Para 7.6.9 — GOODS_MANUAL

7.6.9 Negotiations for Reduction of Prices (Rule 173

(xiv) of GFR 2017) 1. Negotiation with bidders for price reduction after bid opening must be severely discouraged. However, in exceptional circumstances where price negotiation is necessary due to some unavoidable circumstances, it should be held only with the lowest acceptable bidder (L1), who is techno-commercially responsive for the supply of a bulk quantity and on whom the contract would have been placed but for the decision to negotiate.

7.6.10 Consideration of Lack of Competition in OTE/ GTE and LTE [Rule 173 (xix), (xx), and

(xxi) of GFR 2017] 1. The number of bids received, which can indicate adequate competition, depends on the parameters of procurement (value, specification, mode of procurement, tendering system, etc.) and the market situation. This has to be judged by the Tender Committee. However, less than three independent bids (without suspicion of the cartel) may indicate a lack of competition. TC must record a paragraph in its report about the adequacy or otherwise of competition in the tender.

174 2. In no case, including where cartel rates are suspected, should negotiations be extended to those who had either not tendered originally or whose bid was rejected because of unresponsiveness of bid, unsatisfactory credentials, inadequacy of capacity or unworkable rates. 3. Price negotiations may not be considered except under the following exceptional circumstances: a) Where L1 price is not considered to be reasonable, and i) the procurement is done on a nomination basis or ii) Procurement is from single or limited sources or iii) In situations where the requirements are urgent, and the delay in re-tendering for the entire requirement due to the unreasonableness of the quoted rates would jeopardise essential operations, maintenance, and safety - negotiations with L1 bidder

(s) may be done for a bare minimum quantum of immediate requirements. The balance bulk requirement should, however, be procured through a re-tender, following the normal tender process. b) Where there is suspicion of cartel formation, which should be recorded, following provisions of para 7.6.8 above. 4. The decision whether to invite fresh tenders or to negotiate (and with whom) should be made by the tender accepting authority, based on the recommendations of the TC. Convincing reasons must be recorded by the authority recommending negotiations. The CA should exercise due diligence while accepting a tender, ordering negotiations, or calling for a re-tender, and a definite timeframe should be indicated. 5. Normally, all counter-offers are considered negotiations by other means, and the principles of negotiations should apply to such counter-offers. For example, a counter-offer to L1 to arrive at an acceptable rate shall amount to a negotiation. However, any counter-offer (at the rates accepted by L1) to L2, L3, and so on in case of splitting of quantities (and in parallel Rate Contracts) shall not be deemed to be a negotiation. Similarly, dynamic bids in the Reverse Auction process, as per para 4.5 above, are not to be considered as negotiations. 6. After the CA has decided to call a specific bidder for negotiation, the following procedure should be adopted: a) It must be understood that if the period of validity of the original offer expires before the close of negotiations, the original offer will not be available for acceptance. The period of validity of the original offer must, therefore, be extended, wherever necessary, before negotiations; b) The bidder to be called in for negotiations should be addressed as per the format of the letter laid down in Annexure 15 so that the rates originally quoted by him shall remain open for acceptance in the event of failure of the contemplated negotiation; c) A negotiation meeting should be started only after obtaining a signed declaration from the negotiating supplier as per Annexure 15. d) Revised bids should be obtained in writing from the selected bidders at the end of the negotiations in the format of the letter laid down in Annexure 16. The bidder should not be permitted to change any other condition of his bid other than lowering the price. The revised bids so obtained should be read out to the bidders or their representatives present immediately after completing the negotiations. If necessary, the negotiating party may be given some time to submit its revised offer. In case, however, the selected bidder prefers to send a revised bid instead of being present at the negotiation, the offer should be considered. In case a bidder does not submit the revised bid, decision shall be taken based on its original bid.

2. Sometimes, against advertised/limited tender cases, the procuring entity may not receive enough bids and/or, after analysing the bids, ends up with only one responsive bid – a situation referred to as ‘Single Offer.’ As per Rule 21 of DFPR (please see Annexure 2 explanation sub-para), such a situation of ‘Single Offer’ is to be treated as a Single Tender. It has become a practice among some procuring entities to routinely assume that open tenders that result in single bids are not acceptable and to go for re-tender as a ‘safe’ course of action. This is not correct. Re-tendering has costs: firstly, the actual costs of retendering; secondly, the costs of delay in the attainment of the purpose for which the procurement is being done; and thirdly, the possibility that the re-bid may result in a higher bid112. Even when only one Bid is submitted, the process may be considered valid, provided the following conditions are satisfied:

a) The procurement was satisfactorily advertised, and sufficient time was given for submission of bids. b) The qualification criteria were not unduly restrictive, c) Prices are reasonable in comparison to market rates.

3. However, as far as delegation/schedule of procurement powers (SoPP, refer to Annexure 4) is concerned, the competent authority would be as in Single tender mode. In case the price is not reasonable, negotiations (being L1) or retender may be considered if justified.

4. Unsolicited offers against LTEs should be ignored. However, ministries/departments should develop a system by which such interested firms can register and bid in the next round of tendering. However, under the following exceptional circumstances, these may be considered for acceptance at the next higher level of competency:

a) Inadequate Competition b) Non-availability of suitable quotations from registered vendors c) Urgent demand and capacity/capability of the firm offering the unsolicited being known, etc.