Para 7.7.5 - Procurement Limits | KartavyaDesk
Original Rule Text
a) Authorities competent to make purchases may, at their discretion, make purchases of value up to Rupees two and a half lakh by issuing purchase orders containing basic terms and conditions; b) With respect to contracts for purchases valued from Rupees One Lakh to upto Rupees Ten lakhs, where tender documents include the GCC, SCC, and schedule of requirements, the letter of acceptance will result in a binding contract, provided no performance security is called for or due to be submitted. All delivery liabilities would be counted from the date of LoA. (Rule 225 iv)b) GFR 2017). c) In cases where standard forms of contracts are not used or where modifications in standard forms are considered necessary in respect of individual contracts, legal and financial advice should be taken in drafting the clauses in the contract and approval of CA is to be obtained, d) Copies of all contracts and agreements for purchases of the value of Rs. 50 (Rupees Fifty) lakh and above and all rates and running contracts entered into by civil Departments of the Government should be sent to the Accountant General. e) Copies of the LOA/Purchase Order should also be sent to the Jurisdictional Assessing Officer for GST, which is mentioned in the bidder’s bid.
What This Means
Para 7.7.5 of the Manual for Procurement of Goods, 2017 outlines the financial powers and procedures for government departments when making purchases. It essentially sets the rules for how much authority different levels of officers have to approve purchases and what kind of documentation is needed. For smaller purchases (up to ₹2.5 lakh), the purchasing authority can issue a simple purchase order. For mid-range purchases (₹1 lakh to ₹10 lakh) where standard contract terms are used, a Letter of Acceptance (LoA) creates a binding contract as long as no performance security is required.
For more complex contracts or those that deviate from standard forms, legal and financial advice is mandatory, and the Chief Accounting Authority (CA) must approve the contract clauses. Finally, for high-value contracts (₹50 lakh and above) and running contracts, copies must be sent to the Accountant General. Additionally, copies of the LoA or Purchase Order must be sent to the GST Jurisdictional Assessing Officer mentioned in the bidder's documents. This ensures transparency and accountability in government procurement processes.
This rule affects all government departments and employees involved in the procurement of goods. It's crucial for ensuring compliance with financial regulations, preventing irregularities, and maintaining transparency in government spending. Understanding this rule is also important for those preparing for government exams related to finance and procurement.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Purchases up to ₹2.5 lakh can be made with a simple purchase order.
- •For purchases between ₹1 lakh and ₹10 lakh, a Letter of Acceptance (LoA) can form a binding contract if standard terms are used and no performance security is needed.
- •Legal and financial advice, along with CA approval, is required for non-standard contracts.
- •Contracts above ₹50 lakh and running contracts must be reported to the Accountant General.
- •Copies of LoA/Purchase Order must be sent to the Jurisdictional Assessing Officer for GST.
Practical Example
Mr. Sharma, a Section Officer in the Ministry of Textiles, needs to purchase 50 new office chairs. The total cost is estimated at ₹1.8 lakh. According to Para 7.7.5, Mr. Sharma can directly issue a purchase order to the vendor, M/s Comfort Seating, containing the basic terms and conditions.
Later, the Ministry decides to award a contract worth ₹60 lakh to M/s Durable Fabrics for supplying uniforms. Since the contract value exceeds ₹50 lakh, a copy of the contract agreement must be sent to the Accountant General. Also, a copy of the Letter of Acceptance must be sent to the Jurisdictional Assessing Officer for GST as mentioned in M/s Durable Fabrics' bid.
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 the significance of the Letter of Acceptance (LoA) in procurement?▼
When is it necessary to seek legal and financial advice during procurement?▼
What is the purpose of sending contract copies to the Accountant General?▼
Why is it important to send the LoA/Purchase Order to the Jurisdictional Assessing Officer for GST?▼
What happens if I don't follow Para 7.7.5?▼
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 7.7.5 of the Manual for Procurement of Goods, 2017, up to what value can authorities competent to make purchases issue purchase orders containing basic terms and conditions?
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