Industry Welcomes New Public Procurement Guidelines

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.

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).

“Quality-cum-Cost Based Selection (QCBS) was used only for procurement in cases where the quality of consultancy services was the main objective. We welcome this change in the procurement policy. Where nearly all the sectors will get covered, work quality and project completion will improve to a great extent,” said Poonam Kaura, Partner-Government & Public Sector Advisory, Nangia Andersen.

Kaura further explained the problems that were associated with the L1 method stating, “L1 or the lowest bidder is not really an efficient way of selecting a bidder for executing large projects where high technical expertise and experienced manpower is required for its completion.

Raj Kumar, Chairman & Managing Director, Rodic Consultants also described similar problems associated with the L1 system. “If the basic eligibility criteria in the Request for Proposal (RFP) is not drafted in a proper manner, it is very likely that the client might end up with an incompetent firm, who would not be able to deliver services with requisite quality and efficiency.”

While the adoption of Quality-cum-Cost Based Selection (QCBS) has largely been welcomed by the industry there are apprehensions in certain quarters around only entrenched suppliers bidding or cartelising among themselves without proper checks and balances. 

“I don’t think that it will reduce competition, however, there will have to be proper checks in place. The team evaluating the technical bid should have complete knowledge of the product/services being procured, industry benchmarks and understanding of techno-commercial implications,” Kaura said.

“There should be a range (+/-) specified by authorities within which a bidder should quote its price. This will ensure neither very high price is quoted by bidder nor unviable low price is quoted by the bidder,” Kumar said reiterating that new guidelines will ensure only competent firms having requisite technical expertise to bid for the projects.

Addressing Payment Delays

Acknowledging the severe financial crunch faced by contractors during the Pandemic, ad-hoc payments of not less than 75 per cent of eligible running account bill/due stage payment, shall now 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.

Appreciating this change, Kumar said, “The consultants and the contractors are the pillars of the construction industry. If there are no mechanisms to ensure timely payments to the contractors/consultants, it becomes difficult for these firms to survive. This directly affects their performance in project delivery as well.”

Kaura, though welcomed the step but at the same time suggested that focus should more be on work completion and signoffs from the concerned authorities. She contended that in most cases low quality & delay in works leads to payment delays.

Acceptance of Single Bids

With respect to acceptance of single bids under the new rules, Kumar said that rebidding not only has cost associated with it, but it delays the start of work as well which has a cascading effect on the completion schedule of the project. “As long as bids are widely advertised along with sufficient submission time given for submission of bids, qualifying criteria being not restrictive and the price being reasonable viz-a-viz market values, I believe that very idea of allowing to accept a single bid is a good decision and was long overdue.”