Public Procurement & Government Contracts 2022 Comparisons

Procurement via government contracts is governed by several administrative guidelines/directives (Administrative Guidelines), which are followed by all central government ministries/departments and its attached and/or subordinate bodies (Entities) as a set of guiding regulatory principles to conduct their respective procurement processes. These Administrative Guidelines include the following, amongst others:

• the General Financial Rules, 2017 (GFR) issued by the Department of Expenditure (DoE) of the Ministry of Finance;
• the Manual for Procurement of Works, 2019 (Works Manual) issued by the DoE of the Ministry of Finance;
• the Manual for Procurement of Goods, 2017 (Goods Manual) issued by the DoE of the Ministry of Finance;
• the Manual for Procurement of Consultancy and Other Services, 2017 (Consultancy Manual) issued by the DoE of the Ministry of Finance;
• the General Instructions on Procurement and Project Management issued by the DoE, which essentially streamline the manner in which projects are awarded and implemented by public authorities and project executing agencies in India (General Instructions); and
• the Public Procurement (Preference to Make in India) Order, 2017 (Make in India Order) issued by the Department of Industrial Policy and Promotion of the Ministry of Commerce and Industry.

The Central Vigilance Commission (CVC) has also laid down recommendations for procurement processes, through its circulars, such as the adoption of integrity pacts in the bidding process by government departments/organisations. These recommendations are instrumental in securing the integrity and transparency in procurement.

Apart from the Administrative Guidelines, several departments/ministries have also formulated specific procurement policies/guidelines to govern their procurement, such as the Ministry of Defence’s Defence Acquisition Procedure, 2020. In addition, several state governments in India have formulated their respective financial rules and procurement legislation, which are followed by the corresponding state level ministries, departments and the attached/subordinate bodies – the Punjab Financial Rules, the Bihar Financial Rules, etc. In this regard, it is pertinent to note that this chapter deals with the procurement guidelines of central/federal government only, and not with state government procurement guidelines.

It must be noted that government procurement contracts are also subject to legislation such as the Constitution of India, the Indian Contract Act 1872, the Sale of Goods Act 1930, the Prevention of Corruption Act 1988, the Arbitration and Conciliation Act 1996, the Whistle Blowers Protection Act, 2011, etc. Furthermore, there are sector-specific statutes, rules and regulations that supplement the procurement process as provided under the Administrative Guidelines.

To maintain the highest level of transparency and uniformity, the Entities initiating the procurement process and the corresponding private counterparties who participate therein are subject to the Administrative Guidelines.

Types of Government Contracts

The following types of government contracts are subject to the Administrative Guidelines:

• contracts for the procurement of goods;
• contracts for the procurement of works; and
• contracts for the procurement of services.

These types can be further sub-divided into the following specialised forms of contracts as per the objectives of the procuring authority and the corresponding project requirements:

• public-private partnership agreements (PPP) (which further include agreements based on the selection of the relevant PPP model, such as build-operate-transfer, build-own-operate-transfer, design-build-finance-operate-transfer, etc);
• operation and maintenance agreements;
• engineering, procurement and construction agreements;
• works contracts, etc.

Minimum Threshold Values

Minimum threshold values are assigned to procurement contracts, as follows.

• In relation to the procurement of goods up to INR 250,000, only a purchase order may be required to be executed by the procuring entity.
• Procurements of works costing between INR 500,000 and INR3 million are to be carried out through open tenders, whereas limited tenders are to be floated for procurements below INR 500,000.
• The procurement of goods having an estimated value of less than INR 25,000 can be exercised directly – i.e, without any invitation to bid. Procurements between INR 25,000 and INR2.5 million shall be subject to the recommendation of the local purchase committee prior to the execution of the purchase order. In relation to the procurement of goods with an estimated value of INR 2.5 million and above, the procuring entity may either float tenders by advertisement or opt for a limited tender. Lastly, a two-bid system shall be followed for high-value procurements of a complex and technical nature.

• In relation to direct online purchases through the Government e-Marketplace (GeM), the following applies:
1. for procurements up to INR 50,000, the Entities may procure from available suppliers;
2. for procurements of between INR 50,000 and INR 3 million, the Entities may procure from a cohort of at least three suppliers offering the lowest price; and
3. for procurements above INR 3 million, the Entities may directly procure through a supplier quoting the lowest price and meeting the requisite quality, specification and delivery period.
• In relation to the procurement of goods above INR 2 billion, the DoE has prescribed that a global tender enquiry (GTE) may only be floated subject to prior approval from the competent authorities concerned. For the procurement of certain goods and services, the GTE can be issued for tenders of less than INR 2 billion.

Procurement is classified into three categories:

• local/domestic tenders are generally floated for procurements of goods and works with a value below INR2 billion, and are only open to Indian domestic players;
• limited tenders are open to only those entities who are on the list of registered suppliers of goods; and
• GTEs are open to all, including players from foreign countries, albeit subject to several restrictions. In addition to the threshold restriction as stated above, the DoE has imposed restrictions on procurement from countries that share land borders with India on grounds of defence and national security. Bidders from such countries are required to obtain the necessary registration/clearances from the competent Indian authorities in order to be eligible to participate in the procurement process.

The key obligations pertaining to public procurement include the following:

• all procurements must be done in a transparent, competitive and fair manner, to secure the best value for money;
• the text of the bidding document should be self-contained and comprehensive, without any ambiguities. In this regard, the bidding documents must contain a description of the procurement, the eligibility criteria, details of the procedure, the bidding parameters, any special terms of performance, the essential terms of the contract, the terms for non-responsive bids, etc;
• technical specifications, to the extent practicable, must be based on national technical regulations or recognised national/international standards;
• purchases must not be made beyond the requirement, to avoid inventory carrying costs;
• the procuring authority must record the considerations weighed in during the procurement procedure at every stage;
• the complete procurement schedule must be published when the tender is issued;
• bidding documents must include specific provisions for the settlement of any disputes arising out of the resultant contract;
• the bidding documents must provide clarity, to allow bidders to submit meaningful bids;
• a provision for a pre-bid conference must be provided in the case of turnkey contracts or special forms of contracts for procurement;
• bidders are not to be permitted to modify their bids;
• negotiation with bidders after bid opening is generally not allowed;
• the selection of the bidder should be based on the corresponding lowest bid, and in terms of the bidding documents and extant directives in this regard;
• the name of the successful bidder is to be mentioned on the Central Public Procurement Portal (CPPP);
• the procurement process may be considered valid even when only one bid is submitted, subject to conditions; and
• when a limited or open tender results in only one effective offer, it shall be treated as a single tender contract.

In India, the Administrative Guidelines mandate the prior advertisement of regulated contract award procedures: all Entities must publish the details of the tender enquiries and of the tender process on the CPPP (www.eprocure.gov.in).

All relevant information relating to the goods, works or services to be procured is required to be mentioned in the advertisement – i.e, tender fee, contract value, scope of contract, period of contract and the relevant technical, financial and commercial terms of the contract. However, for cases where confidentiality is required due to national security, the requirement of mandatory e-publishing is exempted, subject to approval from the competent authority.

In India, it is customary for the awarding authority to carry out a preliminary market review consultation before launching a contract award procedure, especially for projects that will have a considerable market impact. The awarding authorities prepare a feasibility study/preliminary project report to present before the designated competent authority in relation to an overall assessment of the project, the examination of challenges and mitigation measures, etc. Based on the approval of the designated competent authority and the viability of the project, a detailed project report may also be prepared by the awarding authority for special projects such as PPP projects and projects above a certain threshold value, as determined by the awarding authority.

Modes of Tender Procedure

Advertised tender enquiry

Advertised tender enquiries are floated for the procurement of goods valued at INR2.5 million and above, and are advertised on the CPPP and the GeM. The procuring entity is also required to advertise such tender enquiries on its own website. In this regard, the bid due date is a minimum of three weeks for domestic procurements only, and four weeks for domestic and foreign procurements.

Limited tender enquiry

In the case of limited tenders, the tender documents are sent directly to the registered suppliers. In this regard, there must be at least three such suppliers, and sufficient time must be accorded for the submission of bids.

Two-stage bidding

A two-stage bidding process consists of:

• the technical bid, which includes all the technical details along with the commercial terms and conditions; and
• the financial bid indicating the price of the items mentioned in the technical bid.

The technical bids are opened and evaluated first, and then the financial bids of the bidders qualifying in such technical evaluation are opened. Two-stage biddings can be in the form of a single-stage two-envelope process, or a two-stage two-envelope process.

Single tender enquiry

In single tender enquiries, the procurement is sourced from a particular supplier only due to the standardisation of the goods, the expertise of the supplier, cases of emergency, etc. A proprietary article certificate is required to be provided by the procuring entity.

Electronic reverse auction

In an electronic reverse auction, an online real-time purchasing technique is required to be utilised for the selection of the successful bidder. This method of procurement is utilised if:

• it is feasible for the procuring entity to formulate a detailed description of the procuring matter;
• there is a competitive market of bidders; and
• the evaluation criteria are quantifiable.

Swiss challenge

The Swiss challenge method of public procurement is also encouraged in India. In this method, an interested entity submits a suo moto proposal to the government for carrying out a certain infrastructure project along with necessary details pertaining thereto. Once submitted, the governmental entity invites other bidders to match the proposal, thereby initiating a competitive bidding process. If any bidder other than the original bidder provides a better proposal, the original bidder is given the right of first refusal, pursuant to which the project is then awarded to the bidder with the best proposal.

Further methods of procurements include the fixed budget-based selection for consultancy services, and the quality-cum-cost based selection for works and non-consultancy services.

Negotiation with Bidders

In India, negotiation with bidders after the opening of bidding is generally not allowed. However, in exceptional circumstances where price negotiation against an ad hoc procurement is necessary due to some unavoidable circumstances, negotiations may be resorted to with the lowest evaluated responsive bidder only.

The awarding authority may choose the procurement procedure. However, such procurement procedure shall be subject to any requisite conditions.

The Administrative Guidelines do not provide any specific period for the publication of any or all of the procurement documents. However, the model tender documents (i.e, the request for qualification and the request for proposal) provide a schedule for the bidding process, which must be adhered to by the bidders.

For example, the model request for proposal for public-private partnership projects (Model RFP) provides the following timelines:

• last date for receiving queries – 25 days from the date of the request for proposal;
• pre-bid meeting 1 – to be specified by the procuring entity;
• procuring entity response to queries – 35 days from the date of the request for proposal;
• pre-bid meeting 2 – to be specified by the procuring entity;
• bid due date – to be specified by the procuring entity;
• opening of bids – on bid due date (at least 45 days from the date of the request for proposal);
• letter of award (LOA) – within 30 days of the bid due date;
• validity of bids – within 120 days of bid due date; and
• signing of the concession agreement – within 30 days of the issuance of the LOA.

In India, the Administrative Guidelines do not mandate any time limit for the receipt of expressions of interest in a contract award procedure or the submission of tenders. The bidders are required to submit their expression of interest or tenders within the bid due date or application due date, as provided under the tender documents.

The Administrative Guidelines mandate that the bidding documents must prescribe the minimum eligibility criteria that must be fulfilled in order to be eligible to participate in the bid, and the criteria for the evaluation of the bids.

However, the specific criteria depend on the requirements of the project, which can be technical and financial in nature. The procuring entities are free to decide thereupon. Technical eligibility criteria may be requested in terms of a bidder's relevant experience in the sector in which the project is being developed. Under the financial eligibility criteria, the bidder may be required to demonstrate that its net worth or average annual turnover is above a certain threshold prescribed by the procuring entity. The bidding documents often provide that the bidder can rely upon the technical eligibility criteria and financial eligibility criteria of its associates or affiliates for qualification, subject to certain restrictions.

In India, it is possible to restrict participation in the procurement process to only a small number of qualified suppliers. In this regard, the Administrative Guidelines allow tendering to a limited number of registered suppliers through limited tender enquiries. The tender documents are sent directly to the registered and/or empanelled bidders, who are generally required to be registered in order to be eligible to participate in limited tender enquiries. Furthermore, the GFR state that the procuring entity needs to extend the bidding documents to at least three registered bidders in cases of limited tenders.

Apart from limited tenders, procurement can also be done through a single-tender enquiry subject to the standardisation of the goods, the expertise of supplier, cases of emergency, etc.

Bidders are evaluated according to technical and financial criteria, such as experience in past relevant projects, net worth, etc, and any other bidding parameters determined by the procuring entity.

All tender documents, including the request for qualification and the request for proposals, specify the technical and financial evaluation criteria upon which the bidders are evaluated. Depending on the bidding parameters involved, a bidder is selected and awarded the contract. This position is reflected in the Administrative Guidelines, which mandate that the bidding documents must disclose the criteria for eligibility and the criteria for the evaluation of bids in clear terms. This ensures the transparency of the procurement process, with a level playing field for all bidders.

The procuring entity is not obliged to notify its reasons for not selecting any interested parties in the contract award process under the tender documents. However, the Administrative Guidelines stipulate that the reasons for rejecting a bid or not issuing a tender document to a prospective bidder must be disclosed when enquiries are made by the bidder.

As per the GFR, the name of the successful bidder should be mentioned in the CPPP and on the websites, notice boards or bulletins of the relevant ministries or departments. In general, the time limit for notifying the name of the successful bidder is prescribed in the tender document, pursuant to which, generally, the procuring entity issues an LoA to such successful bidder. The contents of such LoA vary from procuring entity to procuring entity, depending on their requirements. Generally, the LoA provides the timelines for the execution of the contract, the submission of the performance bank guarantee/security deposit, the incorporation of the special purpose vehicle, etc.

The GFR provide that the contract should be executed within 21 days of the LoA being issued. However, the Model RFP provides the contract to be executed within a 30-day period from the date of the LoA. This standstill period varies from procuring entity to procuring entity, depending on the nature of the procurement.

While the Administrative Guidelines do not designate a competent authority to review an awarding authority’s decisions or government contracts, an aggrieved bidder may approach the relevant court to review the awarding authority’s decision and seek appropriate relief.

The scope of judicial review of an awarding authority’s decision to award contracts is very limited, with courts generally only exercising judicial review to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide actions of the procuring entity.

If there is a breach of the Administrative Guidelines, the aggrieved parties may either lodge a complaint with the grievance redressal cell of the procuring entity (if present) or approach the relevant courts for appropriate relief or remedy. Such relief may take the form of a review of the qualification criteria in the tendering process, the cancellation or suspension of the tender process, the issuing of fresh tenders, etc. However, as stated in 4.1 Responsibility for Review of the Awarding Authority's Decisions, judicial review of governmental tenders has a limited scope and is only undertaken in the event of arbitrariness, irrationality, unreasonableness, bias and mala fide actions of the procuring entity.

An aggrieved bidder may also approach the officials of the procuring entity, including the independent external monitor appointed under the extant CVC guidelines, for issues concerning the transparency and fairness of the procurement process.

For any material deviations from the tender conditions or gross violations of the fundamentals of the procurement process, the courts have implemented several interim measures, including suspension of the tender process until final adjudication.

As stated in 4.2 Remedies Available for Breach of Procurement Legislation, the aggrieved parties may approach the courts of the relevant jurisdiction to challenge the awarding authority’s decision and claim appropriate relief or remedy. However, judicial review of tenders has a limited scope in India and is only undertaken in the event of arbitrariness, irrationality, unreasonableness, bias and mala fide actions of the awarding authority.

Generally, bidders have challenged the awarding authority’s decision within the application due date or bid due date by invoking the writ jurisdiction of a High Court on grounds of arbitrariness, irrationality, unreasonableness, bias and mala fide actions of the awarding authority. However, the invocation of such writ jurisdiction should be exercised within a reasonable timeframe.

Based on the complexity of the claim, the tender requirements and the time sensitivity involved in the matter, proceedings before relevant courts can typically take between five and six months. However, this is based on the understanding that the grounds of such claims are clearly set out before the relevant court and the claimant has comprehensively satisfied the court as to its grievance.

In India, there is no central repository for cases in relation to procurement claims.

The costs involved in challenging an awarding authority’s decision may vary depending on the nature of the claims, the size and complexity of the project and various other factors, such as the seniority of the litigator appointed by the bidder.

Once a contract for the procurement of goods, works or services has been entered into, its terms cannot be materially varied, including the scope and specification thereof. However, if a material variation is unavoidable, the fiscal impact of such proposed amendment should be factored in, subject to approval by the competent authority. Once such approval is accorded, any modification must be made with the necessary amendment agreements to the original contract, which must be duly signed by all parties to the contract. Generally, standard forms of contract are adopted by the Entities, with such modifications as may be required for the specific procurement, subject to receiving the requisite financial and legal advice.

As per the Administrative Guidelines, the procuring entity may directly award a contract through single-tender enquiries in cases where only one particular firm manufactures the requisite goods, where goods will be sourced from a particular supplier due to the standardisation of the goods, and in cases of emergency where goods are to be procured from a particular source.

In the procurement of consultancy services, selection by direct negotiation or nomination is permissible for the following exceptional circumstances only:

• tasks that represent a natural continuation of previous work carried out by a firm;
• in case of an emergency situation;
• in situations where the execution of the assignment may involve the use of proprietary techniques;
• where only one consultant has the requisite expertise; and
• where adequate justification is available for such single-source selection in the context of the overall interest of the Entities.

The following orders/judgments are noteworthy.

• M/s N.G. Projects Limited v M/s Vinod Kumar Jain & Ors. (2022), wherein the Supreme Court upheld the principles of judicial review of government contracts. Taking cognisance of the facts, the Supreme Court observed that the construction of roads is an essential part of infrastructure development in a state, and thus any form of judicial intervention in matters relating to awarded contracts is unwarranted and may adversely affect the public interest. The judicial review of government contracts should be subject to inherent limitations, in the absence of which there can be needless interference from courts in commercial matters.
• GMR Airports Ltd. v MIHAN India Ltd. (2021), wherein the High Court of Bombay held that a bidding agency does not have the right to cancel the bid after the communication of its acceptance to the successful bidder.
• Southern Eastern Coalfield Ltd. & Ors. v M/s. S. Kumar’s Associates AKM (JV) (2021), wherein the Supreme Court clarified that, while a letter of intent is a mere indication of the parties’ intention to enter into a contract in future, it can be construed as a binding contract if a clear and unambiguous intention to be bound by it is evident from its terms.
• I.S. Enterprises v Jamia Millia Islamia and Anr. (2021), wherein the High Court of Delhi, quashing the tender process, directed that the price bid submitted should be reviewed given the discriminatory conduct of the procuring entity in evaluating the bids.
• Sabre Gibl Inc. v Air India Limited and Anr. (2021), wherein the High Court of Delhi, whilst refusing to set aside the award of a tender, held that judicial restraint must be exercised by the court in tender matters. It was further held that a court must be satisfied that some element of public interest exists in order to interfere in commercial transactions.

No major legislative amendments are currently under consideration. However, the government occasionally releases guidelines, notifications, orders and circulars to streamline the procurement process in India.