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Para 4.10.1 - PAC Risk Mitigation | KartavyaDesk

Goods Manual

Original Rule Text

Risk Mitigation 1. There is a risk that this mode may get used unjustifiably to restrict competition. Such risks get aggravated in case of secrecy about such procedures as alternative vendors/contractors may not even come to know about such opportunities The delegation of powers should be restricted for signing the PAC. Even in PAC procurements, the NIT and the Award of Contract should be put on GeM- CPPP and Procuring Entity websites. 2. Once approved, there is a risk of a nexus getting developed, and the mode may continue to be used for many years without fresh application of mind No item should be procured on a PAC basis for more than three years, after which a mandatory OTE mode may be used to test the market. The procuring entity may also keep an eye on the GeM portal for other vendors who can supply such items. 3. The bidder may charge a price higher than the market To the extent feasible, the PAC firm should be asked to accept a “fall clause” - undertaking that if it supplies or quotes a lower rate to other governments, the public sector, or private organisations, it shall reimburse the excess. If the price offered is not acceptable, negotiation as per provision of para 7.6.9 may be held with the PAC firm.

What This Means

Para 4.10.1 of the Manual for Procurement of Goods, 2017, focuses on managing risks associated with Proprietary Article Certificate (PAC) procurements. A PAC is used when a specific item can only be sourced from a single vendor. The rule acknowledges that relying solely on one vendor can limit competition and potentially lead to inflated prices or unfair practices. It aims to ensure transparency and prevent long-term dependence on a single supplier without periodically checking the market for alternatives. This rule directly affects all government departments and agencies involved in procurement, especially those using PAC for acquiring goods. It's designed to protect public funds and promote fair competition.

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

Key Points

  • •PAC procurements should be transparent: NIT (Notice Inviting Tender) and contract awards must be published on GeM-CPPP and the procuring entity's website.
  • •PAC procurements should not exceed three years: After three years, an Open Tender Enquiry (OTE) must be conducted to assess market availability.
  • •Procuring entities should monitor GeM for alternative vendors even during PAC procurements.
  • •The 'fall clause' should be included in PAC contracts where feasible, ensuring the government receives the best possible price.
  • •Price negotiation is permitted with the PAC firm if the initial price is deemed unacceptable.

Practical Example

The Ministry of Electronics and Information Technology (MeitY) has been procuring specialized encryption software from 'SecureTech Solutions' under a PAC for the past two years. Following Para 4.10.1, MeitY must now initiate an Open Tender Enquiry (OTE) to determine if other vendors can provide similar software. Even during the PAC period, MeitY's procurement officer, Mr. Sharma, regularly checks the GeM portal for alternative solutions. Furthermore, the contract with SecureTech includes a 'fall clause'. If SecureTech offers the same software at a lower price to a private company, they are obligated to reimburse MeitY the difference. During the annual price review, Mr. Sharma found SecureTech's quoted price higher than market estimates. He initiated negotiations as per para 7.6.9, resulting in a mutually agreeable price reduction.

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

Frequently Asked Questions

What is a Proprietary Article Certificate (PAC)?▼
A PAC is a certificate stating that a specific item can only be sourced from a single vendor, justifying a direct purchase without competitive bidding.
Why is transparency important in PAC procurements?▼
Transparency ensures that the process is fair and prevents potential collusion or favoritism towards a specific vendor. Publishing NITs and contract awards allows other vendors to be aware of the opportunity and potentially challenge the PAC if they believe they can also supply the item.
What is an Open Tender Enquiry (OTE) and why is it mandatory after three years of PAC procurement?▼
An OTE is a competitive bidding process open to all qualified vendors. It's mandatory after three years to test the market and ensure that the PAC is still justified. It helps prevent long-term dependence on a single vendor without periodically checking for alternatives.
What is a 'fall clause' and how does it benefit the government?▼
A 'fall clause' is a contractual provision that requires the vendor to reimburse the government if they offer the same product or service at a lower price to other customers (government, public sector, or private). It ensures the government receives the most competitive price.
What if the price offered by the PAC firm is too high?▼
Para 4.10.1 allows for price negotiation with the PAC firm, following the guidelines outlined in para 7.6.9 of the manual. This allows the procuring entity to attempt to reach a mutually acceptable price.

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 4.10.1 of the Manual for Procurement of Goods, 2017, what information related to Proprietary Article Certificate (PAC) procurements must be published?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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