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Para 10.4.3 - Denial Clause | KartavyaDesk

Consultancy Manual

Original Rule Text

10.4.4 Denial Clause If delay in delivery is attributable to the consultant, the procuring entity should protect itself against extra expenditure during the extended period by stipulating a denial clause (over and above levy of LD) in the letter informing the supplier of extension of the delivery period. In the denial clause (applicable for delays attributable to consultant), any increase in statutory duties and/or upward rise in prices due to the PVC clause and/or any adverse fluctuation in foreign exchange are to be borne by the consultant during the extended delivery period, while the purchaser reserves his right to get any benefit of a downward revisions in statutory duties, PVC, and foreign exchange rate. Thus, in cases of delays attributable to Consultant, PVC, other variations, and foreign exchange clauses operate only during the original delivery period. The format of the denial clause is available in Annexure 22.

What This Means

Para 10.4.3 of the Manual for Procurement of Consultancy Services introduces a 'denial clause' to protect the government (the procuring entity) when a consultant causes delays in project delivery. Essentially, if the consultant is at fault for the delay, this clause ensures the government doesn't bear the brunt of increased costs during the extended timeframe. These increased costs could stem from rising statutory duties (like taxes), price variations (PVC), or unfavorable changes in foreign exchange rates. The government, however, retains the right to benefit from any decreases in these areas during the extended period.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Applies when the consultant is responsible for project delays.
  • •Protects the procuring entity from increased costs (statutory duties, PVC, foreign exchange) during the extended delivery period due to consultant's fault.
  • •The procuring entity benefits from any downward revisions in statutory duties, PVC, or foreign exchange rates during the extended period.
  • •The denial clause is stipulated in the letter informing the consultant of the delivery period extension.
  • •Annexure 22 provides a template for the denial clause.

Practical Example

The Ministry of Urban Development hired 'Design Solutions Pvt. Ltd.' for a smart city project with an initial deadline of 12 months. Due to Design Solutions' internal issues, the project was delayed by 3 months. The Ministry invoked the denial clause as per Para 10.4.3. During the extended period, statutory duties on imported equipment increased by 5%, and the price of certain materials rose due to PVC. Design Solutions Pvt. Ltd. had to bear these additional costs, amounting to ₹5 lakhs. However, if the foreign exchange rate had become more favorable to the Ministry during those 3 months, the Ministry would have benefited from the reduced cost.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What happens if the delay is due to unforeseen circumstances, not the consultant's fault?▼
The denial clause only applies when the delay is attributable to the consultant. If the delay is due to force majeure or other factors beyond the consultant's control, the denial clause is not invoked.
Where can I find the format for the denial clause?▼
The format for the denial clause is available in Annexure 22 of the Manual for Procurement of Consultancy Services.
Does the denial clause override the Liquidated Damages (LD) clause?▼
No, the denial clause is in addition to the levy of Liquidated Damages (LD). LD is a penalty for the delay, while the denial clause addresses the cost implications of the delay.
Who determines if the delay is attributable to the consultant?▼
The procuring entity (the government department) determines the cause of the delay based on project reports, communication records, and other relevant documentation. This determination should be fair and transparent.
If PVC decreases during the extended period, does the consultant get any compensation?▼
No. The purchaser reserves the right to get any benefit of downward revisions in PVC. The consultant only bears the burden of increases.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 10.4.3 of the Manual for Procurement of Consultancy Services, when is a 'denial clause' applied in procurement?

Related Rules

Para 8Manual for Procurement of Consultancy Services, 2025 - Para 8 - Chapter 10 - Annexure 18Para 9Manual for Procurement of Consultancy Services, 2025 - Para 9 - Chapter 10 - Annexure 18Para 1.10.2Manual for Procurement of Consultancy Services, 2025 - Para 1.10.2 - Chapter 1Para 1.11Manual for Procurement of Consultancy Services, 2025 - Para 1.11 - Chapter 1Para 1.13Manual for Procurement of Consultancy Services, 2025 - Para 1.13 - Chapter 1

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