CPPP MOOC Courseware PDF

MASSIVE OPEN ONLINE COURSE (MOOC)
Certificate Program
in Public Procurement
(CPPP)
i
Certificate Program in Public Procurement (CPPP)
This courseware is the supplementary self-study material developed for the Certificate
Program in Public Procurement to be delivered as a MOOC (Massive Open Online Course) at
www.procurementlearning.org. The South Asia Regional Procurement Services of the World
Bank has developed this course with consultants support and through extensive
consultations with academic and management training institutes in India. For the purpose,
these institutes have also formed a Charter for Public Procurement Studies (CPSS) to
promote professionalisation during public procurement in India.
This courseware has been drawn from the detailed course content for the Professional
Diploma in Public Procurement (PDPP) to be delivered by CPSS member institutions, with
support from the World Bank. Its contents may not be used or disclosed without World
Banks authorisation.
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World Bank Acknowledgements

South Asia Regional Vice President
Philippe Le Hourou
India Country Director
Onno Ruhl
Sector Director
Idah Z. Pswarayi-Riddihough
Sector Manager
Felipe Goya
Task Supervision
Abduljabbar Al-Qathab
Task Team Leader
A.K. Kalesh Kumar
Task Team
Girish Bhatnagar
N.K. Mohan Das
Binu Malhotra
Latha Sridhar
Ashwini Bharat
Institutional Partner Members of the Charter

for Public Procurement Studies (CPSS)
Dr. B. S. Chetty
Administrative Staff College of India (ASCI),

Hyderabad.
Dr. Raj Agarwal, Prof. Raj Kr. Singh All India Management Association (AIMA),
New Delhi.
Dr. N. N. Sarma
Assam Institute of Management (AIM),

Guwahati.
Mr. Arun Talwar, Mr. Saket Sharma
CUTS Institute for Regulation and Competition

(CIRC), New Delhi.
Mr. G. Sreekumar, Mr. Manku
HLL Academy (HLL), Thiruvananthapuram.
Mr. Krishan Batra
Institute for Supply Management, India (ISM),

Gurgaon.
Mr. C. Subbakrishna,
Mr. P P Sengupta
Indian Institute of Materials Management

(IIMM), Bangalore.
Mr. V. K. Garg/Mr. Girish Bhatnagar Indian Railways Institute of Logistics and

Materials Management (IRILMM), New Delhi.
Dr. A K. Sharan,
Mr. R. N. Ghosh
National Institute of Finance Management

(NIFM), Faridabad.
Dr. S. Chaturvedi
Symbiosis
Pune.
e-Learning Design, Development

and Layout
C&K Management, Hyderabad, a TMI Group

Company.
Centre
for
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Foreword
World over, public procurement is now recognised as a strategic tool for achieving
development and meeting the social and environmental objectives of Governments, rather
than using it as a tool for compliance of rules and regulations. Significant reforms in
procurement regulations, institutions and systems are being witnessed in many countries,
including the South Asia region. These public procurement reforms are long-term initiatives
and need the involvement of policy makers, judiciary and the civil society. Equally important
are initiatives that focus on building capacities of officials involved in procurement
management. These initiatives need to be addressed in a relatively shorter time with higher
efficiencies and skill up-gradation of the staff involved. Making affordable and quality
learning opportunities for procurement practitioners as well as students who want to pursue a
career in public procurement is a challenge. Particularly so in the South Asia region, where it
is estimated that about 10 million public servants are engaged in public procurement in some
form or the other, as part of their official responsibilities.
In this context and given World Banks own commitment to enhanced use of country
systems and e-procurement, World Banks strategy for capacity building in public procurement
is towards moving for larger systemic efforts. This is to ensure wider availability of
institutionalised learning options for aspiring candidates.
The objective of World Banks procurement capacity building initiatives in the South
Asia region is to support the development of mass scale and affordable e-learning and
blended courses suited to the country systems in the region, in partnership with leading
academic and management training institutions in the region. As the first initiative, World
Bank is supporting the development of a Professional Diploma in Public Procurement (PDPP)
through the Charter for Public Procurement Studies (CPPS) formed by 10 leading
academic and management training institutions in India. CPPS, through its institution
members across the country, will admit, manage, conduct examinations and issue certificates
to candidates registering for the diploma program.
This Certificate Program in Public Procurement (CPPP) is a free precursor of the main
PDPP. CPPP is being offered directly by the World Bank to all aspiring learners in the South
Asia region. It has been a joint effort of the partner institutions, consultants and the World
Bank Task Team. I thank them all for their contributions and efforts.
On behalf of the World Bank, I invite you to take the course at
www.procurementlearning.org. World Bank believes that this is a momentous beginning of a
Capacity Building Program in the South Asia Region. It has the potential to reach a wider
target audience across the world in a cascading expansion.
(Felipe Goya)
Regional Procurement Manager South Asia
The World Bank
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Introduction
This Certificate Program in Public Procurement (CPPP) is targeting in-service public
procurement practitioners and aspiring students who want to pursue a career in public
procurement management in the South Asia region. It is the outcome of a two-year-long
research and development effort undertaken by the South Asia Procurement Services of
the World Bank in association with premier academic and management training institutions in
the region. CPPP is integral to a larger Professional Diploma in Public Procurement (PDPP)
and is to be delivered by partner institutions in India and other countries in the region.
The delivery will be through a unique blended learning mode of distance learning, e-learning
and face-to-face training. PDPP is an advanced diploma program to be launched from
1st July 2014 and confirms to international standards.
CPPP content is drawn from 3 modules of the PDPP. It has been is contextualised for a
universal audience and has many relevant examples for South Asian countries. Students
who pass the CPPP will carry credits for these three modules in the main PDPP, when they
join for the paid course through partner institutions. The three modules that have universal
relevance and appeal are (i) Introduction to Procurement and Public Procurement; (ii) Public
Procurement Operations and (iii) Governance Issues in Public Procurement. The objective of
this certificate program is to orient the learner towards the principles of public procurement,
management principles applicable to public procurement, essential operational aspects of
need assessment, procurement planning, bidding, evaluation, and selection and award
process. The certificate program also provides knowledge on governance issues as well as
information on the anti-corruption initiatives in public procurement.
We do hope the CPPP and PDPP will achieve their objectives of developing competencies
in existing and evolving public procurement practices; bringing in attitudinal changes in the
learner towards achieving prudence, transparency, fairness and equality; inculcating ethical
standards and developing more professionalism; and highlighting Quality, Value for Money
and Green Issues while undertaking procurement with public funds.
The program development process has been personally enlightening for me. I hope
CPPP will achieve the expected learning outcomes for the candidates in that they will
understand the role and strategic importance of procurement, comprehend management
concepts and principles, and acquire skills in preparing bid documents, evaluating and
negotiating bids, awarding of contracts, experiencing international best practices in public
procurement, and understanding global markets.
I look forward to the effective use of these learning opportunities by in-service
professionals as well as students who are interested in development management.
Abduljabbar Al-Qathab
Lead Procurement Specialist and Head, India Procurement Team
World Bank, India
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Table of Contents
WORLD BANK ACKNOWLEDGEMENTS .............................................................................. iii

FOREWORD ................................................................................................................ v
INTRODUCTION ........................................................................................................ vii
MODULE 1 Introduction to Procurement and Public Procurement .................. 1

UNIT 1
Introduction to Procurement and Public Procurement ...................................... 2

INTRODUCTION
TO
PUBLIC PROCUREMENT
AND ITS
STRATEGIC ROLE
IN
ORGANISATIONAL OBJECTIVES ............. 2
1.1
Role of Procurement in Organisational Objectives ......................................... 2
1.2
Strategic Importance of Procurement in the Organisation .............................. 3
1.3
Role of Public Procurement in an Organisation ............................................. 3
1.4
Strategic Importance of Public Procurement for the Government and

Society .................................................................................................. 3
1.5
Public Procurement as an Integral Part of Public Financial Management

System .................................................................................................. 4
1.6
Basic Aims of Procurement the 5 Rs of Procurement ................................... 5
1.7
How is Procurement in Public Sector Different from that in Private Sector? ..... 5
1.8
The Need for a Framework for Public Procurement ........................................ 7
1.9
Limitations in Public Procurement .............................................................. 7
REVIEW OF KEYWORDS AND CONCEPTS ........................................................................... 8

SELF-ASSESSMENT QUESTIONS AND EXPERIENTIAL EXERCISES ............................................ 8
UNIT 2
Management Concepts and Techniques............................................................ 9

MANAGEMENT CONCEPTS AND TECHNIQUES RELATING TO RIGHT PRICE .......................................... 9
2.1 The Concept of Value ................................................................................ 9
2.2 Total Cost of Ownership .......................................................................... 10
2.3 Value for Money (VfM) ............................................................................ 10
2.4 Value Analysis (VA) ................................................................................ 11
MANAGEMENT CONCEPTS
2.5
AND
TECHNIQUES RELATING
TO
RIGHT TIME
AND
PLACE
AND
RIGHT QUANTITY .. 12
Just-In-Time (JIT) ................................................................................. 12
MANAGEMENT CONCEPTS AND TECHNIQUES RELATING TO RIGHT QUALITY ..................................... 12

2.6 Total Quality Management (TQM) ............................................................. 13
2.7 Six Sigma (6 ) ...................................................................................... 14
MANAGEMENT CONCEPTS
2.8
AND
TECHNIQUES RELATING
TO
RIGHT SOURCE GAME THEORY ...................... 15
Theories of Competition: Game Theory ...................................................... 15
REVIEW OF KEYWORDS AND CONCEPTS ......................................................................... 17

SELF-ASSESSMENT QUESTIONS AND EXPERIENTIAL EXERCISES .......................................... 17
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MODULE 4 Public Procurement Operations .................................................19

UNIT 1
Planning for Procurement .............................................................................20

1.1
1.2
1.3
1.4
1.5
Introduction to Procurement Operations ................................................... 20

Planning for Procurement ....................................................................... 20
Need Assessment ................................................................................... 21
Developing Specifications ....................................................................... 21
Developing Procurement Plans ................................................................. 24

UNIT 2
Bidding and Evaluation .................................................................................28

2.1
Introduction ......................................................................................... 28
2.2
Standard Bidding Documents (SBD) .......................................................... 28
2.3
Securities to be Submitted by Bidders ...................................................... 30
2.4
Publication of Bids ................................................................................ 31
2.5
Clarification of Bidding Documents .......................................................... 31
2.6
Amendment of Bidding Documents ........................................................... 31
2.7
Modification; Alteration and Withdrawal of Bids ......................................... 32
2.8
Pre-Bid Conference ................................................................................ 32
2.9
Receipt and Custody of Bids .................................................................... 32
2.10 Procedures to be followed during Bid Opening ........................................... 33

2.11 Late Bids .............................................................................................. 33
EVALUATION
OF
BIDS ............................................................................................. 34
2.12 Introduction to Bid Evaluation ................................................................ 34

2.13 Preliminary Examination ......................................................................... 34
2.14 Minor Discrepancy/ Infirmity/Irregularity/ Non-Conformity ......................... 35
2.15 Clarification of Bids ............................................................................... 35
2.16 Bidders Contacting the Organisation during Evaluation ............................... 35
2.17 Evaluation of Bids in Different Systems of Bids .......................................... 35
2.18 Evaluation of Price Aspects ..................................................................... 36
2.19 Reasonableness of Prices ........................................................................ 37
2.20 Negotiations ......................................................................................... 38
AWARD
OF
CONTRACT ............................................................................................. 39
2.21 Recommendations for Award of Contract ................................................... 39

2.22 Variation of Quantities at the Time of Award ............................................. 39
2.23 Parallel Contracts ................................................................................... 39
2.24 Notification for Award of Contract to Successful Bidder ............................... 40
2.25 Signing of Agreement/Issue of Supply Order .............................................. 40
2.26 Performance Security .............................................................................. 40
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2.27 Acknowledgement of Contract by Successful Bidder and Execution ................ 41

2.28 Rejection of Bids ................................................................................... 41
UNIT 3
Management of Public Procurement Operations ..............................................43

3.1
Organisation of Public Procurement Operations .......................................... 43
3.2
Procurement Agencies ............................................................................ 44
3.3
Roles, Responsibilities and Delegation of Procurement Powers ..................... 45
3.4
Committees: Many Committees Play a Key Role in Procurement Operations .... 46
3.5
Time Limit for Procurement and Accountability .......................................... 47
3.6
Record Keeping and Management Reporting .............................................. 48
3.7
Procurement Key Performance Indices (PKPI) and Management Reporting ...... 49
3.8
Information Technology in Procurement .................................................... 50

MODULE 6 Public Procurement and Good Governance ..................................53

UNIT 1
Governance Issues in Public Procurement ......................................................54

1.1
Values to Ethics and Laws From Beliefs to Behaviour and Punishment ........ 54
1.2
Governance Issues in Public Procurement .................................................. 55
1.3
Governance Risk Areas in Public Procurement ............................................ 56

UNIT 2
Prevention of Corruption in Public Procurement .............................................62

2.1
Corruption ............................................................................................ 62
2.2
Negative Impact of Corruption on Society ................................................. 62
2.3
Prevention of Corruption ......................................................................... 63

2.3.1
Codes of Conduct/Ethics for Public Servants including Elected

Representatives .......................................................................... 63
2.3.2
Transparency Systems .................................................................. 63
2.3.3
Competency and Training Systems ................................................. 64
2.3.4
Whistleblower Hotlines and Helplines Protection of Witnesses

and Whistleblowers ..................................................................... 64
2.3.5
Grievance Redressal Framework Against Arbitrary Exercise of

Powers by Public Servants ............................................................ 64
2.3.6
Corporate Ethical Commitment Against Corruption ........................... 65
2.3.7
Control/Enforcement ................................................................... 65
2.3.8
Banning and Blacklisting of Delinquent Firms ................................. 67
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2.4
Fighting Anti-Competitive Practices ......................................................... 67

2.4.1
2.5
Checkmating Anti-Competitive Practices ......................................... 67
Leveraging Technology ........................................................................... 69

2.5.1
e-Governance ............................................................................. 69
2.5.2
e-Procurement ............................................................................ 69
2.5.3
e-Payment.................................................................................. 70

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MODULE 1
Introduction to
Procurement and
Public Procurement
1
Introduction to Procurement and Public Procurement
Unit 1
Introduction to Procurement and Public

Procurement
LEARNING OUTCOMES
AFTER STUDYING THIS UNIT, YOU WILL BE ABLE TO:
Define procurement and describe its scope, role and
strategic importance to an organisation
Define public procurement and describe its scope, role
and strategic importance to the government and society
Describe the 5 basic aims of procurement called 5 Rs of
procurement
Describe the seven principles that differentiate public
procurement from private sector procurement
Describe the resultant limitations faced by public
procurement
Introduction to Public Procurement and its

Strategic Role in Organisational Objectives
1.1
consultancy
and
non-consultancy
services;
outsourced business processes; transportation,
logistics and so on. They also include intangibles
like intellectual property, artwork, technology
transfer and goodwill, among others.
Role of Procurement in
Organisational
Objectives
Procurement is the business management

function that manages the entire process of
acquisition of such external resources in an
efficient and economical way by means of a
contractual arrangement. This starts from their
identification, sourcing, supply and access, risk
management and regulatory compliance until
disposal or cessation of such external resources.
Procurement applies the science and art of supply
management of such external resource through a
body of knowledge interpreted by competent
practitioners and professionals.
Every organisation, whether in the private

sector or public sector, consumes external
resources in its pursuit to achieve the
objectives for which it was created and for
which it exists. Such external resources can be
materials; machines; engineering construction and
maintenance; services and processes. They include
Defining Procurement
Procurement is a business
management function. It
involves the science and art
of supply management, as
interpreted by competent
practitioners and
professionals.
Procurement is also known by other names,

of course, with varying scope, as Purchasing,
Supply Management, Purchasing and Supply
Management, Logistics, Materials Management,
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Supply Chain Management, Acquisition Management

and so on. This diversity also reflects in the names
of the professional bodies related to this function.
1.2
expenditure is borne by the government. Public

procurement covers such acquisitions of external
resources not only using public funds but also
using any other source of funding, for example,
grants and gifts and so on. It includes resources
and inputs that support the work of government
and ranges from routine items, such as stationery,
temporary office staff, furniture or printed forms
to complex expenditure areas, like construction
works, Private Public Partnership projects, defence
equipment or support to major change initiatives.
It also includes a growing expenditure of direct
delivery of services to citizens through the private
and NGO sectors in areas such as work-for-welfare,
adult education, weaker section subsidies and
empowerment schemes, rural social care and health.
Strategic Importance of
Procurement in the
Organisation
The procurement function is of strategic

importance to the organisation. Economical,
efficient and quicker procurement can help the
organisation, improve profitability, help in
capturing large share of the market, reducing time
from design to market, improving customer
satisfaction, gaining better competitive value,
help in enabling better products and services,
faster and customer friendly channels of distribution
and mass customisation, among others.
1.3
1.4
Role of Public
Procurement in an
Organisation
Strategic Importance of
Public Procurement for
the Government and
Society
Public procurement, generally, accounts for

a large share of public expenditure in a domestic
economy. Take the case of India1 where the annual
public procurement is estimated to be more than
US$ 300 billion, which is 2530% of its GDP.
Similarly, Bhutan2 spends about 25% of their
annual budget in public procurement. Maldives
public procurement expenditure is to the tune of
US$ 2.2 billion and Bangladesh3 expends more
than US$ 3 billion annually on public procurement.
Public procurement refers to procurement of

external resources needed by the central or state
governments as well as entities under their
control. These may be ministries and offices under
their jurisdiction, urban local bodies, public
utilities, public sector companies and other units
owned wholly or substantially by them. It can also
be organisations established by the Constitution
of that country or any act of legislature whose
Due to the magnitude of the spending

involved, a small savings in public procurement
can release large financial resources by way of
economy and efficiency in its operations. Again
citing India as an example, a mere 10% savings
would mean release of US$ 30 billion per year.
This can lead to effective development for the
country particularly the poorer sections of the
society. The starting points for a governments
activities are larger deliverables achieved through
Defining Public
Procurement
Public procurement refers to
procurement of external
resources needed by the
central or state governments
as well as entities under
their control.
http://www.cuts-citee.org
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/03/28/000333037_20110328002252/
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3
policy outcomes a tolerant, safe society,

well-educated citizens and so on. Government
then develops policies like Public Procurement
Policy to meet these outcomes and engages in
activities to deliver them. Public Procurement is
one of such activities. Due to the magnitude of
the spending involved, public procurement
can have a market impact beyond the mere
quantities of goods and services purchased.
Through its procurement policies, the public
sector can affect the structure of the market and
the incentives of firms. Procurement policy,
therefore, may be used to shape a more inclusive
national economic growth by long term support to
SMEs, disadvantaged sections, environmental
concerns and the like.
1.5
It includes revenue collection, prioritisation of

programs, budgetary process, efficient expenditure
management and exercise of controls. The basic
framework of the financial management system
is usually provided in the constitution of
that country and elaborated further through
their legislations and rules. Public procurement
is an integral and important part of this
Public Financial Management System. As already
discussed, even a minor improvement in the
efficiency of public procurement will benefit and
positively impact the financial management
system. This can enable the Public Financial
Management System to normalise the tax rates
and to release more funds for developmental
projects.
The pace of public procurement reforms
in South Asia varies from country to country.
While Afghanistan, Bangladesh, Nepal and
Pakistan have Public Procurement Acts, public
procurement in Bhutan, Maldives and Sri Lanka is
governed by regulations and guidelines. The
General Financial Rules (GFR) regulate public
procurement at the Union Level and in most
of the states in India and only two States
Karnataka and Tamil Nadu have the public
procurement laws.
Public Procurement as
an Integral Part of Public
Financial Management
System
Public Finance Management (PFM) basically,

deals with all aspects of resource mobilisation
and expenditure management in government.
4
1.6
iii) Right Price, refined further by concepts

of Value for Money (VfM), Life Cycle
Costing (LCC) or Total Cost of Ownership
(TCO)
Basic Aims of
Procurement the 5 Rs
of Procurement
It is not correct to aim at the cheapest

material available. The price should be just
right for the quality, quantity and other
factors involved. The concept of price
can be refined further to include concepts
of Life Cycle Costing or Total Cost of
Ownership or Value for Money to take into
account not only the initial price paid for
an item but also take into consideration
other costs like maintenance costs,
operational costs and disposal costs.
In every procurement, we try to achieve a

right balance on the following five parameters
called the 5 Rs of procurement. The whole process
of procurement is designed to achieve these aims.
iv) Right Time and Place

If we need the material in our factory in
3 months time, it will be costly to get it
too late or too early. We may incur costs in
storing it. Similarly, if the vendor delivers
the material in another city, extra time and
money would be involved in transporting it
to our factory.
v) Right Source
Similarly, the source (or supply) of material
has to be just right for our needs. Buying a
few packets of printer paper directly from a
large manufacturer may not be right. On the
other hand, if our requirements are very
large, buying such items through dealers or
middlemen may also not be right.
i) Right Quality
Procurement aims at the required quality
for the purpose, available in the market,
rather than the best quality, since that may
have adverse cost, technical, maintenance
and operational implications. Therefore,
procurement tries to get just the right
quality that will suit the needs no more
and no less.
1.7
ii) Right Quantity

Similarly, buying large quantities irrespective
of your current needs is as wrong as buying
just the immediately required quantity.
There are extra costs and systemic problems
involved with buying an item too frequently
in small quantities or with buying large
quantities and then storing them for
prolonged use. Hence, the right quantity is
purchased, which balances extra costs
associated with larger and smaller
quantities. There are methods to calculate
such right quantities.
How is Procurement in
Public Sector Different
from that in Private
Sector?
Despite similarities, public procurement,

due to the following seven principles that are
peculiar to it becomes quite different from
procurement in the private sector.
i)
Transparency Principle: Transparency,

fairness, equality, competition and appeal
rights entail the prospective participants
to know and understand the actual means
and processes by which contracts are
awarded and managed. It implies clarity,
5
v)
openness, lack of secretiveness, equal

opportunities, non-discrimination and
absence of arbitrariness in processes
as well as simultaneous and symmetric
availability of information for all likely
participants.
Multiplicity Principle: Public organisations

have to achieve many goals at the same
time besides organisational goals like:
Promoting public trust in governance
Conflicting expectations of the general
public, which the organisation is
supposed to serve (for example,
cheap and at the same time efficient
transportation)
ii) Responsiveness
Principle:
Public
procurement is obliged to be responsive to
the aspirations of its many stakeholders.
For example, the stakeholders are citizens,
taxpayers, electorate, elected officials,
management, procurement officers and so
on. They may have different objectives,
which may well be conflicting.
Support to broader social, policy

and program objectives of the
government (like job and employment
creation, strengthening of local
industry and economic growth)
Affirmative procurement from backward
regions, weaker sections and Small and
Medium Enterprises
iii) Professionalism Principle: Professionalism,

economy, efficiency, effectiveness and
integrity are parts of this principle. These
synergic attributes enjoin upon the public
procurement to do what it promised to do
and to avoid improper, wasteful or corrupt,
fraudulent and collusive practices. It also
means that the methodology adopted for
procurement should be reasonable and
appropriate for the cost and complexity of
the subject matter of procurement.
Facilitating administrative goals of

other departments of government
(ensuring tax or environmental
compliance by participants)
vi) Public Accountability Principle: Public
procurement entities and their officers
must be accountable for all the above
principles to several official bodies in that
country. In the case of India, these are the
Parliament and Parliamentary Committees,
Central Vigilance Commission (CVC), Central
Bureau of Investigation (CBI), Comptroller
and Auditor General of India (C&AG). There
are similar accountability institutions in
other South Asian countries. A public
procurement officer is, therefore, obliged
to operate under intense public scrutiny.
iv) Constitutional Principle: The Constitution

of a country normally has certain
provisions regarding Fundamental Rights
and Public Procurement. Courts have over
a time extended and interpreted these
to circumscribe and confine public
procurement within certain limits. These
are not applicable to procurement by
private sector.
6
vii) Transactional Principle: Because of

public accountability, each individual
procurement
transaction
is
usually
evaluated independently instead of
judging the entire procurement process
over a period, as is done in the private
sector. Thus, in public procurement, the
compliance of rules and procedures assume
predominant importance, unlike in the
private sector. Training of procurement
managers in respective sectors also
reflects this difference in focus.
Remember!
A framework of rules and
regulations, under which
Public Procurement has to
function, becomes the
determining characteristic of
public procurement.
framework at various levels. This framework,

under which Public Procurement has to function,
becomes the determining characteristic of public
procurement.
1.9
Limitations in Public
Procurement
The public procurement framework and its

unique governance characteristics lead to certain
limitations in public procurement, which have to
be kept in view in the context of the framework of
regulations:
1.8
Due to a complex interplay of various

elements of the Framework for Public
Procurement, some of these could be
mutually contradictory or elusive.
The Framework becomes quite extensive

and may become hunting ground for lawyers,
arbitrators, facilitators and intermediaries.
Compliance may become the focus of public

procurement, instead of outcomes thereof.
Since there is not much elbowroom for the

public procurement official to go even
marginally beyond the terms of contract,
every dispute could end up in dispute
resolution forums.
The Need for a Framework

for Public Procurement
There are differences between public

procurement and private sector procurement.
Hence, there arises the need to lay down a
framework consisting of special legislations
(besides the relevant commercial laws of the
country), guidelines, rules and manuals for public
procurement to cover the above-mentioned seven
principles. The rules and regulations within the
framework are cumulative international, national
and local. Public procurement is bound to be
executed within strict limits imposed by such a
7
Despite similarities, public procurement, due
Because of the transactional nature of the

Framework, establishing and engaging in
long-term, strategic relationships with
suppliers in public procurement is difficult,
although the public sector does deal with
some very important long-term investments
(e.g. in infrastructure or industrial
development). This is also contrary to
modern trend in private sector towards
integrated Supply Chain Management (SCM)
and Supplier Relationship Management
(SRM), which enable better value for money.
Recent developments in establishing
strategic procurement adopted by developed
nations like USA and European countries are
in its early stages. However, these point
towards innovations possible in long term
GovernmentSupplier relationships.
REVIEW OF KEYWORDS
CONCEPTS
to seven principles that are peculiar to it,

becomes quite different from procurement in
the private sector
Because
of differences between public

procurement and private sector procurement,
there arises the need to lay down a framework
under which public procurement is conducted
The public procurement framework and its

characteristics also lead to certain limitations
SELF-ASSESSMENT QUESTIONS
AND EXPERIENTIAL EXERCISES
1.
What are the two main areas of strategic

importance of public procurement for a
nation?
2.
Why do we need a framework under which

public procurement is conducted?
3.
Find out and list the categories of external

resources needed by your organisation in
pursuit of its objectives. Classify these into
Goods, Works, Consultancy and Services.
4.
Find out if there has been any disruption in

the activity of your organisation due to
non-availability of such external resources.
What were the consequences?
5.
What is the budget of your organisation for

acquisition of such external resources? What
percentage of it is the total expenditure of
your organisation?
6.
In your familys purchases, do you

consciously or unconsciously use the 5 Rs
of procurement?
7.
What will be your considerations for buying

a new desktop computer (PC) for your
home? Will these considerations be taken
into account when you buy a PC for your
organisation?
8.
Discuss with procurement officials in your

organisation whether they encounter any
limitations in achieving the objectives of
the organisation while making procurements.
9.
If you have friends in the private sector,

discuss with them, in the context of what
you have learnt, the way procurement is
carried out in their organisation.
AND
Procurement is the function that manages

the acquisition of external resources needed
by an organisation in the pursuit of its
objectives
Economical,
efficient
and
quicker
procurement can strategically help an
organisation in the pursuit of its objectives
Public procurement refers to procurement of

external resources needed by the central or
state governments as well as the entities
under their control
Due to the magnitude of the spending

involved, public procurement has the
potential to release large financial resources
by way of economy and efficiency in its
operations, leading to the effective
development for the country
Public procurement policy can be used to

shape a more inclusive national economic
growth
Public procurement is an integral and

important part of the Public Financial
Management System
In every procurement, we try to achieve a

right balance on five parameters (called the
5 Rs of procurement)
8
Unit 2
Management Concepts and Techniques
LEARNING OUTCOMES
Imbibe the essence of management concepts and techniques
related to Right Price in Procurement like Value for Money
(VfM), Value Analysis
Imbibe the essence of Just-In-Time (JIT) that is related to
Right Time and Place and Right Quantity in Procurement
Imbibe the essence of management concepts and techniques
related to Right Quality in Procurement like Total Quality
Management (TQM), Quality Circles, Six Sigma and so on
Acquaint yourself with the essence of Game Theory that is
related to Right Source in Procurement
a disposable non-descript functional pen though

both fulfil the same function and have the same
use value. However, the luxury branded pen, in
addition to the use value, also has additional
esteem value. The third source of value comes
from the price that one can get by exchanging or
scrapping the product at the end of the useful
life of the product. This is called the disposal
value. Normally, when people buy a car, they do
consider the estimated disposal value of different
choices of models. Value is the sum-total of all
the three values.
Management
Concepts and
Techniques Relating
to Right Price
2.1
The Concept of Value
Value is a management and economics

concept. It represents the extent of satiation, of a
hierarchy of needs of a person, by a product
bought for this purpose. This is subjective and
difficult to quantify. This is because different
persons would have different hierarchy of needs
and would perceive different extents of satiation
or value from the same product. There are three
sources of the value of a product. The first source
of value is from the functional usage of the
product (known as use value) and the second
source comes from the status associated with the
ownership of the product (esteem value). This can
be shown as the difference between a luxury
branded gold-plated, diamond encrusted pen and
Three Sources of a Products Value:
9
2.2
service that is not included in the purchase

price. In the case of capital equipment, all
costs associated with operating the
equipment through its life. Examples of
usage costs are inventory, conversion,
wastage, lost productivity, lost sales,
warranty,
installation,
training
and
downtime, among others
Total Cost of Ownership
While the value of a product covers all

components of value over the whole-of-life, the
costs incurred on the product should also take
into consideration total of various elements of
costs incurred over whole-of-life of the product.
For this purpose, future costs are discounted to
present value (not to be confused with the value
we are discussing this is an economic
discounting concept). For example, it would not
be prudent to buy a cheap car, which has very
high cost of operating it. This is called variously
as Whole-of-Life (WOL) or Life-Time-Cost (LCC)
or Total Cost of Ownership (TCO). TCO is a
preferred nomenclature in procurement and
is defined as the total of all costs associated
with a product, service, or capital equipment
that are incurred over its expected life. Typically,
these costs can be broken into four broad
categories:
End-of-life costs. All costs incurred when a

product, service, or capital equipment
reaches the end of its usable life, net of
amounts received from the sale of remaining
product or the equipment (salvage value) as
the case may be. Examples of end-of-life
costs are obsolescence, disposal, clean-up,
and project termination costs
2.3
Value for Money (VfM)
Besides value of a product or service,

customer also has his own notion for value of a
particular sum of money. This is different for
different people or even for the same person in
different circumstances. When the perceived value
of a product matches the perceived value of the
amount of money (cost of the product), the
customer feels he has got the full value for his
money. This is called the value for money. In
procurement, Total Cost of Ownership (TCO) is
taken to evaluate value for money. Given the
limited resources available to the government,
ensuring VfM in procurement is the key to
ensuring the optimum utilisation of scarce
budgetary resources. It usually means buying the
product or service with the lowest whole-life costs
Purchase price. The amount paid to the

supplier for the product, service, or capital
equipment
Acquisition costs. All costs associated with
bringing the product, service, or capital
equipment to the customers location.
Examples of acquisition costs are sourcing,
administration, freight, taxes, and so on
Usage costs. In the case of a product, all
costs associated with converting the
purchased part/material into the finished
product and supporting it through its usable
life. In the case of a service, all costs
associated with the performance of the
10
Remember!
2.4
Value for Money is when the

perceived value of a product
matches the customers
perceived cost of the product.
The customer, thus, feels he has
got full value for his money.
Value Analysis (VA)
Value analysis can be defined as a process

of systematic review that is applied to product
specification. This is to identify and eliminate
product and service features that add little value
to the product, but incur disproportionate cost
to the process of manufacturing or provision of
the service. As such, the VA process is used to
develop a specification, which can improve the
Value for Money of the procurement, especially in
complex equipment, works and services. VA
that is fit for purpose and meets the

specification. Where an alternative is chosen that
does not have the lowest whole-life costs, then
the additional value added benefit must be clear
and justifiable. Assessment of supplier bids should
be conducted only in relation to a published set of
evaluation criteria. These must be relevant to
the subject of the contract, and any added value
that justifies a higher price must flow from
these defined criteria. VfM also incorporates
affordability; clearly, goods or services that are
unaffordable cannot be bought. This should
be addressed as soon as possible within the
process, ideally at the business case stage before
procurement commences. In order to address
this issue, a change in procurement approach,
specification or business strategy may be required.
VfM is often primarily established through the
competitive process. A strong competition from
a vibrant market will generally deliver a VfM
outcome. However, where competition is limited,
or even absent, other routes may have to be used
to establish VfM. These can include benchmarking,
construction of theoretical cost models or shadow
bids by the procurement agency. For major
contracts, this can require considerable financial
expertise and external support. A value for money
assessment, based on the published conditions
for participation and evaluation, may include
consideration of factors such as:
approach when applied in manufacturing Industry

to pre-manufacturing stages such as concept
development, design and prototyping is called
Value Engineering (VE). VA process is carried out
by a team consisting of representatives from
all the departments involved with the
procurement and usage of the product over
its whole-of-life. There are 5 stages of this
process. They are:
Orientation Stage: Formation of team,

selection of the product for VA,
understanding the usage of the product
functions and cost elements
Fitness for purpose
Potential
suppliers
performance history
and
Flexibility (including innovation and

adaptability over the lifecycle of the
procurement)
Functional Analysis Stage: The product is

broken down into its various functions and
these are analysed and ranked in the order
of essentiality and usefulness
Environmental sustainability (such as

energy efficiency and environmental
impact) and
Creative Brainstorming: This is an

interactive and creative process to analyse
various What if alternatives
Analysis and Evaluation: The team assigns

Worth and Costs to various functions of
experience
Total Cost of Ownership
11
the product. Value potential is the difference

between the Worth and Cost of a
function. The team then evaluates whether it
is possible to eliminate or replace completely,
substitute or modify the functions with low
or negative value potentials. A report is
then made giving the recommendations
Definition
Just-in-Time is defined as
an inventory control
philosophy, whose goal is
to maintain just enough
material in just the right
place at just the right time
to make just the right
amount of product.
Implementation: Based on the teams

report, the departments involved in the
usage of the product over its Whole-ofLife, take a final call on the recommendations
of the VA Team
Perhaps most important, JIT purchasing does not

mean pushing inventory back to the supplier. JIT
purchasing requires cooperation, coordination,
and information sharing to eliminate inventory
across the supply chain.
Management
Concepts and
Techniques Relating
to Right Time and
Place and Right
Quantity
The essence of JIT is to have:
Manufacturing smallest quantity of product

in one lot
Single source in a close geographical area,

stay with the same suppliers no annual
re-bidding
Suppliers evaluated on ability to provide

high quality products
Just-In-Time (JIT)
Fully specified essential product characteristics only
Just-In-Time has been defined as an

inventory control philosophy, whose goal is to
maintain just enough material in just the right
place, at just the right time to make just the right
amount of product. The essence of JIT purchasing
is to purchase materials and be just-in-time for
consumption. JIT has been successfully used in
the manufacturing sector (Automobile mass
production in particular) to achieve low inventory
carrying costs, higher quality, fast response to
engineering changes, administrative efficiency and
better productivity. However, JIT is not
only an inventory policy, not even a
series of techniques, but also an
operating philosophy. JIT purchasing
also requires permanent changes in
how a firm conducts business. It is
not a one-time effort or a project
but rather a continuous improvement
process. A true JIT purchasing system
requires
cultural
and
personnel
mind-set changes on the part of
the purchaser and the supplier.
Less formal system reduced paperwork
Vendor certification of quality receiving

inspections eliminated
Frequent deliveries in small lot-sizes
2.5
By the very nature of the long-term

preferential tie-ups with a small number of
vendors in JIT, it is difficult to implement in
public procurement, except in rare situations like
proprietary products and 'cold chain operations
of vaccines' and so on.
12
One of the most well-known techniques

used is the PlanDoStudyAct Cycle. The
plandostudyact (PDSA) cycle describes the
activities a company needs to perform in order
to incorporate continuous improvement in its
operation. This cycle is also referred to as the
Shewhart Cycle or the Deming Wheel. The circular
nature of this cycle shows that continuous
improvement is a never-ending process.
Management
Concepts and
Techniques Relating
to Right Quality
2.6
Total Quality
Management (TQM)
Quality is the ability of product or service to

satisfy customers expectations. Total Quality
Management (TQM) is the optimisation and
integration of all the functions and processes of a
business, through a process of continuous
improvement, with an aim to provide total
satisfaction to customers. Its main difference from
other quality assurance systems is its focus on
the customer satisfaction. The seven features of
TQM are:
Customer focus: Goal is to identify and

meet customer needs
Continuous improvement: A philosophy of

never-ending improvement
Employee empowerment: Employees are

expected to seek out, identify and correct
quality problems
Use of quality tools: Ongoing employee

training in the use of quality tools
Product design: Products need to be

designed to meet customer expectations
Process management: Quality should be

built into the process; sources of quality
problems should be identified and corrected
Managing
supplier
quality:
Quality
concepts must extend to a companys
suppliers
Plan: The first step in the PDSA cycle is

to plan. Managers must evaluate the current
process and make plans based on any problems
they find. They need to document all current
procedures, collect data, and identify problems.
This information should then be studied and used
to develop a plan for improvement as well as
specific measures to evaluate performance.
Do: The next step in the cycle is
implementing the plan (do). During the
implementation
process,
managers
should
document all changes made and collect data for
evaluation.
Seven Features of TQM

Customer focus
Study: The third step is to study the data

collected in the previous phase. The data are
evaluated to check whether the plan is achieving
the goals established in the plan phase.
Continuous improvement
Employee empowerment
Use of quality tools
Act: The last phase of the cycle is to act

based on the results of the first three phases. The
best way to accomplish this is to communicate
Product design
Process management
Managing supplier quality
13
the results to other members in the company.

Then, implement the new procedure if it has
been successful. This is a cycle; the next step is to
plan again.
Remember!
To achieve Six Sigma, a
process must not produce
more than 3.4 defects per
million opportunities for
non-conformance.
Team Approach: TQM stresses that quality

is an organisational effort. To facilitate the
solving of quality problems, great emphasis is
given to teamwork. Using techniques, such as
brainstorming, discussion, and quality control
tools, teams work regularly to correct problems.
One of the most common types of teams is the
quality circle, a team of volunteer production
employees and their supervisors whose purpose is
to solve quality problems.
2.7
acronyms DMAIC and DMADV. DMAIC stands for

Define, Measure, Analyse, Improve and Control.
The aim of this method is to improve existing
processes, which have not come up to
specification in respect of quality. The other
method, DMADV, stands for Define, Measure,
Analyse, Design and Verify and is an improvement
system, which focuses on new processes or
products. This method can also be applied if an
existing process or product needs more than
just small improvements. Both these Six Sigma
methods are carried out by executives who have
attained certification in the use of Six Sigma.
There are various levels of such certification
starting from 'Green Belt' to 'Black Belt' and finally
'Master Black Belt'.
Six Sigma (6 )
Six Sigma (6 ) is the application of a

statistical methodology to business processes.
Its aim is to improve effectiveness in value
and productivity, thereby raising profitability.
Sigma ( ) is a letter in the Greek alphabet
that is used to indicate standard deviation1. To
achieve Six Sigma, a process must not produce
more than 3.4 defects per million opportunities
for non-conformance. A defect is defined as
everything that is outside customer specification.
Like many popular initiatives, Six Sigma has
blossomed into a whole culture of strategies, tools
and statistical methods to improve operating
profit. It goes further than merely reducing
defects. It stresses improvements to business
processes in general, including reduction in costs,
shorter cycle times, greater customer satisfaction
and other important metrics. An essential goal of
Six Sigma is to eliminate any suggestion of the
waste often to be found in organisational
processes. Six Sigma involves the application of
two subsidiary initiatives, which go by the
A measure of the variations in a set of data from its mean. The more spread apart the data from the mean, the higher the
deviation. Standard deviation is calculated as the square root of such variances.
14
Management
Concepts and
Techniques Relating
to Right Source
Game Theory
2.8
Game Theory
Game Theory deals with any
problem in which each
players strategy depends on
what the other players do. An
optimal strategy is a sequence
of moves that results in the
best outcome.
These situations call for strategic thinking

making use of available information to devise the
best plan to achieve ones objectives. Everyone is
familiar with assessing costs and benefits in order
to make informed decisions between several
options. Game theory simply extends this concept
to interdependent decisions, in which the options
being evaluated are functions of other players
likely choices. The appropriate techniques for
analysing
interdependent
decisions
differ
significantly from those for individual decisions.
To begin with, despite the rubric game, the
objective is not to win. Even for strictly
competitive games, the goal is simply to identify
ones optimal strategy. Using this methodology,
whether or not we end up ahead of another player
will be of no consequence. Our only concern will
be whether we have used our optimal strategy. In
gaming, players actions are referred to as moves.
The role of analysis is to identify the sequence of
moves that one should use. A sequence of moves
is called a strategy. So, an optimal strategy is a
sequence of moves that results in the best
outcome. It does not have to be unique. More
than one strategy could result in outcomes
that had equal payoffs, and they would all be
optimal, as long as no other strategy could result
in a higher payoff. There are two fundamental
types of games; sequential and simultaneous.
Theories of Competition:
Game Theory
Game theory is the formal study of conflict

and cooperation. The concepts of game theory
provide a language to formulate structure, analyse,
and understand strategic scenarios. Game theory is
the branch of decision theory concerned with
interdependent decisions. The problems of interest
involve multiple participants (may be individuals,
groups, firms or combinations of these). Each of
them has individual objectives related to a
common system or shared resources. Game theory
arose from the analysis of competitive scenarios.
Hence, the problems are called games and the
participants are called players. However, these
techniques apply to more than just sport, and are
not even limited to competitive situations. In
short, game theory deals with any problem in
which each players strategy depends on what
the other players do. Situations involving
interdependent decisions arise frequently, in all
walks of life. A few examples in which game
theory could come in handy include:
Businesses competing in a market say in a

procurement tender
Diplomats negotiating a treaty
Gamblers betting in a card game
15
In sequential games, the players make alternate

moves (as in an auction). In simultaneous games,
the players can act at the same time (like bidders
submitting bids in a bidiing process). These types
are distinguished because they require different
analytical approaches.
Game theory is exciting because although
the principles are simple, the applications are
far-reaching.
Interdependent
decisions
are
everywhere, potentially including almost any
endeavour in which self-interested agents
cooperate and/or compete. Game theory can be
used to design credible commitments, threats,
or promises, or to assess propositions and
statements offered by others.
Application of Game theory to public
procurement indicates that for commonly available
and bought items, to obtain VfM, exactly similar
(symmetric) information should be available to as
many prospective bidders as possible. Thus,
transparency and open tendering are based on
sound theoretical foundations.
16
REVIEW OF KEYWORDS
CONCEPTS
It stresses improvements to business

processes in general, including reduction in
costs, shorter cycle times, greater customer
satisfaction and other important metrics
AND
Game theory is the branch of decision theory
Value is a management and economics
concerned with interdependent decisions

involving multiple participants, each of
whom has individual objectives related to
a common system or shared resources.
Game theory deals with any problem (like
tenders in public procurement) in which each
players strategy depends on what the other
players do
concept, which represents the extent of

satiation of a hierarchy of needs of a person,
by a product bought for this purpose
Total Cost of Ownership (TCO) takes into

consideration the sum total of various
elements of costs incurred over the whole-oflife of the product. For this purpose, future
costs are discounted to present worth
Value for Money is said to be obtained when

the Perceived Value of a Product matches the
Perceived Value of the Amount of Money
(Cost of the product), and the customer feels
he has got the full value for his money
Value Analysis (VA) can be defined as a

process of systematic review that is applied
to product specification. This is to identify
and eliminate product and service features
that add little value to the product, but incur
disproportionate cost to the process of
manufacturing or provision of the service. VA
approach, when applied in manufacturing
industry to pre-manufacturing stages, such
as concept development, design and
prototyping is called Value Engineering
(VE)
Just-in-Time
is an inventory control
philosophy, whose goal is to maintain just
enough material in just the right place at
just the right time to make just the right
amount of product. The essence of JIT
purchasing is to purchase materials that are
just-in-time for consumption
1.
What are the different types of values

perceived in buying a car? How does such
concept of value make a difference in
your selection when you buy a car for your
family or your field office?
2.
If you or your friend has replaced your old

car (or computer) with a new one, make a
rough conceptual estimate of the Total Cost
of Ownership (TCO) of the replaced equipment.
3.
Does open competitive process always

ensure VfM? Under what conditions does it
not ensure VfM? What can be done to
obtain VfM in such adverse situations?
4.
In procurement of helicopters for Defence

Ministry, in your view, what can be done to
obtain value for money?
5.
Join with your friends and as a team do a

rough Value Analyses (VA) of the features
of the Smartphone you have. What are the
features that can be removed to improve its
VfM?
6.
What can be the dangers and risks in

implementing Just in Time? Why would it
be difficult to implement JIT in public
procurement?
7.
Study the material on TQM and Six Sigma

thoroughly. Are the two techniques same
but packaged differently? What are the
fundamental differences that set them
apart?
Total Quality Management (TQM) is the

optimisation and integration of all the
functions and processes of a business,
through
a
process
of
continuous
improvement, with an aim to provide total
satisfaction to customers
Six Sigma (6 ) is the application of a

structured,
data-driven
statistical
methodology to business processes. Its aim
is to improve effectiveness in value and
productivity, thereby raising profitability.
17
8.
A simple game called Prisoners Dilemma

illustrates theoretical importance of Games
Theory. The game is briefly discussed below.
Play it as many times as you like with
different participants and statistically
analyse and rationalise the result.
on the principal charge. They plan to

sentence both to a year in prison on a
lesser charge. Simultaneously, the police
offer both prisoners a bargain. If one of the
prisoners testifies against his partner,
he will go free while the partner will get
three years in prison on the main charge.
However, if both prisoners testify against
each other, both will be sentenced to two
years in jail. Let the game be played by two
persons (prisoners) with a third one as a
referee (police officer).
Two members of the same criminal gang

are arrested and imprisoned. Each prisoner
is in solitary confinement with no means of
speaking to or exchanging messages with
the other. The police admit that they do not
have enough evidence to convict the pair
18
MODULE 4
Public Procurement
Operations
19
Public Procurement Operations
Unit 1
Planning for Procurement
LEARNING OUTCOMES
Describe the process of need assessment of requirement
Describe the various types of specifications
Describe the process of procurement planning
Describe the ABC categorisation of requirements
1.1
1.2
Introduction to
Procurement Operations
Planning for
Procurement
Procurement operations and planning of

procurement have the same relationship as that
exists between a building and its foundations.
Planning for procurement has, therefore, great
leverage in procurement operations. Amount of
time and effort invested here would save multiple
amounts of time and effort in subsequent
procurement operations. It may well decide
Procurement operations in public procurement

can be studied by dividing it into following steps:
a) Planning for Procurement
b) Preparing Bid Documents
c) Publication, Receipt and Opening of Bids
d) Evaluation of Bids and
e) Award of Contract
20
success or failure of the entire procurement

operations. It consists of following steps:
iii) Compatibility and inter-operability with

existing infrastructure or systems.
a) Need Assessment
b) Developing Specifications
iv) Estimation of costs including BOQ (Bill of

Quantities) in case of works.
c) Developing Procurement Plans
v)
1.3
vi) Description of the requirement for the

selected solution.
Need Assessment
vii) Time-schedule and place of product/work/

service delivery.
Procurements are initiated based on an

indent (Requisition in case of goods or
procurement proposal in case of services or
detailed project report in case of works) from the
user department. Need assessment is the process
by which, details of requirement are assessed
before such an indent is prepared. It is an
important process to ensure economy in quantity
(or scope in services); Technical requirement
(or terms of reference in services) and timeliness
in procurement. Records of the basis of decisions
and approvals in need assessment should be
maintained
to
ensure
transparency
and
accountability. As is evident from list of issues
given below there is equal involvement of
commercial and technical aspects. Hence, it is
important to involve procurement and finance
functions in the need assessment.
viii) Sustainability criteria and legal requirements

of environment or pollution control and
clearances from local authorities, if
required, and
ix) Obtaining technical, administrative and
budgetary sanctions.
1.4
Expression of need and methods of

satisfying the needs. In works, this may
involve surveys and soil investigations.
ii)
Techno-economic evaluation of various

alternative methods of satisfaction of the
need and selection of a particular solution.
Developing
Specifications
Specifications are the detailed qualitative

requirements of procurement. In case of goods,
they should indicate the material composition,
physical,
dimensional
and
performance
parameters, tolerances if any, manufacturing
process wherever applicable, test schedule,
preservation and packing, among others. In case
of works, the specifications give materials to be
used (and their specification, tests, storage),
method of executing the work (methods and
records of measurements, acceptance tests,
any temporary work involved) and schedule of
rates as applicable. In case of services, instead of
specifications, the qualitative requirements are
During needs assessment, the following

issues are decided:
i)
Budgetary provisions and availability of

funds.
21
normally not available with the buyer and

firms certificate of quality is accepted.
However,
essential
technical
and
performance characteristics required for
inspection should be made available.
Attention!
Specifications for
procurement should be so
developed that
they provide a level-playing
field to all prospective
bidders.
Using brand or trade names (along with

model number, if required) gives sufficient
information for procurement. Quality of the
branded product is generally reliable.
Procurement of branded product cannot
ensure value-for-money and Maximum Retail
Price (MRP) or Manufacturers Price List,
often
includes
heavy
margins
for
wholesalers and retailers. In public
procurement, specification by brand name is
not allowed. However, if it is inescapable
then specification of Brand Name with or
equivalent has to be included. Unless the
alternatives in the market are nearly
equivalent and comparable, the stipulation
of or Equivalent leads to intractable
complications at the evaluation stage of the
tender. This is appropriate for commonly
used items where quality is more important
than cost or where it is not possible to
make technical or performance specification
like furniture or items of personal use,
etc. In a proprietary procurement, use of
brand name is permissible.
specified in Terms of Reference (TOR) and

Schedule of Work (SOW). This stage has the
greatest
impact
on
value-for-money
in
procurement. A specification should provide a
level playing field for all prospective bidders.
It should:
i)
Meet the essential needs
ii)
Be objective, functional, generic and

measurable
iii) Set out required technical, qualitative and

performance characteristics
iv) Provide a level playing field
v)
Normally, be based on respective National

Standards (Bureau of Indian Standards,
Bangladesh Standards and Bangladesh
Standards and Testing Institution; Pakistan
Standards and Quality Control Authority;
Sri Lanka Standards Institution; Standards,
Productivity and Innovation Board
Singapore) or in special cases on
International Standards (International
Standards Organisation: ISO)
Types of Specifications: There are different

types of specifications. They are:
i)
Proprietary Specifications
ii)
Brand or Trade Names
iv) Tailored Performance Specifications

External Technical
Standards and
and
Performance
vi) Specifications Involving Sample
Tailored Technical Specifications

Tailored technical specifications give a
lot of detail on how to achieve what is
required. Tailored technical specifications
limit the ability of the supplier to offer
more cost-effective solutions and put the
bulk of the performance risk on the buyer.
Tailored
technical
specification
is
appropriate when the buying organisation
has design expertise that the suppliers do
not have and the procurement is of high
value and of critical and complex nature
(the commercially available products do
not meet the requirements even with
minor changes) to justify the effort of
development. The tailored specification can
be used to verify that the supplies meet all
the
requirements.
Tailored
technical
iii) Tailored Technical Specifications

v)
Brand or Trade Names
Proprietary Specifications
Patents or Intellectual Property Rights to
some specifications are owned by only one
organisation (Proprietary Firm). These are
available only with the proprietary firm and
are protected by the intellectual property
rights. Hence, proprietary specifications are
22
measuring whether the desired performance

has been achieved. The buyer requires less
effort in developing specifications. However,
this is matched by increased complexity of
evaluation of bids in procurement, especially
where the supplier is using technology with
which the buyer is unfamiliar.
Remember!
In public procurement, over
specifying, or specifying
something that will greatly
restrict competition, is a
common problem that often
attracts criticism.
A performance specification can include:

i) What is to be performed and the
required levels of outputs
specification may require the supplier

to design a tailor-made product. This can
lead to restricted competition and add
significant cost and time. Over-specifying
or specifying something that will greatly
restrict competition is a common problem
that attracts criticism.
ii) Operational and maintenance performance

iii) The maximum costs associated with
attaining the required levels of output
iv) Rules for measuring performance
Tailored Performance Specifications

Performance specifications might describe
only the essential performance requirements,
and leave the supplier to establish the best
way to achieve them. This widens the
competition. Suppliers can use their full
expertise and innovation to develop the
optimum solution, i.e. value-for-money. In
this case, the supplier carries the bulk of
performance risk. These specifications may
be appropriate where suppliers possess
greater design or functional expertise than the
buying organisation, or where technology is
changing rapidly in the supplying industry
or where innovation is important. Since
they rely heavily on suppliers capability,
it is particularly important to pre-qualify
suppliers
when
using
performance
specifications. It is also important to
communicate how the bids will be
evaluated, and the criteria to be used for
External Technical
Standards
and
Performance
Widely recognised standards exist for many

common products, services, processes,
safety requirements and so on. Standards
enable buyers and sellers to speak the
same language, using common parameters,
terminology and/or symbols. Standards also
offer value-for-money and better lead times
in an atmosphere of wide competition and
standardisation of production. There is
less effort required in developing the
specifications for evaluation of bids. Such
specifications should be the first choice if
these meet the requirements adequately.
There are a number of different categories
and sources of standards. Some of them are:
i) Industry standards:
Respective national standards: (Bureau
of Indian Standards, Bangladesh
Standards and Bangladesh Standards
23
and Testing Institution; Pakistan

Standards and Quality Control Authority;
Sri Lanka Standards Institution;
Standards, Productivity and Innovation
Board Singapore)
indeterminable characteristics, which final

supplies from successful bidder(s) will have
to meet in addition to meeting the
specifications or drawings. In the tender
enquiry, the methodology and tests that
will be done should be made clear for
ensuring compliance of supplies (and preproduction sample, if indicated) with the
purchasers sample. Such purchasers
samples would also have to be later
provided to successful bidders for guidance.
If required, in addition to or instead of
purchasers sample, provision for submission
of a pre-production sample to the inspection
agency/user by successful bidder(s) may be
stipulated for indeterminable characteristics,
before giving clearance for bulk production
of the supply.
ii) International standards: These are

established by institutions, such as
the International Organisation for
Standardisation (ISO), European Union
Directives
Specifications Involving Sample

In public procurement of goods, normally,
purchase is to be done as per drawing/
standard/specification, etc. and purchase
as per sample is discouraged. In certain
national or international standards, there
may be built in sample clause. Usually,
such clauses are stipulated to illustrate
indeterminable characteristics such as
shade/tone, size, make-up, feel, finish and
workmanship, etc. In some specifications,
there may not be a sample clause but such
indeterminable characteristics may not be
specified and may be left to be agreed
between seller and buyer. In either case,
supply is to be in conformity with an agreed
sample in such respects only, whereas for
the remaining characteristics the supplies
must be in conformity with the laid down
standard. In such cases also, calling for
sample along with tender and deciding the
tender on basis of evaluation of sample may
NOT be done. If desired, a purchasers sample
may be put on display for prospective
tenderers, indicating the example of desired
1.5
Developing Procurement
Plans
Advance procurement planning is necessary

so that appropriate procurement strategies can
be developed to achieve the larger goals of
procurement. These procurement strategies cannot
be built in ad-hoc and emergency procurements.
Procurement plans facilitate a structured and
considered approach to the management of
procurement activities. Procurement plans must
be undertaken at both the organisational level
and for vital category individual procurement
projects or aggregated vital categories of
expenditure. Procurement plans should have
interface
with
budgetary
allocations.
Procurement plans should include the following
activities:
i)
Deciding the agency for procurement
Points to Ponder
Advance procurement planning
is essential for evolving
appropriate procurement
strategies to achieve the larger
goals of procurement.
Procurement plans should also
have an interface with
budgetary allocations.
24
ii)
The scope or quantity of the subject

matter of procurement, if determined;
iii)
In the interest of efficiency, economy and

timely completion of supply (but not to
limit competition among bidders) decide
appropriate packages of the requirement;
In a similar manner, procurement agencies

should also develop individual procurement
plans for vital category of procurements and
for common-use-items, since these have
significant impact on the goals of Public
Procurement.
iv) Limitation on participation of bidders as

per the Governments Purchase Policy
regarding preference to certain sections of
industry, if any;
v)
Individual Vital Category Procurement

Plans
The method of procurement to be followed

suitability for e-Procurement or Reverse
Auction; Framework Contracting;
vi) Need for pre-qualification, if any;

vii) Deciding on the mode of procurement and
viii) Review of the procurement
pre-defined intervals
plan
at
Organisational Procurement Plans

Every procurement agency must prepare
an
organisational
procurement
plan
sufficiently before start of the budgetary
year. Organisational procurement plans
set out:
i)
Procurement objectives
ii)
Finalisation of annual requirements
The first step in procurement planning is

the finalisation of the annual requirements.
Annual requirement is finalised at the
beginning of the year considering the
following parameters:
iii) Identification of common use items

for collaborative purchasing
iv) The procurement profile of the
procurement agency including specific
vital category procurements
v)
Finalisation of Annual Requirements
i) Performance target of the organisation

ii) Demand forecasting based on historical
data, estimation of requirement based
on new projects and current stock and
order levels
Procurement systems, processes and

practices, including management
and resources available for the
procurement operations
iii) Consolidation of requirements raised by

all user departments
vi) Procurement strategies that will

achieve the stated procurement
objectives (Skills development of
officers in procurement chain and
improvement of capability and
maturity of procurement organisation)
vii) Deciding how the procurement can
fulfil the social or development
objectives of Procurement Policy
viii) Procurement measures, targets and
annual comparisons against targets
25
Review of the Procurement Plan

A mid-year review of the annual
procurement plan should be undertaken. In
this review, the quantities procured should
be compared to the actual consumption
during the period. Procurement department
should send the consumption data for the
last six months to the user departments
asking them to re-look at the proposed
requirement for the next six months.
This modified demand is then sent back
to the purchase department. Necessary
adjustments in contract execution may be
made based on modified requirements plan
furnished by user departments. Advancing
and postponement of delivery period, if
called for, may be negotiated with the
vendors, without levy of Liquidated
Damages. If review so indicates, quantity
option clause may also be exercised.
items that are 20% of total items but

account for 80% of total value, and
B
Category
Items
inventory/
procurement will typically contain
account for next 15% (81% - 95%) of
total value, and
1. Deciding on Mode of Procurement

After finalisation of procurement plan,
the mode of procurement for goods/
services should be decided. Any one of
the modes of procurement may be used
depending on the nature and expected
value of procurement of the item and/
or type of requirement.
C
Category
Items
inventory/
account for next 5% (96% - 100%) of
total value.
Normally buffer levels, permitted inventory
levels and types/modes of procurement are
decided based on such categorisation. A
one-time exercise may be done for common
items by procurement department and for
local items by the units concerned to
categorise items in such categories.
REVIEW OF KEYWORDS
CONCEPTS
2. ABC Categories of Requirements

Pareto Principle
The Pareto Principle (also known as
the 80-20 rule) states that, for
inventory/procurement, roughly 80%
of the value of inventory/ procurement
comes from 20% of the items stocked/
purchased. Based on this, items are
normally classified into A, B and C
categories as follows:
AND
Need Assessment: The first step in the

procurement operation is to identify and
fully define the need in relation to the
activity. Poor identification of needs may
lead to assets being procured, which do not
fully meet the need of the procurement
agency. This may incur wastage of time, effort
and cost. Or, they may be inefficiencies,
leading to sub-optimal assets being procured.
A
Category
Items
inventory/
26
total items but account for 80% of total

value; B category items constitute 30% of
total items but account for the next 15% of
total value and C category items are 50%
of total items but account for next 5% of
total value.
Having fully defined the requirements, all

options for satisfying that need are carefully
evaluated before finalising the indent
Specifications:
Specifications are the

detailed qualitative requirements of the item
being procured. These indicate various details
like the material composition, physical,
dimensional, performance parameters and
so on
Tailored Technical Specification: Tailored

technical specification gives a lot of detail
on how to achieve what is required. It
requires the supplier to design a tailor-made
product
1.
Tailored Performance Specification: In this
a) Construction of a bridge over a major

river near a provincial capital?
type of specification, only the essential

performance requirements are described. It is
up to the supplier to establish the best way
to achieve them
b) Procurement of an aircraft for the

national airlines?
c)
Industry Standards: These are the generally

accepted requirements
members of an industry
followed
by
What are the likely issues that could be

examined during the Need Analysis of:
the
Consultancy for assessing the impact

of HIV/Aids Program of the Government?
d) Hiring service for security arrangement

in a factory?
National Standards: Standards laid down in

respective countries by Bureau of Indian
Standards, Bangladesh Standards and
Bangladesh
Standards
and
Testing
Institution; Pakistan Standards and Quality
Control Authority; Sri Lanka Standards
Institution; Standards, Productivity and
Innovation Board Singapore
2.
What is the purpose of having a

specification in procurement? What are the
pros and cons of different types of
specifications?
3.
List the various categories of expenditure

in a normal household like yours
(Entertainment; eating out; groceries,
telephone and TV dish; car and transport;
vacations; childrens education; clothing;
house rent; miscellaneous and so on).
Estimate the quantum of expenditure in
each category and total these. Identify A
category expenditures as per the Pareto
Principle. (To do this, list the categories in
the order of quantum of expenditures from
highest to the lowest. Add a column on the
right showing cumulative expenditure from
top till that item as percentage of total
expenditure. Draw a line when cumulative
expenditure reaches 80% of the total. Items
above this line are A category. What are A
category expenditures? Is miscellaneous
expenditure among these?
4.
Study the system of procurement planning

in your organisation and compare it with
the one given in this chapter.
International
Organisation
for
Standardisation (ISO): The International
Organisation for Standardisation, known as
ISO, is an international standard-setting
body composed of representatives from
various bodies of national standards
ABC Categorisation of Items to be

Procured
(Pareto
Principle):
In
procurement activity, Pareto Principle that is,
80-20 rule) is applied for categorisation of
inventory/procurement into three categories
as A Category Items, B Category Items,
and C Category Items)
The Pareto Principle states that 20%
contribute to 80% of achievement/value/cost
and so on.
In procurement activity, A category items
are those items, which are only 20% of the
27
Unit 2
Bidding and Evaluation
LEARNING OUTCOMES
Describe and prepare bid documents
Describe the process of receiving and opening of bids
Describe the process of bid evaluation
Describe the process of negotiations
Describe the process of award of contract
RFP Request for Proposal: Bid floated to

target suppliers like after the RFI or RFQ
Preparing Bid
Documents
2.2
2.1
Introduction
Standard Bidding
Documents (SBD)
The standard bidding documents

grouped broadly under different sections.
Bid documents are prepared to provide clear

technical and commercial terms of reference for
the proposed procurement, based on the standard
bid documents of the organisation. Terminology for
bidding documents in the USA and international
procurement like RFI, RFP and RFQ has nowadays
become prevalent even in indigenous procurement.
Common usage is as follows:
are
Here are the invariable parts of the

Standard Bid Documents that are to be normally
included unchanged:
i) General Instructions to Tenderers (GIT)
ii) General Conditions of Contract (GCC)
iii) Bid Form (Bid Cover Letter)
RFI Request for Information: (Expression of

Interest - EOI Bid): An open enquiry that
scans the market seeking broad data and
understanding
iv) Price Schedule

v) Bank Guarantee Form for EMD
vi) Bank Guarantee
Security
RFQ Request for Qualification (like PQB):

An opportunity for potential suppliers to get
pre-qualified/ short listed for subsequent
procurement bid. Lays down precise
qualification criteria for short listing of
vendors, to whom RFP would be issued
Form
for
Performance
Formats to be Filled by the Bidder:

Here are the parts of the Standard Bid
Documents, which are to be framed keeping in
mind the special requirements of the procurement.
28
submitting and opening the bids. It also

states the qualification criteria. Any
changes warranted by special circumstances
are to be indicated in the Special
Instructions to Tenderers (SIT). In
procurement of services, such changes from
GIT are brought out in Bid Data Sheet (BDS)
instead of the SIT. It is also indicated in
the SBD that the provisions in the SIT
would
supersede
the
corresponding
provisions in the GIT.
Mandatory!
Bid Documents should be
framed keeping in mind the
special requirements of the
procurement, taking care that
instructions/directives
contained in the Procurement
Policy are not violated and
approval of the Competitive
Authority is taken.
Care must be taken that instructions/directives

contained in the Procurement Policy are not
violated and approval of the competent authority
must be taken. The parts of the Standard Bid
Documents are:
The General conditions of contract (GCC) are

general and should be used unchanged with
all types of contracts. Special conditions of
Contract (SCC) of contract may be included
in the tender documents, depending upon
the need, and with the prior approval of
competent authority. It is also indicated in
the SBD that the provisions in the SCC will
supersede the corresponding provisions in
the GCC.
i) Bid Notice/Notice Inviting Tender (NIT)

ii) Special Instructions to Tenderers (SIT)
iii) Special Conditions of Contract (SCC)
iv) List of Requirements
v) Technical Specifications and Quality Control
Requirements
vi) Qualification/Eligibility Criteria

Some broad guidelines for preparing the bid
document are provided in the subsequent
paragraphs.
Bid Notice/Notice Inviting Tender (NIT)
General and Special

Bidders (GIT and SIT)
Instructions
Bid Validity
The minimum period for which the bid
should remain valid for acceptance is
specified in the bid documents. It could
be for example 90 days in case of single
bid tender system and 120 days in case of
two-bid system from the date of submission
of offer. A bid valid for shorter period
can be rejected, as being non-responsive.
In exceptional circumstances, the consent
of the bidder may be requested, in writing
for an extension to the period of bid
validity. The bid security provided should
also be suitably extended. A bidder
accepting the request and granting
extension should not be permitted to
modify his bid.
This model should be used for publishing

the bid notice. The invitation for bids
specifies the minimum acceptable functional,
technical and contractual requirements, and
the evaluation criteria governing the award
of a contract. NIT should be brief but
should contain sufficient details for a
prospective bidder to decide whether to
participate in the bid or not; and if he
decides to participate how to go about
that.
Qualification/Eligibility Criteria
Qualification or eligibility criteria should be
stipulated in the bid documents. The bidder
has to ensure that he provides convincing
proof of having fulfilled these criteria.
vii) Contract Form
Conditions of the Contract (GCC and SCC)
to
The General Instructions to Tenderers (GIT)

contain all the relevant information as well
as guidance to the prospective bidders for
preparation and submission of a responsive
bid. The GIT clearly states the payment
terms, date, time and venue for obtaining,
Agents of Supplier
One agent cannot represent two suppliers
or quote on their behalf in a particular
bid enquiry. One manufacturer can also
29
authorise only one agent/dealer. There can

be only one bid from:
Remember!
The principal manufacturer directly or

through one agent on his behalf
The foreign principal or any of its

branch/division
Earnest Money Deposit (EMD)

must be obtained from all the
bidders to safeguard against a
bidder withdrawing/altering
the bid.
An agent on behalf of only one principal
EMD could be in:

Account Payee Demand
Draft
2.3
Securities to be
Submitted by Bidders
Fixed Deposit Receipt

Bankers Cheque
Securities to be filled in by the bidders are:
Earnest Money Deposit (EMD)
Forfeiture of Earnest Money Deposit

EMD of a bidder should be forfeited, if the
bidder withdraws or amends its bid or
impairs or derogates from the bid in any
respect within the period of validity of its
bid. Further, if the successful bidder fails to
furnish the required performance security
within the specified period, its EMD should
be forfeited.
Earnest Money Deposit (EMD) is also known

as Bid Security. To safeguard against a
bidders withdrawing or altering their bid
during the bid validity period in the case of
advertised or limited bid enquiry, EMD
should be obtained from all the bidders
along with their bids.
The amount of EMD could be for example
be 2% of the estimated value of the goods
to be purchased for bids of smaller value
and 1% for the bid of larger value.
Refund of Earnest Money Deposit

EMD furnished by all unsuccessful bidders
should be returned to them without any
interest whatsoever, at the earliest after
expiry of the final bid validity period (say
within 30 days after conclusion of the
contract). EMD of the successful bidder
should be returned after receipt of performance
security from it as called for in the contract.
The bidders who are currently registered

and, also, would continue to remain
registered during the bid validity period
with procurement organisation or central
procurement agency may be exempted from
payment of earnest money. In case the
bidder falls in these categories, it should
furnish certified copy of its valid
registration details.
In case of separate PQB bid before floating

procurement bids, EMD may be taken only
once from the successful bidders and EMD
may not be asked from them in the
procurement bid again. The EMD clause in
PQB bid should cover this aspect.
Performance Security
To ensure due performance of the contract,
Performance
Security
(also
called
Performance Bank Guarantee PBG or
Security Deposit SD) should be obtained
from the successful bidder who has been
awarded the contract irrespective of its
registration status. Bank guarantee must be
verified from the issuing bank. Performance
security should be specified as a percentage
of the value of the contract (say 10%).
Performance security may be furnished in
specified form (as account payee demand
draft or bank guarantee from a scheduled
commercial bank in an acceptable form).
The EMD should remain valid for a

specified period beyond the final bid
validity period (say 45 days).
Security should be furnished by a

specified date (generally, 21 days after
notification of the award) and it should
Acceptable forms of earnest money

should be specified for example:
Account Payee Demand Draft
Fixed Deposit Receipt
Bankers Cheque
30
remain valid for a specified period beyond

the date of completion of all contractual
obligations of the contractor (say 60 days),
including warranty obligations. Performance
security should be forfeited and credited to
the organisations account in the event of
a breach of contract by the contractor.
Performance security should be refunded to
the contractor without any interest, after he
duly performs and completes the contract
(say within 60 days of completion of all
obligations).
past or current successful suppliers may also

be drawn, wherever possible.
In limited bidding, direct written enquiries

along with detailed specifications of
requirements should be sent by registered
mail/reliable
courier/other
recorded
method to organisations registered bidders
without open advertisement. To avoid
situations where some of selected prospective
bidders may not receive the bid documents
by post/courier, the bid notice may also be
put up on website with a note that:
This notice is being published only as an
abundant precaution and is not an open
invitation to quote in the Bid. Participation
in this bid is by invitation only and is
limited to the selected organisations
registered bidders for the item, who have
been sent this Bid by post/courier.
Unsolicited offers are liable to be ignored.
Publication, Receipt
and Opening of Bids
2.4
Publication of Bids
Adequate publicity in national newspapers,

organisations website and Central Public
Procurement Portal should be ensured as per the
policy of the organisation.
ICB bids should also be published in

International press at least 6 weeks prior to
the deadline of submission of bids, in
addition to national newspaper(s) of wide
circulation. Copies of the bid enquiry may
be sent to the countrys embassies abroad
as well as the foreign embassies in the
country. The selection of embassies would
depend on the possibility of availability of
the required goods/services in such countries.
Newspaper cuttings in each case should be

collected and kept on record as proof of
publicity, actually achieved as far as
possible. Print out of the bids published in
the website should be kept in the file.
2.5
Clarification of Bidding
Documents
A prospective bidder requiring any

clarification of the bidding documents should
notify to the organisation in writing, well before
the due date of submission of the bids. Response
should be sent in writing to the clarifications
sought prior to the date of opening of the bids.
Copies of the query and clarification notes should
In addition to publication of advertisements, attention of reputed suppliers,

organisations registered vendors and also
31
withdrawn in the interval between the deadline

for submission of bids and expiration of the period
of bid validity specified. Withdrawal of a bid
during this period should result in forfeiture of
bidders bid security (EMD) and other sanctions.
Important Info!
The purchaser, prior to the
date of submission of bids may
modify bid documents by
amendments.
However, these modifications
should be notified in writing
to all prospective bidders.
2.8
If found necessary, where technical

specification is considered to be complex,
technical specification and techno-commercial
conditions of the bid, should be fine-tuned in a
pre-bid conference.
be sent to all prospective bidders who have

received the bidding documents.
2.6
Amendment of Bidding
Documents
2.9
At any time prior to the date of submission

of bids purchaser may, at his own initiative or
in response to a clarification requested by a
prospective bidder, modify bid documents by
amendments. The amendments should be notified
in writing by registered/speed post or by fax/
telex/e-mail, followed by copy of the same by
registered post to all prospective bidders. In
order to afford prospective bidders a reasonable
time to consider the amendment while
preparing their bids, the purchaser may, at
his discretion, extend the deadline for submission
of bids.
2.7
Pre-Bid Conference
Receipt and Custody of

Bids
The following key guidelines should be

followed for receipt and custody of bids:
Receipt and custody of bids should be
done in a transparent manner to maintain
credibility of the process. Purchase department
should maintain a bid box for receiving the
bids to facilitate easy access to bidders.
Separate bid boxes should be provided for each
day of the week of bid opening and should be
sealed by nominated competent authority.
For oversized bids which cannot be
dropped into bid boxes, or in cases where the
bid is required to be submitted by hand, it
should be ensured that the names and
designation of at least two officers are
mentioned in the bid documents. The
information about these officers should also be
displayed at the entrance/reception of the
premises where tenders are to be deposited.
The officials authorised to receive the bid
should provide a receipt signed by them with
date and time to the bearer of the bid. He
should also sign on the cover; duly indicating
the date and time of receipt of the bid(s).
Modification; Alteration
and Withdrawal of Bids
The bidder, after submitting its bid is

permitted to submit alterations/modifications to
its bid so long as such alterations/modifications
are received duly sealed and marked like original
bid, up to the date and time of receipt of bid. Any
amendments or modifications received after the
prescribed date and time of receipt of bids are not
to be considered. The bidder may also withdraw
his bid after submission provided the written
notice of withdrawal is received prior to deadline
prescribed for submission of bids. A withdrawal
notice may be sent by fax but followed by a
signed confirmation copy by post not later than
the deadline for submission of bids. No bid may be
Bids received by courier should be

deposited in bid box until the date and time of
bid opening. The officer who deposits these
bid(s), should sign on the cover, duly indicating
the date and time of receipt of the bid(s).
32
2.10
first page by one of the officials authorised to

open the bids. Each page of the price schedule or
letter attached to it should also be initialled with
date, particularly the prices, delivery period etc.,
which should also be circled and initialled with
date. Discounts and rebates should also be circled,
and in case there is no discount, it should be
written prominently No Discounts. Blank bids,
if any, should be marked accordingly by the bid
opening officials. Amounts and quantities in the
price schedule, mentioned only in figures should
be circled and written in words by the BOC.
Procedures to be followed
during Bid Opening
The Bid Opening Committee (BOC) should

prepare a list of the representatives attending the
bid opening and obtain their signatures on the
same. The list should also contain the
representatives names, the corresponding bidders
names and addresses, and the authority letters
brought by the representatives. BOC members
should also sign the list with date and time.
The Bid Opening Committee should collect
bids from Bid Box at prescheduled time. All the
bids received on time should be opened in the
presence of Bid Opening Committee and the
bidders or their authorised representatives
(who have submitted regular bids) at the
prescribed time, date and place. The authorised
representatives, who intend to attend the bid
opening, are to bring with them letters of
authority from the corresponding bidders. BOC
should ensure the bid envelopes are duly sealed
and untampered. Before opening each bid,
envelope should be held up for all participants, to
see that it is in sealed and untampered condition.
The original (and duplicate, if any) copies

in a bid set are to be marked accordingly by the
bid opening panel.
Ensure all mandatory requirements (for

example: EMD, specific supporting documents and
so on), as specified in the bid-documents, are
fulfilled. However, the Bid Opening Committee
rejects no bid at the bid opening stage.
An on-the-spot report containing the names

of the bidders (serial number wise) salient features
of the bids, as read out during public opening of
bids should be prepared by the bid opening
officers duly signed by them with date and time.
The Bid Opening Committee should

announce the salient features of the bids like
description and specification of the goods, quoted
price, terms of delivery, delivery period, discount
if any, whether EMD was furnished or not and any
other special feature of the bid for the information
of the representatives attending the bid opening.
The bids, which have been opened, the list

of the representatives attending the bid opening
and the on-the spot report are to be handed over
to the nominated purchase officer.
After opening, every bid should be

numbered serially, initialled, and dated on the
In case of samples, which accompany the

bid, proper codification needs to be done on
samples as well.
Alterations/overwriting/use of whitener/
columns left unfilled in bids, if any, made by the
bidders, should be initialled with date and time
and numbered by the officials opening the bids to
make it clear that such alterations were present
on the bids at the time of opening. Wherever any
erasing or cutting is observed, the substituted
words should also be encircled and initialled with
date and time to make clear that such erasing/
striking of the original entry was present on the
bid at the time of opening.
Money documents should be handed over to

representative of Finance Department for safe
custody and monitoring.
Attention!
No bid is rejected by the Bid
Opening Committee at the bid
opening stage.
2.11
A bid received after the

specified date and time for
receipt of bids should be treated
as late bid and ignored.
Late Bids
A bid, which is received after the specified

date and time for receipt of bids should be treated
as late bid and should be ignored.
33
offers have been received) and the terms,

conditions etc. stipulated by the bidders in their
bids. No new condition should be brought in while
evaluating the bids. Similarly, no bid enquiry
condition (specially the significant/essential
ones) should be overlooked while evaluating the
bids. Aim should be to ensure that no bidder gets
undue advantage at the cost of other bidders
and/or at the cost of organisation. The process of
bid evaluation is as follows:
Evaluation of Bids
2.12
Introduction to Bid
Evaluation
In any purchase decision, the core issues to

be decided by the competent authority are
whether the bids meet the essential bid
requirements, prices being charged are reasonable
and the procedures followed are proper, fair and
transparent. This responsibility is not discharged
merely by selection of cheapest offer but must
conform to the following yardsticks of financial
propriety:
Whether the offers have been invited in

accordance with Procurement Policy and are
done after following fair and reasonable
procedures in prevailing circumstances
Whether the authority is satisfied that the

selected offer should adequately meet the
requirement for which it is being procured
Whether the price of the offer is reasonable

and consistent with the quality required
Above all, whether accepted offer is the

most appropriate one taking all relevant
factors into account and keeping with the
standards of financial propriety
2.13
Preliminary Examination
The Bid Opening Committee should forward

all the bids to the member secretary of the
nominated Tender Committee (TC) for further
evaluation. All the bids so received should first be
scrutinised by the TC to see whether the bids
meet the basic requirements as incorporated in
the bid enquiry document and to identify the
unresponsive bids, if any. The bids that do not
meet the basic requirements are to be treated as
unresponsive and ignored. The following are the
important points for which a bid may be declared
as unresponsive and to be ignored, during the
initial scrutiny:
Evaluation of bids is one of the most

significant areas of purchase management. The
entire process of bid evaluation and placement of
contract must be transparent. All the aspects that
are to be taken into account for evaluating the
bids including the method to be adopted for
evaluation of bids and the techniques for
determining the most favourable evaluated
responsive bid for placement of contract are to be
incorporated in the bid enquiry document. These
should be done in a clear and comprehensive
manner without any ambiguity and/or confusing
stipulations therein. This is because the interested
bidders can formulate their competitive offers in a
meaningful manner and participate in the bidding
process with confidence.
The bid is unsigned
The bidder is not

qualification criteria
The bid validity is shorter than the required

period
Required EMD has not been provided
Bidder has not agreed to give the required

performance security
The goods quoted are not meeting the

required specification, etc.
The bidder has quoted for goods

manufactured by a different firm without
Did You Know?

No new condition can be
included while evaluating
the bids. The aim should be
to ensure that no bidder
gets undue advantage at
the cost of other bidders or
at the cost of the
organisation.
All the bids are to be evaluated strictly on

the basis of the terms and conditions incorporated
in the bid enquiry document (based on which
34
eligible
as
per
the required authority letter from the

proposed manufacturer
2.16
Against a schedule in the List of

Requirement (incorporated in the bid
enquiry), the bidder has not quoted for the
entire requirement as specified in that
schedule. (e.g. the bidder fails to quote
installation and commissioning where
required).
From the time of submission of bid to the

time of awarding the contract, if a bidder needs to
contact the Organisation for any reason, relating
to this bid enquiry and/or its bid; it should do so
only in writing.
The bidder has not agreed to essential

condition(s) having significant bearing on
the cost/utility/performance of the required
goods. (E.g., warranty clause, etc.)
2.14
2.17
Minor Discrepancy/
Infirmity/Irregularity/
Non-Conformity
Evaluation of Bids in
Different Systems of
Bids
Two-Stage
Bidding:
Prequalification
Bidding (PQB) is the first stage of a two stage
bidding procedure for selection of competent
qualified bidders by using a Prequalification
Criterion (PQC), prior to the issue of the
Invitations to Tender to pre-qualified bidders
from first stage of bidding for the Procurement in
the second stage of bidding. Evaluation in PQB
stage should be strictly done as per the criteria
prescribed. In case relaxation is considered
necessary, re-tendering may be done. PQC
credentials and data called should be verified
(except in cases where the offer does not meet
the specified PQC criteria, as per credentials
submitted by the Bidder himself). Decision of the
PQB shall be conveyed to the successful as well as
unsuccessful bidders. Reasons for disqualification
of unsuccessful bidder(s) should also be
communicated to them. RFP is only issued to
qualified bidders.
Sometimes, non-conformities/errors between

the quoted prices in figures and that in words;
or discrepancies between the original copy
and the other copies of the same bid set; some
minor informality and/or irregularity and/or nonconformity are also observed. The same should be
taken care of as indicated in the bid document.
Attention!
Evaluation in the
Pre-Qualification Bidding
stage should be strictly done
as per the criteria prescribed.
In case any relaxation is
considered necessary,
retendering may be done.
2.15
Bidders Contacting the

Organisation during
Evaluation
Two-Stage Bidding
Clarification of Bids
During evaluation and comparison of bids,

purchaser may, at its discretion ask the bidder for
clarification of its bid. The request for clarification
should be in writing and no change in prices or
substance of the bid should be sought, offered or
permitted. No post bid clarification at the
initiative of the bidder should be entertained.
Stage 1
Pre-Qualification
Bidding
35
Stage 2
Invitations to
Tender
Single Bid (Envelope) System: For

procurement of technically simple requirements
single bid system calls for Technical details
(including any eligibility criteria) of the offer as
well as price quoted in the same bid envelope. The
lowest priced bid that meets the Technical (and
eligibility criteria) requirements laid down in the
Bid Documents is declared as successful.
2.18
Evaluation of Price
Aspects
Evaluation of price aspects should take into

account the following aspects:
i) Normally, the comparison of the responsive
bids should be on CIF destination basis,
duly delivered and commissioned, as the
case may be.
Two-Bid
(Envelope)
System:
In
procurement of technically complex and critical
requirements, the bidders are asked to bifurcate
their quotations in two separately sealed parts
first part, called the Techno-Commercial Bid,
containing the relevant technical details of their
offer with reference to the specification and allied
technical details incorporated in the tender
enquiry documents indicating confirmation to
technical and commercial conditions and, in the
second part, called the Financial Bid, the price
quotation along with other allied issues.
ii) In the case of goods manufactured in India

or goods of foreign origin already located in
India, sales tax and other similar taxes and
excise duty and other similar duties, which
should be contractually payable (to the
bidder), on the goods if a contract is
awarded on the bidder.
iii) In the case of goods of foreign origin
offered from abroad, customs duty and
other similar import duties/taxes, which
should be contractually payable (to the
bidder) on the goods if the contract is
awarded on the bidder.
The techno-commercial bids are only

opened first in the presence of willing bidders
in the first instance, at the prescribed time
and date by the Bid Opening Committee and
the same is scrutinised and evaluated by the
Tender Committee with reference to parameters
prescribed in the tender documents. The technical
(quality) evaluation criteria can be either a
fail/pass criteria or it may be more complex
grading and ranking system in which a technical
score are assigned. Bids which meet the technical
parameters and commercial conditions are
declared as techno-commercially acceptable offers.
As per the policies of the Government from

time to time, the purchaser reserves its option to
give price preference to small scale industries in
comparison to the large scale industries. This
price preference cannot, however, be taken for
granted and every endeavour needs to be made by
such firms to bring down cost and achieve
competitiveness.
In case the list of requirements contains
more than one schedule, the responsive bids
should be evaluated and compared separately
for each schedule. The bid for a schedule
should not be considered if the complete
requirements prescribed in that schedule are not
included in the bid.
Thereafter, in the second stage, the

Financial Bids of only the techno-commercially
acceptable offers (as decided in the first stage
above) are opened in their presence after giving
them due notice about the date, time and venue
of opening of bids. The Financial Bids of
unacceptable bidders is returned unopened to the
respective. Financial evaluation would be done as
per the system of selection laid down in the Bid
Documents. In Goods and Works, it may mean
selecting the lowest priced offer out of the
Financial Bids opened of the Techno-commercially
acceptable offers. In services in some cases Price
Scores and Technical Score may be weighted and
combined to form a combined score. The offer with
highest combined score may be declared a winner.
Did You Know?

If bids have been invited on
a variable price basis, they
should be evaluated,
compared and ranked on the
basis of the position, as
prevailing on the day of bid
opening, and not on the
basis of any future date.
36
organisations pockets). In case there are no

domestic bidders comparison of offers can be done
on the basis of CIF/landed costs since the rest of
costs would be same for all bidders.
If the bids have been invited on a variable

price basis, the bids should be evaluated,
compared and ranked on the basis of the position
as prevailing on the day of bid opening and not
on the basis of any future date.
The organisation, through the above
process of bid scrutiny and bid evaluation, should
determine to its satisfaction whether the bidder,
whose bid has been determined as the most
favourably evaluated responsive bid, is eligible,
qualified and capable in all respects to perform
the contract satisfactorily. If, there is more than
one schedule in the List of Requirements, then,
such determination should be made separately for
each schedule.
2.19
Reasonableness of
Prices
i) Price evaluation
The following are the various methods
in which a price can be analysed for
Estimated Rate in the indent or for
Reasonableness of Rates in the Bid:
Price in the quotation should be in currency

stipulated in the SBD. The contract price should
be normally paid in the currency/currencies in
which the price is stated in the contract.
i)
Estimated rate in the indent
ii)
Last purchase price accepted as

reasonable/workable
during
last
purchase.
For leveraging indigenous shipping industry,

normally bids may be called on FOB/FAS basis.
iii) Prevailing market price ascertained

through a market survey or budgetary
quotations from one or more
prospective suppliers or published
catalogues or MRP printed on the
item (with ascertained appropriate
discount). User department should
collect the documents and authenticate
the same
The foreign bidders are normally asked in

the bid documents to quote both on FAS/FOB
basis and also on C&F/CIF basis duly indicating
the break-up of prices indicating freight,
insurance with purchasers reserving the right to
order on either basis. They are also to indicate the
Custom Tariff Number and the custom duty
applicable in the country. In the case of FAS/FOB
offers, the freight and insurance should be added
to make it CIF cost. Port Handling Charges ,
Custom Duty, Countervailing Duty and Surcharges,
as applicable on the date of opening of bid, as
well as Clearing Agency charges, Inland freight
and Octroi/entry tax, as assessed, should be added
over CIF to arrive at FOR/FOT destination. FOR/FOT
destination price for domestic offers may be
calculated as in NCB Bids. For bids with LC
payment, likely LC charges (as ascertained from
our bankers) should also be loaded.
iv) Costing analysis based on costs of

various components/raw materials of
the item
v)
Price of a similar/nearly equivalent

item
vi) Rough assessment from the price of

the assembly/machine of which the
item is a part or vice versa
vii) Through Market Intelligence Cell
(MIC) or External Expert Costing
Agencies
viii) As a last resort, rough assessment
from the opportunity cost of not
using this item at all
In ICB bids, all offers are to be converted to

countrys currency based on the BC selling
Exchange Rate of specified bank on the date of
Bid Opening (Financial Offer).
These methods are not mutually exclusive.

They can be supplemented with escalations
to cater for inflation, price increases of raw
materials, labour, energy, statutory changes,
price indices and so on. to make them
usable in conditions prevailing currently.
In case both indigenous and foreign bidders

have quoted in the Bid, the comparison of the
offers would be done on the basis of FOR/FOT
Destination including all applicable taxes and
duties (on the principle of total outgo from the
37
In case of various foreign currencies, the

rate should be reduced to a common
denomination of countrys currency.
Hard Facts
Selection of contractors by
negotiation should be an
exception, rather than a rule.
It may be resorted to only in
exceptional circumstances
like when:
ii) Price Indices:

For price indices, internet should be
accessed by officers dealing with purchases/
associated with Tender Committee from
important sites. For price indices of
indigenous items, appropriate website
should be accessed for the latest indices/
trends. For metals and other minerals
access http://www.mmr.online.com or
www.metalprices.com
(subscription
required)
or
www.asianmetal.com
(subscription required) for updates. The
World Economic Outlook a monthly report
from IMF, gives inputs on price trends of
different countries. LME (London Metal
Exchange) gives price trends of nonferrous
details, which often show volatile trends.
Organisation/Chamber of Commerce also
publish regular data on Price Indices and
Price Variations to which we can
subscribe. Important publications like
business/commercial newspapers and so on.
should be subscribed to similarly.
Procurement is on
proprietary basis
There are only limited
sources of supply
There is a suspicion of
cartel formation
ii) On Competent Authoritys Approval

Before recommending negotiation, adequate
care should be taken to re-scrutinise the
rates received to avoid infructuous
instances of negotiations. The decision
whether to invite fresh bids or to negotiate
and in the latter case, with whom to
negotiate, should be taken by the
competent authority after receiving the
recommendations of the Tender Committee.
After the approval, negotiations should be
conducted by the Tender Committee.
A ready database of important price

indices derived from above sources may be
kept updated for ready reference.
2.20
iii) Counter-Offers are Negotiations by other

Means
Normally, all counter-offers are considered
as negotiations by other means and the
principles of negotiations should apply to
such counter-offers. For example, counter
offer to L1, in order to arrive at an
acceptable rate should amount to
negotiation. However, any counter-offer to
L2, L3, etc. (at the rates accepted by L1) in
case of splitting of quantities, as predisclosed in the bid, should not be deemed
to be negotiation.
Negotiations
i) Only as rare exception

Normally, there should be no negotiation.
Selection of contractors by negotiations
should be a rare exception rather than
the rule. It may be resorted to only in the
exceptional circumstances, such as:
When the procurement is done on

proprietary basis
Items to be procured are supplied by

only limited sources of supply
Items where there is suspicion of cartel

formation
iv) With Whom to Negotiate

The negotiations should be held only with
the most favourable acceptable bidder (L1),
who is techno-commercially responsive/
approved for supply of bulk quantity and on
whom the contract would have been placed
but for the decision to negotiate.
38
v) Procedure for Negotiation
Award of Contract
After the competent authority has decided

to call specific bidder for negotiation, the
following procedure should be adopted:
Subject to approval from the

Competent Authority, Award
of Contract is to the bidder,
whose bid has been
determined to be substantially
responsive, most favourable
and whose credentials have
been verified.
i) The period of validity of the original

offer must, therefore, must be extended,
wherever necessary.
The bidder to be called in for negotiations
should be addressed as per a legally drafted
format. A declaration for negotiations should be
obtained from the bidder to the effect that the
rates originally quoted by them should remain
open for acceptance in the event of failure of the
contemplated negotiations.
signed with the supplier should be vetted by the

finance representative of the Tender Committee
and approved by the Competent Authority.
2.22
Before the negotiation is started, an

attendance sheet may be signed by the parties
present in the negotiations. Negotiations meeting
should be started only after obtaining signed
declaration for negotiation as mentioned above.
Tender Committee may vary the quantity

by not more than the percentage specified in
the bid documents (say about 25%), based on
recalculation of requirements on the latest facts,
if allowable as per SBD.
Revised bids should be obtained in writing

from the selected bidders at the end of the
negotiations. If necessary, negotiating party may
be given some time to submit their revised offer.
However, in case the selected bidder prefers to
send a revised bid instead of being present at the
negotiation, the offer should be taken into
account. In case a bidder does not submit the
revised bid, its original bid should be considered.
2.23
Parallel Contracts
If so declared in advance in the SBD,

parallel contracts, with more than one bidder
(for the same tender) may be concluded in the
following cases:
The revised bids so obtained should be read

out to the representatives of the bidder present,
immediately after completing the negotiations.
When the order quantity is large and

the existing suppliers/bidders are not
capable of meeting the bid requirements
individually
When due to the critical/strategic/specific

nature of the supplies/goods, it is desirable
to have multiple sources of supply. For
such cases, specific permission should be
sought from the Competent Authority and
the clause should be added to the bid
documents, clearly stating that the
organisation reserves the right to split the
contract quantity between suppliers, and
the details of the percentage of split are
also to be specified upfront in the Bid
Documents
A bid may not be split into smaller

quantities for the reason that one supplier
Award of Contract
2.21
Variation of Quantities at
the Time of Award
Recommendations for
Award of Contract
The Purchase Agency inviting bids should

award the contract, subject to approval from the
Competent Authority, to the bidder whose bid has
been determined to be substantially responsive
and has been determined to be the most
favourable evaluated bid, provided further that the
bidder is determined to be qualified to perform
the contract satisfactorily and the credentials
have been verified. Any agreement required to be
39
may not be able to supply the entire

quantity
The details of the resulting contract should

be published on organisations website.
The proposed share of the most favourable

bidder (L1) contractor and the rest of
the contractors/bidders should be clearly
defined, along with the minimum number of
suppliers sought for the contract, and the
minimum supply capacity
2.24
2.25
Signing of Agreement/
Issue of Supply Order
The Competent Authority should enter into

an agreement. It should be ensured that the
contract is unambiguous and transparent. It
implies that there is no scope for any
interpretations other than those already been
agreed to between the parties.
Notification for Award of

Contract to Successful
Bidder
It should also be ensured by TC that any

deviation or variation quoted by the supplier in
his bid is not left un-discussed and ruled upon in
the TC. Otherwise, there may be delay in
acceptance of contract by the supplier.
Prior to the expiration of the period of bid

validity, the successful bidder should be notified
in writing. The notification of award should
constitute the conclusion of the Contract.
Upon the successful bidders furnishing of
the signed contract form and performance
security, each unsuccessful bidder should be
promptly notified and their bid security be
discharged. Bid Security of the successful supplier
should be adjusted against the Security Deposit or
returned as per the terms of the Bid Documents.
Supply order or agreement should be

issued/entered strictly as per approval of
Competent Authority.
After notification of award, if a bidder

wishes to ascertain the grounds on which its bid
was not selected, it should address its request to
the purchaser. The purchaser should promptly
respond in writing to the unsuccessful bidder.
However, purchaser need not go into confidential
details in its reply which can be legally misused.
Purchase department should ensure that

the supplier receiving the contract furnishes
the required Performance Security in the
prescribed form by the specified date, failing
which necessary action including forfeiture of
the Earnest Money Deposit should be taken
against the supplier.
2.26
Performance Security
40
Two-Bid
2.27
(Envelope) System: In
procurement of technically complex
and critical requirements, bids are
called in two separately sealed
parts. The first part, called the
Techno-Commercial Bid, contains the
relevant technical details. The second
part, called the Financial Bid, includes
the price quotation along with
other allied issues. Techno-commercial
bids are evaluated first to short list
the technically qualified bidders.
Financial bids of only such short
listed bidders are opened and evaluated
Acknowledgement of
Contract by Successful
Bidder and Execution
Promptly after the successful bidder is

notified that its bid has been accepted, the bidder
should be sent the Contract Form provided in the
Bidding Documents, incorporating all agreements
between the parties. The supplier should
acknowledge and unconditionally accept, sign,
mention date and return the contract form within
7 days from the date of issue of contract. While
acknowledging the contract, the supplier may
raise some issues and/or ask for some
modifications against some entries in the
contract; such aspects should be immediately
looked into for necessary action. Thereafter,
suppliers unconditional acceptance of the
contract must be obtained. If both the parties
(viz. the organisation and the supplier)
simultaneously sign the contract across the table,
further acknowledgement from the supplier is not
required.
2.28
Bid Documents: These are the documents

required to be submitted in response to the
Notice Inviting Tender (NIT). These include
the prescribed bid form, drawings,
specifications, time lines, charts, price break
downs and so on. Bids not accompanied by
all the required documents are considered
incomplete
bids
and
are
usually
automatically rejected. Bid documents are
prepared to provide clear technical and
commercial terms of reference for the
proposed procurement, based on the
standard bid documents of the organisation
Rejection of Bids
Common Usages in Bid Documents:

RFI Request for Information
Purchaser would be justified in rejecting of

all bids when none of the bids are substantially
responsive. It is also a good practice to do
rebidding if L1 bidder withdraws the offer.
However, the lack of competition should not alone
be the criterion, based on number of bids
received, for rejection.
REVIEW OF KEYWORDS
CONCEPTS
(Expression of Interest EOI Bid).

This is an open enquiry, which scans
the market seeking broad data and
understanding
RFQ Request for Qualification (like

PQB). This is an opportunity for
potential suppliers to get prequalified/short listed for subsequent
procurement bid. It lays down precise
qualification criteria for short listing of
vendors to whom RFP would be issued
AND
RFP Request for Proposal: This is a
Different Systems of Bids:

Two-Stage Bidding: In this system,
bid floated to target suppliers like

after RFI or RFQ
the first stage is the Pre-Qualification

Bid, with the aim of short listing bidders
who have requisite qualifications. In
the second stage, RFP is issued only to
the bidders who qualify in the first
stage
Invariable Parts in Standard Bidding

Documents (SBD):
The documents to be included normally are:
i.
41
General Instructions to Tenderers

(GIT):
General
Instructions
to
Notification for Award of Contract to
Tenderers (GIT) contain all the

relevant information as well as
guidance to the prospective bidders
for preparation and submission of a
responsive bid.
Successful Bidder
Signing of Agreement/Issue of Supply

Order
Acknowledgement
of Contract
Successful Bidder and Execution
ii. General Conditions of Contract (GCC):

The general conditions of contract
(GCC) are general and should be used
unchanged with all types of
contracts.
iii. Formats to be Filled by Bidder: Bid

Form (Bid cover letter), Price
schedule, Bank guarantee form for
EMD, Bank guarantee form for
performance security.
iv. Documents are to be framed keeping
in mind special requirements of
procurement:
Bid
Notice/Notice
Inviting Tender (NIT), Special
Instructions to Tenderers (SIT),
Special Conditions of Contract (SCC),
List of Requirements, Technical
Specifications and Quality Control
Requirements, Qualifications/Eligibility
Criteria, Contract Form.
1.
Which are the portions of bidding

documents that are to be framed keeping in
mind the special requirements of the
specific procurement?
2.
Mention the main purpose of following:

i)
iii) List of Requirements

iv)
EMD
v) Performance Security
3.
Distinguish
between
the
provisions
regarding the following in the SBD:
I.
Clarification of Bidding Documents
II. Amendment of Bidding Documents
This consists of the following steps:

Publication of Bids
III. Modification, Alteration and Withdrawal

of Bids
Clarification of Bidding Documents
IV.
Amendment of Bidding Documents
V.
Modification, Alteration and Withdrawal

of Bids
Pre-Bid Conference
Receipt and Custody of Bids
Bid Opening
Evaluation of Bids: This consists of the
Preliminary Examination
Evaluation of Bids
Bidders Contacting the Organisation

during Evaluation
Seek permission to attend the bid opening

of one NCB tender. Observe the procedure
followed and compare it with the one
detailed in this unit.
5.
What are various methods of ascertaining

reasonableness of the prices received in the
tenders?
6.
Mention the similarities and differences

between:
I.
Negotiations
4.
following steps:

NIT
ii) GIT and SIT
Publication, Receipt and Opening of Bids:

by
Variation of Quantity at the Time of

Award
II. Parallel Contracts
Recommendations for Award of Contract
42
Unit 3
Management of Public Procurement

Operations
LEARNING OUTCOMES
Describe the organisation of procurement operations
Describe the various centralised and decentralised
procurement agencies
Describe the roles and responsibilities of various
executives related to procurement
Describe the functions and composition of various
committees involved in public procurement
Describe the time limits for procurement
Describe Record Keeping, Key Performance Indices and
Management Reporting for public procurement
Describe Information Technology systems in public
procurement, like MRP, MRP-II, ERP and e-Procurement
3.1
The most basic building block of a purchase

organisation is a self-contained procurement unit
with minimum staffing that handles a particular
market segment of requirements. Under a procurement
organisation, there may be a number of such units.
Organisation of Public
Procurement
Operations
In a procurement organisation, beside

procurement units, there are also ancillary
sections dealing with:
Most of the public organisations have

many different functional departments. They
also have many regional or field units, reporting
to the organisations Headquarters (HQ).
Organisations having significant procurements
have a dedicated procurement organisation to
carry out the procurement operations. The
structure of procurement organisations is based on
Type of goods/services/works so that each
procurement unit develops expertise in a
particular market. Internal customers, however,
are better served if procurement organisation is
structured based on internal clients served, so
that internal clients have to deal with only one
procurement division for better customer
satisfaction. Thus, large procurement organisations
are structured based on markets, but there are
nodal officers to provide single window interface
to internal clients.
Tender Section: Advertising, Bidding

Document Sale, Issue, Receipt, Tender
Boxes, Tender Opening
Policy Section: Policy and Instructions
Supplier
Relations
Management
and
Registration
Legal and Arbitration Section
Information Technology Systems and Master
Data Management
Direct Contracting/Local Purchase Section
Administration and Management Services
HRD and Training
Liaison and Expediting Section
Procurement Performance Measurement and
Management Reporting
43
3.2
agility to address dynamic situations in the

field. Modern management trends are
also toward larger decentralisation. A
balance has to be arrived at between
centralised procurement and decentralised
procurements by field units.
Procurement Agencies
Procurement operations can be entrusted to

different agencies. Usually, these agencies are as
follows:
iii) Procurement by purchase department
i) Centralised procurement of common use

items and services
Ideally, the purchase department, (In Field

Unit or HQ) should consolidate requirements
of all user departments and then float
tender for annual procurement. The
purchase department should carry out the
annual procurement for the following types
of requirements:
Centralised procurement of common use

items and services, in appropriate
categories of procurements, across all public
procurement agencies in an organisation
leads to improved procurement outcomes;
better utilisation of procurement skills and
resources; greater purchasing leverage
through aggregation of volume; and spread
of best practice. This could be achieved
by clubbing demands from different
procurement agencies, for a normal contract
or a framework contract by identified lead
procurement
agency.
These
common
procurements can be organisation-wide or
be common to a few units in the
organisation. Such centralised procurement
arrangements should be well publicised in
the organisation list of items or services;
lead procurement agencies; time table
for submission of requirements to lead
agencies;
and
framework
contract
arrangements. The demand for these items
or services should be estimated at the
beginning of the previous year and tenders
for such planned procurement shall be
finalised much before the start of the year.
i) Requirements
department
of
more
than
one
ii) Regularly used items throughout the

year in large quantities
However, for procurements that are not
covered in annual tender, the purchase
department should do ad-hoc procurements
through appropriate mode of procurement.
The purchase department may carry out the
procurement of these following types of
requirements:
i)
Requirements not covered in annual

tender
ii) Requirements that are not commonly

encountered and hence not planned
in annual tender
iii) Requirements for which future
demand could not be anticipated at
the time of annual tender
ii) Decentralised procurement in field units
iv) Procurement by user field department
Centralised procurements do have demerit

of longer procurement cycles and lack of
In situations when emergency or ad-hoc

procurement is absolutely necessary to
address specific requirements, the user
department in the field units, may be
empowered to do emergency/ad-hoc
procurements through LTE/Spot Purchase.
This should be subject to financial limits
specified for such modes of procurements,
after duly recording the reasons of such
purchase at their level and keeping the
purchase department informed.
Factoid
Centralised procurement of
common use items and services
across all Public Procurement
agencies leads to:
Improved procurement
outcomes
Better utilisation of
resources
Greater purchasing leverage
44
The purchase department should do the

following as a precautionary measure to
avoid emergency/ad-hoc procurement:
3.3
a.
At the beginning of the year, the

purchase department should ask all
the user departments, through a
written inquiry, to submit requirements
for operations for the whole year.
b.
The purchase department should

update the list for annual procurement
by adding emergency procurement in
the past three years.
c.
Possibility of execution of suitable

rate contract should be explored to
avoid any requirement of making
emergency
purchases
at
user
department.
Roles, Responsibilities
and Delegation of
Procurement Powers
ii) CEO should supervise the administration

of procurement department under
him.
iii) In all procurements initiated at field
level but within the competence
of organisation HQ, the Field CEO
should record his approval with
the concurrence of his Financial
Adviser and ensure harmonisation
of divergence of views between
departments as far as feasible before
the proposal is sent for approval to
organisation HQ.
Delegation of Powers (DOP)/Schedules of

Powers (SOP)
All organisations lay down the powers
related to procurement matters as delegated to
various levels of executives in HQ and Field Units.
For procurements, it lays down the composition of
Tender and Other Committees and Officers
Competent to approve recommendations of such
Committees. It also defines the levels of
Competent Authorities to decide Single Tender
Procurements; Signing of Indents; use of Single
Source or Restricted Sources above a prescribed
Threshold; Signing of Contracts; Post Contract
Decisions and Write-Offs. Wherever Competent
Authority is mentioned, it means executives
delegated with procurement powers for the
concerned procurement operation.
Procurement powers and responsibilities of

the CEO may be shared between CEO and
Dy.CEO. This is to lighten the burden of CEO.
Typically, the roles, responsibilities and

delegations may be on the following lines:
Deputy Head of Organisation (Dy. CEO) in

HQ or Field Unit
Chief Finance Officer in HQ or Field Unit

(CFO)
i)
Head of Organisation (CEO) in HQ or Field

Unit
i) CEO is the final competent authority
for all procurements up to the limit as
per DOP and is the member in Tender
Committee for higher values of
procurement.
He should concur with any deviation

in the GIT and GCC of the SBD and SIT
and SCC.
ii) He is member of the Tender Committees.

iii) In all procurements initiated at field
level but within the competence of
organisation HQ, he should record
his concurrence before the proposal is
45
sent for approval to the organisation

HQ.
vi) They are responsible for drafting and

concluding contracts with successful
bidders.
iv) He should vet all agreements before

their release.
vii) They are responsible for all aspects of

contract management.
v) He is responsible for safe custody of

EMD, SD and ensure their validity as
per the contract
viii) On completion of contractual obligations,

initiate action for release of EMD/SD.
ix) Head of procurement agency supervises
the administrative actions of all
officers and staff of the stores and
purchase functions.
vi) He should supervise all financial

approvals and payments of contractor/
supplier bills in time.
Heads of User Departments in HQ or Field

Units (HOD)
i)
He would be responsible for approving

annual procurement plan for his
department.
3.4
ii) He participates in various committees.

He delegates subordinates responsibility
for tender evaluation and quality
assurance of goods/works/services.
i) Bid Opening Committee (BOC)
iii) He is responsible for timely preparation

and submission of indents of materials
in his jurisdiction.
Role and Mandate: The key role and

mandate of the Bid Opening Committee
(BOC) is to ensure transparency and
integrity of the Bid Opening Process.
iv) He is responsible for emergency

procurement by user department as
per DOP.
Composition: The bid opening committee

shall comprise one purchase officer, one
officer from the finance department and one
officer from technical section. The BOC
opens the bids on the date.
Head/Executives
of
Procurement
Organisation in HQ or Field Unit
i)
Committees: Many
Committees Play a Key
Role in Procurement
Operations
They are responsible for ensuring

compliance of all laid down procedures
in all procurements.
ii) Tender Committee

Role and Mandate: Nomination of
Tender Committee (TC) members, wherever
required shall be approved by CEO on
the recommendation of procurement
organisation. The key role and mandate of
the TC should be as follows:
ii) They are responsible for planning,

aggregating and procurements.
iii) They are also responsible for procurement management: finalisation of
procurement plan, initiating timely
procurement, monitoring of stages of
tenders, compliance to timelines
stipulated in the tender, ensuring
validity of tender offer, amendment of
contract and acceptance of deviation
after seeking approval of competent
authority.
i)
The TC should check whether the

participating bidders satisfy the
Remember!
Many committees play a
key role in Procurement
Operations.
iv) They are member secretaries in Tender

Committees of his level.
They include the:
v) They are responsible for service levels

to internal customers.
Tender Committees
Bid Opening Committee
46
eligibility criteria in respect of the

tender notice and declare the eligible
parties (responsive tenders). Bids of
only the eligible bidders shall be
processed for evaluation thereafter.
The evaluation criteria for evaluating
the tender should be predetermined,
pre-disclosed and documented in the
tender documents
iii) Local Procurement Committees

Procurements up to a low threshold value
are done by local procurement committees.
iv) Market Intelligence Cell
Market Intelligence Cell (MIC) should be
created in the Procurement Organisation
and it shall be assigned the following
tasks:
i)
ii) To evaluate the techno-commercial

responses of the bidders and ensure
that they meet user requirements, in
cases where two-bid system is used
To gather and compile information

on the prices, trends, indices of end
products and input raw materials
ii) To ensure inter-unit sharing of price

indices and price database
iii) To mark the scores of the bidders as

per the tender terms and conditions
of the tender document
iii) To maintain data base on past

contracts showing details of items/
services procured, their essential
spec(s), unit rate, quantity, total
value, mode of procurement, number
of tenders received, number of
tenders
considered
acceptable,
reasons for exclusion of overlooked
tenders, un-negotiated rates of L1
and contract rates in order to help in
ascertaining reasonableness of prices
of future procurements
iv) To rank the bids by scores/marks

awarded or prices and identify the
preferred bidder to be considered for
approval by the competent authority
v) Make comparative statement in case
of both technical and price/financial
bid.
vi) The TC shall have the mandate to
carry out the evaluation of all
eligible tenders and select the
preferred eligible bidder, duly
monitoring compliance of laid down
purchase procedures in all stages of
the tender, reasonability of estimates
and bids (e.g. ascertaining whether
rates are reasonable or not) and, if
required, associated technical details
of the tender.
3.5
Time Limit for

Procurement and
Accountability
The ill effects of delay in processing and

clearance of various procurement activities needs
no emphasis. The decentralisation of decisionmaking mechanism and delegation of financial
powers are aimed at facilitating faster decision
making and obtaining best value for money.
However, the delegation of powers also implies
authority with accountability. Every individual in
the chain of the procurement operation is
accountable for taking action in a specified time
so that the requirements are met on time. Typical
timelines for procurement are given in the
next page.
vii) To prepare the Tender Committee

recommendations and forward to the
competent authority.
Composition:
Composition
of
the
committee and Competent Authority shall
be as DOP. Appropriate Procurement
Executive should be the member
secretary of the committee. The specific
composition of the committee should be
value-based as well as depend upon the
nature of procurement.
47
Sample Time Frame for Procurement

Receipt of Indent and Floating the Bids
Raising Indent
T i.e. Day-1
Indent Approval
T+ 1 week
Preparation of Tender Enquiry
T+ 2 week
Competent Authoritys Approval and Floating Bids
T+ 4 week
Procurement Operation
3.6
Receipt and Opening of Bids
Let B be the date of opening of Bids
Preparation of Comparative Statement
B+2 weeks
TC EvaluationTechno Commercial (in two bid)
B+6 weeks
Approval of Techno-Commercial offer by

Competent Authority
B+8 weeks
Price Bid Opening and Evaluation by TC
B+ 9 weeks
TC Recommendations Preparation
B+10 week
Competent Authoritys Approval
B+12 week
Preparation and Despatch of Contract
B+13 week
Record Keeping and

Management Reporting
All the procurements done by the

organisation are subject to post audit by internal
audit, statutory audit and various internal and
external vigilance agencies. Hence, all the
documents related to the procurement should
be filed and kept systematically and safely. Files
shall be properly numbered in notes and
correspondence side. Period of retention of various
types of documents should be laid down. Salient
records and management reporting are as follows:
Procurement Register (PR): Procurement
Register (manually or electronically) is at the
root of all procurement records for monitoring
efficiency and throughput of Procurement
Organisation. This is used for recording key
information, which includes:
Date of request for procurement/Indent/

Planned Procurement Activity
Name of the department making

request/Annual Procurement Plan
Procurement Number
Mode/Method of Procurement
Date of invitation for bids/preparation of

bid document
Date of decision of Tender Committee
Contract date and number
Name(s) of supplier(s) and

participants to the tender
Codes, unit size, short description and

quantity of units, unit price, total cost per
item/services and expected delivery date
Date of receipt of shipping document
Date of delivery and the total quantity

delivered
Stores receipt voucher date and number
all
other
PR would help in monitoring the progress of

procurement operations.
Purchase department should also maintain
following basic records (either in manual or
electronic form):
Purchase order log: Contains a numerical

brief record of all Purchase Orders issued. It
contains Purchase Order numbers, suppliers
name, brief description of purchase, total
value of the order and so on
Open order file: Contains status of all

outstanding orders
the
48
Attention!
3.7
All procurements done by an

organisation are subject to
post audit by internal audit,
statutory audit and different
internal and external agencies.
Hence, all documents related
to procurement must be filed
and kept systematically and
safely.
Closed order file: Contains historical data

of all completed purchases
Vendor record file: Contains the names,

addresses of suppliers; materials that a
vendor can supply; delivery and quality
records
Procurement Key
Performance Indices
(PKPI) and Management
Reporting
As in all management and financial

functions, it is possible to measure the pulse of
procurement by using certain key performance
indices. Periodic management reports can be
devised to reflect these PKPIs from various
procurement divisions, procurement agencies in
different categories of procurements. Some of the
PKPIs are given here.
3 PKPIs (in a period)
Number and value of indents, contracts received/

finalised
Average price rise in procurements for repeated

items
Proportion of procurement, number and value

wise, taking place based on limited/selective
bidding
Proportion of procurement, number and value

wise, taking place through e-procurement
Number of and oldest indent pending for issue

of Tender
Number and oldest tender pending for which

award decision has not been taken
Total value of purchase
Average time taken for award decision
Allocation of purchase value against

major items/services
Number and oldest of contracts in which

deliveries have been delayed by more than
50% of delivery time
Budget for purchase for the next year
Proposal for revision of budget in

current year
Number and percentage of contracts which have

gone into dispute
Average percentage (of the total contract price)
of contract variations/price variations paid
Rate contract file: Contains the purchase

records of items/services under a term
contract. It is especially important when
the contract is an open one against which
orders may be placed
Purchase reports: Since the Purchase
Department handles a sizable portion of
organisation finances, it is desirable to
have some summary reports periodically
(monthly/quarterly/half
yearly/annually)
available to the management. Some of
important reports are:
Besides
the
above,
the
purchase
organisation should maintain all the records of
issue, receipt, opening, evaluation of tenders,
award of contracts i.e. all pre-order and post-order
records in chronological order and the files
be kept in an identified place and should
be retrievable for scrutiny whenever needed
without wastage of time. The records of
complaint
handling,
correspondences
with
clients, consultants, banks and vendors, among
others, also should be kept separately and should
be retrievable.
Percentage of tenders in which complaints have

been received
Number and oldest of complaints not redressed
Average time taken for examining and redressing

complaints
Productivity per head number and value wise

tenders finalised/on hand
Number and percentage of staff who have not

undergone specified training
Number and percentage of staff who have

undergone training in the period
49
3.8
ii) Manufacturing Resource Planning II

(MRP-II)
and
Enterprise
Resource
Planning (ERP)
Information Technology
in Procurement
MRP integrated the procurement to

production schedules in a factory. Since
1970s, management thinking was to
integrate all enterprise-wide processes from
strategic planning, to management control
and to operational control. MRP systems
lie in-between management control and
operational control processes. Later,
MRP got subsumed by an Integrated
Manufacturing Resource Planning (MRP-II to
distinguish from Material Requirements
Planning)
incorporating
management
functions like Strategic Planning, Sales,
Accounting,
Customer
Relationship
Management,
Supplier
Relationship
Management to improve managements
control of manufacturing and its support
functions. In todays corporate environment,
MRP-II has evolved into ERP (or Enterprise
Resource Planning). ERP or MRP-II represents
a group of software programs designed to
tie together disparate company functions to
create more efficient operations in areas
such as assembly or delivery of products or
services. This links companys information
resources such as human resource
information system, financial management,
accounting, sales and so on.
Information Technology application in

procurement has evolved in many stages. Here are
some of them:
i) Material Requirements Planning (MRP)
The main theme of MRP is getting the right
materials to the right place at the right
time with focus on optimising inventory.
MRP was pioneered in the 1970s with the
work of Joseph Orlicky. This technique
calculates material requirements and
schedules supply to meet demand across all
products and parts in one or more plants.
Information technology plays a major role
in MRP systems. It is able to utilise
information about manufacturing needs
(linked with customer demand) as well as
information about inventory levels. MRP
systems use four pieces of information to
determine what material should be ordered
and when. They are:
i) Master production schedule when
each product is scheduled to be
manufactured;
ii) Bill of materials the parts or materials
required to make each product
iii) Production cycle times and material
needs at each stage of the production
cycle
iv) Supplier lead times
iii) Electronic Procurement (e-Procurement)

e-Procurement is the combined use of
information and communications technology
through electronic means to enhance
internal and external purchasing and supply
management processes. The intention is to
automate, possibly, the entire procurement
operation, in an online web-based real-time
environment using a range of technologies.
e-Procurement
The benefits of e-Procurement
include enhanced efficiency,
reduction in processing costs,
transparency and fair dealing.
However, it brings with it
concerns about privacy and
security.
50
For e-procurement to be implemented,

enactment of appropriate legislation is
essential.
Electronic
Commerce
Act
(Ireland); Electronic Transactions Act (UK,
USA, Australia, New Zealand, Singapore, Sri
Lanka); Electronic Transactions Ordinance
(Hong Kong and Pakistan); Information
Technology Act (India) and Information
Communication Technology Act (Bangladesh
and Sri Lanka) cover these aspects.
of
e-procurement
Data Integrity ensuring that the

message sent is identical to the one
received
Security data must be protected

from loss, theft, misuse, alteration or
destruction
REVIEW OF KEYWORDS
CONCEPTS
Digital signatures are used to ensure

authentication, confidentiality, data integrity
and non-repudiation of all operations
carried out within the e-procurement
system.
Benefits
enhanced:
AND
Delegation of Powers (DOP)/Schedules of

Powers (SOP): This refers to the powers
laid down in the procurement matters by an
organisation for various levels of executives
in the Head Quarters and field units
include
Market Intelligence Cell: It is normally a
Efficiency and reducing processing

costs: Integration and automation of
many workflow processes
Economy: Greater business access and

competition
Equity and fair-dealing
Transparency, uniformity, compliance

and integrity
Breaking down the physical barriers of

space and time
unit functioning under COPS, which is

intended to provide quality input to the
purchase function. This cell provides
information on the prevailing price trends of
goods and services and maintains relevant
data base, including data on past purchases
Procurement Register (PR): Procurement

registers are to be maintained by
Procurement Department for recording key
information on annual procurements. This
register should capture information on
request for procurements and also status on
procurement activities. Procurement Register
facilitates monitoring the progress of the
procurement operation
e-Procurement brings with it concerns

about privacy and security. These include:
Authentication ability to establish

the parties identities with certainty
Confidentiality ensuring that there

is no eavesdropping on transactions
in progress
Procurement
Key Performance Indices

(PKPI): These procurement indices are
devised by each organisation to study
51
periodically the pulse of procurement activity

by various procurement divisions. Some such
PKPI indices are number and value of indents
or contracts received or finalised, average
price rise in procurements for repeated items
or services, number of and oldest indent
pending for issue of tender and so on
large organisation having multiple business

units and spread over a large geographical
level.
2.
Study the organisation chart, telephone

directory and take a tour of the Purchase
Department of your organisation. How is it
organised? Which are different non-purchase
sections/units and what are their functions?
3.
Study the delegation of powers/schedule of

powers relevant for procurement of your
organisation. What are the different levels/
designations/grades of pay scales of people
to whom various powers are delegated?
What are the various committees dealing
with procurement, as mentioned in this
document? Compare them with the
designations and committees mentioned in
this unit.
4.
What are time limits for procurement laid

down in your organisation? Compare these
with those given in this unit.
5.
Study the records and registers maintained

in your purchase office. Note the column
headings used in these registers. Compare
them with the ones mentioned in this
unit.
6.
What are the Procurement Performance

Indices used in your organisation? Compare
them with the ones given in the textbox of
this unit.
7.
Go to IT services department of your

organisation and study the type of IT used
for procurement.
Material Requirements Planning (MRP):

Material Requirements Planning (MRP) is a
computer-based production planning and
inventory control system. MRP is concerned
with both production scheduling and
inventory control. It is a material control
system that attempts to keep adequate
inventory levels to ensure that required
materials are available when needed. MRP is
applicable in situations of multiple items
with complex bills of materials. The major
objectives of an MRP system are to
simultaneously:
1. Ensure the availability of materials,
components and products for planned
production and for customer delivery
2. Maintain the lowest possible level of
inventory
3. Plan manufacturing activities, delivery
schedules and purchasing activities
1.
Discuss the pros and cons of centralisation

and decentralisation of procurement in a
52
MODULE 6
Public Procurement
and Good
Governance
53
Public Procurement and Good Governance
Unit 1
Governance Issues in Public Procurement
LEARNING OUTCOMES
Describe the graded concepts from Values; Morals;
Integrity; Ethics; Codes and Laws
Describe the governance issues in Public Procurement
Describe the governance risks in the various stages of
procurement
1.1
constitute integrity. Ethics and Codes are wellfounded standards of right and wrong that
prescribe what individuals ought to do, usually in
terms of rights, obligations, benefits to society,
fairness, or specific values. Thus, integrity, ethics
and codes are values and morals in action.
Values to Ethics and

Laws From Beliefs to
Behaviour and
Punishment
Values, morals and integrity are neither

written down nor overtly prescribed by society and
are more individual and voluntary beliefs.
However, ethics and codes are often written down
and externally prescribed for groups and
organisations.
Values and Morals; Integrity and Ethics;

Codes and Law are a spectrum of overlapping and
related concepts.
Values can be defined as those things that
are important to or valued by an individual or
groups and organisations. Values also help us
identify the levels of importance and tell us which
values are more useful when we have to trade off
meeting one value over another. Morals have a
greater social relevance to values and tend to
have a broader acceptance.
Laws determine whether an act is

permissible and, if not, what should be the
punishment. Legal issues are based on specific
laws and, if not obeyed, will result in legal
consequences. Codes of Profession may not have
force of law but do have punitive consequences
for its members. Ethical, moral and integrity
issues, though do not have a force of law, possess
a nature that affects the society or has social
consequences for the people involved.
Values and Morals are extraordinarily

important tools for making judgements, assessing
probable outcomes of contemplated actions, and
choosing among alternatives. Values and Morals
determine what is right and what is wrong.
As we move from larger concept of value to

specific concepts of laws, we move from voluntary
to coercion; social sanctions to punitive;
Adherence to moral and ethical principles,

soundness of moral character, and honesty
54
beliefs to behaviour
generality to specifics.
and
punishment,
and
1.2
Even if it was the case that you never broke

any laws or codes, you cannot say that you lived
your best, because being a part of civilised
society means to go beyond what the law demands
of us. It means to live according to values, morals,
integrity and ethics, most of which ask more of us
than the law does. The answer to What should I
do? should therefore not be, What can I get
away with legally? but What does ethics ask for
and what do values, morals and integrity require
of me?
Governance Issues in
Public Procurement
Purchasing agency as well as bidders,

suppliers, contractors and consultants under
purchasing agency contracts should observe
the highest standard of ethics during the
procurement or execution of such contracts.
Governance issues faced in public procurement are
defined as follows:
i) Corrupt practice means the offering,
giving, receiving, or soliciting, directly or
indirectly, at any stage, of anything of value
to influence the action of a public official
in the procurement process or in contract
execution;
ii) Fraudulent
practice
means
misrepresentation or omission of facts,
directly or indirectly, at any stage, in order
to influence a procurement process or the
execution of a contract;
iii) Collusive practice means a scheme or
arrangement, directly or indirectly, at any
stage, between two or more bidders, with or
without the knowledge of the purchaser,
designed to establish bid prices at artificial,
non-competitive levels;
While considering the difference between

ethics and morals, it may be helpful to consider a
criminal defence lawyer. Though the lawyers
personal and social morals find murder immoral
and reprehensible, the code and ethics of
the group demand that the accused client be
defended as strongly as possible. Groups code and
ethics must override personal morals for the
greater good of upholding a justice system
in which the accused are given a fair trial and
the prosecution must prove guilt beyond a
reasonable doubt.
iv) Coercive practice means harming or

threatening to harm, directly or indirectly,
at any stage, persons or their property to
influence their participation in the
procurement process or affect the execution
of a contract;
v) Conflict of interest means a bidding firm
or any affiliate was either involved in the
Consultancy Contract from which this
This is a simpler example in areas other

than law such choices are not so clear-cut and the
good of society must have an upper hand. For
example, when ethics and morals clash at the
workplace, the company ethics can play against
personal morality. Corporate greed or ambitions of
bosses that blur companys own ethical lines may
expect its salesman to win a public contract by
hook or crook. Should the salesman follow his
values and morals or face consequences of failure
to win the contract? In practice, border-lines may
often be quite blurred.
Remember!
Purchasing agencies, as well as
bidders, suppliers, contractors
and consultants involved in
public procurement contracts,
should observe the highest
standard of ethics, both during
procurement and execution of
the contracts.
55
procurement is linked; or if they are part of

more than one bid in the procurement; or if
their personnel have relationship with any
of the procuring organisations personnel
involved in the procurement process at
any stage;
A particular violation of good governance

may span more than one of above mentioned
unethical practices. The following policies
should be adopted in order to maintain good
governance during procurement, if it is
established that a bidder or contractor directly
or through an agent is engaged in any of
the above mentioned unethical practices in
competing for the contract or in executing a
contract:
vi) Obstructive practice: (i) deliberately

destroying, falsifying, altering or concealing
of evidence material to the investigation or
making false statements to investigators in
order to materially impede purchasing
organisations investigation into allegations
of above mentioned unethical practices;
and/or
threatening,
harassing
or
intimidating any party to prevent it from
disclosing its knowledge of matters relevant
to the investigation or from pursuing the
investigation, or (ii) acts intended to
materially impede the exercise of the Banks
contractual rights of audit or access to
information.
i) Bids of such bidders should be rejected if

contract has not yet been awarded
ii) Proposal for award should be rejected if
evaluation has been completed
iii) A contract should be cancelled if it has
been awarded
iv) In case any individual staff is found
responsible, suitable disciplinary or criminal
proceedings should be initiated against
him/her
v) Firms or individuals should be banned/
blacklisted after following due process
1.3
Governance Risk Areas

in Public Procurement
Each stage of public procurement has

different governance risk areas (red-flags), which
need to be addressed:
i) Need Assessment: Decision on procurement
of goods, works or services, or to out-source
services and on technical requirements
The decision does not follow a

policy rational or an existing need
but rather the desire to channellise
benefits to an individual or an
organisation. For example, demand is
created for a good that is not needed
simply to benefit the companys
owner;
Specifications
and
terms
of
reference are made to favour a special
supplier or contractor and not to
properly address the need identified;
Unknown specifications:
procurement
where
56
In such
technical
where samples are asked to be

submitted along with the offer and
the evaluation is based on the
subjective evaluation of samples. If
required, provision for submission of
an advance sample by successful
bidder(s) may be stipulated for
indeterminable parameters such as,
shade/tone, size, make-up, feel, finish
and workmanship, before giving
clearance for bulk production of the
supply.
Attention!
There are different risks
that public procurement
faces, which need to be
addressed to ensure good
governance.
specifications need to be iterated

more than once, expression of interest
should be invited indicating broad
objectives, constraints and so on
as the first stage of a two-stage
tendering process. During the first
stage
of
tendering,
technical
discussions/presentations may be
held (keeping records of such
deliberations) with the short listed
manufacturers/suppliers, which are
prima facie considered technically
and financially capable of supplying
the material or executing the
proposed work, and associating other
stakeholders who could add value to
the decision making. One or more
acceptable technical solutions could
be decided upon laying down a
generic detailed specification in a
manner that is consistent with the
objectives of the transparent and
equitable procurement. Thereafter, the
second stage of tendering of calling
for techno commercial bids as per the
usual tendering system under single
bid or two-bid systems may be done.
ii) Procurement planning: Decision, specific

characteristics and contracting method,
agency responsible and so on
Packaging
and
bundling
of
requirement is done to avoid open
competition or reduce competition
Exceptions to an open bidding

process are abused, leading to single
source processes
Participation of relevant stakeholders

is limited, making it difficult to assess
the need and relevance of the
specification as they are being defined
Evaluation criteria are not set from

the beginning or are not objective,
thereby making them prone to being
abused
iii) Bidding process: Execution of bidding

process
Invitation to tender (an open bid) is

not well publicised, thereby restricting
the number of bidders that participate
When
short-lists
are
used,
companies bribe to be included or to
gain access to them
Invitation to tender is publicised but

very little time is given to present
offers, making it difficult for bidders
without prior knowledge of the
contract to present bids
Abuse of confidentiality or lack of

publicity creates unequal playing field
for bidders
In single-source processes, lack of

publicity or transparency leads to
unjustifiable decisions
Specifications involving samples:

Procurements should not be done
57
Bidders or contractors collude to

influence prices or to share the market
by artificially losing bids, or not
presenting offers
Involvement
of
agents
in
international contracts: Purchases
should preferably be made directly
from the manufacturers. Either the
agent on behalf of the foreign
principal or the foreign principal
itself can directly bid in a tender,
but not both. Further, an agent
participating in a tender on behalf of
one manufacturer, should not be
allowed to quote on behalf of another
manufacturer along with the first
manufacturer in a subsequent/parallel
tender for the same item
Tender negotiations: Normally, there

should be no post-tender negotiations.
In certain exceptional situations, for
example, procurement of proprietary
items; items with limited sources of
supply and items where there is
suspicion of a cartel formation;
negotiations may be held with L-1. In
case of L-1 backing out, there should
be re-tendering
Contract awards are not publicised

and, therefore, are not the grounds for
the decision
iv) Contract award: Decision is made to select

the winning bidder (in open bids) or the
contractor (in single-source processes)
Evaluation criteria are not clearly

stated in tender documents, leaving
no ground to justify the decision
Evaluation of bids is subjective or

leaves room for manipulation and
biased assessments
Independence and neutrality of TC

members: Tender Committee should
give an undertaking at the appropriate
time that none of them has any
personal interest in the companies/
agencies participating in the tender
process. Any member having interest
in any company should refrain from
participating in the Tender Committee
Points to Ponder!
Pre-qualification criteria in
bidding should be relevant to
quality requirements. They
should neither be very
stringent, nor very lax, to
restrict or facilitate the entry
of bidders.
v) Contract implementation and supervision:

The contract is signed with the selected
bidder or contractor
The criteria should be clear,

unambiguous, exhaustive yet
specific, and ensure fair
competition.
Pre-qualification
criteria:
Prequalification bidding has potential of
getting misused or being applied
without considering the restrictive
nature of competition. Pre-qualification
criteria should be relevant to the
quality requirements and should
neither be very stringent nor very lax
to restrict/facilitate the entry of
bidders. These criteria should be
clear, unambiguous, exhaustive and
yet specific. In addition, there should
be fair competition
Advance payments: Any mobilisation

or other advance payments should be
interest bearing and applicable only
for selected works. Terms of such
advances should be expressly stated in
the NIT/Bid documents. The advance
payment may be released in not less
than two stages depending upon the
progress of the work. In case of
machinery and equipment advance,
insurance and hypothecation to the
employer should be ensured. Advance
should be progressively adjusted
against bills cleared for payment.
Interest should be charged on delayed
recoveries. irrespective of the reason
stated. Subsequent instalments should
be released after getting satisfactory
58
jobs. The selection of consultants should

be made in a transparent manner through
competitive bidding. The scope of work
and role of consultants should be clearly
defined. There should be no major
deviation in the scope of work after the
contract is awarded. The role of the
consultants should be advisory and
recommendatory. The final authority and
responsibility should be with the
departmental officers only. The consultants/
firm hired to provide consulting services
for the preparation or implementation of a
project, and any of its affiliates, should be
disqualified from subsequently providing
goods or works or services related to the
initial assignment for the same project.
The payment clause should recognise that
a certain type of output, such as
Architectural Design of Four Hostel Blocks,
may be repetitive). That is, the same rate
for the first work (for example First Hostel
Block) need NOT be paid for mere repetition
of work involving a minor variation.
utilisation certificate from the

contractor for the earlier instalment. In
case of interest-free advance, recovery
should be time-based and not linked
with progress of work and if the contract
is terminated due to default of the
contractor, the mobilisation advance
would be deemed as interest bearing
advance at specified interest rate
Contract changes and renegotiations

after the award are of a nature that
changes the substance of the contract
itself
vii) Anti-competitive practices
Supervising agencies/individuals are

unduly influenced to alter the
contents of their reports; so changes
in quality, performance, equipment
and characteristics go unnoticed
Contractors claims are false or

inaccurate and are protected by those
in-charge of revising them
Subcontractors
and
partners,
chosen in a non-transparent way, are
unaccountable or are used to
channellise bribes
Another governance risk area in public

procurement involves anti-competitive
practices like bid rigging, collusion or
cartels occurring when bidders, that would
vi) Appointment of consultants

Appointment of consultants should be
absolutely need-based and for only specialised
Mandatory!
The selection of consultants in
public procurement should be in
a transparent manner through
competitive bidding.
Their scope of work should also
be clearly defined.
59
Morals: Morals have a greater social
otherwise be expected to compete, secretly

conspire to frustrate buyers attempts to
get value-for-money in a bidding process.
Anti-competitive conspiracies can take
many forms. These strategies may result in
patterns that procurement officials can
detect. Therefore, steps can be taken to
thwart such attempts.
i)
relevance to values and tend to have a very

broad acceptance. They are far more about
good and bad than other values. We thus
judge others more strongly on morals than
values. Values and morals determine what is
right and what is wrong
Integrity: Adherence to moral and ethical

principles, soundness of moral character,
and honesty constitute integrity
Bid-coordination: The bidders collude

to quote same or similar rates that
are much higher than the reasonable
price to force the buyer to settle the
procurement at exorbitant prices.
Ethics:
These refer to well-founded

standards of right and wrong that prescribe
what humans ought to do, usually in terms
of rights, obligations, benefits to society,
fairness, or specific virtues. Thus, integrity
and ethics are values and morals in action
ii) Cover bidding: Cover bidding is

designed to give the appearance of
genuine competition by way of
supporting bids for the leading
bid-rigger.
Codes and Laws: The difference between

codes and ethics is that codes have
punitive elements and ethics have only
consequences by way of social disapproval.
Laws determine whether an act is
permissible and if not what should be its
punishment
iii) Bid suppression: Bid suppression

means that a company does not
submit a bid for final consideration in
support of leading bid-rigger.
iv) Bid
rotation:
In
bid-rotation
schemes, conspiring firms continue to
bid, but they agree to take turns
being the winning (or the lowest
qualifying) bidder in a group of
tenders of similar nature.
Corrupt Practice: It refers to the offering,

giving, receiving, or soliciting, directly or
indirectly, at any stage, of anything of value
to influence the action of a public official
in the procurement process or in contract
execution
v) Market
allocation:
Competitors
carve up the market and agree not
to give competitive bids for certain
customers or in certain geographic
areas.
REVIEW OF KEYWORDS
CONCEPTS
Fraudulent
Practice:
It
means
a
misrepresentation or omission of facts,
directly or indirectly, at any stage, in order
to influence a procurement process or the
execution of a contract
Collusive Practice: It refers to a scheme or

arrangement, directly or indirectly, at any
stage, between two or more bidders, with or
without the knowledge of the purchaser,
designed to establish bid prices at artificial,
non-competitive levels
AND
Values: These are things that are important

to or valued by an individual or the society.
Values are the rules based on which we take
decisions about right and wrong, should
and shouldnt do, and good or bad. They
also tell us which things are more or less
important, which are useful and when do we
have to trade off meeting one value over
another
Coercive Practice: It means harming or

threatening to harm, directly or indirectly,
at any stage, persons or their property to
influence their participation in the
procurement process or affect the execution
of a contract
60
Conflict of Interest: It means a bidding

firm or any affiliate is either involved in
the Consultancy Contract to which this
procurement is linked; or if they are part of
more than one bid in the procurement; or if
their personnel have relationship with any
of the procuring organisations personnel
involved in the procurement process at any
stage
Obstructive Practice: It refers to: (i)

deliberately destroying, falsifying, altering
or concealing of evidence material to the
investigation or making false statements to
investigators in order to materially impede
the purchasing organisations investigation
into allegations of above mentioned
unethical practices; and/or threatening,
harassing or intimidating any party to
prevent it from disclosing its knowledge of
matters relevant to the investigation or
from pursuing the investigation, or (ii) acts
intended to materially impede the exercise
of the banks contractual rights of audit or
access to information
1.
Discuss in a group your perception of

differences between Values; Morals; Ethics;
Codes of Profession and Laws. Apply such
discussions to recently well-known scams in
public procurement.
2.
Discuss in a group, the negative impact of

these scams on the society and country.
3.
Categorise misdemeanours in such scams

under:
a) Corruption
b) Fraud
c) Collusion/Conspiracy
d) Coercion
e) Obstruction of investigation
f) Conflict of interest
4.
Governance
Risk Areas in Public

Procurement: Governance risks are different
at different stages of public procurement
like: Need assessment; Development of
specifications; Procurement plans; Bidding
process and Evaluation of bids; Contract
execution; Appointment of consultants and
Anti-Competitive practices
Governance risks in public procurement

after a tender is floated, evaluated and
awarded are well-known. There are risks
that are more severe in the following
stages:
a) Need assessment before preparing the
proposal/requisition/indent for goods/
works or services
b) Procurement planning in procurement
office after receipt of such indent and
before floating the tender
Anti-Competitive
Practices:
Anticompetitive practices like bid rigging,
collusion or formation of cartels when
bidders, who would otherwise be expected
to compete, secretly conspire to frustrate
the buyers attempts to get value-for-money
in a bidding process
c) Contract implementation and supervision

Discuss these risks and the means of
avoiding them in your context.
61
Unit 2
Prevention of Corruption in Public

Procurement
LEARNING OUTCOMES
Describe the important CVC Guidelines
Describe the various types of anti-competitive behaviours
and how to checkmate them
Describe how to leverage Information Technology as a
tool to reduce corruption
2.1
Corruption
2.2
Based on James S Nyes definition,

Corruption is behaviour, which deviates from the
normal duties of public role because of personal
gains (personal, close, private clique), pecuniary
or status; violates rules against certain types of
personal gains. This includes such behaviour
as bribery (use of reward to prevent the judgement
of a person in position of trust), nepotism
(bestowing of a patronage by reason of
relationship rather than merit) and misappropriation (illegal appropriation of public
resource for private uses) (James S Nye in
Heidenheimer, 1970: 566-567). It broadly refers to
abuse of public office for personal gain.
Negative Impact of
Corruption on
Society
Corruption has multi-dimensional effects on

the political, economic, social and environmental
fronts. In political sphere, corruption impedes
democracy and the rule of law. In a democratic
system, public institutions and offices may lose
their legitimacy when they misuse their power for
private interest. Corruption may also result in
negative consequences, such as encouraging
cynicism and reducing interest in political
participation, political instability, reducing
political competition, reducing the transparency of
political decision making, distorting political
development and sustaining political activity
based on patronage, nepotism and money, among
others.
In our society, the impact of corruption is
often manifested through political intolerance,
problems of accountability and transparency to
the public, low level of democratic culture, with
no principles of consultation and participatory
dialogue, among others.
62
The economic effects of corruption can be

categorised as minor and major. However, both in
one way or the other; have serious impact on the
individual community and country. First and
foremost, corruption leads to the depletion of
national wealth. It is often responsible for
increased costs of goods and services, the
funnelling of scarce public resources to
uneconomic high profile projects at the expense
of the much needed projects such as schools,
hospitals and roads, or the supply of potable
water. It also leads to diversion and misallocation
of resources, conversion of public wealth to
private and personal property, inflation,
imbalanced economic development, weakening
work ethics and professionalism, hindrance of
development of fair market structures and
unhealthy
competition,
thereby
deterring
competition. Large scale corruption damages the
economy and impoverishes entire population.
2.3
Prevention of Corruption
Fighting corruption requires a multi-pronged

strategy. A comprehensive system for preventing
corruption would consist of:
2.3.1
Codes of Conduct/Ethics for

Public Servants including
Elected Representatives
We have discussed the relative roles of

values, morals, integrity, ethics, codes and laws in
ensuring ethical behaviours. A clear enunciation of
Ethical Standards and Codes of Conduct for Public
Servants in general and Public Procurement
Executives in particular is a basic requirement for
preventing corruption. Conflict of interest code
and post-employment code usually form part of
such codes of conduct. Although codes of conduct
are laid down for their Government Servants,
a separate code of conduct particularly for
Procurement Executives needs to be enunciated in
the Procurement Law of the country.
In social sphere, corruption discourages

people from working together for the common
good. Frustration and general apathy among
the public result in a weak civil society.
Demanding and paying bribes becomes the
tradition. It also results in social inequality and
widened gap between the rich and poor, civil
strife, increased poverty, jealousy, hatred and
insecurity, and lack of basic needs like food, water
and drugs.
2.3.2
Transparency Systems
Public procurement regime in a country

is best founded in a Public Procurement Law.
In a Nutshell
Corruption discourages people
from working together for the
common good. Frustration and
general apathy, thereby, result
in a weak civil society.
Demanding and paying bribes
becomes the tradition.
63
Public Procurement Executives is also desirable.

Usually such issues are tackled in Public
Procurement Law. But, most countries lack
institutions
dedicated
to
training
and
professionalisation of public procurement.
Public procurement laws have been passed in

Afghanistan, Bangladesh, Nepal and Pakistan.
In Bhutan, Maldives and Sri Lanka, public
procurement is still governed by regulations
and guidelines. In India, except for two states,
public procurement at the Union level and in most
States is regulated by General Financial Rules,
although Public Procurement Bill, 2012 is under
consideration of the Parliament.
2.3.4
Apart from the Public Procurement Law,

there is still a need for Rules and Manuals of
Procedures for Transparent Public Procurement.
Most of the countries do have such rules/
regulations with varying levels of alignment with
international best practices. Such laws, rule or
manuals should ensure that the decision making
system is transparent and publicised.
In the last unit, we have seen that there

may be instances when a Public Procurement
Executive is required to go beyond normal bounds
of official secrecy to highlight serious governance
issues for redressal. Such an action is fraught with
dangers for the whistleblower. Therefore, there is a
need to provide hotlines and helplines for
whistleblowers in vigilance organisations. There
is also a need for Whistleblower Protection
Law. While such laws do not yet exist, The
Whistleblowers Protection Bill, 2011, is under
consideration of the Upper House in India.
To eliminate secrecy, its necessary to have

a Right to (freedom of) Information Law in the
Country. India (2006) and Pakistan (2013) have
already promulgated such Act and Bangladesh has
promulgated an Ordinance (2008).
Since public procurement is but a part of a
larger Governance Process, ensuring transparency
may have to go beyond the public procurement
regime. Some of the following steps for ensuring
transparency go beyond such boundaries:
2.3.5
i) Simplification of administrative procedures
make
iv) Reforms in monetary system to eliminate

black economy/large cash transactions
v) Clear demarcation of public and private
domains for public servants
vi) Financial or
declaration
2.3.3
interest
Grievance Redressal
Framework Against Arbitrary
Exercise of Powers by Public
Servants
Any bidder, who claims to have suffered,

or may suffer loss or injury due to a manner in
which procurement has been conducted by the
procurement organisation should be able to seek
review. However, the review should not be later
than the specified time (say 10 days) from
publishing of the notice announcing the Award
of Contract.
ii) Deletion of redundant over-regulation laws,

permits, procedures
iii) Reforms in political system to
monetary contributions transparent
Whistleblower Hotlines and

Helplines Protection of
Witnesses and
Whistleblowers
However, the following are excluded from

review:
disclosure/asset
Competency and Training

Systems
Lack of training and competency is one of

the main reasons for poor governance in public
procurement. In this context, certification for
Selection of procurement method
Choice of selection procedure
Issues related to ambiguity in contract

terms may not be taken up after a contract
has been signed. All such issues should be
highlighted before consummation of the
contract by the supplier
64
Complaints against specifications are

provided under the premise that they are
either vague or too specific so as to limit
competition, may be permissible
Transparency International is also an effort in this

direction. It provides a framework, wherein
corporate bidders get bound by a legal document
with punitive measures to eschew corruption and
anti-competition.
Other cases include unethical behaviour on

the part of any Executive of the Procurement Agency
who is connected with any stage of procurement.
2.3.7
It is also salutary to have an independent

Grievance Redressal Mechanism. Normally, Public
Procurement Laws lay down a two-tier or threetier grievance redressal mechanism.
Laws Relating to Control and Enforcement

of Anti-Corruption: Laws relating to investigation
and prosecution for corrupt behaviour by a Public
Servant or other stakeholders may consist of:
Remember!
a) Countrys Penal and Criminal Procedure

Codes
Any bidder who may suffer

loss or injury due to the
manner in which procurement
has been conducted by the
procurement organisation
may seek review, but within
10 days from publishing the
notice announcing the Award
of Contract.
2.3.6
Control/Enforcement
b) Public Procurement Law

c) Anti-Corruption Law: Many countries have
enacted specific laws in this regard.
Bangladesh, Pakistan and India have the
Prevention of Corruption Acts. Bhutan has
the Anti-Corruption Act 2011.
Corporate Ethical
Commitment Against
Corruption
Without a proactive ethical commitment

by the corporate sector against corruption,
fight against corruption may not go very far.
Industry associations should thus encourage
corporate sector to develop and adopt ethical
self-regulatory standards against corruption in
public procurement. Integrity Pact developed by
65
Investigation and Prosecution Agencies:

Although it is desirable to have an integrated
agency for investigation and prosecution of
corrupt people, most of the countries have a
plethora of such agencies with overlapping
jurisdictions. These agencies may be:
Lanka)
Anti-Corruption
Commissions
have been created by enacting suitable
legislations to carry out investigations
and prosecutions in case of Corruption.
Such organisations are known as National
Accountability Bureau in Pakistan (created
under National Accountability Ordinance,
1999). In India and Afghanistan these are
called Central Vigilance Commission. These
agencies inquire or cause an inquiry or
investigation to be made either on a
reference made by the Government or on its
own volition. It reviews the progress of
penal actions or prosecutions ordered by it
after such investigations. Most of these
agencies also carry out preventive checks
and system audits. There is provision of
placement of an annual report of such anticorruption agencies in the Parliament. In
many countries, such agencies are hampered
in their fight against corruption, since they
do not have authority of police to arrest,
seize properties or enforce compliance
from non-government agencies. Such tasks
are normally carried out by special police
bureaus as Criminal Investigation Bureau
(CBI) in India.
a) Ombudsmen: Some countries have such

Ombudsmen Institutions at national or
provincial levels. These institutions have a
large degree of independence and statutory
status. In India a Lokpal and Lokayuktas
Act, 2014 has been recently passed to
create such an institution, though with
restricted scope.
b) Public Finance Audit Agencies: Such

agencies are known as Auditor General in
Sri Lanka and Pakistan and Comptroller and
Auditor General in India and Bangladesh.
Role of such agencies is to audit all receipts
and expenditure of the National and
Provincial Governments, including those of
bodies
and
authorities
substantially
financed by the government. His/her duty is
to uphold the constitution of the country
and laws of the Parliament in the field of
financial administration. Since public
procurement forms a major part of the
Government expenditure, such audits cover
all aspects of this function. The reports of
these auditors are taken into consideration
by the Parliament. Investigations by such
institutions are normally restricted to the
examination of documents and no punitive
powers are given to them.
d) Chief Vigilance Officer

Procurement Organisations
c) Anti-Corruption Commissions: In some

countries (Bhutan, Bangladesh and Sri
e) NGOs, Media and Civil Society: NonGovernment Organisations, Media and Civil
(CVO)
in
CEOs
and
Heads
of
procurement
Organisations
have
the
primary
responsibility for maintenance of purity,
integrity and efficiency in their respective
organisations. These authorities are assisted
by an officer called the Chief Vigilance
Officer (CVO) in the discharge of vigilance
functions. The CVO acts as a special
assistant/advisor to the chief executive and
reports directly to him in all matters
relating to vigilance. As the head of the
Vigilance Division of the organisation
concerned, he serves as a link between his
organisation and the Anti-Corruption
Commission. The functions of CVOs can be
broadly divided into: (i) Preventive
vigilance; (ii) Punitive vigilance; and
(iii) Surveillance and detection.
66
Society play an educative, vigilant and

crusaders role in fight against corruption.
Enactment of Right to Information or
Ombudsmen legislation has happened as a
result of relentless campaign by such
institutions.
2.3.8
who will approve the final orders including the

period of the ban.
In a Nutshell
Banning or blacklisting of
any firm is a potent tool
for preventing corruption.
It restricts a firms right
to participate in public
procurement and is open
to judicial review.
Banning and Blacklisting of

Delinquent Firms
Banning/blacklisting of any firm is a potent

tool for preventing corruption. Since, it restricts a
firms right to participate in public procurement
it is open to judicial review. Hence, it should be
done in a manner that will stand scrutiny in a
Court of Law. The banning of business could be of
three types, namely:
2.4
Fighting Anti-Competitive
Practices
Many countries have enacted Fair

Competition Laws to make such anti-competitive
behaviour as a criminal offence. Nepal (2006),
India (2002/2007), Pakistan (2010) and
Bangladesh (2007) already have Competition Act.
Such an Act also provides for a Statutory Body
(Competition Commission) to investigate or
adjudicate and punish for any violation.
i) Banning confined to a public sector firm or

any autonomous public body;
ii) Banning confined to one ministry; and
iii) Banning to be implemented by all ministries;
The proceedings are to be conducted by a
Reviewing Officer (RO) at the respective level.
Being a quasi judicial process, the firm has to be
afforded adequate opportunity to represent
its case. The firm has to be provided sufficient
ground and documents on which the proposed
proposal to ban is based. It may be given
sufficient time to submit a written response. It
should also be afforded opportunity to present
its case in person before the RO, in addition to
written submission. After the written and oral
submissions, the RO may prepare a written report
for approval by the Nominated Banning Authority
2.4.1
Checkmating Anti-Competitive
Practices
There are some characteristics which

facilitate collusion. Based on the characteristics
that facilitate collusion, buyer can devise
strategies to deny any advantage to such bidders:
a) Lack of Buyers Awareness of the Market
Realities:
Buyers should carry out need assessment and procurement planning phase
67
during
which
the
choices
of
specifications choices are made with
an eye on market characteristics, likely
level of competition and procurement
risks involved.
d) Stability of Demand and Packaging:
Implement a regular training program

on bid rigging and cartel detection
for your staff, with the help of the
competition agency or external legal
consultants.
Reconsider packaging and bundling of

requirements. Whenever possible, allow
bids on certain lots or objects within
the contract, or on combinations
thereof, rather than bids on the whole
contract only.
Avoid any kind of preferential treatment
for a certain class, or type of suppliers.
Do not favour incumbents.
c) Undifferentiated Specifications: Identical

or simple requirements; with little or no
technological change and few, if any,
substitutes make it is easier for firms to
reach an agreement and maintain that
agreement over time.
Avoid predictability in your contract

requirements regarding the size and
timing of tenders.
e) Procedural Opportunities for Collusion:
b) Lack of Free Competition: Small number of

bidding firms makes it easy for bidders to
reach an agreement on how to rig bids.
Protective Entry Barrier helps support
bid-rigging efforts.
Avoid unnecessary restrictions that
may reduce the number of qualified
bidders. Reduce constraints on foreign
participation in procurement whenever
possible. Do not over-emphasise the
importance of performance records.
Whenever possible, consider other
relevant experience.
Avoid large monetary guarantees from
bidders and reduce the preparation
costs of the bid.
Define your specifications allowing

for substitute products or in terms
of
functional
performance
and
requirements whenever possible
Use performance specifications and

state what is actually required,
rather than providing a product
description. This demands specification
differentiation
Avoid packaging contracts with almost

identical values that can be easily
shared among competitors.
Do not disclose or unnecessarily limit

the number of bidders in the bidding
process.
Use post-qualification to avoid collusive

practices among a pre-qualified group.
Avoid a very long period of time
between qualification and award, as
this may facilitate collusion.
Avoid bringing potential suppliers

together by holding regularly scheduled
pre-bid meetings. Open tenders enable
communication and signalling between
bidders by using electronic bidding or
allowing tender boxes in more than
one location.
Consider if procurement methods other

than single stage tenders such as,
negotiated tenders and framework
agreements can be used.
Include in the tender offer a warning

regarding the provisions in the bid
document and in the Competition Law
about the punitive measures for
anti-competitive practices. Consider
the aspect that makes it mandatory
for bidders to sign a Certificate of
Independent Bid Determination.
Ensure that bidders disclose upfront if

they intend to use subcontractors,
which can be a way to split the profits
among bid riggers.
As joint bids can be a way to split

profits among bid riggers, be
68
particularly vigilant about joint bids

by firms.
Avoid splitting contracts between

suppliers with identical bids.
Reserve the right not to award the

contract if it is suspected that the
bidding outcome is not competitive.
Undertake comparison checks between

lists of companies that have submitted
an expression of interest and
companies that have submitted bids
to identify possible trends such as
bid withdrawals and use of subcontractors. Conduct interviews with
vendors who no longer bid on tenders
and with unsuccessful vendors.
Establish a complaint mechanism for

firms to convey competition concerns.
For example, clearly identify the person
or the office to which complaints
must be submitted and provide their
contact details. In addition, ensure
an appropriate level of confidentiality.
Beware of using the services of

industry consultants to conduct the
tendering process, as they may have
established
working
relationships
with individual bidders. Instead, use
the consultants expertise to clearly
describe the criteria/specifications and
conduct the procurement process
in-house. Ensure that they sign
confidentiality agreements and they
are subject to a reporting requirement
if they become aware of improper
competitor behaviour or any potential
conflict of interest.
2.5
Leveraging Technology
Leveraging technology is an effective

tool in prevention of corruption. Information
Technology creates a virtual scenario where
processes
are
anonymous
and
without
intermediators (obviating a human interface),
available 24 7, irrespective of location.
Therefore, it can be a great tool to reduce
corruption. Various facets of IT relevant for
eGP are:
2.5.1
e-Governance
e-Governance is an effective tool in

reducing corruption. All the government
departments having public dealings with respect
to regulatory, enforcement and other functions
should upload the information pertaining to the
rules and procedures governing the issue of
licenses/permissions and others on their websites.
They should make available all the application
forms on the websites in a downloadable form
besides providing the status of individual
application on the organisations website. This
method has gone a long way in reducing
corruption at the public interface in many
countries.
2.5.2
e-Procurement
e-Procurement helps in reducing corruption

in the following ways:
Greater transparency and fair competition:

Bidders get access to all the bidding
opportunities. There is even a provision of
69
if e-payment is facilitated. Many e-payment systems

allow online submission of bills and also help the
user keep track of payment process.
sending alerts to the registered bidder on

SMS/email as and when a bid of his/her
interest is published. The information to all
the bidders is same as the bid documents
are downloadable and tamper-proof and the
bidders submissions are kept confidential
till bid-opening. Any corrigendum is
immediately available to all bidders. Bidders
need not come physically to drop their bids,
where they may face Mafias, Cartels and
Local Thugs. Bidders get the evaluation
summary immediately on bid-opening. Even
the progress of processing the procurement
can be viewed online.
Standardise procurement processes across

the organisation/Government
Uniformity of procurement processes, forms,

conditions of bid and contract is essential
for reducing corruption. This is achieved
through e-Procurement
Remember!
Industry consultants may have
established working
relationships with individual
bidders. Therefore, they should
not be hired to conduct the
tendering process.
REVIEW OF KEYWORDS
CONCEPTS
Corruption is abuse of public office for

personal gains
Effects of Corruption: Corruption has

multi-dimensional effects on the political,
economic, social and environmental fronts.
In political sphere, corruption impedes
democracy and the rule of law. In the
economic sphere, corruption leads to the
depletion of national wealth. Moreover,
large scale corruption hurts the economy
and impoverishes the entire population. In
social sphere, corruption discourages people
from working together for the common good
Minimise
delays
and
human
capriciousness in tender processing:
Dilatory tactics are an important weapon
in the hands of corrupt officials.
e-Procurement helps in drastically cutting
procurement delays. Due to the automated
process, the chances of human errors
(deliberate or otherwise) are obviated. The
evaluation summary is automated and in
reverse auction, even evaluation is
automated, thus reducing human element.
2.5.3
AND
Prevention of Corruption requires multipronged strategies, such as laying down of

Codes of Conduct; Transparency Systems
(Public Procurement Law; Rules and Manuals
of Procedures; Right to Information Act;
and some measures, which go beyond the
public procurement regime); ensuring
Competency and Training; Whistle Blower
e-Payment
Payments are a great source of corruption.

Electronic Transfer of Payment (ECS, EFT and
RTGS) should be made mandatory. The contractor
need not physically go to the payment office
70
Protection; Grievance Redressal Mechanism;

Corporate Ethical Commitment; Control/
Enforcement of Anti-Corruption Activities
(Ombudsmen; Public Finance Auditing
Agencies; Anti-Corruption Commissions;
Departmental Vigilance Organisation; NGO,
Media and Civil Society) and Banning
Procedures
measures needed to prevent corruption.

Is it that some of the steps listed cannot
be implemented under the existing
circumstances?
3.
Anti-Competitive
Practices
requires devising procurement strategies to
deny any advantage to bidders contemplating
anti-competitive behaviour
Compare and contrast similarities and

differences in jurisdiction and impact
of various agencies for fighting corruption
as listed in this unit. Which agency has the
largest impact and which has the least?
4.
Go to the websites of various such agencies

and study their scope and activities.
Leveraging Information Technology is an
5.
Study the mechanism used for grievance

redressal in your organisation, as listed in
your bidding documents and website.
What additional measures would you
suggest to improve the image of your
organisation? In addition, study and find
out the:
a. Number of complaints received.
b. Average time taken to deal with these
complaints.
c. What is the area of procurement,
which attracts the maximum number
of complaints?
6.
Which situations give rise to anti-competitive

practices? How can we checkmate such
nefarious designs?
7.
How can technology help fight corruption?

Is your organisations website showing the
contact details of authorities to whom
vigilance complaints can be made? Try these
mobile numbers. Is it easy to get response
from these numbers?
8.
What are the plans of your organisation for

e-procurement and e-payment?
Fighting
effective tool in prevention of corruption
e-Governance involves replacing manual

interfaces by web-enabled interfaces for
regulatory, enforcement and other functions
of governance
e-Procurement is removal of manual interfaces

and paper documents by web-enabled
bidding and award of contract process
e-Payment:
Electronic payment system

directly releases payment through banks
1.
Study the various ill-effects of corruption

and rank the 3 effects that damage the
society the most.
2.
Relate the steps for prevention of

corruption listed in this module with the
steps taken in your country/organisation.
List the areas requiring further steps and
71

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MASSIVE OPEN ONLINE COURSE (MOOC)

World Bank Acknowledgements

India Country Director

Task Team Leader

A.K. Kalesh Kumar

Institutional Partner Members of the Charter

Administrative Staff College of India (ASCI),

Assam Institute of Management (AIM),

Mr. Arun Talwar, Mr. Saket Sharma

CUTS Institute for Regulation and Competition

Mr. G. Sreekumar, Mr. Manku

HLL Academy (HLL), Thiruvananthapuram.

Mr. Krishan Batra

Institute for Supply Management, India (ISM),

Indian Institute of Materials Management

Mr. V. K. Garg/Mr. Girish Bhatnagar Indian Railways Institute of Logistics and

National Institute of Finance Management

e-Learning Design, Development

C&K Management, Hyderabad, a TMI Group

WORLD BANK ACKNOWLEDGEMENTS .............................................................................. iii

MODULE 1 Introduction to Procurement and Public Procurement .................. 1

Introduction to Procurement and Public Procurement ...................................... 2

ORGANISATIONAL OBJECTIVES ............. 2

Role of Procurement in Organisational Objectives ......................................... 2

Strategic Importance of Procurement in the Organisation .............................. 3

Role of Public Procurement in an Organisation ............................................. 3

Strategic Importance of Public Procurement for the Government and

Public Procurement as an Integral Part of Public Financial Management

Basic Aims of Procurement the 5 Rs of Procurement ................................... 5

The Need for a Framework for Public Procurement ........................................ 7

Limitations in Public Procurement .............................................................. 7

REVIEW OF KEYWORDS AND CONCEPTS ........................................................................... 8

Management Concepts and Techniques............................................................ 9

Just-In-Time (JIT) ................................................................................. 12

MANAGEMENT CONCEPTS AND TECHNIQUES RELATING TO RIGHT QUALITY ..................................... 12

RIGHT SOURCE GAME THEORY ...................... 15

Theories of Competition: Game Theory ...................................................... 15

REVIEW OF KEYWORDS AND CONCEPTS ......................................................................... 17

MODULE 4 Public Procurement Operations .................................................19

Planning for Procurement .............................................................................20

Introduction to Procurement Operations ................................................... 20

REVIEW OF KEYWORDS AND CONCEPTS ......................................................................... 26

Bidding and Evaluation .................................................................................28

Standard Bidding Documents (SBD) .......................................................... 28

Securities to be Submitted by Bidders ...................................................... 30

Publication of Bids ................................................................................ 31

Clarification of Bidding Documents .......................................................... 31

Amendment of Bidding Documents ........................................................... 31

Modification; Alteration and Withdrawal of Bids ......................................... 32

Pre-Bid Conference ................................................................................ 32

Receipt and Custody of Bids .................................................................... 32

2.10 Procedures to be followed during Bid Opening ........................................... 33

2.12 Introduction to Bid Evaluation ................................................................ 34

2.21 Recommendations for Award of Contract ................................................... 39

2.27 Acknowledgement of Contract by Successful Bidder and Execution ................ 41

Management of Public Procurement Operations ..............................................43

Organisation of Public Procurement Operations .......................................... 43

Procurement Agencies ............................................................................ 44

Roles, Responsibilities and Delegation of Procurement Powers ..................... 45

Committees: Many Committees Play a Key Role in Procurement Operations .... 46

Time Limit for Procurement and Accountability .......................................... 47

Record Keeping and Management Reporting .............................................. 48