Para 3.3 — GOODS_MANUAL

3.3. Integrity Pact 1. The Pre-bid Integrity Pact is a tool to help Governments, businesses, and civil society fight corruption in public contracting. It binds both buyers and sellers to ethical conduct and transparency in all activities, from pre-selection of bidders, bidding and contracting, implementation, completion and operation related to the contract. This removes the insecurity of Bidders, that while they themselves may abjure Bribery, their competitors may resort to it and win contracts by unfair means. 2. Ministries/ Departments and their attached/ subordinate offices (including autonomous bodies) should incorporate the Integrity Pact47 in the procurements/ contracts of the nature and of a threshold value, decided by the Ministries/ Departments with the approval of the Minister in charge. As guidance, the threshold should cover bulk (80-90% - eighty to ninety percent by value) of its annual procurement expenditure. The format of the Integrity Pact is included in Annexure 30. The procuring entities may make suitable changes in the format, wherever required based on the specific situation, in which pact is to be used. The pact may also be updated, wherever necessary, to incorporate latest procurement instructions. 3. CVC issued a revised Standard Operating procedure48 and has further stated49 that in view of the increasing procurement activities of Public Sector Banks (PSBs), Public Sector Insurance Companies (PSICs) and Public Sector Financial Institutions (FIs) shall also adopt and implement the suggested format of Integrity Pact. Please refer to Annex-2 of Annexure 30 for details.

3.4. Grievances and its Redressal: 1. Procuring Entities shall provide a suitable clause in their Tender Documents for the redressal of grievances of bidders. The following is a suggested mechanism of redressal: 2. Any supplier, contractor, or consultant that claims to have suffered or is likely to suffer loss or injury as a result of a decision/ action/ omission of the Procurement Entity may make an application for its review within a period of Five (5) days from its date, to the designated officer named in the tender documents in this regard (or the Head of the Procuring Entity, if not so specified), specifying the ground

(s) and the relevant clauses of the tender documents. Unsuccessful Bidders may seek de-briefing regarding the rejection of their bid, in writing or electronically, within Five (5) days of the declaration of techno-commercial or financial evaluation results.

3. Only a directly affected bidder can represent in this regard: a) Only a bidder who has participated in the concerned procurement process, i.e., prequalification, bidder registration or bidding, as the case may be, can make such representation. b) In case the pre-qualification bid has been evaluated before the bidding of Technical/ financial bids, an application for review in relation to the technical/ financial bid may be filed only by a bidder who has qualified in the pre-qualification bid; c) In case the technical bid has been evaluated before the opening of the financial bid, an application for review in relation to the financial bid may be filed only by a bidder whose technical bid is found to be acceptable. d) The following decisions of the procuring entity in accordance with the provision of internal guidelines shall not be subject to review: i) Determination of the need for procurement; ii) Selection of the mode of procurement or tendering system; iii) Choice of selection procedure; iv) Complaints against specifications except under the premise that they are either vague or too specific to limit competition may be permissible. v) Provisions limiting the participation of bidders in the procurement process in terms of government policies. vi) Provisions regarding purchase preferences to specific categories of bidders in terms of policies of the Government vii) The decision to enter into negotiations with the L1 bidder; viii) Cancellation of the procurement process except where it is intended to subsequently re-tender the same requirements; ix) Issues related to ambiguity in contract terms shall not be taken up after a contract has been signed; all such issues should be highlighted before the vendor/contractor consummates the contract.

4. This grievance redressal is beside the avenue of complaints to the vigilance department of the procuring organisation. 5. If received during the processing of the tender, the designated officer shall forward the application to the TC/Convener of TC for its examination on merits and action as considered necessary. An interim reply may be sent that the application will be kept in view in the tender evaluation, and a final response shall be given only after the declaration of the award of the contract. The Tender Committee shall place the application on record, including its analysis and action taken thereon, in the TC minutes/ report to the Competent Authority. After the award, the TC convener shall respond to the aggrieved party as per sub-para 5) below. 6. If such grievance is received after the declaration of the award of the contract, the designated officer shall forward the application to the Competent Authority of the tender for his examination on merits and action as considered necessary. Such post award grievance must be redressed and closed within 30 days of receipt of the grievance. If the

3.5. Conduct of Public Servants in Public Procurement - Risks and Mitigations

Risk Mitigation 1. Hospitality: Hospitality (including facilitation of travel, lodging, boarding and entertainment during official or unofficial programs) from suppliers may tend to cross the limits of ethical/ occasional/ routine/modest/ normal business practice. Officials sent to the firm’s premises for inspections/ meetings may mistakenly presume entitlement to hospitality from the firm, even if other arrangements are available at the location. Hospitality must never be solicited, directly or indirectly. The frequency, scale and number of officials availing hospitality should not be allowed to identify the recipient in a public way with any particular contractor, supplier or service provider or raise doubts about its neutrality. It should not involve significant travel, overnight accommodation, or trips abroad. Particular care should be taken in relation to offers of hospitality from firms (say, participating in current or imminent tenders or their execution) who stand to derive a personal or commercial benefit from their relationship with the recipient. 2. Gifts: Gifts from suppliers may tend to cross the limits of ethical/ occasional/ routine/modest/ normal business practice, especially during the festive season. Since the value of the gift may not be known to the Gifts must never be solicited, directly or indirectly. An official should not accept and retain gifts that are more valuable than the limit as laid down in the conduct rules. Cash, gift cheques or any vouchers that may be exchanged for cash may not be accepted, regardless of the amount. Particular care should be taken in relation to gifts from firms (say,

Competent Authority finds the complaint to have substance, appropriate and feasible remedial measures should be initiated as per sub-pra 5) or 6) below. 7. If the grievance is resolved or if the grievance is found to be unwarranted, the aggrieved party shall be informed by the TC convener of the final decision without disclosing confidential details. 8. Based on such representation, if the Competent Authority is satisfied that there has been a contravention of procurement guidelines in this case, he may initiate such action as, in his opinion, is necessary to rectify the contravention, including: a) If the grievance is due to inadequacy of procurement guidelines or a lack of understanding of the staff, remedial action to address such lacunae may be initiated without repercussions to the concerned staff. b) Annulment or reconsideration of the procurement proceedings; c) cancellation of the resultant procurement contract, if legally feasible; d) In case any individual staff is found responsible, suitable disciplinary proceedings should be initiated against such staff under the conduct rules. e) In case the complicity of any bidder is proved, i) removal of the concerned firm from the list of registered firms ii) debarment of the bidders, if warranted iii) reporting the matter to the Competition Commission of India (CCI) in case of anticompetitive actions by the bidder. f) Handing over the case to CVO if there are aspects that require investigations.

Chapter 3: Supplier Relationship Management

Risk Mitigation recipient, it may cause an inadvertent violation of Conduct rules. participating in current or imminent tenders or their execution) who stand to derive a personal or commercial benefit from their relationship with the recipient. Any gift received inadvertently in violation of the above must immediately either be returned or reported and deposited in Toshakhana/ Treasury. 3. Private Purchases from Official Suppliers: Procuring Officials may mistakenly consider it innocuous to seek discounts in private procurements from suppliers having official dealings or its allied firms (especially from Rate Contract holders). Officials involved in Public Procurement must never indulge in any non-official pecuniary transaction with the contractors, suppliers, or service providers with whom they have official dealings, including seeking or accepting special facilities or discounts on private purchases (particularly the same items that are being ordered officially on rate contracts). 4. Sponsorship of Events: Procuring Officials may mistakenly consider it innocuous to seek financial favours (donations, advertisements for souvenirs, and contributions in cash or kind) in relation to sponsoring cultural, social, charitable, religious, or sporting events in the false belief that since they are personally not benefitted, it would not be a violation of CIPP. Officials involved in Public Procurement must never indulge in any non-official pecuniary transaction with the contractors, suppliers, or service providers with whom they have official dealings, including soliciting of sponsorship for unofficial and private cultural, social, sporting, religious, charitable, or similar organisations or events. 5. Conflict of Interest (COI): para 3.2-1-a)v) Code of Integrity for Public Procurement has a provision that defines Conflict of Interest as:” “…any personal, financial, or business relationship between the bidder and any personnel of the procuring entity who are directly or indirectly related to procurement or execution process of the contract, which can affect the decision of the procuring entity directly or indirectly……” There may be dilemmas regarding the officers related to the tender or Interpretation of Conflict of Interest would depend on the organisational structure and its unique circumstances and cannot be laid down universally. However, some illustrative examples are given below to provide context. a) Officers that can be considered to be related to the tender or execution process would depend on the organisational structure and sensitivity of their role in procurement. It may cover key officials (and any external consultants/ advisors) involved in making a recommendation, various approvals, or making a major decision at any stage in procurement – i.e., during need determination/ indenting, Tender Document preparation/ preparation of comparative tabulation; Technical and Financial evaluation of Bids; negotiation/ signing of Contract; execution of the contract; payments to the contractor.

Risk Mitigation execution process and, even if minor, routine transactions. b) As an illustration - COI (actual, potential, or perceived) can arise if such officers ( or his close family50) have: i) Substantial business interests in the firm50 (e.g., shares more than 0.1% of market cap), taken a loan or other financial obligation (say discounts) from the firm or its personnel50), etc. ii) Business relationships with the firm - say previously worked for the firm or availed hospitality/ gifts beyond the limits laid down in the Code of Conduct of the organisation, etc. iii) Familial relationship50 with the personnel of the firm. iv) close personal friendships or regular (say, more than once in a quarter) social interactions (e.g., clubs, games, social associations) with the Firm’s personnel, etc. c) Resolution of COI: It shall be the responsibility of such officials to declare COI (to the extent he is aware of, in normal course) with reference to a procurement process to the Competent Authority/ next higher officer. The competent officer may evaluate the level of COI and the sensitivity of the function assigned to the official. He may either determine i) COI is insignificant enough to influence the type of function performed by the official and ask the officer to continue his function. ii) If COI or the type of function is significant, nominate any alternative officer to perform the function (partly or fully) of this official in that procurement process.

3.4 Doctrine of Caveat Emptor The Sales of Goods Act lays down this important concept that the buyer must act with due diligence when buying goods; it is not a seller’s duty to point out the defects in goods. This doctrine is not in consonance with modern times but, unfortunately, is a legal position. This, however, does not apply if the seller obtains the buyer’s consent to buy by knowingly concealing the defects that the buyer could not have reasonably discovered at the time of procurement. The caveat emptor is also diluted under some implied conditions in a contract for sale.

3.5 Provision of the Act regarding Statutory Variations in Taxes and Duties Statutory variations in the taxes and duties (customs duties, excise duty, tax on the sale or procurement of goods) after the making of any contract must be borne by the buyer, even if there is no such express stipulation in the contract.

3.3 Document of Title to Goods These are the voucher, bill, document, receipt, cash memo, bill of lading, lorry receipt, railway receipt, or any such acknowledgement which proves the ownership of the goods that, in the ordinary course of business, the buyer may receive. These are called documents of title to goods.

4.0Salient Features of the Indian Arbitration & Conciliation Act 1996 Indian Arbitration & Conciliation Act 1996 provides for dispute settlement either by a process of conciliation and/or by arbitration. This act is based on a 'United Nations Commission on International Trade Law Model Arbitration Law' with an object to minimise the supervisory role of courts in the arbitral process and to ensure that every final arbitral award is enforced in the same manner as if it was a decree of the court. It covers both international and domestic arbitration and conciliation.

4.1. Arbitration Arbitration is one of the oldest methods of settling civil disputes arising out of and during performance of the contract between two or more persons by reference of the dispute to an independent and impartial third person called the arbitrator, instead of litigating the matter in the usual way through the courts. It saves time and expense, avoids unnecessary technicalities and, at the same time, ensures “substantial justice within limits of the law.”