Public
Procurement
Policy
z A Presentation by CA. Rupal Garg
28.04.2025 (Monday)
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Topics to be covered
Public Procurement:
Principles and Methods of Public Procurement,
Transparency and Professionalism in Public procurement,
Penalties & debarment etc.
Indian Contract Act, 1872,
The Arbitration & Conciliation Act, 1996
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Public Procurement Bill, 2012
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Public Procurement Bill, 2012
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Procurement of Goods & Services
Chapter 6 of General Financial Rules, 2017 deals with rules
relating to Procurement of Goods & Services.
Rule 142 – 176 : Procurement of Goods
Rule 177 – 206 : Procurement of Services
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Rule 144 : Fundamental principles of public buying
Every authority delegated with the financial powers of procuring goods in
public interest shall have the responsibility and accountability to bring
efficiency, economy, and transparency in matters relating to public
procurement and for fair and equitable treatment of suppliers and
promotion of competition in public procurement.
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1. The description of the subject matter of procurement to the extent practicable should
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a. be objective, functional, generic and measurable and specify technical,
qualitative and performance characteristics.
b. not indicate a requirement for a particular trade mark, trade name or brand.
2. The specifications in terms of quality, type etc., as also quantity of goods to be
procured, should be clearly spelt out keeping in view the specific needs of the procuring
organisations. The specifications so worked out should meet the basic needs of the
organisation without including superfluous and non-essential features, which may result
in unwarranted expenditure.
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3. Where applicable, the technical specifications shall, to the extent practicable, be
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based on the national technical regulations or recognized national standards or building
codes, wherever such standards exist, and in their absence, be based on the relevant
international standards. In case of Government of India funded projects abroad, the
technical specifications may be framed based on requirements and standards of the
host beneficiary Government, where such standards exist.
Provided that a procuring entity may, for reasons to be recorded in writing, adopt any
other technical specification.
4. Care should also be taken to avoid purchasing quantities in excess of requirement to
avoid inventory carrying costs.
5. Offers should be invited following a fair, transparent and reasonable procedure.
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6. The procuring authority should be satisfied that the selected offer adequately meets
the requirement in all respects.
7. The procuring authority should satisfy itself that the price of the selected offer is
reasonable and consistent with the quality required.
8. A complete schedule of procurement cycle from date of issuing the tender to date of
issuing the contract should be published when the tender is issued.
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9. All Ministries/Departments shall prepare Annual Procurement Plan before the
commencement of the year and the same should also be placed on their website.
10. Notwithstanding anything contained in these Rules, Department of Expenditure
may, by order in writing, impose restrictions, including prior registration and/ or
screening, on procurement from bidders from, or bidders having commercial
arrangements with an entity from, a country or countries, or a class of countries, on
grounds of defence of India, or matters directly or indirectly related thereto including
national security; no procurement shall be made in violation of such restrictions.
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Rule 151 : Debarment from bidding
A bidder shall be debarred if he has been convicted of an offence—
(a) under the Prevention of Corruption Act, 1988; or
(b) the Indian Penal Code or any other law for the time being in force, for
causing any loss of life or property or causing a threat to public health as part of
execution of a public procurement contract.
for a period not exceeding three years commencing from the date of debarment
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Rule 151 : Debarment from bidding
A procuring entity may debar a bidder or any of its successors, from
participating in any procurement process undertaken by it, for a period not
exceeding two years, if it determines that the bidder has breached the code of
integrity.
The bidder shall not be debarred unless such bidder has been given a
reasonable opportunity to represent against such debarment.
The Ministry/Department will maintain such list which will also be displayed on
their website. By CA. Rupal Garg
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Rule 154 : Purchase of goods without quotation
Purchase of goods upto the value of Rs. 50,000 (Rupees fifty thousand) only on
each occasion may be made without inviting quotations or bids on the basis of a
certificate to be recorded by the competent authority in the following format.
"I am personally satisfied that these goods purchased are of the requisite
quality and specification and have been purchased from a reliable supplier at a
reasonable price."
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Rule 155 : Purchase of goods by Purchase Committee
In case a certain item is not available on the GeM portal Purchase of goods costing
above Rs.50,000 (Rupees Fifty thousand only) and upto Rs.5,00,000/- (Rupees Five
lakh only) on each occasion may be made on the recommendations of a duly
constituted Local Purchase Committee consisting of three members of an appropriate
level as decided by the Head of the Department.
"Certified that We, members of the purchase committee are jointly and individually
satisfied that the goods recommended for purchase are of the requisite specification
and quality, priced at the prevailing market rate and the supplier recommended is
reliable and competent to supply the goods in question, and it is not debarred by
Department of Expenditure or Ministry/ Department concerned."
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Rule 158 : Purchase of goods by obtaining bids
For more than Rs. 5 Lakhs, Ministries or Departments shall procure goods under the
powers referred to in Rule 140 above by following the standard method of obtaining bids in:
(i) Advertised Tender Enquiry (Rule 161) – Above Rs. 50 Lakhs
(ii) Limited Tender Enquiry (Rule 162) – Upto Rs. 50 Lakhs
(iii) Two-Stage Bidding (Rule 164)
(iv) Single Tender Enquiry (Rule 166)
(v) Electronic Reverse Auctions (Rule 167)
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Rule 173 : Transparency, competition, fairness and
elimination of arbitrariness in the procurement process
Rule 174 : Efficiency, Economy and
Accountability in Public Procurement System.
Rule 175 : Code of Integrity
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MCQs on Methods of Public Procurement
1. What is the maximum value of goods that can be purchased without inviting
quotations or bids?
A. Rs. 10,000
B. Rs. 50,000
C. Rs. 1,00,000
D. Rs. 5,00,000
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MCQs on Methods of Public Procurement
2. What is the minimum time allowed for bidding after publication of the bidding
document?
A. One week
B. Two weeks
C. Three weeks
D. Four weeks
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MCQs on Methods of Public Procurement
3. Under which rule can goods be purchased by obtaining bids for more than Rs. 5
Lakhs?
A. Rule 154
B. Rule 158
C. Rule 151
D. Rule 167
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MCQs on Methods of Public Procurement
4. What must be provided by the Ministry/Department for proprietary articles?
A. A Quality Assurance Certificate
B. A Proprietary Article Certificate
C. A Supplier Reliability Certificate
D. A Price Schedule
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MCQs on Methods of Public Procurement
5. What is the consequence for a bidder who breaches the code of integrity?
A. Immediate disqualification
B. Debarment from bidding for up to two years
C. No consequences
D. A warning letter
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GFR Procurement Study Guide
Quiz
1. What is the potential consequence for a bidder who breaches the code
of integrity?
2. What is the minimum percentage of textiles that Central Government
departments must procure from handloom origin sources?
3. Under what circumstances can goods costing up to Rs. 50,000 be
purchased without inviting quotations?
4. What is the financial threshold for forming a Local Purchase
Committee for goods procurement?
5. What is the primary purpose of dividing bids into technical and
financial components in the two-bid system?
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Quiz Answer Key
1. The Ministry/Department can determine that the bidder has breached the
code of integrity and potentially debar them.
2. It is mandatory to procure at least 20% from amongst items of handloom
origin.
3. Goods up to this value can be purchased without quotations based on a
certificate from the competent authority confirming quality, specification,
reliable supplier, and reasonable price.
4. A Local Purchase Committee is typically required for purchases costing
above Rs. 50,000 and upto Rs. 5,00,000 (with higher limits for Scientific
Ministries/Departments).
5. The two-bid system is used for complex items to first evaluate technical
suitability and then open financial bids only for technically acceptable offers.
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6. What is the typical minimum time allowed for the submission
of bids in an Advertised Tender Enquiry?
7. Under what specific circumstances can Limited Tender Enquiry
be used for procurements exceeding Rupees Fifty Lakhs?
8. When procuring goods from a single source under Rule 166 (i)
or 166 (iii), what specific certificate is required?
9. What is the defining characteristic of an Electronic Reverse
Auction?
10. According to Rule 168, where should the price schedule be
located within the bidding document?
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6. The minimum time allowed is typically three weeks from the date of
publication or availability of the bidding document, whichever is later.
7. It can be used if the demand is urgent, procuring through advertised
tender is not in the public interest, or sources of supply are definitely
known and limited.
8. A Proprietary Article Certificate must be provided by the
Ministry/Department.
9. It is an online, real-time purchasing technique where bidders submit
successively more favorable bids, with automatic bid evaluation.
10. The price schedule should be located in Chapter-5 of the bidding
document.
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INDIAN CONTRACT ACT, 1872
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Sec. 74 : Compensation for breach of
contract where penalty stipulated for
When a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, or if
the contract contains any other stipulation by way of penalty, the
party complaining of the breach is entitled, whether or not actual
damage or loss is proved to have been caused thereby, to
receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the
case may be, the penalty stipulated for.
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Exception — When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or, under
the provisions of any law, or under the orders of the Central
Government or of any State Government, gives any bond for the
performance of any public duty or act in which the public are
interested, he shall be liable, upon breach of the condition of
any such instrument, to pay the whole sum mentioned therein.
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Illustrations
(a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs.
500 on a given day. A fails to pay B Rs. 500 on that day. B is
entitled to recover from A such compensation, not exceeding Rs.
1,000, as the Court considers reasonable.
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Illustrations
(b) A contracts with B that, if A practises as a surgeon within
Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in
Calcutta. B is entitled to such compensation; not exceeding Rs.
5,000, as the Court considers reasonable.
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Illustrations
(c) A gives a recognizance binding him in a penalty of Rs. 500 to
appear in Court on a certain day. He forfeits his recognizance.
He is liable to pay the whole penalty.
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Illustrations
(d) A gives B a bond for the repayment of Rs. 1,000 with interest
at 12 per cent. at the end of six months, with a stipulation that, in
case of default, interest shall be payable at the rate of 75 per
cent. from the date of default. This is a stipulation by way of
penalty, and B is only entitled to recover from A such
compensation as the Court considers reasonable.
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Illustrations
(e) A, who owes money to B a money-lender, undertakes to
repay him by delivering to him 10 maunds of grain on a certain
date, and stipulates that, in the event of his not delivering the
stipulated amount by the stipulated date, he shall be liable to
deliver 20 maunds. This is a stipulation by way of penalty, and B
is only entitled to reasonable compensation in case of breach.
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Illustrations
(f) A undertakes to repay B a loan of Rs. 1,000 by five equal
monthly instalments, with a stipulation that in default of payment
of any instalment, the whole shall become due. This stipulation
is not by way of penalty, and the contract may be enforced
according to its terms.
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Illustrations
(g) A borrows Rs. 100 from B and gives him a bond for Rs. 200
payable by five yearly instalments of Rs. 40, with a stipulation
that, in default of payment of any instalment, the whole shall
become due. This is a stipulation by way of penalty.]
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THE ARBITRATION AND CONCILIATION
ACT, 1996
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Salient Features of The Arbitration and Conciliation Act, 1996
(as amended)
With Respect to Public Procurement and Penalties
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1. Promotion of Alternative Dispute Resolution (ADR)
• The Act encourages faster and cost-effective settlement of
disputes, including those arising from public procurement
contracts.
• Public entities often include arbitration clauses in their
procurement contracts to avoid lengthy court cases.
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2. Minimal Judicial Intervention
• Courts have very limited scope to intervene in arbitration
proceedings (Section 5).
• Important for public procurement: government bodies cannot
easily delay arbitration by moving to courts.
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3. Binding Arbitration Agreements
• Procurement contracts must have a valid arbitration
agreement (Section 7) for disputes to be referred to arbitration.
• Without a proper arbitration clause, disputes cannot be easily
settled under this Act.
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4. Appointment of Arbitrators
• Section 11: If parties (including government departments) fail to
appoint an arbitrator, the court can step in.
• Public procurement contracts often specify the mechanism for
appointment (e.g., through a government panel).
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5. Time-bound Proceedings
• Section 29A:
• The award must be made within 12 months from the date of
completion of pleadings.
• Extendable by 6 months with consent; beyond that, requires court
approval.
• Critical in public procurement to ensure fast resolution without
hampering ongoing public projects.
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6. Fast-track Procedure
• Section 29B:
• Parties can opt for a fast-track arbitration, based solely on written
pleadings and documents — no oral hearings.
• Useful for smaller value procurement contracts where quick
disposal is important.
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7. Public Policy and Setting Aside Awards
• Section 34 allows setting aside an award if it is against the
public policy of India.
• Especially important for government procurement: ensures no
award violates procurement rules, corruption laws, or
constitutional principles.
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8. Enforcement of Arbitral Awards
• Awards are binding and enforceable like a court decree under
Section 36.
• Quick enforcement is crucial in public procurement to ensure
contractors fulfill obligations
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By CA. Rupal Garg