Para 7.6.3 — GOODS_MANUAL

7.6.4 Option clause 1. Normally, for raw materials/consumables of regular and year-on-year recurrent requirements, all tenders of value above Rs. 50 (Rupees fifty) lakhs, to take care of any change in the requirement during the currency of the contract, a plus/minus option clause [normally 25 (twenty-five) per cent] may be incorporated in the tender document, reserving the purchaser's right to increase or decrease the quantity of the required goods up to that limit without any change in the terms and conditions and prices quoted by the bidders. However, the CA may approve the inclusion of such a clause in lower denomination tenders if such items have a history of frequent disruptions in the continuity of supplies. The clause may be framed along the following lines:

7.6.5 Splitting of Contracts/ Parallel Contracts 1. Unless otherwise stipulated in TIS/ AITB, there shall be no parallel orders or splitting quantities among more than one Bidders.

“The purchaser reserves the right to increase/decrease the ordered quantity by up to [25] per cent at any time, till the final delivery date (or the extended delivery date of the contract), by giving reasonable notice even though the quantity ordered initially has been supplied in full before the last date of the delivery period (or the extended delivery period).”

2. The higher the option limit, the more uncertainty there is for the bidders in formulating their prices and the more chance of hedging the prices quoted to take care of such uncertainties; hence, the option limit should be carefully considered only in justifiable requirements. (Refer to para 9.2.2 for its application).

3. There should be no option clause in development orders; 4. The quantum of the option clause will be excluded from the value of tenders for the purpose of determining the level of CA in the original tender;

2. However, after due processing, if it is discovered that the quantity to be ordered is more than what the L1 bidder alone is capable of supplying and there was no prior declaration in the tender documents to split the quantities, then the quantity being finally ordered may be distributed among the other bidders in a manner that is fair, transparent and equitable based on objective data available in the bids, e.g. eligibility criteria, Quantity/ Delivery etc:

7.6.3 Variation of Quantities at the Time of Award At the time of awarding the contract, the quantity to be procured must be re-judged based on the current data since the ground situation may have very well changed. If so provided in the tender document, and if warranted, the tendered quantity can be increased or decreased by the percentage specified therein (15 (fifteen) %, if percentage not specified) for ordering, at the discretion of the Procuring Entity. Any larger variation may throw up issues about transparency.

Chapter 7: Bid Evaluation and Award of Contract a) As far as feasible, counteroffer the L1 rate to such firms. b) If distribution at the counter-offered rate is not feasible, then distribution may be done at the rates quoted by such bidders if their rates are still within the zone of reasonableness.

3. In case of the critical/ vital/ safety/ security nature of the item, large quantity under procurement, urgent delivery requirements and inadequate vendor capacity, it may be advantageous to decide in advance to have more than one source of supply. In such cases, a parallel contract clause should be added to the tender documents, clearly stating that Procuring Entity reserves the right to split the contract quantity between suppliers. The manner of deciding the relative share of the lowest bidder (L1) contractor and the rest of the contractors/bidders should be clearly defined, along with the minimum number of suppliers sought for the contract. In the case of splitting in two and three, the ratio of 70:30 and 50:30:20, respectively, may be used – a different ratio may also be justified. These ratios are approximate, and the Procuring Entity may marginally vary quantities to suit capacity/ past performance of the bidder/ unit loads of packing or transportation/ relative ranking of the bids/ delivery period offered/ existing load of Bidder and other similar factors affecting smooth supplies as per requirements. Since such predefined splitting of quantity can potentially encourage cartel formation, the procuring entity may stipulate that the bidders must quote at least for a minimum percentage (say a minimum of the ratio of distribution – i.e., 30% or 20% in case of 70:30; 50:30:20 respectively) of the total tender quantity to be considered responsive bidder.

4. The following guidelines are to be considered while opting for parallel contracts in either case (sub-para 2 or 3 above):

a) L1 should be awarded at least the percentage mentioned above or his quoted quantity/ spare supply capacity, whichever is lower, b) In case the quantity thus allocated for L1 is less than the prescribed percentage, higher percentages than those stipulated in the Tender document for L2 (and L3 bidders, and so on, as applicable) may be considered for allocation to cover the entire tender quantity. c) For the rest of the contract quantity, the lowest rate accepted will be counter-offered to the L2 party. On acceptance of the counter-offer, the order will be placed on L2 for the respective percentage (or increased percentage as per the sub-clause above) or the quoted quantity/ spare supply capacity of the L2 bidder, whichever is lower and so on to other higher bidders. In case of non-acceptance of the counter-offer by the L2 party or in case of allocated quantity being short of L2’s stipulated/ increased percentage, a similar offer shall be made to L3 and L4, and so on. d) In case of shortfalls from the prescribed/ increased percentages, the percentage of allocation of bidders in sequence (L2, L3, etc.) may be proportionately increased (on the lines of sub-para b) above), and if unavoidable, more bidders than the minimum number specified may be considered, to cover the entire tender quantity, keeping the sanctity of ranking of bidders. If it is still not possible to cover the entire tender quantity, there would be no alternative but to retender the uncovered quantity. e) In case higher-priced bidders do not agree to match the L1 price, action as per subpara 2-b) above may be considered.

5. In either situation (sub-para 2. and 3. above), before splitting the quantity, distribution shall be subject to i) purchase preference to MSME and ‘Class I Local Supplier’ (under Make in India Order) and ii) rates of L1 being considered reasonable and if it is not reasonable, negotiation if permissible as per para 7.6.9, with the L1 party may be carried out before splitting of quantities, with the approval of the CA, otherwise there would be no alternative, but to retender the requirement.