New Procurement Guidelines: L1 No Longer Sole Criteria In Procurement Process

The Ministry of Finance’s Department of Expenditure on October 29 released new procurement guidelines for government tenders. The guidelines which largely went unnoticed have sweeping reforms with respect to L1 not being the sole criteria to determine the winning bidder, acceptance of single bids and timely payments to contractors.

Allowing Additional Methods of Procurement

The procurement process in India has largely been driven by the L1 or Least Cost Selection Method. Under this method ministries, public agencies and public sector undertakings (PSUs) select the bidders quoting the lowest amount to carry out standard or routine works/non-consultancy services like audit and engineering design of non-complex works. With these new guidelines the Public Procurement Division of the Department of Expenditure has now allowed the selection of bidders for works and non-consultancy services through alternative procurement methods like the Quality-cum-Cost Based Selection (QCBS).

QCBS evaluates a bidder based on a combination of technical and quality scores. The guidelines mention that QCBS route can be taken where the procurement has been declared to be a ‘quality-oriented procurement’ (QOP) by the competent authority and for non-consulting services where the estimated value of the contract does not exceed Rs 10 crore inclusive of taxes, etc. However, the guidelines also mention that the maximum weightage for non-financial parameters should not exceed 30 per cent.

The adoption of alternative methods and more importantly of QCBS has been a demand of industry leaders in recent times. Last month in an interview to a leading publication, Larsen & Toubro (L&T) Group chairman AM Naik said that the current government norms for awarding projects on the basis of lowest bids (L1) do not factor in quality parameters, potentially proving costly for the nation.

Similarly on Tuesday, at the inaugural Global Services Conclave of the Services Export Promotion Council, Amit Sharma Managing Director, Tata Consulting Engineers Limited said, “The focus in government procurement should now move from L1 To Q1.”

The guidelines state that the Central Vigilance Commission (CVC), Comptroller and Auditor General (CAG), and NITI Aayog flagged concerns regarding the L1 system not being the most effective while selecting bidders for executing infrastructure projects, which require a high level of technical expertise.

Other Reforms

The new guidelines also describe the practice of rejecting single bids as “not correct” and states that lack of competition shall not be determined solely on the basis of the number of bidders. “Even when only one bid is submitted, the process should be considered valid provided the procurement was satisfactorily advertised and sufficient time was given for submission of bids, the qualification criteria were not unduly restrictive and prices are reasonable in comparison to market values,” the guidelines read.

Also, under the new rules, ad-hoc payments of not less than 75 per cent of eligible running account bill/due stage payment, shall be made within 10 working days of the submission of the bill and the remaining payment is to be made after final checking of the bill within 28 working days of submission of bill by the contractor.

The guidelines have further instructed that public authorities may put in place a provision for payment of interest in case of delayed payment of bills by more than 30 working days after the submission of bill by the contractor.