Para 1.13 — GOODS_MANUAL

a) Need Assessment: Need assessment, formulation of Specifications and Procurement Planning (including market consultation, if required). b) Bid Invitation Process: Preparing tender documents, publication, receipt and opening of bids; c) Bid Evaluation and Award of Contract: Evaluation of bids and award of contract; d) Contract Management: Contract management and closure. e) Disposal of Scrap: Disposal of Scrap through various modes of disposal.

1.13. Public Procurement Cycle The procurement process for goods, works and/or services typically involves the following cycle of activities, undertaken in the order stated below. Details and procedures of various stages of the procurement cycle shall be described in subsequent Chapters of the manuals:

1.14. Nomenclature Conundrum 1. There is no standardised nomenclature in Public Procurement in India, and a mix of American, European, and British/ Indian nomenclature has become common. ‘Tender’ is taken to mean

(i) the ‘Tender Document’ or ‘Tender Process’ as well as

(ii) the ‘Bid’ submitted by the ‘bidders.’ The Tender Document floated by Procuring Entity is also called a Bid (or Bidding) Document. Similarly, participants in a ‘tender’ are alternatively called bidders and tenderers. This duality is reflected in “Notice Inviting Tenders’ and ‘Instructions to Bidders’ etc.

2. An attempt is made to standardise the term ‘Tender’ for ‘Tender Document’ (document prepared and published by the Procuring Entity, instead of bid/ bidding document) or ‘Tender Process’ and Bid for the ‘bid’ submitted by the ‘bidders’ and hence ‘bidder’ is used instead of the tenderer. Similar attempts are made to standardise other nomenclature in this document without disturbing the nomenclature (e.g., Pre-qualification Bidding) embedded in the CPPP or GeM portals.

2. During need assessments, the following matters are decided to comply with the ‘Procurement Guidelines’: a) The expression/ description of the need is an important determinant of Value for Money (VfM) and wide competition. Therefore, to the extent practicable, it should be:

i) Unambiguous, complete, using common terminology prevalent in relevant trade; ii) In accordance with the guidelines prescribed, if any, in this regard, iii) Except in the case of proprietary purchase from a selected single source, reference to trademark, brand/ trade names, catalogue numbers, or other details that limit any materials or items to the specific manufacturer

(s) should be avoided as far as possible. Where unavoidable, such item descriptions should always be followed by the words “or substantially equivalent.” b) The method of satisfying it (owning /leasing/ hiring/ outsourcing or through Public Private Partnership (PPP), and so on) may be determined as per policies declared in this regard or based on a techno-economic evaluation (using life cycle cost if feasible) of various alternative methods of satisfaction of the need and compatibility and interoperability with existing infrastructure or systems. There are now new procurement approaches like Hardware as a Service39 (HaaS, also known as Infrastructure as a Service - IAAS ) and Software as a Service40 (SaaS).

c) The quantity of the subject matter of procurement commensurate with the economy: i) Care should also be taken to avoid purchasing quantities in excess of the requirement to avoid inventory carrying costs. Where scales of consumption or usage limits of requirements have been laid down by the Competent Authority (CA), the officer signing the indent should also certify that the prescribed scales or limits are not exceeded. It is also necessary to round off the calculated quantity to the nearest wagon load/ truckload/ package to economise on transportation.

ii) An appropriate size of the tender has a great impact on value for money and the level of competition. A balance is achieved by judicious packaging requirements of

Chapter 2: Need Assessment, Formulation of Specifications and Procurement Planning 2.1. Need Assessment 1. Procurements should be initiated only based on an indent (Please refer to Annexure 5) from the user Department. The authority in the user Department initiating the indent for procurement shall first determine the need (including anticipated quantum) for the subject matter of the procurement. Description and Specification of Need assessment is of fundamental importance in ensuring value for money, transparency, competition, and level playing field in procurement. The user department shall maintain all documents relating to the determination and technical/financial/budgetary approvals needed for procurement.

Chapter 2: Need assessment, Formulation of Specifications and Procurement Planning different users or slicing requirements into smaller tenders. Please refer to para 2.5.1-2-b) below on merits and demerits of packaging and slicing of requirements. iii) Units of quantity are an important parameter. Some items may be manufactured in metric tons but may be used in units of numbers or units of lengths (for example, steel sheets/structural). For the sake of transparency, it is important to buy an item in units of manufacture. For example, it is better to buy steel/structural in units of weight since it has a tolerance in weight per unit of length; this usually works to the disadvantage of the buyer if it is bought in units of length. The buying and issuing units of an item may be different – but should be standardised. d) Time-schedule and place of product/work/service delivery: Need assessment and generation of indent for procurement should be done sufficiently in advance of the time when goods are required. Delays in need assessment have an adverse impact on the value for money and transparency. Great care is required to be exercised in filling up realistic dates for the requirement of material. The procuring entity should be allowed time in accordance with the established lead times. In urgent cases, the procuring entity may entertain indents providing shorter periods, but such urgencies should be approved by the authority empowered to grant administrative approval for the indent and must be accompanied by proper justification. e) Formulation of Specifications ensures value for money, transparency, a level playing field, and the widest competition. This is further detailed in para 2.2 below. f) Estimation of Cost: The estimated cost in the indent is a vital element in various procurement processes, approvals, and the establishment of reasonable prices at the time of evaluation of the bids. Therefore, it should be worked out realistically and objectively. Following are some of the suggested methods of cost estimates. These are neither mandatory nor comprehensive nor in any order of preference. These methods are not mutually exclusive, and triangulation from different methods would give a more accurate estimate of cost: i) Where historical cost data is available - Last purchase price (or estimated rate in past indents) of this or similar or nearly equivalent requirements, after due updation as per sub-para iv) below; ii) Where no historical cost data is available – Costing Analysis: Where no historical cost data is available, costing analysis through the internal or external expert costing agencies provides a reliable estimate of cost; iii) Where no historical cost data is available, and Costing Analysis is not feasible: In such situations, a rough assessment of cost can be arrived at but should be used with caution for evaluation of the reasonableness of bids: 1) Rough assessment from the price of the assembly/ machine of which the item is a part or vice versa; 2) Published catalogues/ Maximum Retail Price (MRP) printed on the item is the main source for establishing the estimated cost of items. It may be noted that MRPs usually include significant margins for distributors, wholesalers, and retailers; 3) As a last resort, a rough assessment of the opportunity cost of not using this item at all; 4) Market Survey: For commercially available goods, a formal market survey online (GeM portal or other commercial market apps) or a physical survey of the market can provide a reasonable estimate of cost.

5) Budgetary Quotes: For equipment/ craft that are custom-built to the buyer’s specifications, the best way to get a rough assessment of costs is by obtaining budgetary quotes from potential parties. Ideally, there should be three quotes. However, there is a need to have a time schedule for receipt of quotes to ensure some timeframe for this activity. Thus, an attempt should be made to obtain as many budgetary quotes as possible from reputed/potential firms, and a time (if feasible, ten to twenty-one days) should be indicated. In the event of receipt of less than three budgetary quotes, two extensions (if feasible, of five to days each) may be considered. In the event of the non-availability of three quotes within the above extended period, the estimates should be prepared based on the number of budgetary quote

(s) received, which may even be one, and where more than one budgetary quote is received, the estimate should be framed on an average of the quotes which will reduce variations and fluctuations. It may be noted that budgetary quotes are not exact estimates, as the bidder who expects to be short-listed may quote high rates, and the bidder who does not expect to be shortlisted may quote abnormally low prices to queer the pitch for others. iv) Updation of Historical Data: Historical cost data can be supplemented with escalations to cater for inflation, price increases of raw materials, labour, energy, statutory changes, price indices, and so on, to make them usable in conditions prevailing currently. In the case of foreign currencies, the rate should be reduced to a common denomination of Indian Rupees. Price indices can be obtained from the following websites. Some may require prior free registration, and some have paid subscriptions: 1) For price indices of indigenous items: http://www.eaindustry.nic.in/home.asp.in (Ministry of Industry); 2) For metals and other minerals: http://www.mmronline.com/ or http://www.metalprices.com/index.asp or http://www.asianmetal.com/; 3) For price trends of nonferrous details, London Metal Exchange - https://www.lme.com/ gives price trends of nonferrous details, which often show volatile trends; 4) http://www.tradeintelligence.com/ and http://www.cmie.com/. (Centre for Monitoring Indian Economy); 5) For price trends of different countries: http://www.imf.org/external/pubs/ft/weo/2015/01/ (International Monetary Fund) 6) For organisations/chambers of commerce such as the (Indian Electrical and Electronics Manufacturer’s Association): www.ieema.org; 6) Commodity Prices: Multi Commodity Exchange of India Limited (MCX): https://www.mcxindia.com/home 7) Cross-commodity price reporting agency (PRA) - Fastmarkets: https://www.fastmarkets.com/