addressed as per legally
drafted format.
2. The purchasing organisation should obtain from the bidder a declaration for negotiation
• The declaration should state that the rates originally quoted by them should remain
open for acceptance in the event of failure of the contemplated negotiations.
3. Before the negotiations are started, an attendance sheet may be signed by the parties
present in negotiation
• Negotiations meeting should be started only after obtaining signed declaration for
negotiations as mentioned above.
4. Revised bids should be obtained in writing from the selected bidder at the end of
negotiation.
• If necessary, negotiating party may be given some time to submit their revised offer
• However, in case the selected bidder prefers to send a revised bid instead of being
present at the negotiation, the offer should be taken into account.
• In case a bidder does not submit the revised bid, its original bid should be
considered.
5. The revised bids so obtained should be read out to the representatives of the bidder
present, immediately after completing the negotiations.
 Award of Contract

The contract awarding process comprises five main steps. They are
1. Recommendations for award of contract
2. Notification for award of contract to successful bidder
3. Signing of agreement/issue of supply order
4. Performance security
5. Acknowledge of contract by successful bidder and execution

1. Recommendations for award of contract

• The purchaser inviting bids should award the contract, subject to approval from the
Competent Authority
• It should be awarded to the bidder whose bid has been determined to be substantially
responsive and is the most suitable as per the evaluation criteria of the bid document
• The purchasing organisation must determine that the bidder is qualified to perform the
contract satisfactorily
• The purchasing organisation should also verified the credentials
• Any agreement required to be signed with the supplier should be verified by the
finance representative of the Tender Committee.
• It should also be approved by the Competent Authority

In any purchase decision, the competent authority must decide on certain core issues. They need
to decide whether
• The bids meet the essential bid requirements
• The prices being charged are reasonable
• The procedure followed are proper, fair and transparent
Variation of Quantities at Time of Award
The Tender Committee may vary the quantity by not more than the percentage specified in the
bid documents (say 25%)
For example, the original quantity in the bid document could be 1000 units. It may be revised to
800 units, indicating an acceptable variation of 20%. This can be done based on recalculation of
requirement on the latest facts, and if allowed as per BID Data Sheet.
Parallel Contracts
• If so provided in the bid document, parallel contracts may be awarded to more than one
bidder
• It may be used when the most suitable bidder is not capable of meeting the requirement
For example, the government decides to distribute cycles to all girl students. The most suitable bidder as per
the evaluation criteria is not capable of meeting the requirement. In this case, the next suitable bidder is also
awarded the contract.

• It is also used when it is desirable to have multiple sources of supply due to critical and
strategic nature of the requirement
i. For such cases, specific permission should be sought from the Competent Authority
• Then, the clauses should be added to the bid documents, clearly stating that the
organisation reserves the right to split the contract quantity between suppliers
• The details of the percentage of split are also to be specified upfront in the Bid
Documents.
For example, in the case of an epidemic break out, health department processes vaccines for the
prevention of epidemic since the availability of vaccines at the right time is very critical. In this case,
it is advisable to award parallel contracts to more than one supplier
• A bid may not be split into smaller quantities for the reason that one supplier may not be
able to supply the entire quantity
• The proposed share of the most favorable bidder(L1) contractor and the rest of the
contractors or bidders should be clearly defined
• Also, the minimum number of suppliers sought for the contract and the minimum supply
chain must be defined
For example, Supplier break up for a large order is shown here
Notification to Successful Bidders
• Prior to the expiration of the period of bid validity, the successful bidder should be
notified in writing
• The notification of award should constitute the conclusion of the contract
• In return, the successful bidders have to provide the signed contract form and
performance security
• Bid security of the successful supplier should be adjusted against Security Deposit or
returned as per the terms of the Bid Documents
• After notifying the successful bidder, each unsuccessful bidder should be promptly
notified and their bid security should be returned
• After notification of award, a bidder may wish to know the grounds on which his bid was
not selected. He should address his request to the purchaser
• The purchaser should promptly respond in writing to the unsuccessful bidder. However,
purchaser need not go into the confidential details in the reply. Confidential information
may be legally misused
• The details of the resulting contract should be published on organisation’s website
Signing of Agreement/Issue of Supply Order
• The Competent Authority should enter into an agreement.
• It should ensure that the contract is unambiguous and transparent
• In other words, there should be no scope for any other interpretations than those already
agreed by the parties
• Tender Committee should ensure that any deviation or variation quoted by the supplier in
the bid are discussed properly and ruled upon. Otherwise, the supplier will delay the
acceptance of contract
• Supply order should be issued or agreement entered strictly as per approval of Competent
Authority
Performance Security
Purchase department should ensure that the supplier receiving the contract furnishes the
required Performance Security in the prescribed form by the specified date.
Otherwise, the department should take necessary action against the supplier including forfeiture
of the EMD
Acknowledgement by Successful Bidder and Execution
• Promptly after the successful bidder is notified that his bid has been accepted, the
Contract Form provided in the Bidding Documents should be sent to him. It should
incorporate all agreements between the parties.
• The suppliers should acknowledge and unconditionally accept, sign, date and return the
contract form within 7 days from the date of issue of contract
• While acknowledging the contract, the supplier may raise some issue and/or ask for some
modifications against some entries in the contract
• The purchase department should look into such aspects immediately for necessary action
• Thereafter, supplier’s unconditional acceptance of the contract must be obtained. If both
the parties (namely the organisation and the supplier) simultaneously sign the contract
across the table, further acknowledgement from the supplier is not required
Rejection of Bids
• Purchase can reject all bids when none of the bids are substantially responsive
• It is also a good practice to do rebidding if the most suitable bidder withdraws the offer
• However, based on number of bids received, lack of competition should not alone be the
criterion for rejection
 4. Management of Public Procurement Operations

A state power plant has the responsibility of providing electricity to all the areas of the state. It
is found that the power produced by the plant is insufficient, new planning has to be done to
meet the demand. Let us look at the tasks to be performed to meet the demand.
To make this happen, the power production plant has to carry out the following tasks
1. Conduct the area survey
2. Prepare the design for the new power unit
3. Present the proposal in the presence of management and finalise it
4. Decide upon the possible options of suppliers of raw materials
5. Finance team to finalise the budget
6. Construct the new unit
7. Conduct the QA test
8. New power lines have to be connected in the undersupplied area
Did you notice how many departments were involved
in this whole process?
Each department has a clear set of responsibilities
The process could be completed without any
interruption as the organisation was specifically
structured.
Specific departments were formed to take care of
various issues
Officials of the hierarchy were set to carry out various
tasks in each department. Similarly, every organisation is divided into various
departments and hierarchy of people to perform specific tasks.

Organisation of Procurement Function

Most of the public organisation’s have many different functional departments, such as
• Administration and management services
• HRD and training
• Legal and arbitration section
Organisations having significant procurements also have within them a dedicated public
procurement organisation.
Public Procurement Organisation is divided into various sub units. Each unit handles a specific
type of requirement for the organisation. This helps each Procurement Division develop
expertise in a particular market.
For example,
Goods based: Public medicine supply
Service based: Adult education
Work based: Public construction authority
Large public procurement organisation are
structured based on markets.
However, there are nodal officers to provide
single window interface to internal clients.
Most of the basic building block of a purchase organisation is a self-contained procurement unit
with minimum staffing that handles a particular market segment of requirements.
Under a procurement division, there may be a number of such units.
Ancillary Sections in Procurement Function
In a public procurement organisation, apart from procurement units, there are also
ancillary sections. These deals with bid section, which contains
• Advertising
• Bidding document sale
• Issue and receipt
• Bid boxes
• Bid opening
• Policy section containing policy and instructions
In addition, ancillary section deals with
• Supplier Relations Management (SRM) and Registration
• Legal and Arbitration Section
• Information Technology Systems
• Master Data Management
• Direct Contracting or Local Purchase Section
• Administration and Management Services
• HRD and Training
• Liaison and Expediting Section
• Procurement Performance
• Management Reporting
Types of Procurement Agencies
Procurement operations can be entrusted to different agencies. These agencies perform
1. Centralised Procurement of common use items and services
2. Decentralised Procurement in field units
3. Procurement by user field department
4. Procurement by purchase department

1. Centralised Procurement
Centralised procurement of
• Common use items: Capital Equipment’s
• Services: Audit and Accounting services, Construction of buildings
Centralised procurement leads to
• Improved procurement outcomes
• Better utilization of procurement skills and resources
• Great purchasing leverage through aggregation of volume
• Spread of best practice
The identified lead procurement agency achieves this by clubbing demands from different
procurement agencies, for a normal contract or a framework contract.
These common procurements can be organisation-wide or common to a few units in the
organisation
Such centralised procurement arrangements should be well publicized in the organisation. It
must publish
• List of Items
• Lead Procurement Agencies
• Time table for submission to lead agencies
• Framework contract agreement
The organisation must estimate the demand for these items at the beginning of the previous year
Bids for such planned procurement should be finalised much before the start of the year
Merits and Demerits of Centralised Procurement
Merits
• Improved procurement outcomes
• Better utilization of procurement skills and resources
• Great purchasing leverage through aggregation of volume
• Spread of best practice
Demerits
• Longer procurement cycles
• Lack of agility to address dynamic situations in the field
Note: The organisation must strike a balance between centralised procurement and
decentralised procurement by field units

2. Decentralised Procurement
The purchase department does ad-hoc procurements of certain goods. These include
1. Items not covered in annual bid
2. Items for which requirements are not commonly encountered and hence not
planned in annual bid
3. Items for which future demand could not be anticipated at the same time of
annual procurement.

3. Procurement by User Field Department

In cases where emergency or ad-hoc procurement is absolutely necessary, user department in
the field unit can procure the goods
➢ It can be done by
• LTE
• Spot purchase
➢ This is subject to financial limits specified for such modes of procurement
➢ The department should duly record the reason for such purchase and inform the purchase
department

4. Procurement by Purchase Department

Precautionary Measures to Avoid Emergency/Ad-hoc Procurement
Purchase department should do the following as a precautionary measure to avoid
emergency or ad-hoc procurement
1. At the beginning of the year, the purchase department should ask all the user departments
to submit a list of goods required for operations for the whole year.
• The department must do this through a written inquiry.
2. The purchase department should update the list for annual procurement.
• This is done by adding the requirement that has been procured through emergency
procurement in the past three years
3. The purchase department should also explore the possibility of execution of suitable rate
contract to avoid making emergency purchases at the user department
 Delegation of Powers(DOP)/Schedules of Powers(SOP)
• All organisations lay down the powers related to procurement matters as delegated
to various levels of executives in HQ and field units.
• For procurement, they lay down the composition of bids and other committees.
• Competent officers need to approve the recommendations of such committees.
• It also defines the levels of competent authorities
• This is to decide
✓ Single bid procurement
✓ Signing of indents
✓ Use of single source or restricted sources above a prescribed threshold
✓ Signing of contracts
✓ Post-contract decisions
✓ Write-offs
• Wherever ‘Competent Authority’ is mentioned, it implies that executives are
delegated with procurement powers for the concerned procurement operation.

Roles and Responsibilities in a Public Procurement Organisation

1. Chief Executive Officer (CEO)

• CEO is the final competent authority for all procurements
up to the limit as per the DOP
• The CEO is also member in Tender Committee for higher
value of procurement
• CEO supervises the administration of procurement department under him
• In all procurements initiated at field level but within the competence of
organisation HQ, the Field CEO records his/her approval with the concurrence of
his/her ‘Financial Adviser’. This is to ensure harmonization of divergence of views
between departments as far as feasible. This is done before the proposal is sent for
approval to the HQ of the organisation

2. Deputy Chief Executive Officer ([Link])

• To reduce the burden of the CEO, the Deputy Chief
Executive Officer shares the procurement powers and
responsibilities of the CEO
3. Chief Finance Officer (CFO)
CFO in HQ or Field Unit should
• Concur with any deviation in the General Instructions to
Tenderers(GIT), General Conditions of Contract(GCC), Special
Instructions to Tenderers(SIT) and Special Conditions of
Contract(SCC) of the Standard Bid Document(SBD)
• The CFO records his/her concurrence before the proposal is sent for approval to the
HQ. This must be done in all procurements initiated at field level but within the
competence of organisation HQ.
• CFO vets all agreements before their release
• CFO is responsible for safe custody of the Earnest Money Deposit(EMD) and
Security Deposit(SD) and for ensuring their validity as per contract.
• CFO supervises all financial approvals and payments of contractor/supplier bill in
time.

4. Head of the Department(HOD)

The Head of the Department in HQ or field units is responsible for
• Approving annual procurement plan for his department
• HOD participates in various committees
• Delegates the subordinates with the responsibility of bid
evaluation and quality assurance of goods, works or services
• Timely preparation and submission of indents of materials in
his jurisdiction.
• Emergency procurement by user department as per DOP

5. Head/Executive of Public Procurement Organisation

Head/Executive of public procurement organisation in HQ
or field units is responsible for
• Ensuring compliance of all laid down procedures in
all procurements
• Planning, aggregating and procurements
• Procurement plan
• Initiating timely procurement
• Monitoring the stages of bids
• Compliance with timelines stipulated in the bid
• Ensuring the validity of the bid offer
• Amendment of contract
• Acceptance of deviation after seeking approval of the competent authority
• Is Member Secretary in Tender Committees of his level
 • Service levels to internal customers, for drafting and concluding contracts with
successful bidders
• All aspects of contract management
• In addition, on completion of contractual obligations, they
▪ Initiate action for release of EMD/SD
▪ Supervise the administrative actions of all officers and staff of stores and
purchase functions
Procurement Committees
The various procurement committees are
1. Bid Opening Committee(BOC)
2. Tender Committee(TC)
3. Local Procurement Committee(LPC)
4. Market Intelligence Cell
Bid Opening Committee(BOC)
The key role and mandate of the Bid Opening
Committee(BOC) is to
• Ensure transparency and integrity of the Bid Opening Process
• The BOC shall comprise One Purchase Officer, One Finance Officer and one Officer
from Technical sections.
• BOC opens the bids on the declared bid opening date
Tender Committee(TC)
The key role and mandate of the Tender Committee(TC) is to
• To check whether the participating bidders satisfy the eligibility criteria in respect of the
Bid Notice and declare the eligible parties or responsive bids
• Ensure that bids of only the eligible bidders shall be processed for evaluation thereafter
• Ensure the evaluation criteria for the bid should be predetermined, pre-disclosed and
documented in the bid documents
• To evaluate the techno-commercial responses of the bidders and ensure that they meet
user requirements, in cases where two bid system is used
• To mark the scores of the bidders as per the bid terms and conditions of the bid
document.
• To rank the bids by scores/marks awarded or prices and identify the preferred bidder to
be considered for approval by the competent authority
• To make comparative statement in case of both technical and price/financial bid
• Evaluation of all eligible bids and select the preferred bidder
• Duly monitoring compliance of laid down purchase procedures in all stages of the bid
 • To prepare Tender Committee Recommendations and forward to the competent authority
• Check the responsibility of estimate and bids
Example: Ascertaining whether rates are reasonable or not and, if required, associated technical
details of the bid

❖ Composition of the Committee and competent Authority shall be as per DOP.

❖ Appropriate Procurement Executive should be member secretary of the committee.
❖ The specific composition of the committee should be value-based as well as depend upon
the nature of procurement.

Local Procurement Committee(LPC)

The Local Procurement Committee does the
• Procurement up to a low threshold value
• Uses brief and simple procurement procedures
• It does not go through the detailed bidding procedures as in the case of large value
procurements
Example: Local procurement committee may be involved in procurement of one time procurement of
flower vases and doormats

Market Intelligence Cell(MIC)

Market Intelligence Cell(MIC) should be created under the head of the public procurement
organisation. MIC is assigned the following tasks
• To gather and compile information on the prices, trends and indices of end products and
input raw materials.
• To ensure inter-unit sharing of price indices and price database
• To maintain database on past contracts showing details of
▪ Items procured
▪ Their essential specs
▪ Unit rate, quantity
▪ Total value
▪ Mode of procurement
▪ Number of bids received
▪ Number of bids considered acceptable
▪ Reasons for exclusion of overlooked bids
▪ Un-negotiated rates of L1
▪ Contract rates to help in ascertaining reasonability of prices of future
procurements
Typical Timelines for Receipt of Indent and Floating of Bids

Every individual in the chain of the procurement process is accountable for taking action within
a specified time period. This helps in meeting the requirements in time.
The actual timelines may vary from organisation to organisation, but we will consider the
typical timelines
➢ Receipt of indent starts at: T (Day 1)
➢ Approval of indent: T+1 week
➢ Preparation of bid document: T+2 weeks
➢ Competent authority’s approval and floating bids: T+4 weeks
Typical Timelines for Award of Contract

➢ Opening of bid: B (Day 1)

➢ Preparation of comparative statements: B+2 weeks
➢ TC evaluation for techno-commercial in two bids: B+6 weeks
➢ Approval of techno-commercial offer by competent authority: B+8 weeks
➢ Price bid opening and evaluation by TC: B+9 weeks
➢ Preparation of TC recommendation: B+10 weeks
➢ Competent authority’s approval: B+12 weeks
➢ Preparation and dispatch of contracts: B+13 weeks
Introduction to Record Keeping and Management Reporting
All procurements of the organisation are subjected to post audit by
• Internal audit
• Statutory audit
• Various internal and external vigilance agencies
Hence, the organisation should file and keep all the documents related to procurement
systematically and safely. They should
• Number the files properly
• Lay down the period of retention of various types of documents
Records Maintained by Purchase Department
1. Procurement Register
• Records key information manually or electronically at various stages of procurement
operations, from receipt of requirements till issue of the contract
• Enables ascertaining status of a particular procurement and also overall monitoring of
efficiency and throughput of procurement operations
Purchase department should also maintain certain basic records, either in manual or electronic form.
They are
2. Purchase Order Log
• It contains a numerical record of all Purchase Orders(PO) issued.
• It contains Purchase Order(PO) number
• Supplier’s name
• Brief description of purchase
• Total value of order and so on

3. Open Order File

• Contains status of all outstanding orders

4. Closed Order File

• Contains historical data of all completed purchases

5. Vendor Record File

• Contains the names, addresses of suppliers
• Materials that vendor can supply
• Delivery and quality records

6. Rate Contract File

• Contains the purchase records of items under a term contract
• Especially important when contract is an open against which orders may be placed
7. Purchase Reports
• The purchase department handles a sizable portion of the organisation’s finances. Hence,
it is desirable to have some summary reports periodically
• Published monthly or quarterly or half yearly or annually and should be made available to
the management
• Total value of purchase
• Allocation of purchase value against major items
• Budget for purchase for the next year
• Proposal for revision of budget in current year

8. Head of Public Procurement

Should maintain all the records of
• Issue
• Receipt
• Opening
• Evaluation of bids
• Award of contract
• Pre-order and post-order records in chronological order
• The records of compliant handling
• Correspondence with clients, consultants, banks, vendors and so on
• Should keep the files in an identified place
• Files must be accessible for scrutiny whenever needed without wastage of time
• All files should be kept separately and should be retrievable
Procurement Key Performance Indices(PKPI’s) and Management Reporting
The performance of the procurement can be measured using certain key performance indices.
Periodic management reports are developed to reflect these PKPI’s from various procurement
divisions and procurement agencies in different categories of procurement.
Examples of PKPI’s
1. Number and value of indent, contracts received or finalised
2. Average price rise in procurements for repeated items
3. Proportion of procurement, number and value wise, taking place based on limited or
selective bidding
4. Proportion of procurement, number and value wise, taking place through e-procurement
5. Number and oldest indent pending for issue of bid
6. Number and oldest pending for which award decision has not been taken
7. Average time taken for award decision
8. Number and oldest of contracts in which deliveries have been delayed by more than 50 %
of delivery time
9. Number and percentage of contracts in dispute
10. Average percentage (of total contract price) of contract variations or price variations paid
11. Percentage of bids in which complaints were received
12. Number and oldest of complaints not redressed
13. Average time taken for examining and redressing complaints
14. Productivity per head- number and value of bids finalised or on hand
15. Number and percentage of staff who have not undergone specified training
16. Number and percentage of staff who have undergone training in the period
Use of Information Technology in Procurement
Application of information technology in procurement has evolve in many stages. Some of
them are
1. Material Requirement Planning(MRP)
2. Manufacturing Resource planning(MRP-II)
3. Enterprise Resource Planning(ERP)
4. e-Procurement
Material Requirement Planning(MRP)
Material requirement planning (MRP) is based on the idea of getting right material at the right
place and at the right time. The work of Joseph Orlicky pioneered MRP in the 1970’s
It calculates the material requirement and schedule supply to meet the demand across all
products and parts in one or more plants.
Information Technology plays a major role in the MRP system. It utilizes the information about
manufacturing needs, linked with customer demand and information about inventory levels.
System used four pieces of information to determine what material should be ordered and when.
They are
1. Master Production Schedule
• Describes when each product is scheduled to be manufactured
2. Bill of Materials
• Describes the parts or materials required to make a product
3. Production Cycle Time and Material Needs per Cycle
• Describes the production cycle time and material needs at each stage of the
production cycle
4. Supplier Lead Times
Manufacturing Resource planning(MRP-II)
MRP systems were between management control and operational control processes
Later, MRP got incorporated by an Integrated Manufacturing Resource Planning and called
MRP-II to distinguish from Material Requirement Planning.
MRP-II was incorporated with management functions like
• Strategic Planning
• Sales and Accounting
• Customer Relationship Management(CRM)
• Supplier Relationship Management(SRM)

To improve management’s control of manufacturing and its support functions

Enterprise Resource Planning(ERP)
Now, MRP II has evolved in to
Enterprise Resource Planning(ERP)
ERP represents a group of software
programs designed to combine
separate company functions.
This is to create more efficient
operations in areas, such assembly
or delivery of products or services,
thereby linking company’s
information resources like
• Human Resource Information system
• Financial Management
• Accounting
• Sales
e-Procurement
e-Procurement is the combined used of information and communication technology through
electronic means to enhance internal and external purchase and supply management.
The purpose of e-procurement is to automate, possibly, the entire procurement process, in an
online web-based real-time environment using a range of technologies.
Now-a-days ERP software includes a module for e-Procurement.
For e-procurement to be implemented, enactment of appropriate legislation is essential like
• Electronic Commerce Act in Ireland
• Electronic Transaction Act in UK, USA, Australia, New Zealand, Singapore & Sri Lanka
• Electronic Transactions Ordinance in Hong Kong and Pakistan
• Information Technology Act in India
• Information Communication Technology Act in Bangladesh and Sri Lanka
Digital signatures are used to ensure
• Authentication
• Confidentiality
• Data integrity
• Non-repudiation of all operations, carried out within the e-procurement system
Benefits of e-Procurement
• Enhanced efficiency and reducing processing costs by integration and automation of
many workflow processes
• Enhanced economy with greater business access and competition
• Enhanced equity and fair dealing
• Enhanced transparency, uniformity, compliance and integrity
• Breaking down of the physical barriers of space and time
Concerns with e-Procurement
e-procurement brings with it the concern about privacy and security. The concern includes
1. Authentication
• Which is the ability to establish the parties’ identities with certainty
2. Confidentiality
• For ensuring that there is no eavesdropping on transaction in progress
3. Data Integrity
• For ensuring that the message sent is the same as the one received
4. Security of Data
• Protection from loss, theft, misuse, alteration or destruction
These concerns have to be appropriately and adequately addressed through software and
procedures used in e-procurement.