Introduction to public procurement

Public Purchase

1. M.H.Khan

3. As per World Bank government
procurements (public buying of
goods and services) accounts for
20% of global GDP !
India’s Public Procurement
constitutes 30% of its GDP
Better procurement – Better
service delivery

Even incremental cost saving
measures can bring about huge
savings and expenditure control
in public procurement.

4. Central Government Rs. 2,51,501 crore
State Government

Rs 1,34,280 crore
All Government

Rs. 3,85,781 crore
Central PSUs

Rs. 2,68,100 crore
State PSUs

Rs. 1,46,374 crore
All PSUs

Rs. 4,14,474 crore
All Government and Public
Sector
Rs. 8,00,255 crore

5. Original flight
limit of 18000 feet
Lowered to 15000
feet to include
Augusta Westland in
the fray
Slight modification
in the specs or
conditions may lead
to complete change
of course of action

6. Allotment of spectrum of 2G
on FCFS basis
Allotment at throwaway price
: Unitech bought it for Rs.
1658 cr and sold it to
Telenor for Rs. 6400 cr
Preponing the cut-off date
to September 25, from
October 1, 2007
Later on the same day, DoT
posted an announcement on
its website saying those who
apply between 3.30 and 4.30
pm would be issued licences

7. Tatra, a Czech company sold
trucks to Vectra worldwide at
35% discount
Vectra worldwide sold it to
Tatra sipox , and price goes
up by 30%
Tatra sipox sold it to BEML
after adding 20% to its cost
BEML sold it to Indian Army by
adding 25-35% profit
Clear violation of procurement
rules which do not permit the
involvement of middlemen.
Purchase to be done directly
from OEM

8. Purchase of Chikki
without the mandatory
e-tendering to the tune
of Rs 206 crore, which
were purchased for
school students (ICDS)
without any tender.
Contra vention of
existing government
rules which stipulates
purchases over Rs 3
lakh to be made
through e-tendering

9. Punjab Govt planning
to buy a chopper
Unsolicited/sou moto
chopper proposal
received
Committee under CS
selected Bell 429
Bell 429
purchased
helicopter
by Punjab
without government
any tender

10. India does not have
a single public
procurement law,
though policies,
procedure and
manuals are there
Only the states of
TamilNadu, Rajasthan
and Karnataka have
adopted transparency
laws for public
procurement

11. In broader terms there are three
types of tender
Open Tender
Limited Tender
Single Tender/PAC

12. Purchase of goods without
quotation
Value upto 25000/-
Each occasion
Certificate to be recorded by the
competent Authority – “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.”

13. Purchase of goods by Purchase
Committee
>25000/- and upto 2.5 Lacs on each
occasion
Three members Committee as decided by
the HoD
Committee’s responsibilities
a)Market Survey
b)Reasonableness of Rates
c)Quality & Specifications
d)Identify appropriate supplier
e)Joint Certificate by the Committee

15. Need assessment
Estimate (Qty. and Amount) –
budgetary estimate (How many?)
EOI – Expression of Interest
RFP/RFQ – Request for Proposal
/Quotation
NIT – Notice Inviting Tender
PBC – Pre Bid Conference
Bidding (Two bid or Single?)
TOC – Tender Opening Committee
TEC – Technical Evaluation Committee

16. Purchase Committee (Financial Bid
opening)
Comparative Statement of Tenders
Identification of L-1
(Negotiation?)….suppose if it backs
out?
Approval of authority
SD - Security Deposit
Award of contract and Agreement
Refund of EMD

Notice / web publicity about award
of contract

17. Reverse Auction
Swiss Challenge
Risk and Purchase clause
Option Clause
Repeat Order
Exchange rate variation
Price escalation
EMD
Security Deposit

18. RFP and RFQ
Single Stage tender and two stage tender
Pre bid conference
Expression of Interest
Payment terms
Liquidated damages
Integrity pact

19. Contract for building road: NIT floated for
resurfacing 10 km road. Rates invited for
WBM. Time allotted for completion 6
months.
Contractor completes 40% work till 6
months, asks for extension of 6 months
Extension granted, work completed in 14
months, 2 months extension again granted.
Is there any loss to the Govt?

20. Purchase of electronic equipment: NIT floated
and bids received.
Qualified bids evaluated and L-1 given the order
L-1 said that due to non availability of some
components, the product offered is different,
with some changes in specifications, but will
serve the purpose. Supply order was amended
by making some changes in the technical
specifications.
Can it be accepted?

21. Tender invited for cleaning services in the
Secretariat
RFP says: Firm should have 5 years of
working experience in govt sector
Firm should ensure 99.9% bacteria free
toilets and rooms of the offices
Firm should use established cleaning material
He should deploy minimum manpower of 50
personnel

22. Price preference: Small Scale Sector registered
with National Small Industries Corporation
(NSIC) or with Directorate General of Supply and
Disposal (DGS&D) entitled for price preference
upto 15% over the offer of Large Scale Sector
and 5% over the offer of Public Sector
Undertaking

The evaluated cost of the lowest acceptable
offer, which is from a Large Scale Sector is
Rs.100/-. The evaluated cost of an acceptable
offer from a Small Scale Unit, which is registered
with NSIC / DGS&D is Rs.115/-. This SSI is
entitled to get the order at its quoted price

23. The evaluated cost of the lowest acceptable offer,
which is from a Large Scale Sector is Rs.100/- and the
evaluated cost of an acceptable offer from a CPSU, is
Rs.110/-. As per the extant policy, the CPSU will be
offered the price of Rs.100/- and if it accepts the
same, order will be placed on it (CPSU) at that price
Rs.100/-

24. Online procurement portal like
Amazon/Flipkart
Handled by DGS&D
Upto Rs 50,000, directly placing
order
From 50,000 to 30 lacs, find out
any three suppliers from GeM, and
pick the lowest
Beyond 30 lacs, online
bidding/reverse auction from
amongst the suppliers registered
on GeM

25. Whether we know our needs?
Have we planned the steps?
Document framed properly?
Are we archaic?
Are we just reactive?
Are we reasoned?

27. Limited/Single Tender Enquiry (less
opportunity, higher rate,
favouritism…. )
Market sharing and cartel formations:
quoting same price, distribution of
order… ..
Bid rigging and collusive bidding: all
united to favour one supplier, harm to
exchequer… ..
Area division
Tailor-made specifications
High qualification barriers

“Contractor should have experience of
working at XYZ ….”

29. Policy,Funds
Contract,Funds
Execution
Leakages
Leakages
Leakages
Avoiding leakages can
lead to Savings/Funds
for development

30. CAG
CVC
CCI
CBI
Courts
And of course Media!

31. GFR 2017
GeM
Centralised Public Procurement
Portal
Reverse Auctions
Compulsory uploading on
official websites tenders as
well as contracts awarded
New Public Procurement Bill
2012 (long wait!)

32. Rule 144(VII) – The procuring authority
should satisfy itself that the price of
the selected offer is reasonable and
consistent with the quality required.
Rule 173(XVI) – Contract should
ordinarily be awarded to the lowest
evaluated bidder whose bid has been
found to be responsive and who is
eligible and qualified
Thoughtful pre qualification criteria
and technical specs can ensure quality
QCBS for consultancy services but not
for goods and works

33. Evaluation criteria to be clearly spelt
out and evaluation to be done strictly
as per this only and not invention of
new criteria even if it is valid
Framing of design, specifications, and
vendor base selection is important for
competition
Benefits of OTE, lower prices obtained
Specifications not to be tailor made, no
brand name
Budget estimate to be drawn thoughtfully
Negotiation with L-1 only
Variation clause, repeat clause, option
clause, price escalation

34. Adequate publicity
Exchange rate variation, escalation,
delay in Payment, risk based
contracting
Purchase preference, price preference
Liquidated damages
Complex projects: invite consultancy
Replying queries adequately
Extension of contract: benefit to
contractor?
Worries of vagaries of Contractors…..

Should we be against our contractors?

35. Thank you

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