Public Procurement

of Goods
Procurement Process
Public Procurement in Practice
 Tender – Local purchase or otherwise

Communications of Requirements
(Electronic or Paper based)

• Clarity
• Completeness
• Un-ambiguous
• Documentation
• Units
• Conditions
 Buying System
Main Features
• Authorization - must as per Powers/ Delegation
• System - verifiable, recorded
• Checks & counter checks : Accounts, Audit, Parliament,
Vigilance, CBI, Courts
• Scope for arbitrariness, laid down acceptable terms and
conditions in governmental contract provisions
• Equal consideration with given criterion
• Sometimes efficiency and objectivity suffers
• ‘Find a Way' to get things done
• Thrust: to reach out as many suppliers as practicable
• Responsiveness with regard to bid documents is must
Purchase Contract

• Buyer’s obligation
• Seller’s obligation
• Product description
• Quality & Quantity
• Terms & conditions
• Payments
• Remedies
 Governing Principles
• Applicable Laws - mainly
– ICA, SOGA, Arbn & Conciliation Act

• National Policy
– KVIC, SSI, MSME, Regional
development, Make in India

• Delegation - SOP
– Authority for sanction / Purchase

• Guiding principles
– Canons of Financial Proprietary
 The Objectives
In short
delivering the RIGHT PRODUCT
(Quality & Quantity)
to the RIGHT PLACE,
at the RIGHT TIME,
at the RIGHT PRICE
(Value for money)
to be SOURCED RIGHTLY
(Capability, Capacity, Reliability)
Buying Situations

• Normal, Planned
• Urgency/ Criticality
• Low value
• Proprietary
• Policy restricted
• Externally funded
 Buying Impediments
• Within accepted standards of norms & quality
• Competing Sources
• Quality to serve the purpose not best available
• Acquire materials, when needed
• Economical & Reasonable price
• Law & Regulation defines purchasing authority &
responsibility
• Actions & documentation are Public
• Aggrieved parties have legal right to protest
• Procurement process can stop until protests have
been resolved
 Public Procurement Process
Important considerations

• The purchase function is Need/Demand based,

non-speculative, participative decision making
process.
• The function is normally guided by detailed
instructions on the subject, existing in the
organization.
• The purchases are guided by Law of the land,
mainly Indian Contract Act & Sale of Goods Act.
Most Govt. organizations have standardized the
conditions of contract.
 Public Procurement Process
Important considerations (contd.)

• The procurement method is mainly based on

value of purchase, nature of item, criticality of
use identified for the item.
• The contracts are to be entered into after
specific allocation of funds to meet the payment
obligation by an appropriately authorized
competent authority.
• The materials are normally to be pre-inspected
against all orders placed by the nominated
agency.
 Public Procurement Process
Important considerations (contd.)

• Buying organization, in general prefers

payment for materials after their receipt &
acceptance by the consignee, however
payment against specified documents is also
allowed.
• The contracts contain clauses for dealing
with failures.
• For disputes resolution Arbitration clause
exist in purchase contracts.
 Basis of Procurement

• Contract is the basis for

procurement
Enables supplies
• Tender is the tool for
entering into contract
Enables vendor selection
 Tenders
{Tenders, Offers, Bids, Quotations, Proposals}

Pre-bid stage:
 Need/Demand assessment & indents
compilation
 Estimated value assessment
 Mode of Tendering
 Purchase proposal and approval by CA
 Preparation of Bid Documents
 Bid Invitation, Pre-bid meeting and
 Bid Opening
Procurement stages

Assessment of need

Procurement planning

Bid invitation

Bid evaluation
Procurement stages

Contract award

Contract management

Dispute resolution
 Four pillars of Public Procurement

Public Procurement

Efficiency Value for

Transparency Accountability
money
 Need – Quantity Assessment
• Periodic Review Method - Annual procurement
system for procurement of Regular Items
• Purchase orders are placed well in advance to
maintain continuity of supply
• Continuous Review Method - Re-order Level System,
based on Lead time of item
• Purchase orders are placed in time ensuring supplies
reach before stocks are exhausted
• Purchases are made against specific demands
Need based purchase – No speculation
 Modes of Tendering
or Method of obtaining Bids
• Procurement through e-Tender System
– Open Tender or Open Global Tender
– Limited Tender
– Single Tender
• Other varients
– Two packet bids
– e-Reverse auction (e-RA)
– e-RA with initial bid
 Tendering Process
• Open e-tender is the norm.
– Most competitive bidding process
– All high value tenders above specified value must be open e-
Tenders (Rs 25 Lakh)
• Limited e-Tenders are issued in specific cases
– Competition is restricted
– For low value purchase
– issued to approved/registered/selected suppliers
• Single e-tender
– No competition
– adopted in exceptional cases
• For propriety articles
• For petty value purchase
• In emergency
• For procurement from KVIC, ACASH etc
 Essentials in tendering process
• NIT (Notice Inviting Tender): Advertisement
• Preparation of tender documents:
Tender information: Tender no., Closing date &
Time, EMD, Tender Document cost (Now free)
Bid Evaluation criteria, Eligibility criteria, Delivery
requirements, Other terms & conditions
Schedule of requirement: Description, drawing,
specification of goods, Quantity, Units, place of
requirement, consignee, inspecting authority etc.
• Transparency, Fairness, Cost effectiveness,
Efficiency
• Avoid conditions that Restrict the Competition
 Major areas of Procurement Planning

Procurement Planning

Firm/ variable Qual Criteria Mode of

Specs Procurement
price & Terms
Preparation of Bid Documents,
Contents,
Bids Invitation and Bid Opening
 Bid document
• Most important document in procurement process
– Conveys the buyers exact requirements to the market
– It lays down the rules of the game
• Review the Bid document to consider
– For difficulties faced in settling past tenders and taking
due care in easing them
– For any new policy changes and incorporating them
• To ensure effective and efficient procurement it is
absolutely essential to give proper time and thought
in preparation of the bid document
Pre-tender work on Bid document will smoothen &
speedup the tender finalization process
 Bid document Contents
• Consists of:
– Bid notice or Notice Inviting Tender (NIT)
– Schedule of Requirements (SOR)
– Instructions to Bidders (ITB)
– Standard Forms & Formats
– Check list
– Drawing and specifications
– General conditions of contract
– Special conditions of contract
 Bid Notice/Bid Invitation/NIT
• Must be published in leading News Papers & website of
organization (CVC requirement) (Latest GFR has relaxed it)
• It must contain:
– Description in brief, specification etc.
– Quantity and unit
– Cost of Bid document and how to procure tender document.
– Earnest Money deposit (EMD)
– Bid opening date – at least 30/45 days from publication of Bid
Notice.
– Contact person, address, website (It must be small in size to
reduce advertisement cost)
• As per latest instructions in Railways - publish only a
fortnightly advertisement in Newspapers giving website
address where tenders are published and tender
documents are available for download
 Schedule of Requirements (SOR)
• Detailed description, Specification, Drawings etc
• Quantity, unit
• Destination/port
• Time frame of delivery
• Bid receiving and opening – time and date
• Quantity variation clause – if any
• Exemptions for paying cost of tender
• Conditions on which bid would be summarily rejected
– Cost of bid document not paid
– EMD not enclosed
– Late bids
– Bids with shorter validity than required-say 90/180 days
– Any other critical requirement to be specified
 Schedule of Requirements (SOR)
• Details of tender document:
– Bid Notice/Bid Invitation
– Schedule of Requirements (SOR)
– Instruction to Bidders
– Forms
– Check lists
– Drawings and Specifications
– General/Special conditions of contracts
– Amendments/Corrigendum of bid
 Instructions to Bidders (ITB)
Earnest money Deposit (EMD)

• Amount
• Forms acceptable-cash/BG/FD/Bank Draft etc
• For BG/FD-acceptable banks – Nationalised,
Foreign, Scheduled banks
• Format of BG
• Validity Required When EMD will be returned
• Waivers permissible-if any
• Applicable Laws
 Instructions to Bidders (ITB)
Submission of Offers
• Types of firms eligible-manufacturers, Authorized
agents, traders etc
• Reference of forms for rates submission
• Documents required with bid
• In two bid systems-separate technical & commercial
offers required and details of procedure for opening
financial bids
• Each page is to be signed and uploaded
• Language for interpretation
• Statement of deviations
• Interpretation for discrepancies
• How, where and up to when bid is to be submitted
 Instructions to Bidders (ITB)
Statements and Reports to be submitted
• Authority letter from manufacturer (if needed)
• Performance statement
• Banker’s Report/Annual Financial Statement
• Details of equipments and Quality control
• Statement of Deviations-technical and for other
clauses of tender document-preferably nil
(Forms, formats are to be part of tender document)
 Instructions to Bidders (ITB)
Basis of Price Bid
• FOR Destination/Ex works/FOB/CFR/CIF etc
• Agency Commission (if any) – for imported offer
• Taxes and duties to be paid in India by purchaser
• Statutory variation permissible for GST etc
• Taxes, duties, inland freight – in foreign country
by bidder
• Permissible bidding currencies - imported bid
• PVC applicability
if yes give PVC formula & base parameters
PVC formula quoted by bidders not acceptable
GFR – PVC should be given for contracts running for
more than 18 months
 Instructions to Bidders (ITB)
Security Deposit (SD) or Performance Guarantee
• Amount
• Forms acceptable-Cash/BG
• For PBG – acceptable banks – Nationalized,
Foreign with countersign, scheduled banks
• Format of PBG
• Validity Required
• When SD/PBG will be returned
• Waivers permissible – if any
• Applicable Laws
 Instructions to Bidders (ITB)
Payment terms
• For foreign bidders in general
– 90% on Inspection and shipment by Letter of Credit on
certain documents submitted to bank at sight/with
inspection of correctness of documents
• Bill of lading
• Invoice
• Insurance particulars
• Inspection Certificate of buyers agency/by bidder
• Packing list
– 10% after receipt at port through LC on submission of
Warranty BG of 10% amount (Format, validity, claim
period of WBG is to be specified in tender documents)
– Agency commission is to be paid in INR only after
part/full completion of supply
 Instructions to Bidders (ITB)
ITB-Payment terms
Payment terms
• For Indian bidders in general
– 90/95% on proof of inspection & Receipted
challan and balance 10/5% after receipt at
destination & acceptance and submission of WBG
for 10% value (now option for payment through LC
at nominal cost also to be given in contracts above
Rs 10 Lakh)
– OR 100% on proof of Inspection, receipt at
destination & acceptance and WBG for 10% value
as applicable
– Installation commissioning etc as per item under
procurement
 Instructions to Bidders (ITB)
Evaluation of Offers
• All inclusive price FOR destination for Indigenous
offers (depending on the type of contract)
• For imported offer – Total landed cost after
clearance at Indian port which includes
– FOB + Agency commission + sea freight + Insurance + Port handling +
Custom Duty (Foreign Exchange rate as on date of tender opening)

• It is to be clearly specified if other charges such as

training, installation & commissioning, AMC etc
will be added for bid evaluation and ranking
• All bids are converted to INR for comparison
 Other Important conditions

• Full details of purchaser/manufacturer required

• Alternate offers acceptable or not
• Special requirements for Indian Agents
• Splitting of quantity will be done or not
• Tender for part quantity acceptable or not
• Know local conditions – Any plea of not knowing
local conditions after contract will not be
acceptable
 General & Special conditions of contract
• Definitions of various terms
• Inspections
– Responsibility for boarding, lodging, travel etc
– Facilities for inspection
• Subletting of contract not permissible
• Mistakes in drgs/specs to be pointed out
before contract
• Liquidated Damages
• Default and Risk purchase
• Arbitration clause for disputes resolution
 General & Special conditions of contract

• Force Majeure clause

• Laws governing contracts - Indian laws
• Jurisdiction of court - purchaser’s city/state
• Corruption and payment of commission
• Secrecy clause
• Warranty clause
• Packing requirements
• Transit risk or risk till delivery to consignee
 Forms and formats in Bid documents

• Offer form for Indigenous bid

• Offer form for Imported bid
• Performa for performance statement
• Performa for equipments and quality control
• Performa for authority from manufacturer
• Performa for statement of deviations
• Formats for BGs (EMD, SD, WBG)
 Check List
• Have you submitted cost of bid document?
• Have you submitted bid guarantee?
• Have you submitted letter of authority from
manufacturer?
• Have you submitted performance statement?
• Have you submitted banker’s Report?
• Have you submitted details of equipments and
quality control?
• Have you submitted statement or deviations?
• Have you quoted in prescribed Performa
All answers are to be Y/N with remarks as
applicable
These check lists can be modified as required for
specific tender
 Bid Opening
• Bids to be electronically submitted by an authorized
official using encryption and digital signatures
• Bids are to be submitted up to time specified in
tender and revised any number of times superceging
earlier bids, latest bid at the time of opening will only
be considered as valid. System time stamps all bids
and allots bid-id to each bid
• No bids can be submitted after the due time
• Bid opening is jointly by Authorised officers of Stores
and Accounts using their Digital signatures and
decryption keys.
• After tenders are opened bidders can see the
tabulation statement instantly
 Supply e-Tenders on opening
• Financial Tabulation is instantly generated
– As per evaluation criteria stipulated
– Tabulation of Remarks, Part qty offers, Superseded offers
• Techno-Commercial Tabulation is also instantly
generated
– Part A: Eligibility Criteria
– Part B: Terms And Conditions
– Part C: Performance Statement
– Part D: Technical Specifications
– Part E: Technical Deviation Statement
– Part F: Commercial Deviation Statement
– Part G: Special Conditions & Checklist for Bidders
– Part H: List of Document(s) Attached
– Part I: Documents in support of exemption for TDC or EMD
– Enterprise Details
– Digital Signature Certificate Details of Vendor User who have
signed and submitted Financial Rate Page
 After e-Tender is Opened

• All the participating vendors who have

submitted valid electronic offers can view
– their own offer details as well as
– the tender complete tabulation statement
• using internet access by visiting the web site
instantly
 Process after bid opening
• Consideration of offers
• Technical scrutiny & suitability of offers
• Rates reasonableness
• Tender consideration by competent TC
and TAA or Purchase officer as per value
of lowest bid
• Placement of Supply Contracts
• Contract Management
 MSE provisions in Procurement
tenders
Provisions
(Refer tender documents on website for details)

•Cost of tender documents exemption

•Preferential treatment in consideration
 Within L1+15% price band
 Match L1 price, if L1 not MSE
 Can get upto 25% value of NPQ
•Earnest money deposit exemption
•Security deposit exemption
• Annual procurement goal of 25% including 6.25% & 3%
from reserved category entreprenuers
Thank You