Para 1.4 - Procurement Classification | KartavyaDesk
Original Rule Text
iii) Non-consultancy and Consultancy services - it should generally be processed as Procurement of non-consultancy services. b) The Procurement of IT projects should usually be carried out as a procurement of consultancy services, as the outcomes/deliverables vary from one service provider to another. The IT Projects may include: i) tailor-made software development; ii) cloud-based services iii) Composite IT system integration services involve the design, development, deployment, and commissioning of IT systems, including hardware supply, software development, bandwidth, and operation/maintenance of the system for a defined period after going live, etc. c) If the Non-consultancy services involve construction, fabrication, repair, maintenance, overhaul, renovation, decoration, installation, erection, excavation, dredging, and so on, of Civil assets, then it should be handled as Procurement of Works. In case of fabrication, repair, maintenance, overhaul, renovation, decoration, installation, erection and so on, of mechanical, electrical or ICT assets – e.g., Annual Maintenance Contracts or installation/ commissioning of Machinery and Plant and so on, it may be handled as Procurement of Goods rather than Procurement of services. d) Composite contracts may involve mixed elements of Goods, Works, and Services. For example, in the Procurement of large machinery, some works and services like Installation, Commissioning, Training, Annual Maintenance Contract (AMC) (or a Comprehensive Maintenance Contract (CMC)), and so on may be incidental to the supply of goods. The relationship of primacy between the goods element and the works/ services element may be examined, irrespective of the relative values. If the primary intention is the Procurement of goods with services/ works being incidental to it, it may be processed as such. However, if the primary intention is Procurement of Works/ services with Procurement of goods being incidental, then it should generally be processed as Procurement of works/ services (as the case may be), irrespective of the relative values. A possible approach could be to have separate but linked contracts for such elements of Goods, Works, and Services, but implementation may become challenging.
What This Means
Para 1.4 of the Manual for Procurement of Goods, 2017, helps government departments decide whether to classify a purchase as 'Goods,' 'Services,' or 'Works.' This is important because the procurement process differs for each category. The rule provides guidelines on how to categorize purchases that involve a mix of goods, services, and construction. It emphasizes determining the 'primary intention' of the procurement to decide the correct classification. This rule affects all government employees involved in the procurement process, from those drafting tenders to those approving purchase orders.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •IT projects are generally treated as procurement of consultancy services.
- •Construction, repair, or maintenance of civil assets is categorized as 'Procurement of Works'.
- •Repair or maintenance of mechanical, electrical, or ICT assets can be treated as 'Procurement of Goods'.
- •For composite contracts, identify the 'primary intention' (Goods, Works, or Services) to determine the appropriate procurement process.
- •Consider separate but linked contracts for complex projects involving Goods, Works, and Services, although this can be challenging to manage.
Practical Example
The Ministry of Education wants to procure a new Learning Management System (LMS) for its schools. The LMS includes software development (tailor-made), cloud hosting, and ongoing technical support. According to Para 1.4, this would typically be classified as 'Procurement of Consultancy Services' because the outcomes and deliverables can vary significantly between service providers.
However, if the Ministry were procuring new computers for the schools, along with installation and a 3-year Annual Maintenance Contract (AMC), the primary intention is to procure 'Goods' (the computers). The installation and AMC are incidental services. Therefore, this would be processed as 'Procurement of Goods'.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What if a project involves both software development and hardware supply? How do I classify it?▼
What is meant by 'primary intention' in the context of composite contracts?▼
Can I split a composite contract into separate contracts for Goods, Works, and Services?▼
If we are procuring the installation of new air conditioners in our office, is that Goods, Works, or Services?▼
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 the Manual for Procurement of Goods, 2017, how should the procurement of tailor-made software development generally be classified?
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