Advisor, IDS Cell1 NEGOTIATIONS G.C. Tallur (Former Secretary, PWD) Advisor, IDS Cell Monday, July 11, 2005

Advisor, IDS Cell2 NEGOTIATIONS  There were no guidelines for conducting negotiations.  KTPP Act-1999, Section 13, Sub para-3, provided for negotiations: “Provided further that Subject to such general or special order as may be issued by the Government from time to time, the Tender Accepting Authority may before passing order accepting a tender negotiate with lowest tenderer”  Tender Accepting Authorities (TAA) therefore sometimes carry out negotiations.

Advisor, IDS Cell3 NEGOTIATIONS (Contd…)  Free, fair & competitive tendering is the very essence of good procurement process.  Hence negotiation should not be resorted to, even with the lowest tenderer purely for reducing the rates.  Negotiating as a routine matter would vitiate competitive tendering & tenderers would resort to hike rates in anticipation of negotiations.  Negotiations cause delay & provide an avenue for corruption

Advisor, IDS Cell4 NEGOTIATIONS (Contd…)  Circular PWD 1359 SO/FC 2001 (P-2), dated has been issued containing guidelines to be followed for negotiations.  Failure to follow the guidelines can attract penalty as per Section 23 of the Act.  Penalty can be imprisonment for a term which may extend to 3years & fine which may extend to Rs. 5000/-

Advisor, IDS Cell5 Guidelines for negotiations for Works Contracts  Do not negotiate as a routine.  Negotiations are appropriate only in exceptional circumstances: i. Less than three bids indicating lack of competition. ii. Single bid iii. Suspected collusion iv. Lowest evaluated bid is substantially above the estimated cost.  Even in such exceptional cases the preferred option is rejection of all tenders & re-tendering.

Advisor, IDS Cell6 Guidelines for negotiations for Works Contracts (Contd…) Period of contract and provision of Price Adjustment Updated* Estimated cost of the Work Upto Rs. 20 lakhs Updated* Estimated cost of the Work Rs. 20 to Rs. 50 lakhs Updated* Estimated cost of the Work Rs. 50 lakhs & above (a) Contracts where price adjustment is not provided 10% above the updated* estimate or Rs. 1 lakh whichever is more 10% above the updated* estimate (b) Contracts where price adjustment is provided from the date of opening the tenders Does not arise 5% above the updated* estimate or Rs. 5,00,000 which ever is more. *Estimate based on the current rates of labour and materials such as cement, steel & other key materials.  Where tendered amount is not “Substantially high” the Tender Accepting Authority shall accept the lowest evaluated, responsive tender only.

Advisor, IDS Cell7 “Substantially high” tenders  The Tender Scrutiny Committee / Evaluating officer shall: i. identify the items which are high ii. get the break-up of rates from the lowest evaluated, responsive tenderer. iii. make a thorough examination of the reasonableness.  If the Tender Scrutiny Committee / Evaluating Officer is satisfied with the Tenderer’s explanation it shall recommend for tender acceptance.

Advisor, IDS Cell8 “Substantially high” tenders (Contd…)  In other ‘exceptional cases’ (except those that are considered ‘Substantially high”): - The Tender Scrutiny Committee (TSC) / Tender Evaluating Officer (TEO) shall examine all causes that my lead to rejection of all tenders and recommend for rejection to the Tender Accepting Authority and to re-invite fresh tenders - The Tender Scrutiny Committee (TSC) / Tender Evaluating Officer (TEO), in such a case, can also propose necessary changes needed in the estimated cost, specifications, Special Conditions of Contract or packaging before re-inviting tenders.

Advisor, IDS Cell9 Re-inviting tenders  Tender Accepting Authority (TAA) shall pass order for re-tendering with changes if any in the tender documents.  Pre-tender conference shall be held to explain: Qualification Criteria Specification Conditions of Contract Any reservation of prospective tenderers.  Reservations of the prospective tenderers shall be studied & modifications if needed in the bidding documents shall be made.  The works shall thereafter be re-tendered.

Advisor, IDS Cell10 Negotiations in all ‘Exceptional Cases’  In cases where the Tender Scrutiny Committee / Evaluating Officer decides it in favour of negotiation in all “exceptional cases” he shall obtain approval of the Tender Acceptance Authority giving reasons and the points on which negotiations are proposed.  Tender Accepting Authority shall examine the proposal thoroughly & approve the points of negotiations: Change in scope Specifications Packaging etc.

Advisor, IDS Cell11 “Negotiating Committee” (NC)  Tender Accepting Authority shall appoint a “Negotiating Committee” consisting of: Tender Inviting Authority (TIA) A representative of the Tender Scrutiny Committee / Evaluating Officer A representative of the Tender Accepting Authority  The NC shall conduct negotiations.  The NC shall keep record of proceedings of negotiations.  The NC shall submit the proceedings to the Tender Accepting Authority for taking decision  If Negotiations are successful & the TAA accepts the recommendations of the Committee Tender is accepted at negotiated rates / terms.  Contract is accordingly concluded.

Advisor, IDS Cell12 If Negotiations fail  TAA shall issue orders on the future course of action to be taken by the TIA.  This may include adoption of revised procurement strategy like: Repackaging Execution by departmental forces / facilities etc.

Advisor, IDS Cell13 Procurement of Goods  There are no schedule of rates for goods / equipments unlike for works.  Rates for equipments / goods vary widely according to the functional requirements, quality & specifications.  Award should therefore be made to the tenderer: i. who is technically & commercially responsive ii. who meets the stipulated qualification criteria. iii.who is determined to perform the contract satisfactorily.

Advisor, IDS Cell14 Procurement of goods where rates are high If the tendered rates for goods are considered unreasonably high compared with the market rates for the same brand & specifications:  Negotiate with the lowest tenderer.  Follow all procedures as in case of works negotiations.  Here also the preferred option is rejection & re-tendering.

Advisor, IDS Cell15 Applicability of these guidelines  They apply to works / goods & not for Consultancy proposals.  Not applicable to tenders invited to fix rate contracts.  Apply to all Procurement Entities as per Section 2(d) of the KTPP Act, Chapter I’.  Not applicable to projects funded by IFA or covered by International Agreements for which funding agencies’ rules shall apply (KTPP Act Section 3)

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