Chapter – 6

GENERAL FINANCIAL RULES 2017

Ministry of Finance
Department of Expenditure

PROCUREMENT OF GOODS AND SERVICES

PROCUREMENT OF GOODS b) not indicate a requirement for a
particular trade mark, trade name
Rule 142 This chapter contains the general rules or brand.
applicable to all Ministries or (ii) the specifications in terms of quality,
Departments, regarding procurement of type etc., as also quantity of goods to
goods required for use in the public be procured, should be clearly spelt
service. Detailed instructions relating to out keeping in view the specific needs
procurement of goods may be issued by of the procuring organisations. The
the procuring departments broadly in specifications so worked out should
conformity with the general rules meet the basic needs of the
contained in this Chapter. organisation without including
Rule 143 Definition of Goods. The term ‘goods’ superfluous and non-essential
used in this chapter includes all articles, features, which may result in
material, commodity, livestock, furniture, unwarranted expenditure.
fixtures, raw material, spares, instruments, (iii) Where applicable, the technical
machinery, equipment, industrial plant, specifications shall, to the extent
vehicles, aircraft, ships, medicines, practicable, be based on the national
railway rolling stock, assemblies, sub- technical regulations or recognized
assemblies, accessories, a group of national standards or building codes,
machineries comprising of an integrated wherever such standards exist, and in
production process or such other category their absence, be based on the
of goods or intangible products like relevant international standards. In
software, technology transfer, licenses, case of Government of India funded
patents or other intellectual properties projects abroad, the technical
purchased or otherwise acquired for the specifications may be framed based
use of Government but excludes books, on requirements and standards of the
publications, periodicals, etc. for a library. host beneficiary Government, where
The term ‘goods’ also includes works and such standards exist.
services which are incidental or Provided that a procuring entity may,
consequential to the supply of such goods, for reasons to be recorded in writing,
such as, transportation, insurance, adopt any other technical
installation, commissioning, training and specification.
maintenance. (iv) Care should also be taken to avoid
Rule 144 Fundamental principles of public purchasing quantities in excess of
buying (for all procurements including requirement to avoid inventory
procurement of works). Every authority carrying costs.
delegated with the financial powers of (v) offers should be invited following a
procuring goods in public interest shall fair, transparent and reasonable
have the responsibility and accountability procedure.
to bring efficiency, economy, and
(vi) the procuring authority should be
transparency in matters relating to public
satisfied that the selected offer
procurement and for fair and equitable
adequately meets the requirement in
treatment of suppliers and promotion of
all respects.
competition in public procurement.
(vii) the procuring authority should satisfy
The procedure to be followed in making
itself that the price of the selected offer
public procurement must conform to the
is reasonable and consistent with the
following yardsticks :-
quality required.
(i) The description of the subject matter
(viii) at each stage of procurement the
of procurement to the extent
concerned procuring authority must
practicable should -
place on record, in precise terms, the
a) be objective, functional, generic considerations which weighed with it
and measurable and specify while taking the procurement
technical, qualitative and decision.
performance characteristics.
(ix) a complete schedule of procurement

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

cycle from date of issuing the tender to items to be procured through GeM for the
date of issuing the contract should be prospective suppliers. The Procurement of
published when the tender is issued. Goods and Services by Ministries or
(x) All Ministries/Departments shall Departments will be mandatory for Goods
prepare Annual Procurement Plan or Services available on GeM. The
before the commencement of the year credentials of suppliers on GeM shall be
and the same should also be placed certified by DGS&D. The procuring
on their website. authorities will certify the reasonability of
Rule 145 Authorities competent to purchase rates. The GeM portal shall be utilized by
goods. An authority which is competent the Government buyers for direct on-line
to incur expenditure may sanction the purchases as under :-
purchase of goods required for use in (i) Up to Rs.50,000/- through any of the
public service in accordance with available suppliers on the GeM,
provisions in the Delegation of Financial meeting the requisite quality,
Powers Rules, following the general specification and delivery period.
procedure contained in the following (ii) Above Rs.50,000/- and up to
rules. Rs.30,00,000/- through the GeM
Rule 146 Procurement of goods required on Seller having lowest price amongst the
mobilisation Procurement of goods available sellers, of at least three
required on mobilisation and/ or during different manufacturers, on GeM,
the continuance of Military operations meeting the requisite quality,
shall be regulated by special rules and specification and delivery period. The
orders issued by the Government on this tools for online bidding and online
behalf from time to time. reverse auction available on GeM can
Rule 147 Powers for procurement of goods. The be used by the Buyer if decided by the
Ministries or Departments have been competent authority.
delegated full powers to make their own (iii) Above Rs.30,00,000/- through the
arrangements for procurement of goods. supplier having lowest price meeting
In case, however, a Ministry or Department the requisite quality, specification and
does not have the required expertise, it delivery period after mandatorily
may project its indent to the Central obtaining bids, using online bidding
Purchase Organisation (e.g. DGS&D) with or reverse auction tool provided on
the approval of competent authority. The GeM.
indent form to be utilised for this purpose (iv) The invitation for the online e-
will be as per the standard form evolved by bidding/reverse auction will be
the Central Purchase Organisation available to all the existing Sellers or
Rule 148 Rate Contract. DGS&D shall conclude other Sellers registered on the portal
rate contracts with the registered suppliers and who have offered their
for such goods, which are not available on goods/services under the particular
GeM, and are identified as common use product/service category, as per terms
items and are needed on recurring basis and conditions of GeM.
by various Central Government Ministries (v) The above mentioned monetary
or Departments. DGS&D will furnish and ceiling is applicable only for purchases
update all the relevant details of the rate made through GeM. For purchases, if
contracts on its website. The Ministries or any, outside GeM, relevant GFR Rules
Departments shall follow those rate shall apply.
contracts to the maximum extent possible. (vi) The Ministries/Departments shall work
Rule 149. Government e-Market place (GeM). out their procurement requirements of
DGS&D or any other agency authorized by Goods and Services on either “OPEX”
the Government will host an online model or “CAPEX” model as per their
Government e-Marketplace (GeM) for requirement/ suitability at the time of
common use Goods and Services. preparation of Budget Estimates (BE)
DGS&D will ensure adequate publicity and shall project their Annual
including periodic advertisement of the Procurement Plan of goods and

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

services on GeM portal within 30 days supplier(s) willing to continue with

of Budget approval. registration are to apply afresh for
(vii) The Government Buyers may renewal of registration. New
ascertain the reasonableness of prices supplier(s) may also be considered for
before placement of order using the registration at any time, provided they
Business Analytics (BA) tools available fulfil all the required conditions.
on GeM including the Last Purchase (iv) Performance and conduct of every
Price on GeM, Department’s own Last registered supplier is to be watched by
Purchase Price etc. the concerned Ministry or Department.
(viii) A demand for goods shall not be The registered supplier(s) are liable to
divided into small quantities to make be removed from the list of approved
piecemeal purchases to avoid suppliers if they fail to abide by the
procurement through L-1 Buying / terms and conditions of the
bidding / reverse auction on GeM or registration or fail to supply the goods
the necessity of obtaining the sanction on time or supply substandard goods
of higher authorities required with or make any false declaration to any
reference to the estimated value of the Government agency or for any ground
total demand. which, in the opinion of the
Rule 150 Registration of Suppliers Government, is not in public interest.
(i) With a view to establishing reliable (v) The list of registered suppliers for the
sources for procurement of goods subject matter of procurement be
commonly required for Government exhibited on the Central Public
use, the Central Purchase Procurement Portal and websites of the
Organisation (e.g. DGS&D) will Procuring Entity/ e-Procurement/
prepare and maintain item-wise lists portals.
of eligible and capable suppliers. Rule 151 Debarment from bidding.
Such approved suppliers will be (i) A bidder shall be debarred if he has
known as “Registered Suppliers”. All been convicted of an offence—
Ministries or Departments may utilise (a) u n d e r t h e P r e v e n t i o n o f
these lists as and when necessary. Corruption Act, 1988; or
Such registered suppliers are prima (b) the Indian Penal Code or any
facie eligible for consideration for other law for the time being in
procurement of goods through force, for causing any loss of life or
Limited Tender Enquiry. They are also property or causing a threat to
ordinarily exempted from furnishing public health as part of execution
bid security along with their bids. A of a public procurement contract.
Head of Department may also register
suppliers of goods which are (ii) A bidder debarred under sub-section
specifically required by that (i) or any successor of the bidder shall
Department or Office, periodically. not be eligible to participate in a
Registration of the supplier should be procurement process of any procuring
done following a fair, transparent and entity for a period not exceeding three
reasonable procedure and after years commencing from the date of
giving due publicity. debarment. Department of
Commerce (DGS&D) will maintain
(ii) C r e d e n t i a l s , m a n u f a c t u r i n g such list which will also be displayed
capability, quality control systems, on the website of DGS&D as well as
past performance, after-sales service, Central Public Procurement Portal.
financial background etc. of the
supplier(s) should be carefully verified (iii) A procuring entity may debar a bidder
before registration. or any of its successors, from
participating in any procurement
(iii) The supplier(s) will be registered for a process undertaken by it, for a period
fixed period (between 1 to 3 years) not exceeding two years, if it
depending on the nature of the goods. determines that the bidder has
At the end of this period, the registered breached the code of integrity. The

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

Ministry/Department will maintain “I,, am personally satisfied that these

such list which will also be displayed goods purchased are of the requisite
on their website. quality and specification and have been
purchased from a reliable supplier at a
(iv) The bidder shall not be debarred
reasonable price.”
unless such bidder has been given a
reasonable opportunity to represent Rule 155 Purchase of goods by Purchase
against such debarment Committee. Purchase of goods costing
above Rs. 25,000 (Rupees twenty five
Rule 152 Enlistment of Indian Agents. As per the
thousand only) and upto Rs.2,50,000/-
Compulsory Enlistment Scheme of the
(Rupees two lakh and fifty thousand only)
Department of Expenditure, Ministry of
on each occasion may be made on the
Finance, it is compulsory for Indian
recommendations of a duly constituted
agents, who desire to quote directly on
Local Purchase Committee consisting of
behalf of their foreign principals, to get
three members of an appropriate level as
themselves enlisted with the Central
decided by the Head of the Department.
Purchase Organisation (eg. DGS&D).
The committee will survey the market to
However, such enlistment is not equivalent
ascertain the reasonableness of rate,
to registration of suppliers as mentioned
quality and specifications and identify the
under Rule 150.
a p p r o p r i a t e s u p p l i e r. B e f o r e
Rule 153 Reserved Items and other recommending placement of the purchase
Purchase/Price Preference Policy. order, the members of the committee will
(i) The Central Government, through jointly record a certificate as under.
administrative instructions, has “Certified that we, members of the
reserved all items of hand spun and purchase committee are jointly and
hand-woven textiles (khadi goods) for individually satisfied that the goods
exclusive purchase from Khadi Village recommended for purchase are of the
Industries Commission (KVIC). It has requisite specification and quality, priced
also reserved all items of handloom at the prevailing market rate and the
textiles required by Central supplier recommended is reliable and
Government departments for competent to supply the goods in
exclusive purchase from KVIC and/or question, and it is not debarred by
the notified handloom units of Department of Commerce or Ministry/
Association of Corporations and Apex Department concerned.”
Societies of Handlooms (ACASH).
Rule 156 (1) Purchase of goods directly under
(ii) Ministry of Micro, Small and Medium Rate Contract. In case a Ministry or
Enterprises (MSME) have notified Department directly procures Central
procurement policy under section 11 Purchase Organisation (e.g. DGS&D) rate
of the Micro, Small and Medium contracted goods from suppliers, the
Enterprises Development Act, 2006. prices to be paid for such goods shall not
(iii) The Central Government may, by exceed those stipulated in the rate contract
notification, provide for mandatory and the other salient terms and conditions
procurement of any goods or services of the purchase should be in line with those
from any category of bidders, or specified in the Rate Contract. The Ministry
provide for preference to bidders on or Department shall make its own
the grounds of promotion of locally arrangement for inspection and testing of
manufactured goods or locally such goods where ever required.
provided services. Rule 156 (2) The Central Purchase Organisation
Rule 154 Purchase of goods without quotation (e.g. DGS&D) should host the
Purchase of goods upto the value of specifications, prices and other salient
Rs. 25,000 (Rupees twenty five thousand) details of different rate contracted items,
only on each occasion may be made appropriately updated, on the web site for
without inviting quotations or bids on the use by the procuring Ministry or
basis of a certificate to be recorded by the Department.
competent authority in the following Rule 157 A demand for goods should not be divided
format.

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

into small quantities to make piecemeal inviting bids or proposals in any form
purchases to avoid the necessity of whether they are advertised, issued to
obtaining the sanction of higher authority limited number of parties or to a single
required with reference to the estimated party.
value of the total demand. (iv) In the case of procurements made
Rule 158 Purchase of goods by obtaining bids. though DGS&D Rate Contracts or
Except in cases covered under Rule through any other Central
154,155, and 156(1), Ministries or Procurement Organizations (CPOs)
Departments shall procure goods under only award details need to be
the powers referred to in Rule 147 above published.
by following the standard method of (v) These instructions would not apply to
obtaining bids in : procurements made in terms of
(i) Advertised Tender Enquiry provisions of Rules 154 (Purchase of
(ii) Limited Tender Enquiry goods without quotations) or 155
(iii) Two-Stage Bidding (Purchase of goods by purchase
committee) of General Financial
(iv) Single Tender Enquiry Rules.
(v) Electronic Reverse Auctions Rule 160 E-Procurement
Rule 159 E-Publishing (i) It is mandatory for Ministries/
(i) It is mandatory for all Ministries/ Departments to receive all bids
Departments of the Central through e-procurement portals in
Government, their attached and respect of all procurements.
Subordinate Offices and Autonomous (ii) Ministries/ Departments which do not
/Statutory Bodies to publish their have a large volume of procurement
tender enquiries, corrigenda thereon or carry out procurements required
and details of bid awards on the only for day-to-day running of offices
Central Public Procurement Portal and also have not initiated
(CPPP). e-procurement through any other
(ii) Individual cases where confidentiality solution provided so far, may use
is required, for reasons of national e-procurement solution developed by
security, would be exempted from the NIC. Other Ministries/ Departments
mandatory e-publishing requirement. may either use e-procurement
The decision to exempt any case on solution developed by NIC or engage
the said grounds should be approved any other service provider following
by the Secretary of the Ministry/ due process.
Department with the concurrence of (iii) These instructions will not apply to
the concerned Financial Advisor. In procurements made by Ministries /
the case of Autonomous Bodies and Departments through DGS&D Rate
Statutory Bodies’ approval of the Contracts.
H e a d of th e B od y w i t h th e
concurrence of the Head of the (iv) In individual case where national
Finance should be obtained in each security and strategic considerations
such case. Statistical information on demands confidentiality, Ministries/
the number of cases in which Departments may exempt such cases
exemption was granted and the value from e-procurement after seeking
of the concerned contract should be approval of concerned Secretary and
intimated on a Quarterly basis to the with concurrence of Financial
Ministry of Finance, Department of Advisers.
Expenditure. (v) In case of tenders floated by Indian
(iii) The above instructions apply to all Missions Abroad, Competent
Tender Enquiries, Requests for Authority to decide the tender, may
Proposals, Requests for Expressions of exempt such case from e-
Interest, Notice for pre Qualification/ procurement.
Registration or any other notice Rule 161 Advertised Tender Enquiry
(I) Subject to exceptions incorporated

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

under Rule154, 155,162 Rule 162 Limited Tender Enquiry

and166,invitation to tenders by (i) This method may be adopted when
advertisement should be used for estimated value of the goods to be
procurement of goods of estimated procured is up to Rupees Twenty five
value of Rs. 25 lakhs (Rupees Twenty Lakhs. Copies of the bidding
Five Lakh)and above. Advertisement document should be sent directly by
in such cases should be given on speed post/registered post/courier/ e-
Central Public Procurement Portal mail to firms which are borne on the
(CPPP) at www.eprocure.gov.in and list of registered suppliers for the
on GeM. An organisation having its goods in question as referred under
own website should also publish all its Rule 150 above. The number of
advertised tender enquiries on the supplier firms in Limited Tender
website. Enquiry should be more than three.
(ii) The organisation should also post the Efforts should be made to identify a
complete bidding document in its higher number of approved suppliers
website and on CPPP to enable to obtain more responsive bids on
prospective bidders to make use of the competitive basis.
document by downloading from the Further, an organisation should
web site. publish its limited tender enquiries on
(iii) The advertisements for invitation of Central Public Procurement Portal
tenders should give the complete web (CPPP) as per Rule 159. Apart from
address from where the bidding CPPP, the organisations should publish
documents can be downloaded. the tender enquiries on the
(iv) In order to promote wider Department’s or Ministry’s web site.
participation and ease of bidding, no (ii) The unsolicited bids should not be
cost of tender document may be accepted. However Ministries/
charged for the tender documents Departments should evolve a system
downloaded by the bidders. by which interested firms can register
(iv) Where the Ministry or Department and bid in next round of tendering.
feels that the goods of the required (iii) Purchase through Limited Tender
quality, specifications etc., may not be Enquiry may be adopted even where
available in the country and it is the estimated value of the
necessary to also look for suitable procurement is more than Rupees
competitive offers from abroad, the twenty-five Lakhs, in the following
Ministry or Department may send circumstances.
copies of the tender notice to the (a) The competent authority in the
Indian Embassies abroad as well as to Ministry or Department certifies
the foreign Embassies in India. The that the demand is urgent and any
selection of the embassies will depend additional expenditure involved by
on the possibility of availability of the not procuring through advertised
required goods in such countries. In tender enquiry is justified in view of
such cases e-procurement as per Rule u r g e n c y. T h e M i n i s t r y o r
160 may not be insisted. Department should also put on
(v) Ordinarily, the minimum time to be record the nature of the urgency
allowed for submission of bids should and reasons why the procurement
be three weeks from the date of could not be anticipated.
publication of the tender notice or (b) There are sufficient reasons, to be
availability of the bidding document recorded in writing by the
for sale, whichever is later. Where the competent authority, indicating
Department also contemplates that it will not be in public interest
obtaining bids from abroad, the to procure the goods through
minimum period should be kept as advertised tender enquiry.
four weeks for both domestic and (c) The sources of supply are
foreign bidders. definitely known and possibility of

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GENERAL FINANCIAL RULES 2017
Ministry of Finance
Department of Expenditure

fresh source(s) beyond those study or development, except

being tapped is remote. where the contract includes the
(iv) Sufficient time should be allowed for production of items in quantities
submission of bids in Limited Tender sufficient to establish their
Enquiry cases. commercial viability or to recover
Rule 163 Two bid system (simultaneous receipt research and development
of separate technical and financial costs; or
bids) : For purchasing high value plant, (d) The bidder is expected to carry out
machinery etc. of a complex and technical a detailed survey or investigation
nature, bids may be obtained in two parts and undertake a comprehensive
as under : assessment of risks, costs and
(i) Technical bid consisting of all obligations associated with the
technical details along with particular procurement.
commercial terms and conditions; (ii) The procedure for two stage bidding
and shall include the following, namely:—
(ii) Financial bid indicating item-wise (a) in the first stage of the bidding
price for the items mentioned in the process, the Ministry/Department
technical bid. shall invite bids through
The technical bid and the financial bid advertised tender containing the
should be sealed by the bidder in separate technical aspects and contractual
covers duly super-scribed and both these terms and conditions of the
sealed covers are to be put in a bigger proposed procurement without a
cover which should also be sealed and bid price;
duly super-scribed. The technical bids are (b) all first stage bids, which are
to be opened by the purchasing Ministry or otherwise eligible, shall be
Department at the first instance and evaluated through an
evaluated by a competent committee or appropriate committee
authority. At the second stage financial constituted by the Ministry/
bids of only these technically acceptable Department;
offers should be opened after intimating (c) the committee may hold
them the date and time of opening the discussions with the bidders and if
financial bid for further evaluation and any such discussion is held, equal
ranking before awarding the contract. opportunity shall be given to all
Rule 164 Two-Stage Bidding (Obtain bids in two bidders to participate in the
stages with receipt of financial bids after discussions;
receipt and evaluation of technical bids) (d) in revising the relevant terms and
(i) Ministry/Department may procure conditions of the procurement,
the subject matter of procurement by the procuring entity shall not
the method of two-stage bidding, if modify the fundamental nature of
(a) it is not feasible to formulate the procurement itself, but may
detailed specifications or identify add, amend or omit any
specific characteristics for the specification of the subject matter
subject matter of procurement, of procurement or criterion for
without receiving inputs evaluation;
regarding its technical aspects (e) in the second stage of the bidding
from bidders; or process, the procuring entity shall
(b) the character of the subject matter invite bids from all those bidders
of procurement is subject to rapid whose bids at the first stage were
technological advances or market not rejected, to present final bid
fluctuations or both; or with bid prices in response to a
revised set of terms and
(c) Ministry/Department seeks to conditions of the procurement;
enter into a contract for the
purpose of research, experiment, (f) any bidder, invited to bid but not in
a position to supply the subject

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Ministry of Finance
Department of Expenditure

matter of procurement due to

modification in the specifications
or terms and conditions, may (Signature with date and designation
withdraw from the bidding of the indenting officer)
proceedings without forfeiting Rule 167 Electronic Reverse Auction
any bid security that he may have (i) Electronic Reverse Auction means an
been required to provide or being online real-time purchasing technique
penalised in any way, by utilised by the procuring entity to select
declaring his intention to the successful bid, which involves
withdraw from the procurement presentation by bidders of successively
proceedings with adequate more favourable bids during a
justification. scheduled period of time and
Rule 165 Late Bids. In the case of advertised tender automatic evaluation of bids;
enquiry or limited tender enquiry, late bids (ii) A procuring entity may choose to
(i.e. bids received after the specified date procure a subject matter of
and time for receipt of bids) should not be procurement by the electronic reverse
considered. auction method, if:
Rule 166 Single Tender Enquiry. Procurement (a) It is feasible for the procuring
from a single source may be resorted to in entity to formulate a detailed
the following circumstances : description of the subject matter of
(i) It is in the knowledge of the user the procurement;
department that only a particular firm (b) There is a competitive market of
is the manufacturer of the required bidders anticipated to be qualified
goods to participate in the electronic
(ii) In a case of emergency, the required reverse auction, so that effective
goods are necessarily to be competition is ensured;
purchased from a particular source (c) The criteria to be used by the
and the reason for such decision is to procuring entity in determining the
be recorded and approval of successful bid are quantifiable
competent authority obtained. and can be expressed in monetary
(iii) For standardisation of machinery or terms; and
spare parts to be compatible to the (iii) The procedure for electronic reverse
existing sets of equipment (on the auction shall include the following,
advice of a competent technical namely:
expert and approved by the
(a) The procuring entity shall solicit
competent authority), the required
bids through an invitation to the
item is to be purchased only from a
electronic reverse auction to be
selected firm
published or communicated in
Note : Proprietary Article Certificate in the accordance with the provisions
following form is to be provided by the similar to e-procurement; and
Ministry/Department before procuring the
(b) The invitation shall, in addition to
goods from a single source under the
the information as specified in
provision of sub Rule 166 (i) and 166 (iii)
e-procurement, include details
as applicable.
relating to access to and
(i) T h e i n d e n t e d g o o d s a r e registration for the auction,
manufactured by M/s....................... opening and closing of the
(ii) No other make or model is acceptable auction and Norms for conduct of
for the following reasons : the auction.
...................................................... Rule 168 Contents of Bidding Document
(iii) Concurrence of finance wing to the All the terms, conditions, stipulations and
proposal vide: ……………….. information to be incorporated in the
(iv) Approval of the competent authority bidding document are to be shown in the
vide: appropriate chapters as below :-
Chapter – 1: Instructions to Bidders.

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Ministry of Finance
Department of Expenditure

Chapter – 2: Conditions of Contract. Draft, Fixed Deposit Receipt, Banker’s

Chapter – 3: Schedule of Requirements. Cheque or Bank Guarantee from any
Chapter – 4: Specifications and allied of the Commercial Banks or payment
Technical Details. online in an acceptable form,
safeguarding the purchaser’s interest
Chapter – 5: Price Schedule (to be in all respects. The bid security is
utilised by the bidders normally to remain valid for a period
for quoting their prices). of forty-five days beyond the final bid
Chapter – 6: Contract Form. validity period.
Chapter – 7: Other Standard Forms, if (ii) Bid securities of the unsuccessful
any, to be utilised by the bidders should be returned to them at
purchaser and the bidders. the earliest after expiry of the final bid
Rule 169 Maintenance Contract. Depending on validity and latest on or before the 30th
the cost and nature of the goods to be day after the award of the contract.
purchased, it may also be necessary to (iii) In place of a Bid security, the
enter into maintenance contract(s) of Ministries/ Departments may require
suitable period either with the supplier of Bidders to sign a Bid securing
the goods or with any other competent declaration accepting that if they
firm, not necessarily the supplier of the withdraw or modify their Bids during
subject goods. Such maintenance the period of validity, or if they are
contracts are especially needed for awarded the contract and they fail to
sophisticated and costly equipment and sign the contract, or to submit a
machinery. It may, however, be kept in performance security before the
mind that the equipment or machinery is deadline defined in the request for
maintained free of charge by the supplier bids document, they will be suspended
during its warranty period or such other for the period of time specified in the
extended periods as the contract terms request for bids document from being
may provide and the paid maintenance eligible to submit Bids for contracts
should commence only thereafter. with the entity that invited the Bids.
Rule 170 Bid Security Rule 171 Performance Security
(i) To safeguard against a bidder’s (i) To ensure due performance of the
withdrawing or altering its bid during contract, Performance Security is to be
the bid validity period in the case of obtained from the successful bidder
advertised or limited tender enquiry, awarded the contract. Unlike contracts
Bid Security (also known as Earnest of Works and Plants, in case of
Money) is to be obtained from the contracts for goods, the need for the
bidders except Micro and Small Performance Security depends on the
Enterprises (MSEs) as defined in MSE market conditions and commercial
Procurement Policy issued by practice for the particular kind of
Department of Micro, Small and goods. Performance Security should
Medium Enterprises (MSME) or are be for an amount of five to ten per
registered with the Central Purchase cent. of the value of the contract as
Organisation or the concerned specified in the bid documents.
Ministry or Department. The bidders Performance Security may be
should be asked to furnish bid security furnished in the form of an Account
along with their bids. Amount of bid Payee Demand Draft, Fixed Deposit
security should ordinarily range Receipt from a Commercial bank,
between two percent to five percent of Bank Guarantee from a Commercial
the estimated value of the goods to be bank or online payment in an
procured. The amount of bid security acceptable form safeguarding the
should be determined accordingly by purchaser’s interest in all respects.
the Ministry or Department and (ii) Performance Security should remain
indicated in the bidding documents. valid for a period of sixty days beyond
The bid security may be accepted in the date of completion of all
the form of Account Payee Demand

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contractual obligations of the supplier purchases should be made in a

including warranty obligations. transparent, competitive and fair manner,
to secure best value for money. This will
(iii) Bid security should be refunded to the also enable the prospective bidders to
successful bidder on receipt of formulate and send their competitive bids
Performance Security. with confidence. Some of the measures for
Rule 172 (1) Advance payment to supplier ensuring the above are as follows:-
Ordinarily, payments for services rendered (i) the text of the bidding document
or supplies made should be released only should be self-contained and
after the services have been rendered or comprehensive without any
supplies made. However, it may become ambiguities. All essential
necessary to make advance payments for information, which a bidder needs
example in the following types of cases :- for sending responsive bid, should
(i) Advance payment demanded by firms be clearly spelt out in the bidding
holding maintenance contracts for document in simple language. The
servicing of Air- conditioners, condition of prior turnover and prior
computers, other costly equipment, experience may be relaxed for
etc. Startups (as defined by Department
(ii) Advance payment demanded by firms of Industrial Policy and Promotion)
against fabrication contracts, turn-key subject to meeting of quality &
contracts etc. technical specifications and making
Such advance payments should not suitable provisions in the bidding
exceed the following limits : document. The bidding document
should contain, inter alia.
(a) Thirty per cent. of the contract
value to private firms; (a) Description and Specifications
of goods including the nature,
(b) Forty per cent. of the contract quantity, time and place or
value to a State or Central places of delivery.
Government agency or a Public
Sector Undertaking; or (b) the criteria for eligibility and
qualifications to be met by the
(c) in case of maintenance contract, bidders such as minimum level
the amount should not exceed the of experience, past
amount payable for six months performance, technical
under the contract. capability, manufacturing
Ministries or Departments of the facilities and financial position
Central Government may relax, etc or limitation for
in consultation with their participation of the bidders, if
Financial Advisers concerned, the any.
ceilings (including percentage (c) eligibility criteria for goods
laid down for advance payment indicating any legal restrictions
for private firms) mentioned or conditions about the origin of
above. While making any goods etc which may required
advance payment as above, to be met by the successful
adequate safeguards in the form bidder.
of bank guarantee etc. should be
obtained from the firm. (d) the procedure as well as date,
time and place for sending the
Rule 172 (2) Part payment to suppliers: bids.
Depending on the terms of delivery
incorporated in a contract, part payment (e) date, time and place of
to the supplier may be released after it opening of the bid.
dispatches the goods from its premises in (e) Criteria for evaluation of bids
terms of the contract. (f) s p e c i a l t e r m s a f f e c t i n g
Rule 173 Transparency, competition, fairness performance, if any.
and elimination of arbitrariness in the (g) E s s e n t i a l t e r m s o f t h e
procurement process All government procurement contract

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(h) Bidding Documents should the bidding document to enable a

include a clause that “if a firm bidder to question the bidding
quotes NIL charges/ conditions, bidding process and/ or
consideration, the bid shall be rejection of its bid. The reasons for
treated as unresponsive and rejecting a tender or non-issuing a
will not be considered”. tender document to a prospective
(ii) Any other information which the bidder must be disclosed where
procuring entity considers necessary enquiries are made by the bidder.
for the bidders to submit their bids. (v) Suitable provision for settlement of
(iii) Modification to bidding document: disputes, if any, emanating from the
(a) In case any modification is resultant contract, should be kept in
made to the bidding document the bidding document.
or any clarification is issued (vi) The bidding document should
which materially affects the indicate clearly that the resultant
terms contained in the bidding contract will be interpreted under
document, the procuring entity Indian Laws.
shall publish or communicate (vii) The bidders should be given
such modification or reasonable time to prepare and
clarification in the same send their bids.
manner as the publication or (viii) The bids should be opened in public
communication of the initial and authorised representatives of
bidding document was made. the bidders should be permitted to
(b) In case a clarification or attend the bid opening.
modification is issued to the (ix) The specifications of the required
bidding document, the goods should be clearly stated
procuring entity shall, before without any ambiguity so that the
the last date for submission of prospective bidders can send
bids, extend such time limit, if, meaningful bids. In order to attract
in its opinion more time is sufficient number of bidders, the
required by bidders to take into specification should be broad based
account the clarification or to the extent feasible
modification, as the case may (x) Pre-bid conference: In case of turn-
be, while submitting their bids. key contract(s) or contract(s) of
(c) Any bidder who has submitted special nature for procurement of
his bid in response to the sophisticated and costly equipment
original invitation shall have or wherever felt necessary, a suitable
the opportunity to modify or re- provision is to be kept in the bidding
submit it, as the case may be, documents for one or more rounds
or withdraw such bid in case of pre-bid conference for clarifying
the modification to bidding issues and clearing doubts, if any,
document materially affect the about the specifications and other
essential terms of the allied technical details of the plant,
procurement, within the period equipment and machinery etc.
initially allotted or such projected in the bidding document.
extended time as may be The date, time and place of pre-bid
allowed for submission of bids, conference should be indicated in
after the modifications are the bidding document. This date
made to the bidding document should be sufficiently ahead of bid
by the procuring entity: opening date. The records of such
Provided that the bid last conference shall be intimated to all
submitted or the bid as bidders and, shall also be exhibited
modified by the bidder shall be on the website(s) where tender was
considered for evaluation published.
(iv) Suitable provision should be kept in (xi) C r i t e r i a f o r d e t e r m i n i n g

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responsiveness are to be taken into lowest acceptable bidder against

account for evaluating the bids such ad-hoc requirement is not in a
as: position to supply the full quantity
(a) time of delivery. required, the remaining quantity, as
(b) Pe r f o r m a n c e / e f f i c i e n c y / far as possible, be ordered from the
environmental characteristics. next higher responsive bidder at the
rates offered by the lowest
(c) the terms of payment and of responsive bidder.
guarantees in respect of the
subject matter of procurement (xvii) Procurement of Energy Efficient
Electrical Appliances: Ministries/
(d) price. Departments while procuring
(e) cost of operating, maintaining electrical appliances notified by
and repairing etc. Department of Expenditure shall
(xii) Bids received should be evaluated in ensure that they carry the notified
terms of the conditions already threshold or higher Star Rating of
incorporated in the bidding Bureau of Energy Efficiency (BEE).
documents; No new condition which (xviii) The name of the successful bidder
was not incorporated in the bidding awarded the contract should be
documents should be brought in for mentioned in the CPPP, Ministries or
evaluation of the bids. Departments website and their
Determination of a bid’s notice board or bulletin.
responsiveness should be based on (xix) Rejection of all Bids is justified when
the contents of the bid itself without
recourse to extrinsic evidence. a. effective competition is lacking.
(xiii) Bidders should not be permitted to b. all Bids and Proposals are not
alter or modify their bids after expiry substantially responsive to the
of the deadline for receipt of bids. requirements of the
Procurement Documents.
(xiv) Negotiation with bidders after bid
opening must be severely c. the Bids’/Proposals’ prices are
d i s c o u r a g e d . H o w e v e r, i n substantially higher that the
exceptional circumstances where updated cost estimate or
price negotiation against an ad-hoc available budget; or
procurement is necessary due to d. none of the technical Proposals
some unavoidable circumstances, meets the minimum technical
the same may be resorted to only qualifying score.
with the lowest evaluated responsive (xx) Lack of competition in rule 173(xix)
bidder. shall not be determined solely on the
(xv) In the Rate Contract system, where a basis of the number of Bidders. Even
number of firms are brought on Rate when only one Bid is submitted, the
Contract for the same item, process may be considered valid
negotiation as well as counter provided following conditions are
offering of rates are permitted to the satisfied:
bidders and for this purpose special a. t h e p r o c u r e m e n t w a s
permission has been given to the satisfactorily advertised and
Directorate General of Supplies and sufficient time was given for
Disposals (DGS&D). submission of bids.
(xvi) Contract should ordinarily be b. the qualification criteria were
awarded to the lowest evaluated not unduly restrictive; and
bidder whose bid has been found to c. prices are reasonable in
be responsive and who is eligible comparison to market values
and qualified to perform the (xxi) When a limited or open tender
contract satisfactorily as per the results in only one effective offer, it
terms and conditions incorporated shall be treated as a single tender
in the corresponding bidding contract.
document. However, where the

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(xxii) In case a purchase Committee is otherwise influence the

constituted to purchase or procurement process.
recommend the procurement, no (b) a n y o m i s s i o n , o r
member of the purchase Committee misrepresentation that may
should be reporting directly to any mislead or attempt to mislead so
other member of such Committee in that financial or other benefit may
case estimated value of be obtained or an obligation
procurement exceeds Rs. 25 lakhs. avoided.
Rule 174 Efficiency, Economy and Accountability (c) any collusion, bid rigging or anti-
in Public Procurement System. Public competitive behavior that may
procurement procedure should ensure impair the transparency, fairness
efficiency, economy and accountability in and the progress of the
the system. To achieve the same, the procurement process.
following keys areas should be addressed (d) improper use of information
: provided by the procuring entity
(i) To reduce delay, appropriate time to the bidder with an intent to
frame for each stage of procurement gain unfair advantage in the
should be prescribed by the Ministry procurement process or for
or Department. personal gain.
(ii) To minimise the time needed for (e) any financial or business
decision making and placement of transactions between the bidder
contract, every Ministry/Department, and any official of the procuring
with the approval of the competent entity related to tender or
authority, may delegate, wherever execution process of contract;
necessary, appropriate purchasing which can affect the decision of
powers to the lower functionaries. the procuring entity directly or
(iii) The Ministries or Departments should indirectly.
ensure placement of contract within (f) any coercion or any threat to
the original validity of the bids. impair or harm, directly or
Extension of bid validity must be indirectly, any party or its property
discouraged and resorted to only in to influence the procurement
exceptional circumstances. process.
(iv) The Central Purchase Organisation (g) obstruction of any investigation or
(e.g. DGS&D) should bring into the auditing of a procurement
Rate Contract system more and more process.
common user items which are (h) making false declaration or
frequently needed in bulk by various providing false information for
Central Government Departments. participation in a tender process
The Central Purchase Organisation or to secure a contract;
(e.g. DGS&D) should also ensure that
the Rate Contracts remain available (ii) disclosure of conflict of interest.
without any break. (iii) Disclosure by the bidder of any
Rule 175 (1) Code of Integrity previous transgressions made in
respect of the provisions of sub-clause
No official of a procuring entity or a (i) with any entity in any country during
bidder shall act in contravention of the last three years or of being
the codes which includes debarred by any other procuring
(i) prohibition of entity.
(a) making offer, solicitation or Rule 175 (2) The procuring entity, after giving a
acceptance of bribe, reward or reasonable opportunity of being heard,
gift or any material benefit, either comes to the conclusion that a bidder or
directly or indirectly, in exchange prospective bidder, as the case may be,
for an unfair advantage in the has contravened the code of integrity, may
procurement process or to take appropriate measures.

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Rule 176 Buy-Back Offer Rule 179 This chapter contains the fundamental
When it is decided with the approval of the principles applicable to all Ministries or
competent authority to replace an existing Departments regarding engagement of
old item(s) with a new and better version, consultant(s). Detailed instructions to this
the department may trade the existing old effect may be issued by the concerned
item while purchasing the new one. For Ministries or Departments. However, the
this purpose, a suitable clause is to be Ministries or Departments shall ensure that
incorporated in the bidding document so they do not contravene the basic rules
that the prospective and interested bidders contained in this chapter.
formulate their bids accordingly. Rule 180 Identification of Services required to be
Depending on the value and condition of performed by Consultants: Engagement
the old item to be traded, the time as well of consultants may be resorted to in
as the mode of handing over the old item situations requiring high quality services
to the successful bidder should be decided for which the concerned Ministry/
and relevant details in this regard suitably Department does not have requisite
incorporated in the bidding document. expertise. Approval of the competent
Further, suitable provision should also be authority should be obtained before
kept in the bidding document to enable the engaging consultant(s).
purchaser either to trade or not to trade the Rule 181 Preparation of scope of the required
item while purchasing the new one. Consultant(s): The Ministries/
Departments should prepare in simple and
PROCUREMENT OF SERVICES concise language the requirement,
A. CONSULTING SERVICES objectives and the scope of the
assignment. The eligibility and
prequalification criteria to be met by the
Rule 177 "Consulting Service" means any subject consultants should also be clearly
matter of procurement (which as identified at this stage.
distinguished from ‘Non- Consultancy Rule 182 Estimating reasonable expenditure:
Services’ involves primarily non-physical Ministry or Department proposing to
project-specific, intellectual and engage consultant(s) should estimate
procedural processes where outcomes/ reasonable expenditure for the same by
deliverables would vary from one ascertaining the prevalent market
consultant to another), other than goods c on di ti on s an d c on s ul ti n g oth e r
or works, except those incidental or organisations engaged in similar activities.
consequential to the service, and includes
professional, intellectual, training and Rule 183 Identification of likely sources.
advisory services or any other service (i) Where the estimated cost of the
classified or declared as such by a consulting service is up to Rupees
procuring entity but does not include direct twenty-five lakhs, preparation of a
engagement of a retired Government long list of potential consultants may
servant. be done on the basis of formal or
Note: These Services typically involve informal enquiries from other
providing expert or strategic advice e.g., Ministries or Departments or
management consultants, policy Organisations involved in similar
consultants, communications consultants, activities, Chambers of Commerce &
Advisory and project related Consulting Industry, Association of consultancy
Services which include, feasibility studies, firms etc.
project management, engineering (ii) Where the estimated cost of the
services, finance, accounting and taxation consulting services is above Rupees
services, training and development etc. twenty-five lakhs, in addition to(i)
Rule 178 The Ministries or Departments may hire above, an enquiry for seeking
external professionals, consultancy firms ‘Expression of Interest ’ from
or consultants (referred to as consultant consultants should be published on
hereinafter) for a specific job, which is well Central Public Procurement Portal
defined in terms of content and time frame (CPPP) at www.eprocure.gov.in and on
for its completion.

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GeM. An organisation having its own (v) List of key position whose CV and
website should also publish all its experience would be evaluated.
advertised tender enquiries on the (vi) Bid evaluation criteria and selection
website. Enquiry for seeking procedure.
Expression of Interest should include (vii) Standard formats for technical and
in brief, the broad scope of work or financial proposal.
service, inputs to be provided by the
Ministry or Department, eligibility and (viii) Proposed contract terms.
the pre-qualification criteria to bemet (ix) Procedure proposed to be followed for
by the consultant(s) and consultant’s midterm review of the progress of the
past experience in similar work or work and review of the final draft
service. The consultants may also be report.
asked to send their comments on the Rule 187 Receipt and opening of proposals
objectives and scope of the work or Proposals should ordinarily be asked for
service projected in the enquiry. from consultants in ‘Two bid’ system with
Adequate time should be allowed for technical and financial bids sealed
getting responses from interested separately. The bidder should put these
consultants. two sealed envelopes in a bigger envelop
Rule 184 Short listing of consultants. On the duly sealed and submit the same to the
basis of responses received from the Ministry or Department by the specified
interested parties as per Rule 183 above, date and time at the specified place. On
consultants meeting the requirements receipt, the technical proposals should be
should be short listed for further opened first by the Ministry or Department
consideration. The number of short listed at the specified date, time and place.
consultants should not be less than three. Rule 188 Late Bids. Late bids i.e. bids received after
Rule 185 Preparation of Terms of Reference the specified date and time of receipt
(TOR). should not be considered.
The TOR should include Rule 189 Evaluation of Technical Bids: Technical
(i) Precise statement of objectives. bids should be analysed and evaluated by
a Consultancy Evaluation Committee
(ii) Outline of the tasks to be carried out. (CEC) constituted by the Ministry or
(iii) Schedule for completion of tasks. Department. The CEC shall record in detail
(iv) The support or inputs to be provided the reasons for acceptance or rejection of
by the Ministry or Department to the technical proposals analysed and
facilitate the consultancy. evaluated by it.
(v) The final outputs that will be required Rule 190 Evaluation of Financial Bids of the
of the Consultant. technically qualified bidders: The
Rule 186 Preparation and Issue of Request for Ministry or Department shall open the
Proposal (RFP). RFP is the document to financial bids of only those bidders who
be used by the Ministry/Department for have been declared technically qualified
obtaining offers from the consultants for by the Consultancy Evaluation Committee
the required service. The RFP should be as per Rule 189 above for further analysis
issued to the shortlisted consultants to seek or evaluation and ranking and selecting
their technical and financial proposals. the successful bidder for placement of the
The RFP should contain : consultancy contract.
(i) A letter of Invitation Rule 191 Methods of Selection/ Evaluation of
(ii) Information to Consultants regarding Consultancy Proposals
the procedure for submission of The basis of selection of the consultant
proposal. shall follow any of the methods given in
(iii) Terms of Reference (TOR). Rule 192 to 194 as appropriate for the
circumstances in each case.
(iv) Eligibility and pre-qualification
criteria in case the same has not been Rule 192. Quality and Cost Based Selection
ascertained through Enquiry for (QCBS):QCBS may be used for
Expression of Interest. Procurement of consultancy services,

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Department of Expenditure

where quality of consultancy is of prime disasters, situations where timely

concern. completion of the assignment is of
(i) In QCBS initially the quality of utmost importance; and
technical proposals is scored as per (iii) situations where execution of the
criteria announced in the RFP. Only assignment may involve use of
those responsive proposals that have proprietary techniques or only one
achieved at least minimum specified consultant has requisite expertise.
qualifying score in quality of technical (iv) Under some special circumstances, it
proposal are considered further. may become necessary to select a
(ii) After opening and scoring, the particular consultant where adequate
Financial proposals of responsive justification is available for such
technically qualified bidders, a final single-source selection in the context
combined score is arrived at by giving of the overall interest of the Ministry or
predefined relative weight ages for the Department. Full justification for
score of quality of the technical single source selection should be
proposal and the score of financial recorded in the file and approval of
proposal. the competent authority obtained
(iii) The RFP shall specify the minimum before resorting to such single-source
qualifying score for the quality of selection.
technical proposal and also the (v) It shall ensure fairness and equity, and
relative weight ages to be given to the shall have a procedure in place to
quality and cost (determined for each ensure that the prices are reasonable
case depending on the relative and consistent with market rates for
importance of quality vis-a-vis cost tasks of a similar nature; and the
aspects in the assignment, e.g. 70:30, required consultancy services are not
60:40, 50:50 etc). The proposal with split into smaller sized procurement.
the highest weighted combined score Rule 195 Monitoring the Contract. The
(quality and cost) shall be selected. Ministry/Department should be involved
(iv) The weight age of the technical throughout in the conduct of consultancy,
parameters i.e. non- financial preferably by taking a task force approach
parameters in no case should exceed and continuously monitoring the
80 percent. performance of the consultant(s) so that
Rule 193 Least Cost System (LCS). LCS is the output of the consultancy is in line with
appropriate for assignments of a standard the Ministry /Department’s objectives.
or routine nature (such as audits and Rule 196 Public competition for Design of
engineering design of non-complex symbols/logos. Design competition
works) where well established should be conducted in a transparent, fair
methodologies, practices and standards and objective manner. Wide publicity
exist. Unlike QCBS, there is no weight age should be given to the competition so as to
for Technical score in the final evaluation ensure that the information is accessible to
and the responsive technically qualified all possible participants in the competition.
proposal with the lowest evaluated cost This should include publication on the
shall be selected. website of Ministry/Department
Rule 194 Single Source Selection/Consultancy concerned, as also the Central Public
by nomination. The selection by direct Procurement Portal. If the selection has
negotiation/nomination, on the lines of been by a jury of experts nominated for the
Single Tender mode of procurement of purpose, the composition of the jury may
goods, is considered appropriate only also be notified.
under exceptional circumstance such as:
(i) tasks that represent a natural B. OUTSOURCING OF SERVICES
continuation of previous work carried
out by the firm; Rule 197 "Non-Consulting Service" means any
(ii) in case of an emergency situation, subject matter of procurement (which as
situations arising after natural distinguished from ‘Consultancy

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Services’), involve physical, measurable capable contractors and issue limited

deliverables/ outcomes, where tender enquiry to them asking for their
performance standards can be clearly offers by a specified date and time etc.
identified and consistently applied, other as per standard practice. The number
than goods or works, except those of the contractors so identified for
incidental or consequential to the service, issuing limited tender enquiry should
and includes maintenance, hiring of be more than three.
vehicle, outsourcing of building facilities (ii) For estimated value of the non-
management, security, photocopier consulting service above Rs.10 lakhs:
service, janitor, office errand services, The Ministry or Department should
drilling, aerial photography, satellite issue advertisement in such case
imagery, mapping etc. should be given on Central Public
Rule 198 Procurement of Non-consulting P r o c u r e m e n t Po r t a l ( C P P P ) a t
Services. www.eprocure.gov.in and on GeM. An
A Ministry or Department may procure organisation having its own website
certain non-consulting services in the should also publish all its advertised
interest of economy and efficiency and it tender enquiries on the website. The
may prescribe detailed instructions and advertisements for invitation of
procedures for this purpose without, tenders should give the complete web
however, contravening the following basic address from where the bidding
guidelines. documents can be downloaded.
Rule 199 Identification of likely contractors. Rule 202 Late Bids. Late bids i.e. bids received after
The Ministry or Department should the specified date and time of receipt
prepare a list of likely and potential should not be considered.
contractors on the basis of formal or Rule 203 Evaluation of Bids Received.
informal enquiries from other Ministries or The Ministry or Department should
Departments and Organisations involved evaluate, segregate, rank the responsive
in similar activities, scrutiny of ‘Yellow bids and select the successful bidder for
pages’, and trade journals, if available, placement of the contract.
web site etc. Rule 204 Procurement of Non-consulting
Rule 200 Preparation of Tender enquiry. services by nomination. Should it
Ministry or Department should prepare a become necessary, in an exceptional
tender enquiry containing, inter alia : situation to procure a non-consulting
(i) The details of the work or service to be service from a specifically chosen
performed by the contractor; contractor, the Competent Authority in the
Ministry or Department may do so in
(ii) The facilities and the inputs which will consultation with the Financial Adviser. In
be provided to the contractor by the such cases the detailed justification, the
Ministry or Department; circumstances leading to such
(iii) Eligibility and qualification criteria to procurement by choice and the special
be met by the contractor for interest or purpose it shall serve, shall form
performing the required work/service; an integral part of the proposal.
and Rule 205 Monitoring the Contract. The Ministry or
(iv) The statutory and contractual Department should be involved
obligations to be complied with by the throughout in the conduct of the contract
contractor. and continuously monitor the performance
Rule 201 Invitation of Bids. of the contractor.
(i) For estimated value of the non- Rule 206 Any circumstances which are not covered
consulting service up to Rupees ten in Rule 198 to Rule 205 for procurement of
lakhs or less: The Ministry or non-consulting services, the procuring
Department should scrutinise the entity may refer Rule 135 to Rule 176
preliminary list of likely contractors as pertaining to procurement of goods and
identified as per Rule 199 above, not to the procurement of consulting
decide the prima facie Eligible and services.

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CONTRACT MANAGEMENT
Rule 224 (1) All contracts shall be made by an between Rupees one lakh to
authority empowered to do so by or under Rupees ten lakhs, where tender
the orders of the President in terms of documents include the General
Article 299 (1) of the Constitution of India. Conditions of Contract (GCC),
Rule 224 (2) All the contracts and assurances of Special Conditions of Contract
property made in the exercise of the (SCC) and scope of work, the
executive power of the Union shall be letter of acceptance will result in a
executed on behalf of the President. The binding contract.
words “for and on behalf of the President (c) In respect of contracts for works
of India” should follow the designation with estimated value of Rupees ten
appended below the signature of the lakhs or above or for purchase
officer authorized in this behalf. above Rupees ten lakhs, a
Note 1: The various classes of contracts Contract document should be
and assurances of property, which may be executed, with all necessary
executed by different authorities, are clauses to make it a self-
specified in the Notifications issued by the contained contract. If however,
Ministry of Law from time to time. these are preceded by Invitation to
Note 2: The powers of various authorities, Tender, accompanied by GCC
the conditions under which such powers and SCC, with full details of scope
should be exercised and the general and specifications, a simple one
procedure prescribed with regard to page contract can be entered into
various classes of contracts and by attaching copies of the GCC
assurances of property are laid down in and SCC, and details of scope
Rule 21 of the Delegation of Financial and specifications, Offer of the
Powers Rules. Te n d e r e r a n d L e t t e r o f
Acceptance.
Rule 225 General principles for contract.
(d) Contract document should be
The following general principles should be invariably executed in cases of
observed while entering into contracts:— turnkey works or agreements for
(i) The terms of contract must be precise, maintenance of equipment,
definite and without any ambiguities. provision of services etc.
The terms should not involve an (v) No work of any kind should be
uncertain or indefinite liability, except commenced without proper execution
in the case of a cost plus contract or of an agreement as given in the
where there is a price variation clause foregoing provisions.
in the contract.
(vi) Contract document, where necessary,
(ii) Standard forms of contracts should be should be executed within 21 days of
adopted wherever possible, with such the issue of letter of acceptance. Non-
modifications as are considered fulfilment of this condition of executing
necessary in respect of individual a contract by the Contractor or
contracts. The modifications should Supplier would constitute sufficient
be carried out only after obtaining ground for annulment of the award
financial and legal advice. and forfeiture of Earnest Money
(iii) In cases where standard forms of Deposit.
contracts are not used, legal and (vii) Cost plus contracts should ordinarily
financial advice should be taken in be avoided. Where such contracts
drafting the clauses in the contract. become unavoidable, full justification
(iv) (a) A Ministry or Department may, at its should be recorded before entering
discretion, make purchases of into the contract. Where supplies or
value up to Rupees two lakh and special work covered by such cost plus
fifty thousand by issuing purchase contracts have to continue over a long
orders containing basic terms and duration, efforts should be made to
conditions: convert future contracts on a firm price
(b) In respect of Works Contracts, or basis after allowing a reasonable
Contracts for purchases valued period to the suppliers/contractors to

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stabilize their production/ execution minimum percentage of variation

methods and processes. of the contract price above which
Explanation : A cost plus contract means price variations will be admissible
a contract in which the price payable for (e.g. where resultant increase is
supplies or services under the contract is lower than two per cent. no price
determined on the basis of actual cost of adjustment will be made in favour
production of the supplies or services of the supplier).
concerned plus profit either at a fixed rate (f) Where advance or stage
per unit or at a fixed percentage on the payments are made there should
actual cost of production. be a further stipulation that no
(viii) (a) Price Variation Clause can be price variations will be admissible
provided only in long-term on such portions of the price, after
contracts, where the delivery the dates of such payment.
period extends beyond 18 (g) Where deliveries are accepted
months. In short-term contracts beyond the scheduled Delivery
firm and fixed prices should be Date subject to levy of liquidated
provided for. Where a price damages as provided in the
variation clause is provided, the Contract, the liquidated damages
price agreed upon should specify (if a percentage of the price) will
the base level viz, the month and be applicable on the price as
year to which the price is linked, varied by the operation of the
to enable variations being Price variation clause.
calculated with reference to the (h) No price variation will be
price levels prevailing in that admissible beyond the original
month and year. Scheduled Delivery Date for
(b) A formula for calculation of the defaults on the part of the
price variations that have taken supplier.
place between the Base level and (i) Price variation may be allowed
the Scheduled Delivery Date beyond the original Scheduled
should be included in this clause. Delivery Date, by specific
The variations are calculated by alteration of that date through an
using indices published by amendment to the contract in
Governments or Chambers of cases of Force Majeure or defaults
Commerce periodically. An by Government.
illustrative formula has been (j) Where contracts are for supply of
appended to these rules at equipment, goods etc, imported
Appendix -11 for guidance. (subject to customs duty and
(c) The Price variation clause should foreign exchange fluctuations)
also specify cut off dates for and/or locally manufactured
material and labour, as these (subject to excise duty and other
inputs taper off well before the duties and taxes), the percentage
scheduled Delivery Dates. and element of duties and taxes
(d) The price variation clause should included in the price should be
provide for a ceiling on price specifically stated, along with the
variations, particularly where selling rate of foreign exchange
escalations are involved. It could element taken into account in the
be a percentage per annum or an calculation of the price of the
overall ceiling or both. The buyer imported item.
should ensure a provision in the The mode of calculation of
contract for benefit of any variations in duties and taxes and
reduction in the price in terms of Foreign exchange rates and the
the price variation clause being documents to be produced in
passed on to him. support of claims for such
(e) The clause should also stipulate a variations should also be
stipulated in the Contract.

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(k) The clause should also contain (xiv) (a) The terms of a contract,
the mode and terms of payment including the scope and
of the price variation admissible. specification once entered into,
(ix) Contracts should include provision for should not be materially varied.
payment of all applicable taxes by the (b) Wherever material variation in
contractor or supplier. any of the terms or conditions in
(x) “Lump sum’ contracts should not be a contract becomes
entered into except in cases of unavoidable, the financial and
absolute necessity. Where lump sum other effects involved should be
contracts become unavoidable, full examined and recorded and
justification should be recorded. The specific approval of the
contracting authority should ensure authority competent to approve
that conditions in the lump sum the revised financial and other
contract adequately safeguard and commitments obtained, before
protect the interests of the varying the conditions.
Government. (c) All such changes should be in
(xi) Departmental issue of materials the form of an amendment to
should be avoided as far as possible. the contract duly signed by all
Where it is decided to supply materials parties to the contract.
departmentally, a schedule of (xv) Normally no extensions of the
quantities with the issue rates of such scheduled delivery or completion
material as are required to execute the dates should be granted except
contract work should form an where events constituting force
essential part of the contract. majeure, as provided in the
(xii)(a) In contracts where government contract, have occurred or the terms
property is entrusted to a and conditions include such a
contractor either for use on provision for other reasons.
payment of hire charges or for Extensions as provided in the
doing further work on such contract may be allowed through
property, specific provision for formal amendments to the contract
safeguarding government duly signed by parties to the
property (including insurance contract.
cover) and for recovery of hire (xvi) All contracts shall contain a
charges regularly, should be provision for recovery of liquidated
included in the contracts. damages for defaults on the part of
(b) Provision should be made in the the contractor. Only in exceptional
contract for periodical physical circumstances to be justified by
verification of the number and the procuring entity in writing, an
physical condition of the items at exemption from such provision can
the contractor’s premises. Results be made.
of such verification should be (xvii) A warranty clause should be
recorded and appropriate penal incorporated in every contract,
action taken where necessary. requiring the supplier to, without
(xiii) Copies of all contracts and charge, repair or rectify defective
agreements for purchases of the value goods or to replace such goods with
of Rupees Twenty-five Lakhs and similar goods free from defect. Any
above, and of all rate and running goods repaired or replaced by the
contracts entered into by civil supplier shall be delivered at the
departments of the Government other buyers premises without costs to the
than the departments like the buyer.
Directorate General of Supplies and (xviii) All contracts for supply of goods
Disposals for which a special audit should reserve the right of
procedure exists, should be sent to the Government to reject goods which
Audit Officer and /or the Accounts do not conform to the specifications.
officer as the case may be.

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Department of Expenditure

(xix) No claim for the payment from

contractor shall be entertained after
the lapse of three years of arising of
the claim.
Rule 226 Management of Contracts.
(i) Implementation of the contract should
be strictly monitored and notices
issued promptly whenever a breach of
provisions occurs.
(ii) Proper procedure for safe custody and
monitoring of Bank Guarantees or
other Instruments should be laid
down. Monitoring should include a
monthly review of all Bank
Guarantees or other instruments
expiring after three months, along
with a review of the progress of supply
or work. Extensions of Bank
Guarantees or other instruments,
where warranted, should be sought
immediately.
Rule 227 Legal Advice.
Wherever disputes arise during
implementation of a contract, legal advice
should be sought before initiating action
to refer the dispute to conciliation and/or
arbitration as provided in the contract or
to file a suit where the contract does not
include an arbitration clause. The draft of
the plaint for arbitration should be got
vetted by obtaining legal and financial
advice. Documents to be filed in the matter
of resolution of dispute, if any, should be
carefully scrutinized before filing to
safeguard government interest.

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