Rule 164 of The General Financial Rules 2017 TwoStage Bidding

Rule 164 of The General Financial Rules 2017 TwoStage Bidding

Original Rule Text

Rule 164 Two-Stage Bidding (Obtain bids in two stages with receipt of financial bids after receipt and evaluation of technical bids) (i) Ministry/Department may procure the subject matter of procurement by the method of two-stage bidding, if ( a) It is not feasible to formulate detailed specifications or identify specific characteristics for the subject matter of procurement, without receiving inputs regarding its technical aspects from bidders; or ( b) The character of the subject matter of procurement is subject to rapid technological advances or market fluctuations or both; or ( c) Ministry/Department seeks to enter into a contract for the purpose of research, experiment, study or development, except where the contract includes the production of items in quantities sufficient to establish their commercial viability or to recover research and development costs; or ( d) The bidder is expected to carry out a detailed survey or investigation and undertake a comprehensive assessment of risks, costs and obligations associated with the particular procurement. (ii) The procedure for two stage bidding shall include the following, namely: (a) In the first stage of the bidding process, the Ministry/Department shall invite bids through an advertised tender containing the technical aspects and contractual terms and conditions of the proposed procurement without a bid price; (b) All first stage bids, which are otherwise eligible, shall be evaluated through an appropriate committee constituted by the Ministry/ Department; (c) The committee may hold discussions with the bidders and if any such discussion is held, equal opportunity shall be given to all bidders to participate in the discussions; (d) In revising the relevant terms and conditions of the procurement, the procuring entity shall not modify the fundamental nature of the procurement itself, but may add, amend or omit any specification of the subject matter of procurement or criterion for evaluation; (e) In the second stage of the bidding process, the procuring entity shall invite bids from all those bidders whose bids at the first stage were not rejected, to present final bid with bid prices in response to a revised set of terms and conditions of the procurement; (f) Any bidder, invited to bid but not in a position to supply the subject matter of procurement due to modification in the specifications or terms and conditions, may withdraw from the bidding proceedings without forfeiting any bid security that he may have been required to provide or being penalised in any way, by declaring his intention to withdraw from the procurement proceedings with adequate justification.

Visual Summary

When to Use

Complex specs, rapid tech changes, R&D, detailed risk assessment.

Stage 1: Technical Bid

Invite bids for technical aspects, evaluate, hold discussions.

Stage 2: Financial Bid

Invite final bids with prices from technically qualified bidders.

Executive Summary

Rule 164 of the General Financial Rules, 2017 outlines the procedure for two-stage bidding, a procurement method used when detailed specifications are hard to define upfront, or when dealing with rapidly evolving technology, research and development, or complex projects requiring extensive surveys. This process involves an initial technical bid stage where proposals are evaluated without prices, potentially including discussions and revisions to terms. Only technically qualified bidders are then invited to submit financial bids in the second stage, ensuring that the procurement focuses on technical suitability before price competition.

In-Depth Analysis of the Rule

Introduction: Two-stage bidding, as per Rule 164 of the General Financial Rules, 2017, is a strategic procurement approach designed for complex scenarios where a clear, detailed specification of the required goods or services is not immediately feasible. It allows for a collaborative refinement of requirements before financial commitments are made.

Breakdown of the Rule:

  • Applicability (Rule 164(i)): This method is suitable under specific conditions:
    • When detailed specifications cannot be formulated without technical input from bidders.
    • For procurements subject to rapid technological advancements or market fluctuations.
    • For contracts involving research, experiment, study, or development, where commercial viability or cost recovery is not yet established.
    • When bidders need to conduct detailed surveys or investigations to assess risks, costs, and obligations.
  • Procedure for Two-Stage Bidding (Rule 164(ii)): The process is structured into two distinct stages:
    • First Stage (Technical Bid):
      • Ministry/Department invites bids focusing on technical aspects and contractual terms, without a bid price.
      • Bids are evaluated by a competent committee.
      • Discussions may be held with bidders, ensuring equal opportunity for all.
      • Terms and conditions may be revised, but the fundamental nature of the procurement must not change.
    • Second Stage (Financial Bid):
      • Only technically qualified bidders are invited to submit final bids with prices, based on the revised terms.
      • Bidders unable to supply due to specification changes can withdraw without penalty or forfeiting bid security.

Practical Example: Imagine a government department needs to procure a highly specialized AI-driven data analytics system. The exact technical specifications are difficult to define initially due to the rapidly evolving nature of AI technology. Instead of a single-stage tender, they opt for two-stage bidding. In the first stage, vendors submit technical proposals detailing their proposed solutions, methodologies, and team expertise, but no prices. The department’s evaluation committee reviews these, holds discussions with vendors to clarify technical aspects, and refines the system requirements. In the second stage, only those vendors whose technical proposals meet the refined requirements are invited to submit their financial bids for the now clearly defined system. This ensures the department gets a technically sound solution before considering cost.

Related Provisions

Understanding Rule 164 is enhanced by examining other procurement methods:

Learning Aids

Mnemonics
  • T-S-B: Technical Specs Before Budget – Emphasizes that technical evaluation precedes financial offers.
Process Flowchart
Procurement Need ArisesComplex Specs, Rapid Tech,R&D, Detailed Survey?YesStage 1: Invite Technical BidsEvaluate Bids, Hold Discussions,Revise Terms (No Price)Technically Qualified BiddersStage 2: Invite Financial BidsContract Award

Multiple Choice Questions (MCQs)

1. According to Rule 164 of the General Financial Rules, 2017, which of the following is a valid reason to use two-stage bidding?

  • A) The procuring entity wants to finalize the contract quickly.
  • B) Detailed specifications are difficult to formulate without bidder input.
  • C) The procurement involves standard, off-the-shelf goods.
  • D) The bidder has a strong financial background.
Show Answer

Correct Answer: B) Detailed specifications are difficult to formulate without bidder input.

2. In the first stage of two-stage bidding under Rule 164 of the General Financial Rules, 2017, what must be excluded from the invited bids?

  • A) Technical specifications.
  • B) Contractual terms and conditions.
  • C) Bid price.
  • D) Eligibility criteria.
Show Answer

Correct Answer: C) Bid price.

3. Who is responsible for evaluating all first-stage bids in two-stage bidding as per Rule 164 of the General Financial Rules, 2017?

  • A) The Ministry of Finance.
  • B) An appropriate committee constituted by the Ministry/Department.
  • C) The Comptroller and Auditor General.
  • D) The lowest bidder from a previous tender.
Show Answer

Correct Answer: B) An appropriate committee constituted by the Ministry/Department.

4. Under Rule 164 of the General Financial Rules, 2017, if a bidder is invited to bid but cannot supply due to modifications in specifications, what can they do without penalty?

  • A) Demand compensation for the changes.
  • B) Withdraw from the bidding proceedings with justification.
  • C) Force the procuring entity to revert to original specifications.
  • D) Automatically qualify for the second stage.
Show Answer

Correct Answer: B) Withdraw from the bidding proceedings with justification.

5. When revising terms and conditions in the first stage of two-stage bidding under Rule 164 of the General Financial Rules, 2017, what is the procuring entity prohibited from modifying?

  • A) The criterion for evaluation.
  • B) Any specification of the subject matter.
  • C) The fundamental nature of the procurement itself.
  • D) The number of bidders invited to the second stage.
Show Answer

Correct Answer: C) The fundamental nature of the procurement itself.

Frequently Asked Questions

Q1: When is two-stage bidding preferred over a single-stage tender?

Two-stage bidding is preferred when it’s difficult to formulate detailed specifications upfront, or when the procurement involves rapid technological changes, research and development, or requires extensive surveys and risk assessments from bidders. It allows for technical refinement before price competition.

Q2: What is the primary difference between the two stages of bidding under Rule 164?

The first stage focuses solely on technical aspects and contractual terms without requiring a bid price. The second stage, following the evaluation and potential revision of terms from the first stage, invites only technically qualified bidders to submit their financial bids.

Q3: Can a bidder withdraw from the process if the specifications change significantly?

Yes, Rule 164(ii)(f) allows a bidder to withdraw from the bidding proceedings without forfeiting any bid security or being penalized if modifications to the specifications or terms and conditions materially affect the essential terms of the procurement, provided they declare their intention with adequate justification.

Key Takeaways

  • Two-stage bidding is ideal for procurements with undefined specifications, rapid technological changes, or R&D projects.
  • The process prioritizes technical suitability and refinement of requirements in the first stage before financial bids are considered.
  • It allows for interactive discussions and revisions of terms, ensuring a more tailored and effective procurement outcome.
  • Bidders are protected, with provisions for withdrawal if the procurement’s essential terms are materially altered.

Conclusion

Rule 164 of the General Financial Rules, 2017 provides a flexible and robust framework for procuring complex goods and services. By separating technical and financial evaluations, it ensures that government entities can adapt to evolving requirements and secure the most appropriate solutions, fostering innovation and efficiency in public procurement.

Related posts:

  1. Rule 173 of The General Financial Rules 2017 Transparency Competition Fairness and Elimination of Arbitrariness in the Procurement Process
  2. Rule 163 of The General Financial Rules 2017 Two Bid System
  3. Rule 170 of The General Financial Rules 2017 Bid Security
  4. Rule 190 of The General Financial Rules 2017 Evaluation of Financial Bids of Technically Qualified Bidders