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Para 7.7 - Award of Contract | KartavyaDesk

Goods Manual

Original Rule Text

7.7. Award of Contract 7.7.1 LoA to Successful Bidder 1. Prior to the expiry of the period of bid validity, the successful bidder will be notified (briefly indicating therein relevant details such as quantity, specification of the goods ordered, prices, and so on) in writing by a registered letter or any other acknowledgeable and foolproof method that his bid has been accepted. Legal communication of acceptance of the offer is considered complete as soon as it is submitted to postal authorities (please refer to para 2.9-1 of Appendix 2). A template for the Letter of Acceptance (or Notice of Award or Acceptance of Tender) is given in Annexure 17. In the same communication, the successful bidder is to be instructed to furnish the required performance security within a specified period (generally 14 (fourteen) to 28 (twenty-eight), depending on the amount). Letter of Award - LoA shall state the sum (hereinafter and in the contract called the "Contract Price") that the Procuring Entity shall pay the contractor in consideration of the supply of the Goods. The Letter of Award (LoA) shall constitute the legal formation of the contract if it is not conditional on submission of Performance Security (as in tenders below Rs 50 Lakhs). In case Performance Security is stipulated it would amount to a contract only after the furnishing of performance security as per the provisions of the para 7.7.3 below. The Procuring Entity, at its discretion, may directly issue the contract subject only to the furnishing of performance security, skipping the issue of LoA.

What This Means

Para 7.7 of the Manual for Procurement of Goods, 2017, explains how a government department (the 'Procuring Entity') officially accepts a bid from a supplier. Once the department decides on the winning bid, they send a 'Letter of Acceptance' (LoA) to the supplier. This letter confirms that their bid has been chosen and includes details like the quantity of goods, specifications, and prices. Sending this letter through a reliable method like registered post officially starts the contract process. The LoA also instructs the supplier to provide 'Performance Security,' which is like a guarantee, within a specific timeframe. This rule applies to all government departments and agencies involved in purchasing goods and affects both the department and the suppliers bidding for contracts.

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

Key Points

  • •The Procuring Entity sends a Letter of Acceptance (LoA) to the successful bidder.
  • •The LoA includes details of the order (quantity, specifications, price).
  • •The LoA instructs the bidder to furnish Performance Security within a specified timeframe (typically 14-28 days).
  • •The LoA forms the contract if Performance Security is not required (e.g., tenders below Rs 50 Lakhs). Otherwise, the contract is formed upon furnishing Performance Security.
  • •The Procuring Entity can directly issue the contract, skipping the LoA, subject to furnishing Performance Security.

Practical Example

The Ministry of Electronics and Information Technology (MeitY) floated a tender for the supply of 5000 laptops. After evaluating all bids, they selected 'Tech Solutions Pvt. Ltd.' as the successful bidder. MeitY then sends a Letter of Acceptance (LoA) to Tech Solutions, stating the quantity (5000 laptops), specifications (Intel i5 processor, 8GB RAM, etc.), and the total contract price of Rs. 2.5 Crore. The LoA also instructs Tech Solutions to submit a Performance Security of Rs. 12.5 Lakh (5% of the contract value) within 21 days. Since the contract value is above Rs 50 Lakhs, the contract is legally formed only after Tech Solutions submits the Performance Security. Alternatively, MeitY could have skipped the LoA and directly issued the contract to Tech Solutions, contingent on the submission of the Performance Security.

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 Letter of Acceptance (LoA)?▼
A Letter of Acceptance (LoA) is a formal document issued by the Procuring Entity to the successful bidder, notifying them that their bid has been accepted.
What is Performance Security and why is it required?▼
Performance Security is a guarantee provided by the supplier to ensure they fulfill the contract terms. It protects the Procuring Entity if the supplier fails to deliver the goods as agreed.
What happens if the successful bidder fails to provide the Performance Security within the specified time?▼
If the bidder fails to provide the Performance Security, the Procuring Entity may cancel the award and forfeit any bid security submitted by the bidder. They may then award the contract to the next lowest evaluated bidder.
Can the Procuring Entity skip issuing the LoA?▼
Yes, the Procuring Entity has the discretion to directly issue the contract subject only to the furnishing of performance security, skipping the issue of LoA.
When is the contract legally formed?▼
If Performance Security is not required (as in tenders below Rs 50 Lakhs), the LoA itself forms the contract. If Performance Security is stipulated, the contract is formed only after the Performance Security is furnished.

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 7.7.1 of the Manual for Procurement of Goods, 2017, what is the typical timeframe given to a successful bidder to furnish the required performance security after receiving the Letter of Acceptance (LoA)?

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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