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Para 7.5.2 - Bid Evaluation | KartavyaDesk

Goods Manual

Original Rule Text

2. Evaluation of Offers: a) Import of Goods or services or both attract integrated tax (IGST). The IGST rate and GST cess shall be applicable on the ‘Customs Assessable Value’ plus the ‘Basic Customs duty applicable thereon.’ The offers would be compared based on the principle of the total outgo from the Procuring Entity’s pockets, including all applicable taxes and duties (Customs duty, IGST, and GST Cess). b) The foreign bidders are normally asked, in the tender documents, to quote both on a FAS/FOB basis and also on a CFR/CIF basis duly indicating the break-up of prices for freight, insurance, and so on, with purchasers reserving the right to order on either basis. They should also indicate the customs tariff number and customs duty applicable in India. In the case of FAS/FOB offers, the freight and insurance shall be (after ascertaining, if not quoted) added to make up the CIF cost. To arrive at the DDP/ FOR/ (FOT) destination cost, the following is to be added over and above CIF: one per cent as port handling charges; customs duty, countervailing duty, and surcharges, as applicable on the date of opening of the bid; clearing agency charges; inland freight and GST, as assessed. For bids with Letter of Credit (LC) payment, the likely LC charges (as ascertained from the Procuring Entity’s bankers) should also be loaded. The FOR/FOT destination price for domestic offers may be calculated as in OTE tenders. In case both Indian and foreign bidders have quoted in the tender, the comparison of the offers would be made based on DDP/FOR/FOT destination, including all applicable taxes and duties (on the principle of the total outgo from the Procuring Entity’s pockets). In case there are no domestic bidders, a comparison of

What This Means

Para 7.5.2 of the Manual for Procurement of Goods, 2017, deals with how government departments should evaluate bids when purchasing goods, especially when those goods might be imported. The core idea is that the government needs to figure out the *total* cost to the government's pocket, including all taxes and duties, before deciding which bid is the best. This ensures a fair comparison between domestic and foreign suppliers.

When comparing bids, especially from foreign companies, the rule specifies how to calculate the final cost. It involves adding up the price of the goods, shipping costs, insurance, port handling charges, customs duties, and any other applicable taxes like IGST and GST cess. The rule also considers Letter of Credit (LC) charges if that's how the payment will be made. By calculating the 'DDP/FOR/FOT destination cost,' the government can accurately compare bids from different sources and choose the most economical option. This rule applies to all government departments and agencies involved in procurement, and it directly affects both domestic and foreign suppliers who bid on government contracts.

Essentially, this rule ensures transparency and fairness in government procurement by standardizing how bids are evaluated, especially when imports are involved. It makes sure that the government considers all costs associated with a purchase before making a decision, leading to better value for taxpayer money.

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

Key Points

  • •Focuses on calculating the total cost to the government ('total outgo') for bid evaluation.
  • •Specifies how to calculate the 'DDP/FOR/FOT destination cost' for both domestic and foreign bids.
  • •Requires inclusion of all applicable taxes and duties (Customs duty, IGST, GST Cess, etc.) in the cost calculation.
  • •Addresses the handling of freight, insurance, port charges, and other incidental costs.
  • •Ensures fair comparison between Indian and foreign bidders by standardizing cost calculation.

Practical Example

The Ministry of Electronics and Information Technology (MeitY) is procuring servers. Two companies bid: 'Tech Solutions India' (domestic) and 'Global Tech Inc.' (foreign). Tech Solutions India quotes ₹50 Lakh FOR destination. Global Tech Inc. quotes $60,000 FOB. MeitY calculates the CIF cost for Global Tech Inc. by adding freight and insurance, which comes to $65,000. Then, MeitY converts this to INR (let's say ₹53 Lakh). Next, they add 1% port handling charges (₹53,000), customs duty (₹5 Lakh), clearing agency charges (₹20,000), inland freight (₹30,000), and GST (₹1 Lakh). The final DDP cost for Global Tech Inc. is ₹59.03 Lakh.

Since Tech Solutions India's FOR cost is ₹50 Lakh and Global Tech Inc.'s DDP cost is ₹59.03 Lakh, MeitY, based on Para 7.5.2, would consider Tech Solutions India's bid more economical, assuming all other technical specifications are met. This example demonstrates how the rule ensures all costs are considered for a fair comparison.

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

Frequently Asked Questions

What does 'total outgo from the Procuring Entity’s pockets' mean?▼
It refers to the total cost the government department will ultimately pay, including the initial price of the goods or services, plus all associated costs like taxes, duties, transportation, and handling charges.
What is the significance of calculating DDP/FOR/FOT destination cost?▼
Calculating the DDP/FOR/FOT destination cost provides a standardized basis for comparing bids from different suppliers, regardless of whether they are domestic or foreign. It ensures that all relevant costs are considered, leading to a more accurate assessment of the true cost to the government.
How are Letter of Credit (LC) charges handled in bid evaluation?▼
If payment is made through a Letter of Credit, the estimated LC charges (obtained from the Procuring Entity's bank) are added to the overall cost of the bid. This ensures that the cost of using this payment method is factored into the comparison.
What if freight and insurance costs are not quoted in FAS/FOB offers?▼
The procuring entity is responsible for ascertaining these costs (e.g., by contacting freight forwarders or insurance providers) and adding them to the FOB price to arrive at the CIF cost.
Does this rule apply to all types of government procurement?▼
While Para 7.5.2 specifically addresses the evaluation of offers involving imports, the underlying principle of considering the 'total outgo' is generally applicable to all government procurement processes.

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 7.5.2 of the Manual for Procurement of Goods, 2017, on what principle should offers be compared when procuring goods involving imports?

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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