PROCUREMENT POLICY, DELEGATION OF
FINANCIAL POWERS & TENDERING
PROCEDURE IN ORDNANCE FACTORIES
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PROCUREMENT POLICY IN
ORDNANCE FACTORIES
• TO PROCURE WORK, MATERIAL, SERVICES
• OF THE SPECIFIED QUALITY
• WITHIN THE SPECIFIED TIME
• AT THE MOST COMPETITIVE PRICES
• IN A FAIR, JUST & TRANSPARENT MANNER
• RESPONSIBLITY AND ACCOUNTABILITY
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DELEGATION OF FINANCIAL
POWERS
• New Management Strategy
• Decentralization of decision making process
to increase efficiency and effective utilization of
resources by actual operators
• Responsibility and accountability
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CIVIL
CAPITAL CIVIL WORKS FOR
PRODUCTION BUILDINGS
LEVEL-I
GM
LEVEL-II
AGM
5 CRORE
1 CRORE
CAPITAL CIVIL WORKS FOR NON 1 CRORE
PRODUCTION BUILDINGS
NIL
CAPITAL CIVIL WORKS FOR
AMENITY BUILDINGS AND
RESIDENTIAL ACCOMODATION
REVENUE CIVIL WORKS
1 CRORE
NIL
0.5 CRORE
0.1 CRORE
PERIODICAL SERVICES
FULL
1 CRORE
25 CRORE
1 CRORE
Full – for purchase from
DGS&D under Rate/ Running
contract
NIL
LEVEL-III
LEVEL-IV
1 CRORE
10 LAKHS
1 CRORE
10 LAKHS
P&M
Procurement, modification and/or
re-conditioning of P & M through
LTE/OTE under RR and NC
Procurement, modification and /or 1 CRORE
re- conditioning of P&M on single
tender/ resultant single tender or
proprietary items under RR and
NC.
STORES
Procurement of stores against
20 CRORE
LTE/OTE or Rate / Running
contract placed by DGS&D or OFB
or from M/S Rosoboronexport,
Russia.
Procurement of Stores (i) Of
1 CRORE
proprietary articles on single tender,
(ii) From single known source, (iii)
Where resultant single acceptable
offer is received against LTE/OTE
Procurement of stores against ab- 5 LAKHS
initio single tender.
5 CRORE
Placement of Development orders. 5 LAKHS
NIL
Direct Purchase of Steel & Alloys
from Public Sector
5 CRORE
FULL
50 LAKHS
NIL
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The Basics
• Capital Procurement:
•Expenditure with the objective of increasing assets
• Primarily bears first charge for first construction
• Costing more than Rs 10 lakhs and with a life of 7 years as per GFR.
• Procurement procedure documented in DPP, Guidelines for Procurement of
P&M in Ordnance Factories etc.
• Revenue Procurement:
•All subsequent charges for production, maintenance and working expenses
• For items and equipments to maintain and operate already sanctioned
assets
• Procurement procedure documented in DPM, OFB procurement manual
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ACCEPTANCE OF NECESSITY
Assessment of physical requirement of resources with
respect to targets fixed and budget availability
• Purchase of stores must be made
• in the most economical manner
• in accordance with definite requirements
• Stores should not be purchased in small quantities.
• Stores should not be purchased much in advance of actual
requirements which will result in locking up of capital
• Elements:
• Vetting of estimated requirements / SHIS
• Vetting of estimated cost
• Mode of tendering and source of procurement
• Availability of funds and head of account.
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ACCEPTANCE OF NECESSITY..contd
• For scaled items utmost care to be taken to incorporate:
• Available stock
• outstanding dues/supplies
• Past consumption patterns
• average life of equipment and spares
• Clubbing of requirements
• For one time purchase for projects or capital equipments
• Actual requirement usage
• Rate of return
• Obsolescence factor
• Confirmation to latest technology and specifications
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ACCEPTANCE OF NECESSITY..contd
• Estimated cost is the most important element of AON.
• Basis of estimation:
• L.P.P.
• Budgetary quotations from established / registered vendors,
• Assessed cost by specialist officer, in case of non-standard giving an
objective cost break-up, etc.
• Informal enquiries with vendors should be avoided
• Estimated cost is often inflated and prepared in perfunctory
manner, escalating at a uniform rate without assessing market
trends which results in an acceptance and payment of higher
prices.
• Budgetary provision / availability of funds and head of account
are to be clearly assessed during acceptance of necessity.
• Mode of tendering, as also sources of procurement i.e. from trade
or P.S.U.s or from import, to be clearly decided at this stage.
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Tendering Modes
• PAC
• Items/equipments that are proprietary products of
manufacturer: specifications not available to others to
manufacture
• PAC issued to OEM by user
• PAC valid for one year from date of issue.
• Single Tender Enquiry:
• Invitation to one firm
• For non PAC items can be resorted to on grounds of
urgency, operations and technical requirements
• Reasons must be recorded
• Reasonableness of rates must be determined
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Tendering modes..contd
Limited tender enquiry
• To be adopted when estimated value of procurement is below
Rs 10 lakhs and sources of supply arewell known; new source
unlikely
• List of credible suppliers; competition to be encouraged
• Web based publicity
• Sufficient time to be allowed to vendors to quote
Open tender enquiry
• Preferred mode for common use items of generic or
commercial specifications, adopted when estimated value of
procurement is above Rs 10 lakhs
• Wide publicity through advertising media, internet
• Four weeks allowed for submission of bids.
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Vendor Selection
• Selection and registration of firms/suppliers and their evaluation
must be clear and transparent.
• Users required maintain a list of approved vendors / contractors
• Prequalification necessary to bring competent contractors into
competition with technical & financial capability required for the
particular procurement. To be done on the basis of :
• Experience and past performance on similar contracts
• Capabilities with respect to personnel, equipment and
manufacturing facilities
• Financial standing through latest I.T.C.C., Annual report
(balance sheet and P & L account) of last three years.
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Vendor Selection..contd
• PQ evaluation criteria must be incorporated in the bid documents in
clear and unambiguous terms
• Prepare the PQ criteria specific to the requirement of the work.
• Evaluate the bids exactly as per the notified criteria.
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Specification/QRs
•Detailed QRs for the item to be procured should indicate
• Material composition
• Physical and performance parameters
• Tolerances if any
• Manufacturing processes where applicable
• Test schedule
• Preservation and packing
• QRs must be finalized before tendering.
• No waiver or modification of QRs allowed after issue of TE.
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Bid system
• Single bid or two bid (for T/P, IT and communications systems,
turn key projects)
• Two bid system: techno-commercial and price bids are called
separately.
• The techno-commercial bid contains all terms and conditions
including commercial terms except price.
• Technical bids will be evaluated by T.E.C.
• Price bids of only technically acceptable offers are to be opened
to ensure an objective evaluation of tenders.
• Single stage two bid system is followed in MOD and widely
prevalent, being most transparent.
• In case of two-stage two bid system, price/commercial bids are
called from only technically acceptable vendors after technical
evaluation.
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Preparation of tender documents
Stipulate all prevailing standard conditions, Govt.policies:
• Eligibility : registration with DGQA, OFB etc
• Clarifications on bidding documents:
• Amendment to bidding documents: can be done before date
of submission of bids
• Bid validity: 90 days for single bid and 120 days for two bid
tender
• Late bids
• Modification and withdrawal of bids: can be done before
deadline for submission of bids
• Clarification of bids: no change in price or substance
permitted
• Agents of supplier: one agent cannot represent two suppliers
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Preparation of tender documents..contd
Stipulate all prevailing standard conditions, Govt.policies:
• Preliminary examination: Completeness of bid and
substantially responsive bids
• Evaluation of substantially responsive bids: On basis of prices
offered
• Award criteria: Meeting all technical and commercial
conditions and lowest
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Preparation of tender documents..contd
Special conditions:
• Delivery schedule and place: Clear and unambiguous
• Payment terms and paying authority
• Security Deposit: @ 10% (max) of the total value of each
contract within 20 days of the receipt of acceptance of tender.
• Liquidated damage: recoverable @ 0.5% of value of
undelivered goods for each week or part thereof, not exceeding
10% of the outstanding contract/supply value
• Earnest Money Deposit: @ 3 % of the estimated value of the
tender and may not exceed 5 %. EMD forfeited, if the tenderer
withdraws or amends, impairs or derogates from the tender in
any respect within the period of validity of his tender.
• Fall clause
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Preparation of tender documents..contd
Special conditions:
•Risk and expense purchase: Supplier liable to pay additional
amount as compared to original contracted amount. Difficult to
enforce.
•Option Clause and repeat order: Right to vary quantities at
same rates and terms within delivery period: Increase/decrease
upto 100% of quantity specified provided there is no downward
clause.
• Force majeure: Need not be included in TE
• Price Variation Clause: when included items and formula on
which the price variation is based should be clearly spelt out
indicating the base price of the raw materials, etc., on which
variation is to be allowed
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• Arbitration: Must indicate provisions for appointing arbitrator.
Tender Invitation and Receipt
• Prefer open tendering as far as possible
• In case limited tenders are resorted to, prepare a panel of
contractors/ vendors in a transparent way.
•Ensure adequate & wide publicity: Upload NIT & tender
document on web-site, even in case of limited tenders.
• Conduct pre-bid meeting
• to bring clarity regarding sprit of various provisions
• to bring necessary modifications , if required.
• Make suitable arrangement for receipt of sealed tenders at
scheduled date and time through conspicuously located tender
boxes.
•For bulky tender documents, keep provision in tender documents,
for submission of bids by hand to designated officials
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Tender Opening
• Tenders to be opened by Tender opening Committee in
presence of firms or their authorized representative at
particular date and time, specified in T.E.
• Each tender to be numbered serially, initialed and dated on
first page. Prices, important terms and conditions etc. should
be encircled and initialed by tender opening officers /
committee.
• Each page of the tender should also be initialed with date and
particularly, alterations in tenders made by the firms, to be
initialed.
• In two bid system, only technical bids to be opened first.
Sealed commercial bids should be initialed by BOO
• Late tenders, delayed tender offers not to be considered at all.
• Board of Officers should not be connected with procurement
activities at particular date and time specified in the tender
enquiry.
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Tender Evaluation
• Technical evaluation:
– Whenever a two bid system is followed
– Evaluation by a Technical Evaluation Committee- IFA not part of it
– To ascertain conformity of technical bid with technical specifications
sought
– To bring all bidders on a level playing field in qualitative requirement
– Report to be submitted to CFA for approval.
• Commercial evaluation:
– Evaluation by a Tender Purchase Committee- IFA a part of it
– Comprises of Users, technical member, CFA rep and IFA
– PNC/TPC shall maintain a self-speaking record of its work in
chronological manner.
– Minutes are to be page numbered and signed
– Issues to be seen:
• Duties and taxes
• Delivery period and delivery compliance
• All inclusive cost on delivery.
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Negotiations
• Negotiations
should
be
held
in
rare
and
exceptional
circumstances where rates are not found reasonable.
• Negotiations with LI/ techno-commercially acceptable vendor
only:
– When there is inadequate competition in LTE.
– Wide variation between quotes of L1 and L 2 and others
– Wide variation between estimated cost and tendered cost.
– In case of proprietary items procured on single tender
where reasonability of rates cannot be justified.
– Where all tenders/firms quoting one make but different
prices and terms and conditions
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Negotiations..contd
• CVC guidelines:
– Post tender negotiations are banned with immediate effect
except with L1
– There should not be any negotiations. Exceptions will be
only in the case of proprietary items or in items with limited
source of supply. Counter offers tantamount to
negotiations.
– When the quantity to be ordered is much more than what
L-1 alone can supply, the quantity order may be distributed
in such a manner that it is fair, transparent and equitable.
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Tender Evaluation and Award of Work
Concern areas:
• Evaluate tenders exactly as per notified criteria
• Timely decision within validity period
• Comply with instructions/guidelines of CVC on negotiations
• Ensure that conditions/specifications are not relaxed in favour of
vendor to whom work is being awarded.
• Ensure that L1 is not ignored on flimsy ground.
• Ensure that supply order is placed within justified rates
• Incorporate all standard terms and conditions, rates, denominations
and specifications as per TPC’s decision.
• Do not deviate materially from any tender enquiry condition
• Match agreement with the tender document, properly document,
sign and seal
• Ensure acceptance of contract/supply order by vendor.
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