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Para 4.12.1 - Procurement Risk | KartavyaDesk

Goods Manual

Original Rule Text

Risk Mitigation 1. The main risk is the splitting of demand to avoid higher approvals or higher modes of procurements. Supervisors should carry out periodic reviews of such procurements to ensure that the demand is not split into small quantities for the sole purpose of avoiding the necessity of getting approval from the higher authority required for sanctioning the purchase of the original demand or for avoiding LTE or OTE mode of procurement. An annual review of such procurements shall be carried out to ensure that future anticipated requirements are clubbed and procured through LTE/ OTE/ RC. To keep better control, an annual ceiling may be fixed for each office for such a mode of procurement, say, Rupees five Lakh for each office per year. Each office should maintain records to monitor such limits. 2. Over a period, intentionally or otherwise, the due diligence of enquiries from the market may degenerate into a mechanical obtaining of quotations, leading to the development of nexus and crony suppliers. Vendor selection may be manipulated with fake supporting vouchers. Since such smallvalue materials do not undergo accounting Supervisors should cross-check a percentage of cases in the market for prices, fake vouchers, and so on. Supervisors should also check that the same vendor(s) is not being patronised repeatedly. For the sake of transparency, payments should be made by cheque or through Electronic Clearance Service, except that cash payment may be

What This Means

Para 4.12.1 of the Manual for Procurement of Goods, 2017, is all about preventing fraud and misuse in small-value purchases. It focuses on two main risks: splitting up larger purchases into smaller ones to avoid needing higher-level approvals or using more competitive bidding processes (like Limited Tender Enquiry or Open Tender Enquiry), and the development of cozy relationships with certain vendors that lead to inflated prices or fake documentation. This rule applies to all government departments and agencies making purchases, and it directly affects supervisors who are responsible for overseeing these procurements. It's designed to ensure fairness, transparency, and value for money in government spending.

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

Key Points

  • •Prevents splitting of demand to avoid higher approvals or competitive bidding.
  • •Requires annual review of procurements to identify and club future requirements.
  • •Suggests fixing an annual ceiling (e.g., ₹5 Lakh) for small-value procurements per office.
  • •Mandates supervisors to cross-check market prices and verify vouchers to prevent vendor manipulation.
  • •Encourages payments through cheque or Electronic Clearance Service (ECS) for transparency.

Practical Example

The Accounts department at the Zilla Parishad, headed by Mr. Sharma, noticed that several purchase orders for stationery were being raised for ₹40,000 each, just below the ₹50,000 threshold that would require approval from the District Magistrate. Suspecting demand splitting, Mr. Sharma reviewed the purchases and found that the total stationery requirement for the year was actually ₹2 Lakh. He then recommended that future stationery purchases be made through a Limited Tender Enquiry (LTE) to get better prices and ensure transparency. Furthermore, he discovered that all the ₹40,000 orders were going to the same vendor, M/s Gupta Enterprises. He initiated a market survey and found that M/s Gupta Enterprises was charging 20% more than other vendors. He then recommended that future payments to M/s Gupta Enterprises be stopped and other vendors be empanelled through a transparent process.

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 meant by 'splitting of demand' in this context?▼
Splitting of demand refers to dividing a larger procurement requirement into smaller parts to avoid the need for higher-level approvals or more competitive bidding processes like LTE or OTE.
What is the purpose of fixing an annual ceiling for small-value procurements?▼
The purpose is to control expenditure and prevent misuse of funds by limiting the amount that can be spent through less rigorous procurement methods.
What are the responsibilities of supervisors under this rule?▼
Supervisors are responsible for reviewing procurements, ensuring that demand is not split, cross-checking market prices, verifying vouchers, and preventing the repeated patronage of the same vendor(s).
Why is payment through cheque or ECS preferred over cash payments?▼
Payment through cheque or ECS provides a clear audit trail and enhances transparency, reducing the risk of fraud and corruption.
What action should be taken if demand splitting is suspected?▼
A thorough review of the procurement records should be conducted to determine the actual requirement. Future procurements should be clubbed and made through appropriate methods like LTE or OTE. The concerned officials should be cautioned against such practices.

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 4.12.1 of the Manual for Procurement of Goods, 2017, what is the primary risk associated with splitting demand in procurement?

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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