NATIONAL SUMMIT ON PUBLIC PROCUREMENT 1 NATIONAL SUMMIT ON PUBLIC PROCUREMENT OVERVIEW ON GFR-2005 Presentation by: G A R Rao, Director (Finance) Mazagon Dock LTD.

EVOLUTIONARY PROCESS OF GENERAL FINANCIAL RULES 2 EVOLUTIONARY PROCESS OF GENERAL FINANCIAL RULES 1947 : IN THE FORM OF EXECUTIVE INSTRUCTIONS 1963 : THE COMPENDIUM OF EXECUTIVE INSTRUCTION MODIFIED AND GENERAL FINANCIAL RULES, 1963 WERE ISSUED. 1963 –JUN 05: GFR. 1963 SUPPLEMENTED BY GOVT. OF INDIA DECISIONS.TASK FORCE SET UP TO RECAST THE RULES, SINCE SOME OFTHESE HAD BECOME REDUNDANT. JUL 2005 : RULES RECAST AND ISSUED IN THE FORM OF GFR 2005.

THE TOPICS COVERED IN G.F.R. 2005 ARE SHOWN BELOW Relevant for Material Managers Chapter 6 Procurement of Goods and Services Chapter 1 : Introduction Chapter 2 : General System Of Financial Management Chapter 3 : Budget formulation and implementation Chapter 4 : Government Accounts Chapter 5 : Works Chapter 6 : Procurement of Goods and Services Chapter 7 : Inventory Management Chapter 8 : Contract Management Chapter 9 : Grants-in-Aid and Loans Chapter 10 : Budgeting and Accounting for Externally Aided Projects Chapter 11 : Government Guarantees Chapter 12 : Miscellaneous Subjects

GENERAL FINANCIAL RULES, 2005 4 GENERAL FINANCIAL RULES, 2005 Fundamental principles of Public Buying (Rule 137) “Every authority delegated with the financial powers of procuring goods in public interest shall have the responsibility and accountability to bring Efficiency,Economy and Transparency in matters relating to Public procurement and for fair and equitable treatment of suppliers and promotion of competition in public procurement.”

FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING (RULE 137) 5 FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING (RULE 137) The specification in terms of quality,type etc .,as also quantity of goods. Remove superfluous and non-essential features,which may result in unwarranted expenditure. Fair,transparent and reasonable procedure. Get satisfied that the selected offer adequately meets the requirement in all respects. Offer is reasonable and consistent with the quality required. Concerned procuring authority must place on record, in precise terms,the considerations which weighed with it while taking the procurement decision.

FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING 6 FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING RESPONSIBILITY AND ACCOUNTABILITY TO BRING EFFICIENCY ECONOMY TRANSPARENCY PROMOTION OF COMPETITION FAIR AND EQUITABLE TREATMENT OF SUPPLIERS RECORD THE CONSIDERATIONS FOR THE DECISION

POWER FOR PROCUREMENT OF GOODS Rule 140 : 7 GFR Equivalent Procedure in MDL The ministries or departments have been delegated full powers to make their own arrangement for procurement of Goods DGS &D Delegation of Powers for CFA Board of Directors Procurement SubCommittee(PSC) CMD Functional Director GGM,GM to the level of Manager

REGISTRATION OF SUPPLIERS(SR&R Dept) Rule 142: 8 GFR Equivalent Procedure in MDL Eligible &Capable suppliers Credentials verification. - Mfg. Capabilities - Quality Control System - Past Performance - After Sales Service - Financial Background Item-wise list of suppliers Registered for fixed period between(1-3 years) Suppliers willing to continue will have to apply for renewal. Vendor Rating -Mfg. Capabilities -Quality Control System -Past Performance After Sales Service - Financial Background Documents as per statutory requirement Site visits Product wise list of , Permanent and Temporary supplier Permanent vendors registered for 3 Yrs Suppliers willing to continue will have to apply for re-registration. Vendor Rating is done on basis of : Quality, Delivery, Services Where >80% is Very good < 40% is Unsatisfactory Yearly Vendors Meet

PURCHASE OF GOODS WITHOUT TENDERS 9 PURCHASE OF GOODS WITHOUT TENDERS PURCHASE OF GOODS WITHOUT TENDERS GFR Equivalent procedure in MDL Rule 145: Upto ` 15000/- on each occassion (Certificate to be recorded by Competent authority) Rule 146: >` 15000/- upto ` 1Lakh by 3 Members purchase committee Rule 147: Purchase of goods directely under rate contract(DGS&D) Emergency Cash Purchase for Projects : up to ` 10000 per item/service for projects Petty Cash Purchase: up to ` 20000 for petty miscellaneous items Per purchase. Delegated power upto ` 10 Lakhs Items covered under DGS&D

PURCHASE OF GOODS WITH TENDER 10 GFR Equivalent Procedure in MDL Rule 150: Advertised Tender Enquiry Subject to exemptions incorporated under Rules 151 and 154. (for the value above ` 25L) Rule 151: Limited Tender Enquiry. (upto ` 25L) No. of supplier more than Three Rule 154: Single Tender Enquiry Particular firm is the manufacturer of required goods In case of Emergency Web Tender - ` 5L to `25L Global/Press Tender- > ` 25L Upto ` 5L No of Supplier more than Five. Items Proprietery in nature (PAC) Customer instruction/Requirement Emergency Tender : Exigency due to operational or technical requirements CMD> `25L Director:Up to ` 25L Enquiry by Fax/E-mail/Courier/Speed Post TEF with essential conditions only.

CONTENTS OF BID DOCUMENT RULE 155: 11 GFR Equivalent Procedure in MDL Instruction to Bidders Condition of Contract Schedule of Requirement Specification and allied technical. Price schedule Contract form Other standard form if any. Tender enquiry form(TEF) Detail scope of supplies/work specification including Insp&QA requirement. Price bid format. Standard terms and condition(STACS) along with acceptance form. General terms and condition(GT&C) along with acceptance form. Shipping instruction Statutory Requirement Official Secret Act 1923 and Safety clause. Format for BG,SD,RTGS/NEFT,LC, BID BOND ,BG for advance payment etc.

ADVANCE PAYMENT TO SUPPLIER RULE 159: 12 GFR Equivalent Procedure of MDL Advance payment is demanded by supplier for maintenance contract Advance payment is demanded by Firms against turnkey contracts/High value/Overseas supplies Limit for Advance Payment a) 30% to Private firm b)40% State or Central Govt agency or PSU. c)Maintenance Contract,Amt not exceeding the Amt. Payable for six months. Upto ` 1Cr contract value - No advance payment. > ` 1Cr contract value – 15% interest bearing (PLR+2%) against BG equivalent to the amount.

Equivalent Procedure in MDL TRANPARENCY,COMPETITION,FAIRNESS AND ELIMIMNATION OF ARBITRARINESS IN PROCUREMENT PROCESS Rule 160: 13 GFR Equivalent Procedure in MDL Bidding document to be self –contained and comprehensive without any ambiguities Criteria for eligibility and qualification -Date ,place and time for sending/opening bids -Terms of delivery Suitable provision for settlement of dispute. Reasonable time for sending bids. The bids should be opened in public The specification of required goods should be clearly stated without any ambiguity . Draft of tender enquiry approved by HOD(C) Bid Rejection criteria is defined. Date ,place and time for sending/opening bids Terms of Delivery: -Indian :Free delivery at MDL - Overseas: FOB Indian arbitration and conciliation act 1996 Press Tender: 4 Wks,Web Tender : 3 Wks Limited :2 Wks for local bidder , Emergency : 1 Wk for local bidder Part I&II bids witnessed by the bidders Technical specification prepared by Design

Equivalent Procedure in MDL TRANPARENCY,COMPETITION,FAIRNESS AND ELIMIMNATION OF ARBITRARINESS IN PROCUREMENT PROCESS Rule 160: 14 GFR Equivalent Procedure in MDL In case of turn-key projects pre-bid conference to be indicated in bid,for clarifying issues/doubts. Criteria /Factors for evaluating the bids Received bids to be evaluated as per bidding documents. Bidders should not be allowed to alter/modify bids. Negotiation in exceptional circumstances. Contract should be awarded to lowest evaluated bidder Pre Bid may be scheduled as an exception rather than a rule to avoid cartel formation. Loading criteria towers deviation in delivery , warranty & payment terms are defined in bid documents Bid evaluated by designated technical Evaluation Committee Bidders cannot alter/modify bids. Based on specific reason and beyond wide variation in prices with approval of CFA Lowest Technically qualified bidder

Equivalent procedure in MDL EFFICIENCY,ECONOMY AND ACCOUNTABILITY IN PUBLIC PROCUREMENT SYSTEM Rule 161: 15 GFR Equivalent procedure in MDL Appropriate time frame of each stage of procurement should be prescribed to reduce delay. Placement of contract with in original validity of bids Rate contract system Techno-commercial scrutiny- 4 Wks Order Placement- 6 Wks after Techno-commercial clearance Overall time frame within validity period Coded items/Service/Maintenance Contract DGS&D contract with supplier consent

BUYER IN PRIVATE SECTOR 16 BUYER IN PRIVATE SECTOR Principles of Confidentiality Compliance with Statutory and Internal Audit Responsible to mainly Share Holders BUYER IN PUBLIC SECTOR Transperacy ,Non Discrimination & Equal Opportunity to all Rule based,Compliance with Government Audit(CAG) in addition to Statutory and internal Audit. Responsible to Public