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Supply Tenders &

Contracts
R. Rajpurohit
Prof (IM)

Canons of financial Propriety

While dealing with public money; follow


Cannons of Financial Propriety
1. The expenditure should not prima facie be
more than- the occasion demands, and that
every Govt. Servant should exercise the
same vigilance in respect of expenditure
incurred from public moneys as a person of
ordinary prudence would exercise in respect
of his own money.

Canons of financial Propriety


1. No authority should exercise its powers of
sanctioning expenditure to pass an order
which will be directly or indirectly to its own
advantage
2. Public money should not be utilized for the
benefit of a particular person or section of
the community unless(a) The amount of expenditure involved is
insignificant ; or

Canonscontd.
(a) A claim for the amount could be enforced in
a court of law;
(b) The expenditure is in pursuance of a
recognized policy or custom;
1. The amount of allowance, such as traveling
allowance, granted to meet expenditure of a
particular type, should be so regulated that
allowance are not on the whole sources of
profit to the recipients.

Purchase Policy
Purchase Policy to be within the frame
work of Constitution of India & various
Public Acts;
Indian Contract Act, 1872
Sale of Goods Act, 1930
Arbitration & Conciliation Act, 1996
Relevant Customs, Excise & Sales Tax Acts

Purchase Policy contd..


Types of Supply Contracts:
Rate Contracts
Running Contracts
Fixed Quantity/Delivery Contracts

RATE CONTRACTs:
Generalized Contracts
Finalized for a specified period, one/two years
All terms finalized including RATE but not the
QUANTITY & CONSIGNEES
DDOs place orders on RC for specific Consignee &
Quantity.

Purchase Policy contd..


Saves lot of time in routine processing
Supplier takes a risk as anticipated quantity may not
be placed on him, no damage can be claimed
DGS&D: Common User items of RC: e.g.
Ceiling Fans, Cables, Torch Cells
Refrigerators, ACs
Industrial gases
Cleaning Items
Vehicles
PCs

Purchase Policy contd..


Running Contracts:
To avoid risk in RC, supplier insists on
quantity specification, approximately
Quantity variation up to 30%
Consignee not specified
Generally Contract Placing Authority only
operates RGC (Unlike RC by DDOs)

Purchase Policy contd..


Fixed Quantity/Delivery Contracts:
All terms including quantity, consignee &
delivery date, specified at the contract stage
itself
It is not a long period contract like RC/RGC
No subsequent supply order
Lack of flexibility but better contract
administration
Most of the Railways supply contracts fall in
this category

INDENTS
All items are not purchased by the concerned
Railway;
Due to bulk advantage, centralized purchase is
resorted to;
Bulk indents are placed on;
DGS&D,
Railway Board (Import, other high value item)
DLW/CLW/ICF/CORE/COFMOW (For
certain identified items)
Government Medical Store (by CMD)

Tender System
Purchase requires contracts with suppliers
Two essential elements of contract are;
Offer
Acceptance of offer
Supplier submits offer, accepted by way of supply
order

For purchase of materials at competitive prices


we follow tendering systems;
Open Tender: Used for estimated tender
value>Rs. 15 Lakhs,
Wide publicity, no control on choice of suppliers
Most competitive prices
Causes longer lead time

Tender System
Limited Tender System;
Value <15 Lakhs
Limited sources, on approved panel
Demand is urgent
Different types of LTs are;

Ordinary LT
SLT; safety items, urgent
demands

Tender System
Weekly Bulletins;
few hundred items at a time,
issued to the registered suppliers
who subscribe to the bulletin

Single Tender
PAC item
Item extremely urgent
Very small value, not economical
for competitive tendering

Tender System
PAC Format:
Makers Name & Address, & Name of Local Agent
I approve the above purchase & I certify that(a) No other make/brand will be suitable
(b) This is the only firm who is
manufacturing/stocking this item
(c) A similar article is not manufacture/ sold by
any other firms which could be used in lieu of.
NB: If (c) is deleted Purchase Power gets
restricted to Rs. 8 lacs/- only, else GMs approval

Tender Invitation
Purchase proposal is approved by PO and tender
document is prepared
In case of OT a tender notice is sent to CPRO for
publication in the dailies & posted on website
Tender documents are then sent to the tender sale
section
LT & SLT enquiries are sent directly
All tenders have due date & time for submission
Case transferred to Tender Section of COS office

Tender Opening
On the due date & time
Elaborate system to ensure that all offers received
are linked to the relevant tenders
OT & SLT opened in the presence of firms
representatives (transparency), by a Gazetted
Stores Officer, & Section officer from accounts
dept.
Limited tenders are opened by Ch.OS/OS of
Stores & SO from Accounts dept. Firms
representatives are not allowed at the time of
tender opening.

Tender Opening
All pages of all offers are signed. All financial
terms are encircled & initialed
Over writings are attested
Offers are sorted tender case wise
Tender cases with offers are transferred to POs
For cases where lowest tender value is exceeding
Rs. 15 lacs, comparative statement is prepared &
got vetted by finance also before passing on the
file to POs.

Tender Finalization
Finalization;
Accept/Reject an offer

If value is less than Rs. 15 lacs, direct decision by


the PO, if more, the case to be dealt by a TC,
consisting of three officers
Officers from stores & user dept. are Sr. Scale
Officers (Minimum level)
TC is a recommending body, its
recommendations are to be considered by an
accepting authority.

Guidelines for Tender Committee


Committee to be duly constituted (SOP)
Lowest tender value is the criteria for level of
TC; a TC may have to transfer the case to a
higher level TC
Dropping of purchase is also to be considered by
the TC
Stores Member is the convener of TC, who puts
up the case to competent authority
TC member can not be the AA also
Concept of dissenting note. In some Railways
case goes to next higher accepting authority

TC Proceedings
Signed by all the three members
Any changes to be done with the consent of all
members of the TC
The Points included in the TC Proceedings are;
Demand No & Date
Description/Specification/Quantities
Authority for issue of tender & Number of tenders
issued
Date of opening & No. of offers received
Details of Technical Comments

TC Proceedings contd..
LPR & details of last PO
Discussion of offers under the zone of
consideration
Reasonableness of rates
Specific recommendation for splitting with
rate differential
Credential/Performance of the firm being
recommended
Summary of recommendations

TC Proceedings contd..
Recommended Terms & Conditions;

Delivery Terms
Delivery schedule
Payment terms
Inspection clause
Warranty clause
ST/ED/P&F, extra or inclusive
ST/ED variation if any
PVC, along with formula & base prices

TAA to record its acceptance on the body of TC


recommendations & not on the noting side

Tender Finalization
Certain important points;
Offer to be technically suitable
Rates of lowest technically suitable offer to be
examined for rate reasonability
Check if the delivery condition offered suits our
requirement
Above being OK, see if the firm is reliable & their
past performance is satisfactory
Check various terms & conditions offered by firm are
acceptable
IRS Conditions of Contract: whether any deviation
Tenders to be finalized within the offer validity

OFFERS FROM UNTRIED FERMS

EMD/SD, Bankers Particulars, Performance


Statement
Details
of
Equipment
&
Technical
Personnel,
In case of failure to furnish the above their
offer be ignored
Else verify the capacity-cum-capability,
20% trial order
If trial order fails cover the qty. on regular
order against option clause

Unsolicited Offer
In-adequate competition,
Urgency of demand & Rate
Reasonableness
Capacity-cum-capability
Acceptance at higher level

Late/Delayed Offer
In exceptional cases with Boards
approval if;
o
o
o
o

Competition is restricted
Ring Formation suspected
Need for development of new source
Offer with substantial price advantage,
from a proven source

Placement of PO
Placement of Purchase Order
Acceptance recorded by PO or the TAA
Case passed on to the Purchase Section for
making PO
PO is signed & sent to Accounts Dept. for
vetting if value exceeds 6,00,000/ Value of PO is posted in the Liability Register
PO is numbered & sent to the supplier by post

Contract Administration
Placement of PO is not the end
We have to get the materials, administer the
contract

PO Modifications:
Suppliers may make requests for certain
amendment in the PO, dispose it appropriately
Take finance concurrence if the requested
modification involves financial repercussions

Contract Administration
Delay in supply:
DP expires, Contract expires, further extension in DD
with mutual consent
Right to recover LD for any loss or inconvenience
suffered by Railway due to delay in supply (IRS
Terms)

Failure of Supply: Risk Purchase


Purchase from alternative source at risk & cost of the
defaulting supplier; if higher price paid, recover from
the defaulter
Give opportunity to defaulter to minimize his loss
Ensure that the RP is tenable, finalized within 6/9
months

Powers of signing PAC


Indenting Officer up to Rs. 40,000/JAG/SG
up to Rs. 1 Lakh
SAG-up to Rs. 5 Lakhs
PHOD/CHOD-- > Rs. 5 Lakhs
Authority: - Bds letter dated 12.03.2015

Thank You