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Para 7.5.3 - Rate Contracts | KartavyaDesk

Goods Manual

Original Rule Text

7.5.3 Evaluation in Rate Contracts 1. If stipulated in the Tender Documents that this is a Tender Process to enter “Rate Contract(s)” for the supply of Goods, then additional clauses (including Performance Security, Fall Clause, etc) shall be incorporated therein, and the evaluation would be done accordingly (please refer to para 4.4.1-3 above). 2. Procedures stipulated in this chapter for evaluation of bids and award of contract shall be applicable mutatis mutandis in the finalisation of rate contract. The procedure for negotiations/counter-offers and splitting of contracts (parallel contracts) is slightly different in Rate Contract as per sub-para below. One-time or standing approval of the Secretary of the Department may be taken for this procedure. 3. Procuring Entity reserves the right to conclude more than one rate contract for the same Schedule/ Goods. The procedure for negotiation and counter-offering for concluding parallel rate contracts could be as follows. a) Initially, the rate contract would be awarded to the L-1 Bidder. Then the price of L-1 shall be counter-offered to the higher quoting responsive Bidders (under intimation to L-1), asking them to send their revised Bids online on the e-procurement portal to be opened at a specified place, date, and time (as per the standard procedure). L-1 Bidder would be specifically informed that it may, if it desires, reduce its price, and send its revised bid accordingly. The Bidders who accept the counter-offered rate or rate lower than that would be awarded parallel rate contracts. If L-1 Bidder lowers its rate in its revised offer, the same would also be accepted with effect from that date, and its rate contract would be amended accordingly. b) Price Negotiation with the bidders should be severely discouraged. However, in the case where parallel rate contracts are necessary, even if the lowest responsive bidder (L-1) price is not reasonable, negotiation may be conducted with the L-1 bidder in the first instance. If the L1 Bidder agrees to bring down the price to the desired level, a rate contract would be concluded with it, and parallel rate contracts would be concluded as per the sub-para above. If, however, L1 Bidder does not agree to reduce its price in the first instance itself, then the price, which has been decided as reasonable, shall be counter-offered to all the higher quoting responsive Bidders (including L-1) for further action on the above lines. c) All such parallel rate contracts would be released transparently and simultaneously.

What This Means

Para 7.5.3 of the Manual for Procurement of Goods, 2017, focuses on how to evaluate bids when the government wants to establish 'Rate Contracts' for goods. A Rate Contract is essentially an agreement where suppliers agree to provide goods at a pre-determined price for a specific period. This rule ensures fairness and transparency when multiple suppliers might be chosen for the same goods through these contracts. It outlines the process for negotiating prices and awarding contracts, especially when the government wants to have multiple suppliers (parallel contracts) to ensure a steady supply and competitive pricing.

The rule emphasizes that the general procedures for evaluating bids and awarding contracts still apply to Rate Contracts. However, it provides specific guidance on how to handle negotiations and splitting contracts among multiple suppliers. The goal is to secure the best possible prices while ensuring a reliable supply chain. It also highlights the importance of transparency and fairness in the process, ensuring that all bidders are treated equitably.

This rule affects government departments and agencies involved in procuring goods through Rate Contracts. It also impacts suppliers who participate in these tenders, as it outlines the process for negotiation and the possibility of securing parallel contracts. Understanding this rule is crucial for ensuring compliance with procurement guidelines and achieving 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

  • •Applies to tender processes for establishing Rate Contracts for goods.
  • •Emphasizes incorporating additional clauses like Performance Security and Fall Clause in tender documents.
  • •Allows for concluding multiple (parallel) rate contracts for the same goods.
  • •Outlines a specific procedure for negotiation and counter-offering to higher quoting bidders.
  • •Prioritizes transparency and fairness in awarding parallel rate contracts.

Practical Example

The Ministry of Textiles needs to procure cotton yarn for various government-supported weaving projects. They issue a tender for a Rate Contract. After evaluating the bids, M/s. Cotton King is the L-1 bidder at ₹100/kg. However, the Ministry wants to ensure a stable supply and decides to explore parallel rate contracts. They inform M/s. Cotton King that they are considering parallel contracts and invite them to revise their bid if they wish. Simultaneously, they counter-offer the price of ₹100/kg to the next three responsive bidders, M/s. Yarn Spinners, M/s. Thread Masters, and M/s. Weave Well, asking them to submit revised bids. M/s. Yarn Spinners and M/s. Thread Masters accept the counter-offer and are awarded parallel rate contracts at ₹100/kg. M/s. Cotton King, seeing the competition, lowers its price to ₹98/kg, which is then accepted, and its rate contract is amended accordingly. Now, the Ministry has three suppliers ensuring a consistent supply of cotton yarn at competitive rates.

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 Rate Contract, and why is it used?▼
A Rate Contract is an agreement where suppliers agree to provide goods at a pre-determined price for a specific period. It's used to ensure a stable supply and pre-negotiated pricing for frequently purchased items.
Can the government award multiple Rate Contracts for the same item?▼
Yes, Para 7.5.3 explicitly allows for concluding multiple (parallel) rate contracts to ensure a reliable supply chain and competitive pricing.
What happens if the L-1 bidder's price is not considered reasonable?▼
Negotiation may be conducted with the L-1 bidder. If they don't agree to reduce the price, the reasonable price can be counter-offered to all higher quoting responsive bidders, including L-1.
What are the 'additional clauses' mentioned in the rule?▼
These include clauses like Performance Security (to ensure the supplier fulfills the contract) and Fall Clause (ensuring the government gets the lowest price if the supplier offers a lower price to someone else).
Is price negotiation encouraged under this rule?▼
Price negotiation is generally discouraged. However, it is permitted when parallel rate contracts are necessary, especially if the L-1 price is not reasonable.

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 7.5.3 of the Manual for Procurement of Goods, 2017, what additional clauses MUST be incorporated in tender documents when the tender process aims to establish Rate Contracts?

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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