Rule 173 of The General Financial Rules 2017 Transparency Competition Fairness and Elimination of Arbitrariness in the Procurement Process

Original Rule Text

Rule 173 Transparency, competition, fairness and elimination of arbitrariness in the procurement process All government purchases should be made in a transparent, competitive and fair manner, to secure best value for money. This will also enable the prospective bidders to formulate and send their competitive bids with confidence. Some of the measures for ensuring the above are as follows: – (i) The text of the bidding document should be self- contained and comprehensive without any ambiguities. All essential information, which a bidder needs for sending responsive bid, should be clearly spelt out in the bidding document in simple language. The condition of prior turnover and prior experience may be relaxed for Startups (as defined by Department of Industrial Policy and Promotion) subject to meeting of quality & technical specifications and making suitable provisions in the bidding document. The bidding document should contain, inter alia. (a) Description and Specifications of goods including the nature, quantity, time and place or places of delivery. (b) The criteria for eligibility and qualifications to be met by the bidders such as minimum level of experience, past performance, technical capability, manufacturing facilities and financial position etc. or limitation for participation of the bidders, if any. (c) Eligibility criteria for goods indicating any legal restrictions or conditions about the origin of goods etc. which may be required to be met by the successful bidder. (d) The procedure as well as date, time and place for sending the bids. (e) Date, time and place of opening of the bid. (f) Criteria for evaluation of bids (g) Special terms affecting performance, if any. (h) Essential terms of the procurement contract. (i) Bidding Documents should include a clause that “if a firm quotes NIL charges/ consideration, the bid shall be treated as unresponsive and will not be considered”. (ii) Any other information which the procuring entity considers necessary for the bidders to submit their bids. (iii) Modification to bidding document: (a) In case any modification is made to the bidding document or any clarification is issued which materially affects the terms contained in the bidding document, the procuring entity shall publish or communicate such modification or clarifications in the same manner as the publication or communication of the initial bidding document was made. (b) In case a clarification or modification is issued to the bidding document, the procuring entity shall, before the last date for submission of bids, extend such time limit, if, in its opinion more time is required by bidders to take into account the clarification or modification, as the case may be, while submitting their bids. ( c) Any bidder who has submitted his bid in response to the original invitation shall have the opportunity to modify or re- submit it, as the case may be, or withdraw such bid in case the modification to bidding document materially affect the essential terms of the procurement, within the period initially allotted or such extended time as may be allowed for submission of bids, after the modifications are made to the bidding document by the procuring entity: Provided that the bid last submitted or the bid as modified by the bidder shall be considered for evaluation (iv) Suitable provision should be kept in the bidding document to enable a bidder to question the bidding conditions, bidding process and/ or rejection of its bid. The reasons for rejecting a tender or non-issuing a tender document to a prospective bidder must be disclosed where enquiries are made by the bidder. (v) Suitable provision for settlement of disputes, if any, emanating from the resultant contract, should be kept in the bidding document. (vi) The bidding document should indicate clearly that the resultant contract will be interpreted under Indian Laws. (vii) The bidders should be given reasonable time to prepare and send their bids. (viii) The bids should be opened in public and authorised representatives of the bidders should be permitted to attend the bid opening. (ix) The specifications of the required goods should be clearly stated without any ambiguity so that the prospective bidders can send meaningful bids. In order to attract sufficient number of bidders, the specification should be broad based to the extent feasible (x) Pre-bid conference: In case of turn- key contract(s) or contract(s) of special nature for procurement of sophisticated and costly equipment or wherever felt necessary, a suitable provision is to be kept in the bidding documents for one or more rounds of pre-bid conference for clarifying issues and clearing doubts, if any, about the specifications and other allied technical details of the plant, equipment and machinery etc. projected in the bidding document. The date, time and place of pre-bid conference should be indicated in the bidding document. This date should be sufficiently ahead of bid opening date. The records of such conference shall be intimated to all bidders and, shall also be exhibited on the website(s) where tender was published. (xi) Criteria for determining responsiveness are to be taken into account for evaluating the bids such as: ( a ) Time of delivery. ( b ) Performance/ efficiency/ environmental characteristics. ( c ) The terms of payment and of guarantees in respect of the subject matter of procurement ( d ) Price. ( e ) Cost of operating, maintaining and repairing etc. (xii) Bids received should be evaluated in terms of the conditions already incorporated in the bidding documents; No new condition which was not incorporated in the bidding documents should be brought in for evaluation of the bids. Determination of a bid’s responsiveness should be based on the contents of the bid itself without recourse to extrinsic evidence. (xiii) Bidders should not be permitted to alter or modify their bids after expiry of the deadline for receipt of bids. (xiv) Negotiation with bidders after bid opening must be severely discouraged. However, in exceptional circumstances where price negotiation against an ad-hoc procurement is necessary due to some unavoidable circumstances, the same may be resorted to only with the lowest evaluated responsive bidder. (xv) Deleted. (xvi) Contract should ordinarily be awarded to the lowest evaluated bidder whose bid has been found to be responsive and who is eligible and qualified to perform the contract satisfactorily as per the terms and conditions incorporated in the corresponding bidding document. However, where the lowest acceptable bidder against ad-hoc requirement is not in a position to supply the full quantity required, the remaining quantity, as far as possible, be ordered from the next higher responsive bidder at the rates offered by the lowest responsive bidder. (xvii) Procurement of Energy Efficient Electrical Appliances: Ministries/ Departments while procuring electrical appliances notified by Department of Expenditure shall ensure that they carry the notified threshold or higher Star Rating of Bureau of Energy Efficiency (BEE). (xviii) The name of the successful bidder awarded the contract should be mentioned on the GeM-CPPP, Ministries or Departments website and their notice board or bulletin. (xix) Rejection of all Bids is justified when a. Effective competition is lacking. b. All Bids and Proposals are not substantially responsive to the requirements of the Procurement Documents. c. The Bids’/Proposals’ prices are substantially higher that the updated cost estimate or available budget; or d. None of the technical Proposals meets the minimum technical qualifying score. (xx) Lack of competition in rule 173(xix) shall not be determined solely on the basis of the number of Bidders. Even when only one Bid is submitted, the process may be considered valid provided following conditions are satisfied: a . The procurement was satisfactorily advertised and sufficient time was given for submission of bids. b . The qualification criteria were not unduly restrictive; and c . Prices are reasonable in comparison to market values (xxi) When a limited or open tender results in only one effective offer, it shall be treated as a single tender contract. (xxii) In case a purchase Committee is constituted to purchase or recommend the procurement, no member of the purchase Committee should be reporting directly to any other member of such Committee in case estimated value of procurement exceeds [Rs. 50 lakhs].

Visual Summary

Transparent Process

Ensure open and fair procurement.

Best Value

Secure optimal value for public funds.

Unambiguous Bids

Comprehensive and clear bidding documents.

Executive Summary

Rule 173 of the General Financial Rules, 2017, mandates that all government procurement processes must be conducted with transparency, competition, and fairness to achieve the best value for public money. It outlines essential measures, including the creation of clear and comprehensive bidding documents, the establishment of eligibility and qualification criteria, procedures for bid submission and opening, and guidelines for bid evaluation. The rule also addresses modifications to bidding documents, dispute settlement, and the importance of pre-bid conferences. It emphasizes awarding contracts to the lowest evaluated responsive bidder and justifies bid rejection only under specific conditions, promoting accountability and preventing arbitrariness in public buying.

In-Depth Analysis of the Rule

Introduction: Rule 173 sets the foundational principles for government procurement, ensuring public funds are utilized efficiently and ethically. It aims to foster trust among bidders and the public by establishing a structured and equitable process.

Breakdown of the Rule:

Core Principles: Government purchases must be transparent, competitive, and fair, with the primary goal of securing the best value for money.
Bidding Document Clarity: Bidding documents must be self-contained, comprehensive, and free of ambiguities, providing all necessary information for responsive bids. This includes detailed descriptions, specifications, eligibility criteria (with relaxation for Startups), submission procedures, evaluation criteria, and essential contract terms. A “NIL charges/consideration” bid is deemed unresponsive.
Modifications to Bidding Documents: Any material modifications or clarifications must be published in the same manner as the original document, with extended submission deadlines if necessary. Bidders can modify or withdraw bids if changes materially affect terms.
Bidder Grievance Mechanism: Bidding documents should include provisions for bidders to question conditions, processes, or rejections, with reasons for rejection being disclosed upon inquiry.
Dispute Settlement: Contracts should include provisions for resolving disputes.
Governing Law: Contracts will be interpreted under Indian Laws.
Reasonable Time for Bids: Bidders must be given adequate time to prepare and submit bids.
Public Bid Opening: Bids must be opened publicly, allowing authorized bidder representatives to attend.
Clear Specifications: Specifications must be unambiguous and broad-based to attract sufficient bidders.
Pre-bid Conferences: For complex or high-value contracts, pre-bid conferences are encouraged to clarify technical details, with records shared with all bidders and published online.
Bid Evaluation: Bids are evaluated based on predefined criteria (delivery time, performance, payment terms, price, operating costs) without introducing new conditions or extrinsic evidence. Bidders cannot alter bids after the deadline.
Negotiation: Post-bid opening negotiations are strongly discouraged, permitted only in exceptional, unavoidable circumstances with the lowest evaluated responsive bidder.
Contract Award: Contracts are typically awarded to the lowest evaluated responsive, eligible, and qualified bidder. If the lowest bidder cannot supply the full quantity, the remainder may be ordered from the next higher responsive bidder at the lowest bidder’s rates.
Energy Efficient Appliances: Procurement of electrical appliances must meet specified Star Ratings from BEE.
Public Disclosure of Award: Successful bidder details must be published on GeM-CPPP and departmental websites.
Bid Rejection Justification: Rejection of all bids is justified if competition is lacking, bids are non-responsive, prices are too high, or technical proposals fail minimum scores. Lack of competition is not solely based on the number of bidders if advertising was sufficient, criteria not restrictive, and prices reasonable.
Single Tender Contract: A limited or open tender resulting in only one effective offer is treated as a single tender contract.
Purchase Committee Composition: For procurements exceeding Rs. 50 lakhs, no member of a purchase committee should report directly to another member of the same committee.

Practical Example: A government department needs to procure new IT infrastructure. Following Rule 173, they issue a comprehensive Request for Proposal (RFP) detailing technical specifications, delivery timelines, and evaluation criteria, including a clause for startups. They hold a pre-bid conference to clarify doubts. Bids are opened publicly, and after a thorough evaluation based on the stated criteria, the contract is awarded to the lowest responsive bidder. All details of the award are published online.

Related Provisions

Other rules in the General Financial Rules, 2017, that complement or are related to Rule 173 include:

Learning Aids

Mnemonics

To remember the core principles of Rule 173: Through Clear Frameworks, All Procurements Prosper. (Transparency, Competition, Fairness, Arbitrariness, Procurement Process)

Process Flowchart

Government Purchase NeedPrepare Clear Bidding DocsDefine Eligibility CriteriaPublish Bids PubliclyOpen Bids TransparentlyEvaluate Bids FairlyAward Contract (Lowest Responsive)Public Disclosure

Multiple Choice Questions (MCQs)

1. What is the primary objective of Rule 173 of the General Financial Rules, 2017, regarding government purchases?

A) To maximize profits for government suppliers.
B) To ensure transparency, competition, and fairness to secure the best value for money.
C) To limit participation to a select group of experienced bidders.
D) To prioritize speed of procurement over all other factors.

Show Answer

Correct Answer: B

2. According to Rule 173 of the General Financial Rules, 2017, what is a key requirement for bidding documents?

A) They should be brief and open to interpretation.
B) They must be self-contained, comprehensive, and free of ambiguities.
C) They should primarily focus on the lowest price, regardless of quality.
D) They must include a mandatory clause for price negotiation after bid opening.

Show Answer

Correct Answer: B

3. Under Rule 173 of the General Financial Rules, 2017, what happens if a firm quotes “NIL charges/consideration” in its bid?

A) The bid is automatically accepted as the most economical.
B) The firm is given an opportunity to revise its offer.
C) The bid shall be treated as unresponsive and will not be considered.
D) It triggers a mandatory negotiation process.

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Correct Answer: C

4. Rule 173 of the General Financial Rules, 2017, states that for procurements exceeding Rs. 50 lakhs, if a Purchase Committee is constituted, what is a critical condition regarding its members?

A) All members must be from the finance department.
B) No member should be reporting directly to any other member of such Committee.
C) The committee must consist of at least seven members.
D) Members are permitted to alter bids after the deadline.

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Correct Answer: B

5. When is the rejection of all bids justified under Rule 173 of the General Financial Rules, 2017?

A) When there is only one bidder.
B) When the procuring entity decides to cancel the project for any reason.
C) When effective competition is lacking, or bids are not substantially responsive, or prices are too high, or technical proposals fail minimum scores.
D) Only when the lowest bidder withdraws their offer.

Show Answer

Correct Answer: C

Frequently Asked Questions

What is the main purpose of Rule 173 of the General Financial Rules, 2017?

Rule 173 aims to ensure that all government purchases are conducted in a transparent, competitive, and fair manner, ultimately securing the best value for public money. It outlines measures to eliminate arbitrariness in the procurement process.

How does Rule 173 of the General Financial Rules, 2017, address the clarity of bidding documents?

The rule mandates that bidding documents must be self-contained, comprehensive, and free of ambiguities. They should clearly spell out all essential information, including descriptions, specifications, eligibility criteria, submission procedures, and evaluation criteria, to enable bidders to submit responsive offers.

Can negotiations with bidders occur after bids are opened under Rule 173 of the General Financial Rules, 2017?

Rule 173 strongly discourages negotiations with bidders after bid opening. They are only permitted in exceptional circumstances, such as an ad-hoc procurement due to unavoidable situations, and only with the lowest evaluated responsive bidder.

Key Takeaways

Transparency and Fairness: Government procurement must prioritize transparency, competition, and fairness to achieve optimal value for public funds.
Clear Bidding Process: Comprehensive and unambiguous bidding documents, clear eligibility criteria, and public bid openings are crucial for an equitable process.
Accountability and Best Value: The rule emphasizes awarding contracts to the lowest responsive bidder, discouraging post-bid negotiations, and justifying bid rejections based on specific, objective criteria.
Adaptability for Startups: The rule allows for relaxation of prior turnover and experience conditions for Startups, promoting broader participation while maintaining quality standards.

Process Flow Chart