Para 1.11.3 - Local Content Penalty | KartavyaDesk
Original Rule Text
the certificate for local content from Cost/ Chartered Accountant after completion of the contract, within the limit acceptable to the procuring entity. In case the contractor/ supplier does not meet the stipulated local content requirement and the category of the supplier changes from Class-I to Class-II/ Non-local or from Class-II to Non-local, a penalty upto 10% of the contract value may be imposed. However, contract once awarded shall not be terminated on this account. d) Decisions on complaints relating to the implementation of this Order shall be made by the competent authority that is empowered to investigate procurement-related complaints relating to the procuring entity. e) Nodal Ministries may constitute committees with internal and external experts for independent verification of self-declarations and auditor’s/ accountant’s certificates on a random basis and in the case of complaints. f) Nodal Ministries and procuring entities may prescribe fees for such complaints. g) False declarations will be in breach of the Code of Integrity under Rule 175(1)(i)(h) of the General Financial Rules, for which a bidder or its successors can be debarred for up to two years as per Rule 151 (iii) of the General Financial Rules along with such other actions as may be permissible under law. The Department of Expenditure shall issue suitable instructions (please refer to para 3.7 of this manual) for the effective and smooth operation of this process so that: i) The fact and duration of debarment for violation of the Order by any procuring entity are promptly brought to the notice of the Member-Convenor of the Standing Committee and the Department of Expenditure through the concerned Ministry /Department or in some other manner; ii) On a periodical basis, such cases are consolidated, and a centralized list or decentralized list of such suppliers with the period of debarment is maintained and displayed on the website(s); iii) With respect to procuring entities other than the one that has carried out the debarment, the debarment takes effect prospectively from the date of uploading on the website(s) in such a manner that ongoing procurements are not disrupted. iv) A supplier who has been debarred by any procuring entity for violation of the Order shall not be eligible for preference under the Order for procurement by any other procuring entity for the duration of the debarment. The debarment for such other procuring entities shall take effect prospectively from the date on which it comes to the notice of other procuring entities in the manner prescribed above.
What This Means
Para 1.11.3 of the Manual for Procurement of Goods, 2017, focuses on ensuring suppliers meet the required 'local content' percentage in their goods or services. After a contract is completed, the supplier needs to provide a certificate from a Cost or Chartered Accountant proving they met the local content requirements. The procuring entity (the government department buying the goods) determines what's acceptable. If a supplier doesn't meet the local content requirement and their supplier category changes (e.g., from 'Class-I Local Supplier' to 'Class-II Local Supplier' or 'Non-Local Supplier'), a penalty of up to 10% of the contract value can be imposed. However, the contract itself won't be cancelled because of this.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Suppliers must provide a certificate of local content from a Cost/Chartered Accountant after contract completion.
- •Failure to meet the stipulated local content can result in a penalty of up to 10% of the contract value.
- •Contracts will not be terminated solely due to failure to meet local content requirements.
- •False declarations regarding local content can lead to debarment for up to two years under General Financial Rules.
- •Debarment information will be centralized and made publicly available.
Practical Example
The Ministry of Textiles awards a contract worth ₹50 Lakhs to 'Bharat Textiles' for supplying uniforms. The contract specifies a minimum of 50% local content, classifying Bharat Textiles as a Class-I Local Supplier. After the contract is completed, Bharat Textiles submits a certificate showing only 40% local content. The Ministry, after reviewing the certificate, determines that Bharat Textiles now falls under the Class-II Local Supplier category. They impose a penalty of 5% (₹2.5 Lakhs) of the contract value. Despite the penalty, the Ministry does not terminate the contract and accepts the uniforms.
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 a supplier provides a false declaration about local content?▼
Can a contract be terminated if the supplier fails to meet the local content requirement?▼
Who decides on complaints related to the implementation of this order?▼
Where will the list of debarred suppliers be maintained?▼
If a supplier is debarred by one government entity, does it affect their eligibility for contracts with other entities?▼
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 1.11.3 of the Manual for Procurement of Goods, 2017, what is the maximum penalty that can be imposed on a contractor if they fail to meet the stipulated local content requirement, causing their supplier category to change?
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