Fundamental Principles of Public Procurement
The fundamental principles are primarily derived from the General Financial Rules (GFR), 2017, particularly Rule 144, and the Standards of Financial Propriety (Rule 21). Procuring authorities are responsible and accountable for abiding by these principles.
The key principles include:
- Efficiency, Economy, and Transparency: Every authority with financial powers for procuring goods in the public interest must ensure efficiency, economy, and transparency. All government purchases should be made in a transparent, competitive, and fair manner to secure the best value for money.
- Fair and Equitable Treatment of Suppliers: Suppliers must be treated fairly and equitably. This involves providing equal opportunities and avoiding discrimination.
- Promotion of Competition: Procurement procedures should promote competition by attracting the widest competition through optimal description of need, appropriate specifications, packaging of requirements, and selection of the suitable mode and tendering system. Procedures should not limit competition among bidders.
- Standards of Financial Propriety: Officers incurring or authorizing expenditure from public moneys must be guided by high standards of financial propriety. This involves exercising the same vigilance as a prudent person would with their own money, ensuring expenditure is not excessive, avoiding self-advantage, and ensuring expenditure is for valid claims or recognized policy/custom.
- Transparency Principle: This principle emphasizes simultaneous, symmetric, and unrestricted dissemination of information to likely bidders regarding opportunities, processes, and time limits. It requires consistency, predictability, clarity, openness, and equal opportunities, ensuring officers do only what is pre-declared and nothing that hasn’t been declared. Publishing relevant information on GeM and CPPP is part of this.
- Professionalism Principle: Procuring authorities are responsible and accountable for professionalism, economy, efficiency, effectiveness, and integrity. They must avoid wasteful, dilatory, and improper practices and ensure the methodology is reasonable and appropriate. Adhering to the Code of Integrity for Public Procurement (CIPP) is crucial.
- Broader Obligations Principle: Public procurement should facilitate broader government objectives and social policies, such as economic growth, supporting local industry (Make in India), Ease of Doing Business, and job creation, to the extent these are included in procurement guidelines. Compliance with other government policies (tax, environmental, accessibility) is also required.
- Extended Legal Responsibilities Principle: Procuring authorities must comply with additional legal obligations beyond mercantile laws, stemming from the Constitution (Fundamental Rights like equality and right to trade) and laws related to governance (RTI Act, Prevention of Corruption Act). Courts can exercise judicial review over public procurement decisions.
- Public Accountability Principle: Procuring authorities are accountable to various statutory and official bodies (Legislature, CVC, CAG, CBI) for individual transactions and overall outcomes. They must record considerations for decisions at each stage and preserve these records for scrutiny.
- Reasonable Price and Quality: The procuring authority must be satisfied that the selected offer adequately meets the requirement and that the price is reasonable and consistent with the quality required. The concept of “Value for Money” (VfM), considering total cost of ownership (including operation, maintenance, disposal) and non-price attributes, goes beyond just the initial price.
Public Procurement Process
The public procurement process, also referred to as the Public Procurement Cycle or Tender Process, extends from assessing the need to the award of the contract and subsequent contract management. The cycle typically involves the following stages:
- Need Assessment, Formulation of Specifications, and Procurement Planning:
- Procurement begins with identifying and assessing the need, usually based on an indent from the user department.
- Technical specifications are formulated to ensure Value for Money (VfM), a level playing field, and wide competition. Specifications should be objective, functional, generic, measurable, and avoid indicating specific brands.
- Cost estimation is worked out realistically and objectively.
- Annual Procurement Plans should be prepared and published.
- Decisions are made on reassessing quantity, packaging/slicing requirements (generally avoiding actions that limit competition or avoid higher authority sanction, but allowing exceptions for efficiency/economy/competition), determining limitations or preferences based on government policy, selecting the appropriate Tendering System (e.g., Single-Stage, Two-Stage, Reverse Auction) and Mode of Procurement (e.g., Open, Limited, Single), and setting timeframes for the process.
- Bid Invitation Process:
- Tender documents are prepared and published/floated. These documents are fundamental, must be clear, self-contained, and comprehensive, addressing aspects like description, specifications, quantity, time/place, limitations/preferences, and procedures/dates. Model Tender Documents may be used.
- Offers are invited following a fair, transparent, and reasonable procedure.
- The process includes obtaining and submitting bids, and opening bids.
- Eligibility and qualification criteria are defined to identify capable bidders.
- Sufficient time is allowed for bidders to prepare proposals.
- Publishing tender enquiries and details of bid awards on platforms like CPPP is mandatory.
- Bid Evaluation and Award of Contract:
- Bids are evaluated transparently and strictly based on the terms and conditions in the tender document. Care is taken to avoid undue advantage or overlooking essential conditions.
- This stage includes the evaluation of techno-commercial and financial bids.
- Price negotiations may occur if permitted under specified circumstances.
- The contract is awarded to the selected bidder(s) after approval by the Competent Authority.
- Contract Management: This is the final stage of the procurement process, involving the execution of the contract.
Different modes of procurement are used depending on circumstances, varying the extent of competition. These include Advertised Modes (like Open Tender Enquiry – OTE, the default mode aiming for widest competition), Pre-Qualification Modes, Restricted Modes (like Limited Tender Enquiry – LTE, used for estimated values between Rs. 5 lakh and Rs. 50 lakhs), Nomination Modes (like Proprietary Article Certificate – PAC, and Single Tender Enquiry – STE, used in special circumstances), and Shopping Modes for small value procurements. Tendering Systems like Single-Stage and Two-Stage bidding are chosen based on the complexity and criticality of technical requirements and procurement value.
The use of electronic platforms like the Government e-Marketplace (GeM) and the Central Public Procurement Portal (CPPP) is mandatory for publishing tenders and conducting e-procurement to ensure transparency and efficiency. For common use goods and services available on GeM, procurement must be done through the portal.
Procurement decisions at various stages require the written approval of the Competent Authority. The entire process is subject to audit and scrutiny by oversight agencies, necessitating proper record-keeping.