Contract Management Procedure 3/3

313 Al,&*c-q 5:.6 Franrirrg of Corrtract Tlre f51;e*i'',n general principles slrould be observe<J while entering into contracts: i) Any agreenrent shall tre issued stricly as per approved TC recommendations, be vetted by the Associatedi integrated Finance and approved by CA- The ternrs of contract must be complete, precise, definite and without any ambiguities. The terms slrould not involve an uncertain or indelinite liability, except in the case of a cost plus contract or whei'e there is price variation in the contract. ln other words, no contracL involving an uncertain or indefinite liability or any condition of an unusual character should be entered into without the previous consent of the Associated/ integrated Finance. ii) All contracts shall contain a provision for a) Recovery of liquidated damages (LD) for deray in performance of the contract on the part of the contractor; b) A warranty clause/ defect liability clause slrould be incorporated in contracts for plant and machinery and works, above a threshord varue, requiring the contractor to, without charge, reprace, repair or rectify defective goods/ works/ services; c) All contracts for supply of goods should reserve the right of the government to reject goods which do not conform to the specifications; d) Payment of all applicablo taxes by the contractor; and e) when a contract is rikery to endure for a perrod of more than two years, it should, wherever feasibre, incrude a provision for an unconditional power of revocation or cance'a'on by the govornment at any time on the expiry of six. months' noflco to ilrat offect. f) How the appointed day or day of starting of the work sha, be determined. 122(:h$l\lrlr l\ [:\,r\hrAliorl ol f]irls nnrl Arisri0n af W0rk iir \ slrlndirrd folrrts of contr$cts should be invariably adopted, excoplin lollowing (:0Srls a) a3A lMinistry or Dcpartment may, at its discretion, make purchases of value up to Rupees two lakh and fifty thousand by issuing purchase orders containing. basic lerms and conclitions b) ln cases where standarcj forms of contracts are not used or where modifications in strindard forms are consiclered necessary in respect of individual contra(. .r, legal and financialarJvice should be taken in drafting the clauses in the contract ancl approval of CAs is to be obtained; and c) Copies of all contracts and agreements for purchases of the value of Rs. 25 (twenty-five) larh and above, and of all rate and running contracts entered into by civir departments of the government shourd be sent to the Accountant General. 5.7.7 Procurement Records;, / The Procurement fire shourd start with the incient and reratecr documents. A, subsequent documents reratiirg to procurement pranning; copy of Bid Document and documents rerating to its an' iormuration, pubrishing and issue/ uproacling; Bid opening; Bids received; cor,espondcnce and documents (incruding Technicar Evaruation and rc report)relating to pre-quarification, evaluation, Award of contract; and finally the contract copy, sncrLrld be kept on the file. ln case of bulky bids received, ar bids received may be kept ir. e separate vorume, with a copy of accepted bids later being put on the main vorume. To maintarn integrity of the records reratin, to procurement, these fires should bo kept securo and for contract management a new vorume of fire may rre opened to obviato frequent exposure of sensitive procurement flle. ln contract managomont vorumo, copros of srrccossfur brd, Tonder committee Report & contract may also bo ttopt for ready roforonco, bosrdos con.ospondonco anci documents relating. to contraol lr4anagemonl and lts closruo. Thoso docunrents can be very valuable at the limo ol' a.'bltration, dlsputo, corrr[ proceedlpgs, clairls etc. &ncl honcr: noods to bo safoguarded, 43Ruta 255 (iv) (a), crR 2017 tzJfor Piocuremet tt ur lr.4anural 5.8 Evaluatiorr of Bldn nncl Awnrd of Contract. Rlske and Mltl ations Mltl atlon at the R Er v's ak luation of blds is subjective or TC should give an thun ad te nrl oa nk eing ol the leaves loorrr for nranipulation and biased approPriate tlme ypersonal interest in assessrrents, Sonre TC members may mentbers has an bs ating in hn ao vt e b ce o nin fld ice t p oe f n ind te en ret so t.r neutral or may t t ah h nee c teo nm td ep e rea r n spi tre os ic n/ e a sg ase . n n A yc n cy o m mP e pa m arl ni bc yi eP r sh ha ov uin ldg in ing in the TC. refrain from arliciPat Prsofa TC may be Some membe in subordinate to or related others a organisation, so that strictly hierarchical they are notfree to express indePendent views - subh a situation must be avoided when constitutin tlte TC. of risk Discriminating against a Best Value Mitigation for each type is Bid: ln case a bidder's bid (not in the mentioned below. good books of the procuring entity) becomes the best value bid a's per the evaluation criteria, some of the following actions may have risks of misuse. There is also a reverse risk in these actions if a favourite becomes best value bid: Unwarranted rebidding: Rejecting all ln case a procurement is rebid more bids and calling for rebidding on the than once, approval of one level above pretext of prices being high, change of the CA may be taken. Please also see specifications, budget not being the complaint mechanism. available and so on. Sudden quantity reduction/ increase Bid conditions must specify a limit or splitting of quantity work at the time beyond which originally announced of award; Many organisations have quantib/ scope cannot be reduced/ lf provisions for change/ splitting in the bid increased. parallel contracts are quantity at the time of award. Some envisaged, clear criteria for the splitting organisations vary quantity even without may be specified in the bid documenti such rovisions beforehand. Unwarranted negotiations are can le lego dt ia wti io thn os u: t tN eo nr dm ea r v nth ege or t atS i.h )nIJ Su d b n no p ro taSt n justification. Sometimes a counter-offer is eXc p ona tu tione for examp e made to discourage lowest acceptable pro ur m nt of propn tary t mS t(t mS bidder. h m ted sour S f Supp v and t rnS f here th re S SuSp CIon of a carte Lor Ima nt o cn a Sn ees oIJ ft d Lt 1on bS am kav nsbe oh ut d thet reh shou d be re tender n orcvU e foa cn tn or hw y t m era i a n m cr cr g oeta n nn t a tdh rt g ae ae r ctd e i t o et ind e sm s e r d eml eaa n lr ay s t e:s eo eai v dcn f e c o n epf n pri a n e t oefaa t ndenl e,i rn z stoi hn l rgu e eg nn tl T ec no xCe gr t A bp D hrr e eo oc ut 1a u sv mr r s hg eme a o ot n u fdn Lt Tt brm Ce ea tSe StJh S ron enue t5 hd ero h tf C ab e ne r AR en o oa f na oSS d t rh ha cot ouo d f nin o d trw abno c ce lf t t 1)A()ltnltler l-r' I vnltntlorr oI Blris nrrrl Asslgrr ol Work 5.8 I I Evnlrrntlon of Uids arrcl Award of Contract - Rlsks and Mlti ations is( A Mitigotion t\t tht> L'rtlrer. Although there is a standard signing. The contract should be strictly I .ontritcl form in the bid documents, the as per the bid conditions and accepled r)olrtract nray be drafted in a fashion to offer. favour or discourage lhe successful bidder. Anti-competitive practices: Bidders, These strategies, in turn, may result in that would otherwise be expected to patterns that procurement officials can compete, secre y conspire to frustrate detect and steps can be taken to thwart t th ne aP ro bc idu drin ing g E pn rt oit cy e's s a st .t e Am np tit -s c oto m g pe ett iV tivfM e s acu tc rvh it iea st te com mp ets u. nS du erc th h ea n pt ui- rc vo iem wp e ot fi t ti hve e c S po ro on m cs uep rti er ima mc e eie s n s tt hc ma en a yof t fa bick eee r psm aina rtvn o oy l v ff o er dm s in. c oo f m sp tre inti gtio en n t la pw e, n w alh tie er se . t Rhe er ge uis la p i r to rav ii nsi io nn g collusion. such should be held for officers involved in Bid coordination: The bidders collude p pr ro ac cu ticre em s e an nt d t ao l sd oe t ue sc et a ofn td h em cit oig ma pte e ts itu ioc nh to the quote same or similar rates that are law against such bidders. much higher than the reasonable price to force the procuring Entity to seiile the procurement at exorbitant prices. Cover bidding: Cover bidding is desig.ned to give the appearance of genulne competition by way of :Bupidpo rting bids for the leading bid-iigger. suppression: Bid suppression means that a company does not submit a bid for final consideration in support of the leading bid-rigger. Bid rotation: ln bid-rotation schemes, conspiring firms continue to bid but they agree to take turns being the winninil (i.e., lowest qualifying) bid"der in . a;;;6 of tenders of a similar nature. Market allocation: Competitors carve up the market and agree not to give competitive bids for certain customer:i or in certain eo ra hic areas. 125r, !\, r)<11tt(, uclt I uti I tf U tf,ivri\_r 6.7 Closure of Contract 6.7.1 Gonrpletion of Contract The contract is not to be treated as completed untila Defects Liability Cerlificale (DLC) has been issued- There will be only one DLC. lt will be issued when the contra clor has completed all his obligations under the contract. While making the final payment to the contractor and before releasing the PBG, it should be ensured that there is nothing outstanding from the contractor, because it would be difficult to retrieve such amounts after releasing the bank guarantee/ final payment. Before the bank guarantee is released a "no claim certificate" may be taken from the contractor as per the format given in Annexure 7. At least in large contracts (above Rs. 25 (twenty-five) lakh), it should be ensured that before the release of the bank guarantee (final payment, if there is no bank guarantee), the following reconciliations should be done across departments involved in the execution of the contract:nonirrsl 13G.'14'' 6.11 Breach of Corrtract, Ronrocllos and Tormlnatlon 6 1 1.1 Broaclr of Corrtrnct llr cAse tho colrlrector is r:nnblo [o lronour lrnportant stlpulations of tho 60ntract, or gives ttotice of his intontlon of not honoLrrlng or hls lnablllty to honour such a stlpulation, a breach of contract is said to lravo occurrocl. Mostly, such broaches oocur in rolation to the perfornrance o[ the contrnct in terms of inabillty to complete the Work within strpulated tinre. lt could also bo clue to broach of othical standards or any other stipulation that affects Procuring Enl.ity sorlously. As soon as a breach of contract is noticed, a show cause noticg shoulcl be issued to the contractor, giving two weeks' lf is notice, reserving the right to imploment contractual remedies. there an unsatisfactory resolution, romodial actlon may bo taken immodiately. lf termination takes place becauso of a fundamental broach/ insolvency on the part of the contractor, the engineer shall issue a certificate for the value of work done, deducting from the amounts in respect of: (i) advance payments; (ii) any recoveries; (iii) taxes as due; and (iv) porcentago to apply to tlto work not comploted as indicated in the contra ct dala.lf ths total amount dus to the procuring entity exceods that due to the contractor, the difforonco will be a debt payablo to the procuring entity. The CA may terminato a contract in tho followlng casos. Tho Procuring Entity is then free to lake over the site and comploto tlto works hlmsolf ot with anothor contractor and use the contractor's matorials, 6gulpmont, tompornry works os ho/ thoy think propor. of Gontract for Dofault 6.11,2Cancellatlon 46New rule 227A of GFR,2017 nouflcd vtdo ol,1 t'lo. F./v9l202I-PPD lssucd by Depnrtnlent of Expcndlture dated 29.10,2021' 151of Works lvlanLtnl for Proottromcnt as remov::'fron such without prcJudice to nrry olltor rornedy for brsach of contract' lhe lo lha conlractor' on*i"t the list ol onlistecl cottlractor, by written notlce of "'nt has: contmct nray be ternrinated in whole or in part, if the contractor i) hos seriously or repeatedly breached the contract, including in lhe a) fairure to comprete the work within the time period(s) specilted contract, or any extension lhereof granted; work' or defective b) failure to obey instructions in relation to his progress material or plant; c) breach of the prohibition against sub-contracting plant' temporary d) Failure to supply sufficient and suitable constructional works, labour and material as proposed in the work programme; e) substahtial subpension of work for more than the specified days without authority from the engineer and failure to proceed with the work within the specified days of receipt of notice from the engineer f) Failure to comply.with the requirements regarding JVs ii) committed fraud iii) lf the contractor fails to perform any other obligation under the contract within the period specified in the contract or any extension thereof granted. iv) If the contract is terminated in whole or in part, recourse may be taken to any one or more of the following actions: a) Forfeiture of the performance security; b) Upon such terms and in such manner as it deems appropriate, taking over the site and to complete the works himsetf or with another contractor (risk purchase) and use thc contractor's materials, equipment, temporary works as he/ they think proper. ln small value contracts, instead of Risk Purchase, a flxed percentage recovery may be provided in the SBD; and c) However, the contractor shall contlnue to fulfll the contract to the extent not terminated. Before cancelling the contract and taking further action, it may be desirable to obtain legal advice. 6.1'1.3 Termination of Contract for Insolvency 152Chapter 6: Execulion of Contract lf tlre contractor boconros bankrupl or l;ocomes otherwise insolvent or undergoes liquidatiou r-rr loses srrhslnrrtlnlly lltc ler;ltttlt;nl or financial capability (based on which Ire uras selcr:tnrl for nwrrxl ol rxlrtlrnt:t), nI ttrly tirnc, lhe rxlntract nay be terminated, Lr1, qi1,i11q a w;itt6rt rrotico to lhe contractor, without compensation to the contractor, llrirt such lsrnrirration will not prejudice or affect any right of action or remedy Providod rvlrit'.lr lras accrued or will accrue thereafter to Procuring Entity. 6.'1 1.4 Terrlina(ion of Contract for Procttring Entityr'5 Failure or Convenience After placement of the ccntract, there may be an unforeseen situation compelling Procuring Entity to cancel the contract. ln such a case, a suitable notice has to be sent to the contractor for cancehation of the contract, in whoie or in part, for its (Procuring Entity's) couvenience, inter alia, indicating the date with effect from which the tr lernrination will become effective. This is not Procuring Entity's legal right- the contractor has to be persuaded to acquiesce. Depending on the merits of the case, the contractor nray have to be suitably compensated on mutually agreed terms for terminating the contract. Suitable provisions to this effect should be to be incorporated in the tender document as well as in the resultant contract. lf termination occurs because of Procuring Entity's convenience or a fundamental breach on his part, the engineer will certify the value of works executed, value of any materials lying at site, reasonable cost of removal of equipment, repatriation of project staff, cost of protecting and securing the works and deducti:rg from it: (i) pending advances; (ii) other r^^^',^-i^^. ^^l /iil\ 3^..^^ ^^ 1..-7: Registra tiortl Enlistmonf of Contractors and Clrapter' Governance lssues 7.1 Management Contractor Relationship Con tractor Rela tionsh ip Ma na gem ent comprises the following f unctions: i) Ensuring compliance of contractors to the Code of lntegrity for Public procurement and Integrity Pact (CIPP) if stipulated in Bid Documents; Holiday listing; removal from the list of enlisted contractors and banningl ll ) debarment of firms; and iii) Development of new sources and registration/ enlistment of contractors.7.4 Developrnerrt of New sources and Registrationl Enlictment of Contractors 1 tr Tlre lernrs 'enlistment'and 'registration' may be differentiated asfollows; - Registration: Simply registering the contractor, without any verifrcation. i\ Enlistment: lncluding the name of the contractor in the list of after venfrcatian of credentials. v 4.2 Registration: All the Ministries/Departments shall reglster the prospective conti'actors on theii'e piocurerient portal or in the CPPP (in case they do not have their own e-prooureirent portal) before submitting their bids. The contractor may be an lndividual, Sole proprietoi-ship firm, partnership firm, limited liabitity partnership. private or public limited company. For registration, the Ivlinistries/DepartmenUCpSUs siiall capture a( least- (i) Narne of contractor, (ii) Address and Contact details, (iii) Perrnanent Account Number (PAN), (iv) Details of digital signature certificate (DSC) and (v) GSTIT{. Depending on the requirement of respective procurement portal, the ltrtinistrieslDepartmenls can capture any other information, as may be considered neQessary. 7.4.'t) Enlistment: Some Departments such as Central Public Works Deg'rartrlent (CPWD) and t,ltilitary Engineering Services (MES) are enlisting the contractors after Aa ..1of worKs Mnnunl ft:r Procuromont bids lor obtaining by cPwD verificatiorr or lt.\etr crorlonilal$, such 6nllstrnent ls usocl 20 crores ;:'iiJtl,J; rs above for snratt val(rc tencters i'c. up to Rs. 20 crores' ,Rs' CPWD' by the t"" issuecJ a.r\r eo.tfoctor even iI rtot enlisted can particlpat" ' '"""rs own enlislment *ill ;;'; develop their It is expected that Ministries/Departntents ot and Mlnislry o'*'""" (MoR) process, as has been done by CPWD, Ministry ol tor verifrcafion Road rrarrsport & Highways (MoRTH) to reduce the time required credentials of the contractors after opening of the bids' The lists of such enlisted contractors can be used by any Ministry/Department/CPSU' and of registered 7.4.4 The l\,4inistries/Departments will aiso share the information (CPPP)' enlistecl contractors with eacit other through the Central Public Procurement The [l1inistries/Departments will also ensure that whenever a contractor is debarred' tlre information regarding the same is made available immediately to all the l\4inistries/Departments througll the CPPP. The reasons for tlre debarment and order of such debarment may also be displayed on the CPPP. The National lnformatics Centre (NIC)/ l\4inistry of Electronics and Information Technology (MeitY) shall make appropriate changes in the GPPP so that each contractor can be uniquely identified by PAN. All the Ministries/ Departments may take cognizance of the information regarding debarment of contractors and use it as an input for the decision making process as per their own procurement policies. 7.4.5 Ministries/ Departments with a significant volume of procurements may follow their own policies and procedures for enlistment of contractors, if already existing. The policies and procedures for enlistment desciibed below is for guidance of Ministries/ Departments, who do not have their own, laid down policies/ procedures for enristment. The Ministry/ Department shail notify the authorities competent to dear with the apprications and grant enlistments, arong with their jurisdictions. The appeilate authority sha, be at least one revel above the registering authority or as designated by the Ministry/ Department. 7.4.6 Categories for Enlistment ln case of procurement of works, the Administrati **: '":lff":; ;"JIff:: *:x *li:i liEli^ffi ;:,,:Hil: r may be a Private' Partnership, Ltd, corporate, psU or a Joint Venture company. pvt 164and Governance lssues of Contraclors Chapler 7: Registralion Llrrlto) 7.4.7 Class of Enllstmont (Torrclorlng Enlistnrent slrorrld I'lc tlottc lry Clllss of llto finns (Grado A' B' anc1 so on) on their of different monetary limits in the relevanl capabilitv for exet-'rttittl; t:tlttlracl ortJr:rs categol}ofrcquil\rll]ellts.Thernonetarylimitsshouldbecarefullylixedkeepingin Vie\,!.theLlanker.sreports,capacityandcapabilityoftlrefirmandolherlinancial in{rlrnlation indicated in lhe balance sheets' profit and loss statements: (A sample ctassificalion - Source CPWD website) Class Tendering Class Tendering Limit Lintit Class-l (Super) Rs 500 crore Class-ll Rs 5 crore Class-l (AAA) Rs 200 crore Class-lll Rs '1 .5 crore I Class-l (AA) Rs 100 crore Class-lV Rs 60 lakh Class-l (A) Rs 50 crore CIass-V Rs 15 lakh Class-l Rs 20 crore 7.4.8 Procedure for Enlistment: Enlistment of contractors should be done by any It4inistry/ Department in case it desires to enlist contractors for works which are exclusively needed by it by keeping fundamenta! principles of public precurement in view (especialy the transparency principle - transparency, fairness, equarity, competition and appeal rights) with the approval of CA after carefully assessing and verifying credentiars, capabirity, qrrality contror systems, past performance, after_sares service facirities, financiar background, a4d so on, of the contractor/ service provide(s): i) Detairs of the procedure for enrisr-ment of new firms may be uproaded on the website and arso pubrishecr in the form of a bookret for information of the contractors, Timeframes and criteria for enlistment of new contractors may be clearly indicated; ii) Possibre sources for any category/ group of requirements can be identified oba bs taed in eo dn i fn rr o'e mrn a tr h a en d r ee sx pte orn na sr o r eferences. Data of new contractors can be recehrod frcm contractors, open tender advertisements, pre_qualifloa,on blds, Expresslon of lntorost (Eol), against various enquiries on tho woirsito, dodlcatod wobsltos, exhlbitions, buyer-seller 165N enual fcr Procurement of Works meets, variolrs pul)llcnilons of BlS, tracle journats, and so on. The e- procuretxenl portal doos pro.rcglstr6lon of contraclors online, Such dala can be o source of inlormolion or) prospec vo contractors; iiil New collh'acto(s) may be considered for enlistment al any lime, provided lhey firlfil all the required conditions. For any larger scale or crillcal enlistment of contractors, Procuring Entity should call for EOI by publicising its need for development of sources. The stages to be followed together with the applicable guidelines for EOI have been detailed in Chapter 3; While registering 'v) the firms, an undertaking may be obtained from them that they will abide by the CIPP enclosed with the application with a clear warning that, in case of transgression of the code of integrity, their names are likely to be deletecl from the rist of enristed contractors, besides any other penarty or more severe action as cleemed fit; and v) Along with the new/ renewar apprication for enristment, the contractors shourd also be asked to decrare that, if awarded a contiact in any LTE in which they participate, they bind themserves to abide by the procuring Entity,s Generar Conditions of Contract (GCC). Such GCC should be part of the application. vl) Eligibitity i) Any firm' situated in lndia or abroad, which is in the business of providing goods/ works/ services of specified categories of interest, sha, be erigibre for enlistment; ii) Contractors should possess valid Digital Si certificate (Dscs) crass ill b with the company name at the time oignature renewal, to enable them to particrpate in e-procuremenr"t "n""tt"nv so as iii) Firm, against whonr punlflve acflon has beer for re-enristment during the currency o, orn,,*"'^l1ken'shall not be eligible Enlistment requests may not be entertained from such rirr., ,tut .3 ho l li do en r' s of whom interest in de-Enlisted/ banned firms; have any vii) The application form, complete ln all respects e requisite processlng foe anct prescrlbod oo.rn.l"n,lntl.natc"c ompanied with the be submitteo firms to the registering authorlty. The enllstmen, .0, uv rhe rlication 1qrrn, duly nff"O-in, 't66(:h /t l\l0r Rools1pn111y,, rrl Conlrnckrrrr arrr.l Orivornanr;o Issues *rr.rr received fronr the firrns sha' be scrutinrsed carefury lor assessing rhe cnp.city and capability of the firms including credentials, capability, qualily conlrol system, past performance, financial background, and so on, of the appricant. References shalr be made to orher firms of standing of whom the appricant firm craims to be a conhactor. Likewise, the appricant firm,s bankers may arso be requested to advice about the financiar standing of the firm. Enlistment of contractors should be done with the approval of CA. viii) ln cases where the firm is not considered capabre and enristment cannot be granted, the concerned authorlty shall communicate the deficiencies and shortcomings direct to the firms under intimation to the apperate authority. where a request for re'verification and revie. is made by the firm, arong with any fee as prescribed and within the period prescribed by the department, review shail be undertaken. Requests for re-verification after expiry of the said period wourd be treated as a fresh apprication and processing fee, if any prescribed, charged accordingly; ix) Enlistment should be for specific category of works; x) It should be mentioned in the letter of enlistment that the enlistment is valid for a period of ihree years and wourd be considered for extension based (on application by the contractor/ service provider) on satisfactory performance of the firm. However, the enlistment would be initially treated as provisional and it would be treated as conrirmed only after the firm has satisfactorily executed one contract of the relevant category and value from procuring Entity. The extension of validity of enlistment is nol a matter of righl and procuring Entity reserves the right not to cxtend such enlistment without assigning any reason; xi) All Enlisted contractors should be allocated a unique enlistment number. once the firms are enlisted, a circular shall be issued by the enlistment authority indicating the names and addresses of the enlisted contractors with details of the requirements and monetary value they will execute as well as the validity period, and so on, for rvhich they are enlisted; xii) Performanco and conduct of overy onlisted contractor is to be watched by the concerned department. Procurln6l Entlty should also reserve the right to remove firms who do not perform satlsfactorily, even during the validity of enlistment 167Manual for Procurement of Works if they a to representation) (after giving due opportunity to the contractor make to execute or fail enl fail to abide by the terms and conditions of the entistm to any declaration contracts on time or do substandard work or make any false governmenl' of the government agency or for any ground which, in the opinion is not in public interest; at any enlisted' xiii) Procuring Entity shall retain its option to reassess firms already credit later date, to satisfy itself about the current financia! soundness/ Entily may worthiness, facilities available, and so on. Thereafter, Procttring and monetary decide to retain them as enlisted contractors for the requirements fit. ln case of limit earlier considered or with necessary changes as deemed adverse reports from the team of Procuring Entity officers who reassess the firm, Procuring Entity shall delete such firm from the enlisted contractors list;7.6.4 Capacity of Contractors Contractors involved in construction or development of large projects for the Government needs to have tremendous capacity to deliver prcjects on time and cost. Firms are often unable to deliver contracts on time in cases where conditions precedent is met by the Government agency. There are several other reasons for project delays or escalation of costs: i) Poor Governatrce within the firm 178()hRp[or 7r lloltislralion of Corrlractors an(l Govornanco lssuori ii) Firranr,:ial llisl))onagement iii) lrrcor.l.)peterrlprojecileadership irr) Lack of competence in the project team r,) lnability to use technology for project management. vi) Poor process management and standardisation Financial management by the contractor is an equally crilical faclor. Mobilising finances and resources for several large projects on which the firm is wcrking on poses significant managerial challenge. Hence, ensuring that the eligibility criteria in fixing the minimum turnover, net worth, profits and bidding capacity in relation the project size (simultaneous exposure in other large projects) becomes a sine qua non for successful execution of projects. There is need to ensure that contracting f;rms adopt appropriate management standards. Adoption of ISO 21500:2011could be specified in the RFQ conditions when inviting tenders. Third party assessment of the capabilities listed in this standard could be called for. Contracting firms involved project construction need qualified, trained personnel and managers to plan and construct projects in time, cost and quality. lt is important to ensure that contractor organisations have qualified/ certifled project management professionals at the time of commencernent of works on awarded contracts. certifications such as pMr"pMp/pRrNCE2-practitioner/cpMp etc., besides experience, may be specifled in the contract conditions for the key staff of the field:(i6 Structuring contracts for timely completion r) Optintal sharing of rlsks has been a balanced way of ensuring that the time and costs of completion of a project do not go way off the mark. Structuring contract clauses keeping in mind the principle of 'responsibility for each risk shall be with the pafty best equipped to handle lt' has enabled contracts to lead to lower risk perceptlon by bidders and as a result offer better prices. Contract clauses need to be further screened using this principle. II) Scope & DesrErn creep are widely stated causes for project delays. Changes in scope or design midway oi" at start cause time and cost variations. lt may be therefore essential to consider options thoroughly and spend time on designs exhaustively at the time of DPR preparation and before procurement. iii) Timely release of payments to contractors raises the confidence level of contractors to mobilise more resources lbr early completion. DN/RC's practice of releasing 80% of the lnterim Payment certificates (Bills)within '14 days of claim by contractor and the rest within 28 days of certification by the Engineer. Building these payment clauses into contracts raises contractor confidence, reduces project risk perception and enables better priees. iv) Embedding a fair price rrariation clause in contracts that mimics the market forces of escalation/reduction would lower risks to contractors and to the public organisation as well. PV clauses would vary from contract to contract, depending the structure of rnaterials and ccsts. v) Dispute Resolution Board (DRB) may be created hy express consent of the procuring entity and the contractor to monitor the project execution at various 181Manual for Procuroment of Works arntcably ' disputes stages of conrpletiolr. rhin ls I concillalon forum to resolve with Tho pritrary fllr'|otlor.r 9f DRl3s ln ter monltor tno progresn of the Project with respect rospecl 1.:, fi)r'llrocl r()quirontont.,i. ln ca$o oF ,ny nrn'"'mpllanca ways lo resalve to il.lo eo,traot, rhe Board immddiately interferes and suggests the cJispute. DRB mechanism may be embedded in contracts' through lnstitutional rri) Er;courage irtstitutional arbitration:settlement of disputes provides an arbitration is better than ad-hoc arbitration. lnstitutional arbitration and established format with a proven record ensures impartial decision-making adherence to pre-established rules and procedures. 7.6.7 to 1r| the I terestofT he Stakeho dera i) The incentive structure for atl the key stakeholderB of public procurement ought to be such that the system itself will ensure timely delivery of the projects / works in a qualitative manner within approved cost' A balanced framework and work culturc, where risk and rewards are properly shared amongst stakeholders goal, can be the artd timely completion of quality projects is the common bedrock of efflcient project management. An incentive structure; which may include pecuniary as well as non-pecuniary aspects (lncluding pubtic recognition), linked with measurable parameters of outcome / output, can help align the interests of stakeholder.s. An ethics based regime, where integrity of all the stakeholders is nLlrtured, can help increase efficiency in all aspects of project management- ii) Public authorities may devise strategies to provide incentives to contractors /concessionaires/ consultants/ architects/ other stakeholders by various means, including bonus, better rating and recognition for early/ timely / quality completion of the projects. Similar strategies may be devised for recognition of engineersl o{'ficersl other team members for early / timely and quality completion ol lhe projects. The practice of mentioning the names of the contractor and the project in charge publlcly at work sites may be implemented, Such recogn ition may be in a form which has long shelf life so as to associate the contractor and proiect ln-charge with the life of the project. iil ',Comingtogether is a beginning; keeping together is progress; working together is success". lt is an accepted fact that the success of any project is dependent on a welbcoordinatod team working towards a common goal. For successful executian of any praioct withln spoclfiecj tlme, cost ancl quality, the interest of 142(-'ltttlr(ttt' /' lltr11{tillrlllntt rtl ortttltni;tnrrr (Jovnnt,ln00 rrrrrl l*rittoe tlll tlttr slnli*lttillJtll'ri ilr].ld lrl l;u rrllgrr*11, L"'r)r.rrdlrrrtlad 0fh'lil cf rtll t?l,knftol elat,w stttlh ns uitlltt'nt)ltlt'$, eotttittllttttlo, gri.rl-rllt; rrrrrirorlty ttrtrJ proJoel oxocu,ng tttttltclt'lty nnd tttrhllt: i'3i)r'(tiietttnllvou wlll t:r'lrrg nrlout tho l:get poeollllo outr:omo,fr-n"#o'G **+**c--e+ No.F.1/1/2021-PPD Govemment of lndia Minlstry of Finance Department of Expendlture Procurement Policy Division 264-c, North BIoch$?I ?BH: Subject: General lnstructions on Procurement and Project lrllanagement It has always been a corrcern and challenge forthe Governmcnt and its agencies to execute public projects on time, within the approved cost and with good quality. As lhe Govemment strives to step up the pace of economic development, the role of procedure and rules, and the incentives and disincentives they create, warants careful examination. 2. The Central Vigilance Conrmisbion (CVC) and the Comptroller & Auditor General (CAG) are among the lnstitutions which have, at various times, had occasion lo comment on procurement and project management. Taking cognizance of these issues, CVC lssued. a Concept paper on Alternative Procurement strategy suggesting various reforms. Later after elaborate consultations witlr various stakeholders and a reform workshop held on 18.12.2020, CVC prepared Draft Guiclelines on ,,Reforms in pubtic Procurement and Project Management". 'l'he draft guidelines inter alia stated: "Endeavour should be to explore the possibility of employing alternative procurement methods and other emerging trends apart from regularly used methods of procurement". Separately, the CAG held a workshop on 27th Febru ary,2020, soliciting ideas to improve procurement and proJect managenlent. rn that workshop, the then cAG himself observed: "lt is also important to examine the information availabte with the declslon maker at the time of taking the procurement decision. Post facto wisdom is easy and costs of indecision high", He hoped that the "focus of the presentations would be on discussing the challenges faced in procurement, especially that of adhering to the L1 requirement and related quality issues and new mechanisms/ strategies of procurement to overcome these challenges'. The National. Inelitution for Tranoforming lndia (NlTl) Aayog els.o prepared in August, 2020 a detailed paper entifled ,,lndian public Procurement: Altemative strategies and way Forward" with various proposals. Page 7 of 223. A common theme arising in all these deliberations was a need to 'and improve procurement and project management rules procedures, to update them to present day needs, and empbwer those implementing projects to take better decisions, while adhering to probity and fairness. The fact that two premier institutions overseeing probity and accountability and lndia,s premier policy think-tank felt the need to improve public procurement and project management procedures indicates the importance of the issue. 4. The Draft Guidelines prepared under the aegis of the CVC provided a sound. platform for initiating reforms for empowering executing agencies and officers to take effective decisions in public interest, not only without favour but also without fear. These Draft Guidelines were considered by the Committee of Secretaries, and it was decided that the Department of Expenditure (DoE) would consider and issue guidelines, after soliciting and incorporating comments from Ministr.ies/ Decartments. Comments were solicited from all Ministries/ Departments and after due and detailed consideration of the comments received, instructions as contained in the subsequent paragraphs are being issued for compliance. While the primary source of these instructions is the draft guidelines prepared by the CyC, the views expressed in the CAG's lvorkshop, by NITI Aayog, and in other comments received have also been duly considered and incorporated wherever appropriate. 5. The instructions belov/ are 'general instructions,, within the meaning of Rule 6(1) of the GFR. They shall prevail in case of any general or case- specific conflict with the existing provisions of the Manual for procurement of Goods, 2017, Manual for Procurement of Consultancy and other Services 2017, Manual for Procurernent of works 20tg or any other instruction issued by poE in the past. For the lurpose of these instructions: (i) lnstructions containing lmay' are tg t,e consiCered desirable or good practices which procuring entjties/ project executing agencies are encouraged to implement but not mandatory. (ii) lnstructions containing 'should' are required to be followed in general. However, there may be circumstances where it may not be practical/ desirable to implement them. In such cases, the concerned officer/ agency may deviate by recording reasons in writing for not irnplementing the sanne. Page 2 of 22(iiD lnstructions containing 'shali' are mandatory; any devlation shall require relaxation of rules from the DoE (for Minlstries/ 'or Departrnents etc.) ftom the Board of Directors (for Central Public Sector Eni€rprises). (iv) lnstructions containing "allowed, indicate an optional course of action to be decided upon on merits. (v) "Procuring Entity" or 'proJect Executing Authorit/ or .project Executing Agency' means Central Govemment Ministries/ Departments, Attaclred/ Subordinate bodies lncluding Autonomous Bodies or Central public Sector Enterprises (CPSEs) (etc) executing projects/ works (vi) "Public Authoritf means the client organization, which may be asking a "Procuring Enflty" or ,,project Executing Authorit/ or 'Project Executing Agenc/ to execute a project or work on their behalf, For example, in case a University executes the works through Central publtc Works Department (CPV/D), then flre said university vrill be the public authority and CpWD will be the Procuring Entity or project Executing Authority or project Executing Agency. (1'he public authority and the project executing authority may also be the same.) 6. Feasibility Study/ Ground Survey: Before undertaklng a project Feasibility study/ Preliminary project Report (ppR) may be prepared by the Project Executing Agency as prescribed in para 2.2.1 of the Manual for Procurement of works 2019 (hereinafter catted Manuat). A presentation on the findings of the feasibility study/ ppR,may be made by a team (which may include engineers/ consultants/ outside experts, finance officers etc.) before the public authority/ or designated competent authority. This is to provide an opportunity to the public authority to have an overall assessment of the situation, appraisal of various options as wel as rikery chalenges and mitigation measures, ln the case of very large projects, such presentation may be made to the head of the public authority. The record of discussions durini the presentation may become part of the Detaired project Report (DpR) anJ tender file/ project record. PaBe 3 of 227. Detailed Project Report (DPR): .1 7 As prescribed in Para 2.4 of the Manual, once the project is considered viable and the competent public authority gives approval, a DpFy Detailed Estimate should be prepared with due iare and accuracy, using latest technological tools collecting all relevant ground information including consultation with the field units, wherever applicable. 7.2 Presentation may be made about the DPR before the public authority, for projects above a threshold value, as decided by project Executing Authorities. The presentation may include salient features of the project including general layout, .architectural drawings, broad specifications, cash flow (over the life of the project), composition of the project team, quallty management plan for the project, important milestones in the project execution, obligations of the authority and the contractor/ concessionaire (hereinafter referred to as "contracto/') and possible risks and mitigation measures. ln the case of very large projects such presentation may be made to the head of the public authority. The record of discussions during the presentation shall become part of tender fileiproject r"ecord. 7.3. Wherever consultants are appointed for preparation of DpR, field units of the public authorities should also be associated with the process. The inputs from these field units can bo useful in proposing best solutions for design and execution of the work as they are the custodian of legacy data, which may not be available with the consultants. as they may not be operating regularly in that geographical region. 7.4. Endeavour may be made to enlarge the base of the ,schec,iule of Rates' published by various organizations to bring a maximum number of items under its ambit. For non-scheduled items, rates may be finalized by a corirnrittee corrstiluted by th: organlzation concerned/ consultants as the case maybe. 8. Availability of Land and Statutory Clearances: 8.1 lt is desirable to have 100% of the reouired land in possession before award of contract; however, it may not always be possible to have the entire land due to prevailing circumstances. Also, it may not be prudent to put the entire process of award of contract on hold for want of the rernaining portion of land, which in the assessment of public authority.or the project execrrting Page 4 of 22authority, could possibly be acguired in a targeted manner after award of the contract, without affecting piogress. 8.2 Minimum necessary encumbrance free lan<i should be available before award of contract. The mhrlmum may be determined based on the circurnstances of eaclr case or general guldelines, issued by tite concemed authorities. Only such land, non availablllty of whlch, will prevent essential components of work from execution, shouid be insisted upon. 8.3 Time taken in grant of staiutory and other clearances also contributes to the time and cost of public projects. These clearances are required to achieve specific objectives like concem for the environment, aviation safety, preservation of national heritage, conservation of forest and wildlife etc. public Authorities/ Project Executing Authorities should plan for obtaining all necessary clearances quckly and closely monitor the progress. L Pre-Tender activities: 9.1 Architectural and structural drawings: Architectural aid strucfural drawings (fit for construction) are arr'ong the core requlrements for proJects. Finaiization of lhese drawirrgs at flre earliest, preferably at the time of preparation of the cost estimate itself, can help to determine quantities of 'the various items of work. Advcrse consequences of not preparing these drawings before invitation of tenders may manifest in the form of delay in execution of the work and deviations ln quantities of the items of work. Hence, approved architectural and structural drawings should be available before invitation of tenders. Fit for construction (sometimes called Good for construction) drawings means the archltectural and structural drawings approved by the project executing authority as well as by the authority goveming the extant rules/ laws, including byelaws, such as local authorities. 9.2 Pre-Notice lnviting Tencier (NlT) Conference: ln complex and innovative procurement cases or where the procuring entity may not have the required knorvledge to formulate tender provisions, a pre-Nlr conference may help the procuring entity in obtaining Inputs from the rndustry. such conferences should be wrdely publicised so that different potential suppliers can attend. 9.3 Empanerment of contractors: pubric authorities may empanel/ register contractors of those specific goods and seryices which are requlred by them regularly. Performance of such empanelled contractors should be reviewed Page 5 of 22periodlcally. The list of registered contractors shall be updated on a regular basis. The category/ class of contractors may be upgradedi downgraded or contractors may be de-listed based on their performance. Empanelment of contractors shall be done in a fair and equitable manner, preferably online after giving due publicity. The practice of inviting bids for works tenders only from empanelled contractors may be confined to tenddrs up to certain threshold value, as decided by the project executing authorities. 10. Tenderdocuments: 10.1 The tender document is the fundamental document in the public procurement process as after award of the contract it becomes part of the contract agreement. All necessary provisions governing the contract should be clearly provided in the tender document. Examples are technical specifications, drawings, commercial terms and conditions including payment terms, obligations of the procuring entity and the contractor, timeframe/milestones for executlon of the project, tax implications, compliance framework for statutory and other norms, repcrting on progress/quality of the work, dispute resolution. Provisions/clauses in the tender clocument should be clear to avoid differences in interpretation and possible time overrun, cost overrun and quality compromises. comprehensive survey & soil investigation report, area grading & mapping of uncrerground facirities, where project is to be executed, may be made avairabre and made part of tender document. Model Tender Documents issrred by the DoE may be used, with due customisation. 10.2 ln tenders containing Generar conditions of contract (GCC), additionar/ special conditions to be inccrporated in the tencler document, shall be need based and specific. The GCCs should not. be alte!.ed and changes, if any, in -conditions of contract shnr,ld only be made through the special conditions of Contract. '10.3 ldentification of mirestones may tre done in an optimal and sequential manner and the same may be stipurated in the tender document arong with enabling provisions. 10.4 Payment terms prescribed in the tender doctrment should be such that the payment made to contractors at every stage is commensurate to quantum of work done, subject to any requirements for initial mobilisation. Page 6 of 3210.5 . Procuring entities may issue instructions regarding appropriate delegation of authority for approval of deviations, variations and changes in the scope of the contract. 10.6 Provision of prlce variation, wherever considered appropriate, as well as methodology for calculation of the same shall be clearly stipulated in the tender document. '10.7 Quality Assurance Plan (QAP) may be incorporated ln the tender <locument/ contract. scheiiille of visit by varlous levels of offlclals shoulcl also form part of the QAP. '10.8 Technical and Financial eligibility Criteria for the bidders are important in the public procurernent process. They shall be clear and fair, having regard to the specific circumstances of the procurentent. Appropriate parameters should be prescribed in the eligibility criterla for bidders, to enable selection of the right type of bidders in public inlerest, balancing considerations of quality, time and cost. 10.9 Open online tendering shoul<l be the rlefault method to ensure efficiency of procurenrent. Public auflrorities should also keep the experience criteria broad based so that bidders with experience in similar nature of works in various sectors can pa(iclpate. 10.10 Pre-bid conference may be conciucted for large varue tenders by ' Procuring Entities. l'he Place an<l time of pre-bid conferences should be mentioned in the tender document and/ or publicized through the website of the procuring entity and/ or through newspaper publication. 11. Project Management 11.1 The quality of project works significanfly <repends on supervision and monitoring. For completion of the projects within the stipulated time and cost and with ' specified quarity stancrards, periodicar review shourd be done by various levels of the officers. 11-2 lnformaiion Technorogy (rr) enabred project management systems can help in improving efficiency, transparency and aicr faster decisron making in execution of projects. These systems may be used for maintenance of records for the progress of work (including hindrance register), variations, etc., wherein reasons for delays are also to be captured on real time basis. such Page 7 ot ZZsystems may be used for oapturing progress and quality of work, site records/ photographs/ videos etc. including geo tagging. 11.3 Wherever applicaple, the role of the project Management Consultant (PMC) should be clearly defined in the eontracts. Deployment of the pMC does not absolve the project executing authority of the responsibility to supervise the quality and timelines of the project., 11.4 The credentials and deploynrent scheduld of key and other technical personnel to be engaged by PMC on the work silould be taken along with the bid. During execution, adherence to deploymeni of key and other technical personnel as per the scheclute oi deployment should be ensured. 11.5 Execution of the work shall primarily bg the responsibility of the officials designated with such resoonsibility. How'ever, fcr large contracts senior officers shall also review the 'prooress anri qrl2li1y of the wcrk at various stages of construction. To this effect. p!"esentations on the project performance may be made periodically before the senior officers cepending upon the value of the project and progress of the project vis-A-vis schedule. Project executing authorities should put in place detailed instructions in this regard. 1'1.6 Project executing authorities shourd put in orace a system for capturing the photographs and videos oi important and critical ectivities oi construction. This may be implemented ir, orojects above a threshotd varue or., if possibre, in all projects. Such photosr video! cra'r be trnroaded in IT based project monitoring system to facrr'l.ale ntonitonno the n:oJ'ress and lualitv of .rvork as well as assessmenr of delAv r;r exet:ution of vrc,r.k bv stakeholcers and senior management. Aoart fror.i this, photograoirs anri .,.!de:s rnny serve as permanent record of.+he nrojer_t for posteii\. ir... case needeC for any eventuality including litigalr-rrr ci enquiry/investi., atiD ^ 11.7 sub-contracting: As trer para 6.1.6 of the Manuar, the works contract may provide for the contractor to get specified works executed from sub- contractors included in the pre-qualification application or later agreed to by the Procuring Entity, with a caveat that the responsibirity for ail sub-contract work rests with the prime contractor. srrb-cont'acting may be for soecialized items of work. such as reinforced earth retainino ,walJs, pre_stressing rvorlcs, and so on. Procurement of rnaterial, hir"in6r of eqr,iomenl op er.:gagement of labour urill not mean sub'-contracting. '!'he tctal v..alue of subcontracted r,vork- should not exceed the percentage of lhe ccrrrract prroe specifiecr i:r the Pag3 I of22contract (say 25o/o). Sulcontrdcting by the contractor without the approval of the Procuring Entity shall be a breach of contract, unless explicitly permitted in the contract. 11.8 Rejection cif Single Bid: lt has become a practice among some procuring entities to routinely assume tlrat open tenders which result in single bids are not acceptable and to go for re-tender as a 'safe' course of action. This is not conect. Re-bidding has costs: firstly the actual costs of re- tendering; secondly the delay in execution of the work with consequent delay in the attainment of the purpose for which the procurement is being done; and thirdly the possibility that the re-bid may result in a higher bid. Lack of competition sltall not bc determined solely on the basis of the number of Bidders. Even when only one Bid is submitted, the process should be considered valid provided following conditions are satisfied: (i) tile procurement was satisfactorill: advertised and sufficient time was given for submission of bids; (ii) the qualification criteria were not unduly restrictive; and (iii) prices are reasonable in comparison to market values. .9 Electronrc-Measurement Books(e-MBs): project 1 1 executing authorities should, as early as possible, implement e-lVlBs and the same should be integrated with lr based project monitoring system, being used by the procuring entities. 11.10 Extension of time for complefion of projects: procuring entity may 'a put in place graded authority structure whereby extension of time for completion of contract, beyond a specified threshokj value of contract, may be granted by the next higher authority. 11.11 Deray in taking time[y declsions: Deray in decision making by the officials of the project executing authority on various changes in the project scheme arising out of emerging sltuations during execution of the work is also one of the contributors to the delay in completion of projects. Sometimes timely decisions on these changes are so crucial that the nelt step could onry be taken after addressing the change. Delay in decisions by the project executing authority can also lead to litigation due to inadequate utilization/ idling of resources of the contractor. There is frequenfly a feering among officials that indecision is safe while a decision may lead to adverse Page 9 of22consequences for the decision maker. Therefore, there is a need for project executing authorities to put in place a system of resolution of the issues coupled with timelines for various levels to take decisions. '11.12 Project executing authorities may review the flow chart of decision making and remove redundancies for faster decision making. They may also fix timelines for taking decisions on variations, extra items and changes in scope and specifications, etc. to avoid delay and litigailon arising out of delayed decisions. 11.13 Awarding of works in stalled contracts: lt is noted that in cases, where a contractor abandons or strcps the work mid-way, either due to insolvency or a dispute or other reason. enga5ement of the new contractor takes considerable time and in the meanwhile public money is locked up in assets which cannot be utilized, apart from inconvenience and loss of amenities to the general public due to sueh half completed works. Notwithstanding anything in the GFR or the Manual, procuring entities should devise methods (including limited/ single tenders) to deal with part completed contracts, wherever the wcrk is abandcned by the contractor mid_way. However, for issuance of limiteC/ single tenCers in such cases, at least 20%, of work should have been billed by the cont:e ctor who has abandoned the work. Procurement appro\al of such limited/ single tender should be at the next higher level or such reve: as rnay be prescribed. 12. Delay in payment to the contractors: 12.1 Delay in erigibre payrnents to contract(.rs ieads to delay in executlon of projects, cost overruns and disputes. Hence, ad-hoc payments of not less lhan 7 5o/o of eligible running account biil./ due stage payment, shall be made within 10 vrorking days of ttre submission of the Llill. This period of 1 0 days is for completion of all processes including prima racie scrutiny and certification by the engineer in-;harge 1as declared by procur.ing entities). The remaining payment is also to be made a{te'final checking of the bill within 28 vrorking days of submission of bill by the c,ontractor. ln case the payment has not been released witlrin 10 working days as prescribeti above, it chall be rnade as soon as possible, and aftei payment a written expla,iation for the clelay sirall be submitte.I to the next higl,er. aufltority rvithin rhree rvcykrng days. 12.2 Public atrthorities may l)ut in place a provision for Oayment of interest in case of delayed paymenr I l:ills by rnclr? ths, l0 rtorklnq days after Page LO of 22submission of bill by the contractor. Where interest is to be paid, the rate of interest shoulcl be the rate of interest on General Provident Fund. 12.3 ln case of unwaranted discretionary delays in payments, including failui'e to authorise / make a<J hoc payments.as prescribed in para 12.1 above, reiponsibilig shall be fixed on the concemed of{icers. Project executing authorities should have a system to monitor delays in payments and to identify such unwananted delays. 12.4 The Final bill should aiso be paid to the contractor within three months after completion of work. 12.5 All projeci executing authorities implementing works contracts involving aggregate payments of moi-e than Rs.100 crore per annum shall have an online system for monitoring of the bills submitted by contractors. Such system shall have the facility for contractors to track the status of their bills. lt shall be manciatory for all contractors' bills to be entered into the system with date of submission and date of payment. Such system shall be put in place within one year of issue of these instructions, 13. Engineering, Procurement and Construction (EpC) contracts: 13.1 ln EPC contracts, since primary responsibility to execute lhe work lies with the EPC contractor, success of the project also depends upon the quality of the tender document wherein enough clarity on the broad framework for execution of the work and the obligations of the contractor needs to be built ln. 13.2 Milestones for payment to the contractor sl,rould be fixed in a manner that facilitates smooth cash flow for the contractor as well as for progress of the work. Milestones fixed should avoid excessive front loading or back loading, i.e., amount of payment should be commensurate with stage-wise quantum of work/ cost incuned. Milestones for payment to the contractor should also be linked with the.deliverables. 13.3 In case of EPC contracts, only general anangement drawlngs and architectural control parameters should be part of the Epc tender document. ln case of EPC contracts, timelines for submission of drawings by the contractors and approval thereof by the competent authority should be clearly prescribed in the tender document, wherein, damages for non-adherence of such timelines in thls regard may also be incorporated. Page 11 of 2213.4 EPC contracts shall specify broad technicar specifications and key output parameters. over-specification.of design may lead to increase in cost. Technical specifications shall be framed in such a manner to allow sufficient freedom to the contractor to optimize design. provisions on the following should be included in commercial conditions: (i) Limitation of liability for prgcqring entity as well as contractor. (ii) Deviation limits and procedure for change of scope. (iii) Contract closing timelines and procedure to ehsure timely closing of the contract. (iv) Performance oarameters and liquirtated damages for shortfall in performance. (v) Risk matrix snd responsibilities of the contractor and the procuring entity" In addition, a latent defect period beyond the defect riabirity period may be included to protect the procurinq entity anci puhlic authority interest in case of any design/ engineering <refect after the dr:fect liabiiity period is over, wherever appropriate. 13'5 To mitigate the risk invorved in the methodorcgy proposed by the contractor, the project executi,g authority shail either have an in-house engineering, quality assurance ancJ prqect management expert or alternatively hire an experienced engineer to intensivery examine the proposal submitted by the contractor. project executing arthorities are to ensure that optimal technological solutions ere provided l)y the contractor. 3.6 'ensure 1 To quality, regular inspection and quality checks must be ca'ied out. The Project executing authority shail carry out stage inspections in manufacturing of criticar equiprnent, , iticar activities of the proiect. 14. substitution of key personner during execution of consurtancy contract: (i) Quality in consultancy contracts is largely dependent upon deployment arrd performance oI key personnel, cluring execution of the oontra. I Page 12 of 22(ii) The following conditions should be incorporated in Tender Documents for procurement of Consultancy Services: a) Substitution of key personnel can be allowed in compelling or unavoidable s'rtuations only and the substitute shall be of equivalent or lrigher credentials. Such substitution may ordinarily be limited to not more than 30% of total key personnel, subject to equally, or better, qualified and experienced personnel being provided to the satisfaction of the procuring entity. b) Replacement of first 10% of key personnel will be subject to reduction of remuneratioh. The remuneration is to be reduced, say, by 5% of the remuneration which would have been paid to the original personnel, from the date of the replacement till completion of contract. c) In case of the next 10% replacement, the reduction in remuneration may be equal to (say) 10% (ten per cent) and for l.he third 10% replacement such reduction may be equal to (say) 15% (fifteen per cent). ln case such percentages are not relevant, or for some o{her practical considerations, for a particular contract, the procuring entity may formulate a suitable mechanism following the above logic, which . should be specified in the tender documents. (iii) Public authorities may make use of lT enabled systems at the designated place of deployment to ensure presence of key personnel as per the schedule of deployment. 15. Additional Methods of Procurement; 15.1 Fixed Budget - based Selection (FBS) for consultancy services: 15.1.1 GFRs 2017 provide three methods for selection/evaluation of consultancy proposals viz. Quality and Cost Based Selection (eCBS), Least Cost System (LCS) and Singte Source Selection (SSS). The Fixed Budget- ba'sed Selection (FBS) method is hereby also allowed for selection of consultants- under this method, cost of the consulting services shall be specified as a fixed budget in the tender document itself. FBS may be used when: Page 13 of 22(i) the type of consulting service reqdired is simple and/or repetitive and can be precisely defined; and (iD the budget can be reasonably estimated and set based on credible cost estimates andi or previous selections which have been successfully executed; and (iii) the budget is sufficient for the consultant to perform the assignment. 1 5.1.2 Under FBS, the selection of the consultant shall be made by one of the following two methods:- (i) By a competitive selection process, hased only on quality, using specific marking criteria for quality in the manner indicated in Rule 192(i) of the GFR. The propcrsal rvith tho highest technical score that meets the fixed budget requirernent shall be considered for placement nf contract. (ii) ln cases of repetitive or multiple assignments, by empanelling suitable consultants, through an open advertised process with specified quality criteria. Thereafter, selection of a specific consultant for a specific assignment from such panel shall be based on overall considerations ef public interest including r:meliness, practicability,' number of oflrer assignments already given to that consultant ln lhe oast, etc. ln such cases the budget for eech assignment shall :uso oe fixeC by the procuring entity. 15.2 Quality-cum-Cost baseC Selection (OCBS) for lUorks and Non_ Consultancy Services :- 15.2.1 Procuring entities are hereby allowed to rrse ecBS fcr procurement of works and non-consultancy services in the following cases: (i) where the procurement has been declarecl to be a euality Oriented procurement (eOp) by the competent authority or (ii) for procuremeirt of Non-Consultinq Services. where estimated value of protu,-ement (incrudiii5l al! taxes and option clause) does not exceeJ Rs .iC cror" Page 14 of ?2Note: ln cases Mrere estimated value was /ess than Rs 70 crore, but on tendering, lollowing QCBS process, it ls proposed to place contract for more than Rs 10 crore, the following procedure shall be adopteci: (a) ln case the difference between estimated value ( including faxes efc as above) and value of the proposed contract (including taxes etc) is /ess fhan 10% of tha estimated value, there wlll be no bar on placement of contract. (b) ln ali other caseg fhe procurement process ls fo be scrapped and restafted elther as QOP or on non QCBS basis. The prirrciples of QCBS slrall be as provided in Rule 192(i), (ii) and (iii) of the GFR. l'lowever, thsn aximum weight of the non-financial parameters shall in no case exceed 30.%. 15.2.2The Competent Authority for allowing QCBS shall be as followsi (i) For declaring a procurement as QOp: a) Where the procuring entity/ proJect executing authority is covered by Rule 1 of GFR, the Secretary of the Ministry/ Department, to which the procuring entity belongs. b) Where the procuring entity is a CpSE, the Board of Directors of the CPSE. (ii) For Non-consulting Services not exceeding Rs.i0 crore in value: a) Where the procuring entity is coverecl by Rule 1 of GFR, by the officer or authority two levels above the officeri authority competent to finalize the pariicular procurcmellt, or the Secretary of the Ministry/ Department whichever is lower. b) Where the procuring entity is a CpSE, the authority or officer two levels above the offlcer competent to finalize the particular procurement, or the Board of Directors of the CPSE whichever is lower. 15.2.3 ln all cases of eop, a Special TechnicalCommittee (STC) shall be constituted with the following composition:- Page 15 of 2a(i) Two or more persons who have expert knowledge and/or long experience relevant to the procurement in question (ii) One or more persons with extensive experience in handling public projects and/or public finance in the Government or State/Central Public Sector; (iii) One or more persons with experience in financial managemenU financial ad ministration/audiVaccountancy; (iv) Not m.ore than one member representing the orocuring entity who may lnter alia prorride adnrinistrative suoport to the Committee. (v) Any person who is a member of the STC shall not associate himself in any mannet with any bidder for the procurement concerned. (vi) The persons referred to in sub paras (i) to (iii) shall be persons not working under the Competent Authority specified in para 15.2.2 and shall not belcng to any organization under the control of, or receiving funding from, the procuring entity or the tr4inistry/ Department to which such procuring entity belongs. 15.2.4The names of mer.qLers of the -special recl'nlcal Comn-.lttee shall be decided either by the Cc;"nqetent Authority specified ir: para 1 I.?.? abor,,e or t, by any other authority rlrom such nuwer is delegated by the competent authority; however, powers shall not be delegatec to the officer or authority competent to finalize the particular procurement. Sitting fee may be paid to the members of the STC. Incidental costS including travel shall be paid by the procuring entity. 15.2.5 The STC shall make specific recorrimendations on the following matters:- 'lhe (i) weight to be given to non.financral parameters (not exceeding 307 j, (ii) The specific ouality/ technlccl paranreters, tireii welghts, their scoring metho(lology, the tninirnunt clualification sc,Jre- etc. and . other relevant criteria necess'ary for .s;-15ur1nt fair and transparent qr!ality/ technical evaluation of the bids. Page !6 of Zz'Ihe reconrmendations of the STC shall be followed except where there are special grounds irr public interest for deviating from them. However, every case of deviation from the recommendations of the STC shall require approval of the Competent Authority specified ln para 15.2.2(i) above who approved the declaration of the procurement as QOP. 15.2.6 ln respect of QCBS for Non-Consultancy Services not exceeding Rs.10 crore, a Technical Comrnittee shall be constiluted to carry out funclions mentioned in para 15.2.5 in lieu of the STC. The composition of the Technical Committee shall follow the provisions oI para 15.2.3 (i) to (v). The provi5ions of 15.2.3 (vi) shall however not be applicable in such cases. 15.2.7 Grounds for Declaring a Procurement to be Quality Oriented Procurement: A procuremenl should be declarecj as a QOP only if there is enough justification in terms of yalus addition or enhancement of delivery or paramount importance of quality. Reasons for not adopting two cover/ pre- qualification-based/ Ieast cost system shall be documented. 15.2.8 Tender Documents - Fixing/ Selection of the Evaluation/ eualification Criteria (D To ensure quality, some of the criteria used in marking may be nrade nrandatory and if a bidder does not meet those, then bids shall not be evaluated further. (iD Weightage may also be given for timely completion of past proJects of similar nature by the bidder. (iiD ln all cases of QOP, a pre-bid meeting shall be held in which the technical critet ia including the marking scheme shall be discussed with the potential bidders. lf any changes in the criteria are necessitated by such consuttation, such clranges shall require the recommendation of the STC. ln Non- Consultancy Services, pre-bid meelings may be held at the discretion of the public authority. 15.2.9 Fixing of Scoring/ Marking Criteria: (l) The scoring should not be a variable that relies on the subjective opinion of the evaluating panel. The marking scheme should enable achievement of almost similar scores irrespective of the persons/ experts being involved in the evaluation process. When Page 17 of Zzthe outcomes are consistent for the available information, the QCBS parameters are more reliable. Unambiguous description and criteria help to avoid grey areas so as to ensure that there is only one possible score for the ltem. As far as possible, the criteria should be so specific and clear that bidders can self- mark their own bids. (ii) lt is better to specify minimum. marks for meeting the qualifying criteria specified. (iii) Examples of fixed quality pararneters that ought not to be considered for relative scoring include organizations' ISO/ standards' accreditation, etc. These are required to establish the credentials of the service provider but cannot be used fcr relative comparison between various bidders. (iv) Bidders should be asked to produce certificates for the past performance. A format may be given in the tender itself outlining the contract details, completion. sustainability of service etc and bidders may be asked to fill it and give evidence to that effect. (v) Bidders may be asked to srrbnrit a detailed presentation on their proposals in the lbrm of soft copy along \.vith the bid so as to facilitate bette, understanding of their proposal and to errsure commitment. (vi) Besides the Bill of Quantity (BOe) output criteria for payment, Key Performa.lce Indicators (Kpls) may be specified with minimum achievement levels for- paynieni so as to ensure quality compriance. 15,2.10 Evaluation gf QaBS B.'rls: F.:r evaluatlorr, a iuitable co,,nmittee shat! be constituted. However, rnen)bers of the sTC shail nct be invol,,ed. 15.2.1 l Joint ventures in QCBS: (i) ln conventi<.,nal tenders, sonre Lrzltiers adopt .'name l:orrowing', and Joint Ventures (JV) often do not function in httet.and spirit. This results irr lack r,f quality and accountability. JVs often end in one-sided participation, diltrting the essence of the tender evaluation during its perforrnance. Since quality is given weightage in the evaluation itself, in eCBS procurement, it is Page 18 of 22even more important to guard against such tendencies. Thcrefore, Joint Ventures may be avoided in QCBS procurements as far as possible. Joint Ventures could, however, become necessary in high technology or innovative projects where a single enlity, may not be able to execute the work alone. ii) lf JVs are allowed, adequate safeguards should be provided. ( Since weighteige for quality/ experience influences the award itself, measures should be taken to ensure that all the JV partners are present and deliver services all through the contract period. An lmpiementation Boarcl with participation of all JV partners may be provided for wlrerdin the Project Manager from the procuring entity shall also be allowed audience when requlred. Meeling of JV partners with the project executing authority for quarterly progress review may be made as a criterion linked to achievement of key dates or even payment. 16. Arbitration and dispute resolution: 16.1 During operation of the contracts, lssues and disputes arislng due to lack of clarity in the contract become the root cause for litigation. Litigation has adverse implications on the timelines and overall cost of the project. Before resorting to arbitration/ litigation, the parties may opt for mutual discussion, mediation, arrd conciliation for the resolution of disputes. 16.2 Arbitration/ Court awards should be critically reviewed. ln cases where there is a dbcision against GovernmenUPublic Sector Enterprise (pSE), the decision to appeal should not be taken in a routine manner but only when the case genuinely merits going for the appeal and lhere are high chances of winning in the courU higher court. Thdie ls a perception that such appeals etc. are sometimes reqorted to postpone the problem and defer personal accountability. casual appealing in arbitration/court cases has resulted ih payment of heavy damages/ compensation/ adc.litional interest cost, thereby causing more harm to the exchequer, in addition to tamishing the lmage of the Government. 16.3 The procuring entity should monitor the success rate of appealing against arbitration awards. There should be a clear detegation to empower officials to accept arbitration/ court orders. A special board/commiftee may be set up to review the case before an appeal is filed against an order. ArbitrationiCourt awards should not be routinely appealed without due Page L9 of 22application of mind on all facts and circumstances including realistic probability of success. The Boardicommittee or other authority deciding on the matter shall clarify that it has considered both legal merits and the practical chances of success and after considering the cost of, and arising through, lltigation/appealifurther litigation as the case may be, it is satisfied that such litigationiappeal/further litigation cost is likely to be financially beneficial compared to accepting the arbitration/court award. 16.4 Statistics have shown that in cases where the arbitration award is challenged, a large majority of cases are decided in favour of the contractor. ln such cases, the amount becomes payable w:th interest, at a rate which is often far higher than the Government's cost of .funds. This results in huge financial losses to the Government. Hence, in aggregare, it is in public interest to take the risk of paying a substantial part of the award amount subject to the result of the litigation, even k in somo rare cases of insolvency etc. recovery of the amount in case of success may become difficult. lnstructions have been issued in this matter in the past but have not been fully complied with. The GFRs have now been am6nd'ed accordingly. 16.5 All procuring entities and public authorities are required to comply with Rule 2274 of GFRs. The only circumstances in lvhich such payment need not be made is where the contractor declines, or is unable, to provide the requlsite Bank Guarantee an.l ror fails fo operr escro\/ account as requlred. Persons responsible for not aclhering to the Rule 2274 of the r'i FRs are liable to be held personally accountable for the aclditional interest arlsing, in the event of the final court order going against the prccuring entity. 17. Allgning the lnterest.of stakeho!det.s .1 17 The incentive stn lcture for all the [:ey stakeholdels of public procurement ought to be such that the systenr itself will errsure tirnely delivery of the projectsiworks in a qualitative manner \rithin approved cost. A balanced framework and work culture, where risks an<i rewards are properly sharecl amongst stakeholders and iimely completion of quality projects is the common goal, can be the bedrock of efficient project management. An incentive structure, which may include pecuniary as rvell as non-pecuniary aspects (including public reccgnitior,). linked. rvith rneasurable Jrarameters of outcome/output, can help aliclil the intereets of :it? keholciL,is. A:x ethics_based regime, wherein integrity cf :rll the stallehalder," r: nui,rred, can help increase efficiency in all aspects of project managemer.t. Page 20 of 2217 .2 Public authorities may devise strategies to provide incentives to contractors/ concessionaires/ consultants/ architects/ other stakeholders by various means, including bonus, befter rating and recognition for early/ timely and quality completion of projects. Similar strategies may be devised for recognition of engineers/ officers/ other team members for early/ tlmely and quality completion of the projects. The practice of mentioning the names of contiactor and the project in-charge publicly at work sites may be implemented. Such recognition may be in a form which has long shelf life so as to associate the contractor and prcject in-charge with the life of the projoct. 17.3 "Coming together is a beginnlng; keeping together is progress; working together is success.' lt is an accepted fact that the success of any project is dependent on a well-co-ordinated team working towards a common goal, For successful execution of any project within specified time, cost and quality, tlre interest of all the stakeholders needs to be aligned. Coordinated efforts of all stakeholders such as contractors, consultants, public authority and project executing authority and public representatives will bring aboul the best possible outcome. (, &,o .\0: (Kanwalpreet) Director (Procurement Policy) Tel.: 23093811 E-mail: kanwal.irss@gov.in To (i) Secretaries to All Central Goventment Ministries/ Depallments of a ( ii) Secretary, Department Public Enterprises with request for reiterating these instructions to all Central Public Sector Enterprises Co to: (i) Cabinet Secretary ' ii) Secretary, Central Vigilance Commission. ( Page 2L of 22ACKNOWLEDGE MENTS The valuable contribution of the following persons at various stages andl or different aspects of preparation of these instructions are gratefully acknowledged:- 1. Shri Rajiv Mehrishi, formerly Comptroller & Auditor General of lndia 2, Shri Sanjay Kothiri, formerly Central Vigilance Commissioner 3. Shri Rajeev Kumar, Vice Chairman, NlTl Aayog 4. Shri Suresh N Patel, Vigilance Conrmissioner. CVC 5. Shri Amitabh Kant. CEO, NlTl Aayog 6. $hri Otem Dai, Secretary, CVC 7. Smt. Mahua Pal, Deputy CAG 8. Shri P Daniel, Additional Secretary, CVC 9. Shri Sudhir Kumar, Additional Secretary, CVC - 10. Shri Shailendra Kumar, Chief Technical Examiner, CVC 11. Ms. M. Janaki, Director, CVC 12. Ms. Wormila Jasmine Keishing, Deputy Secretary, CVC 13. Shri Sandeep Vermr, Governrnent of Rajasrhan 14. Shri Jebaselwin Gladsorr, Chennai Metro Rarl Lid. 15. Smt. Anuradha Thakur, Additional Secretary, Cabinet Secretariat 16. Shri Devendra Dhagarra, DeputyAdvisor, NlTl Aayog 17. Shri Chandrasekhar Jain, Consultant, Nl-fl Aayog 'lB. Shri Sanjay Aggarural, Adviser., DoE 19. Shri Kanwalpreet, Director, Dop 20. thri Girish Bhatnega.,, Gonsultant, D(rE 21. Shri Shanker Lal, World Bank Page 22 of 22