Para 8.4 — GOODS_MANUAL

GOODS_MANUAL

8.4. Annual Maintenance Contract (AMC) (Rule 169, GFR 2017) 1. Some goods, especially sophisticated equipment, and machinery, need proper maintenance for trouble-free service. For this purpose, the purchase organisation may enter into a maintenance contract. It must, however, be kept in mind that the maintenance contract is to start after the expiry of the warranty period, during which period the goods are to be maintained free of cost by the supplier. 2. The maintenance contract may be entered into either with the OEM manufacturer/supplier of the goods or with a competent and eligible firm, not necessarily the manufacturer/supplier of the goods in question. The purchase organisation should decide this aspect on a case-to-case basis on merit. 3. If the maintenance contract is to be made a part of the procurement of equipment (refer to para 8.3 above), then suitable clauses for this purpose are to be incorporated in the tender enquiry document itself. While evaluating the offers, the cost component towards the maintenance of the goods for the specified number of years is also to be added to the evaluated tender value on an overall basis to decide the inter se ranking of the responsive bidders. Equipment with a lower quoted price may carry a higher maintenance liability. Therefore, the total cost (all-inclusive, based on total outgo from the pocket) on purchase and maintenance of the equipment over the period of the maintenance contract should be assessed to consider its suitability for purchase. While evaluating the bidders for maintenance of goods covering a longer period (say, three to five or more years, depending on the life span of the equipment), the quoted prices pertaining to maintenance in future years are to be discounted to the Net Present Value (NPV, please refer to para 8.5 below) as appropriate for comparing the tenders on an equitable basis and deciding the lowest evaluated responsive tender. 4. However, if the maintenance contract is to be entered into with a competent and eligible supplier separately, then a separate tender enquiry is to be floated for this purpose, and tenders are evaluated and ranked accordingly for placement of the maintenance contract.
Here, the OEM supplier of the goods may also quote, and his quotation, if received, is to be considered along with other quotations received. In some situations, OEM manufacturers/suppliers of goods authorise certain service providers to provide AMC support. In such cases, the Service provider must produce such authorisation/ letter from the OEM, confirming technical and spares support to the service provider. 5. The details of the services required for the maintenance of the goods, the required period of maintenance and other relevant terms and conditions, including payment terms, are to be incorporated in the tender enquiry document. The terms of payment for the maintenance service will depend on the nature of the goods to be maintained as well as the nature of the services desired. Generally, payment for maintenance is made on a halfyearly or quarterly basis. 6. A Service Level Agreement (SLA) may be incorporated in complex and large maintenance contracts. SLA should indicate guaranteed levels of service parameters like - %age uptime to be ensured, Performance output levels to be ensured from the equipment, a channel for registering service requests, response time for resolving the request, Channel for escalation of a service request in case of delay or the unsatisfactory resolution of the request, monitoring of Service Levels etc. This would include the provision of helplines, complaint registration and escalation procedures, response time, percentage of uptime and availability of equipment, non-degradation in performance levels after maintenance, maintenance of an inventory of common spares, use of genuine spares, and so on. The maintenance contract may also include penalties (liquidated Damages) for unacceptable delays in responses and degradation in the performance output of machines, including provisions for terminations. 7. It should be indicated in the tender documents whether the maintenance charges would be inclusive of visiting charges price of spares (many times, consumables such as rubber gasket, bulbs, and so on, are not included, even though major parts may be included), price of consumables (fuel, lubricants, cartridges, and so on). If the costs of spares are to be borne by the procuring entity, then a guaranteed price list should be asked for along with the bids. It should also be clarified whether room/space, electricity, water connection, and so on would be provided free of cost to the contractor. 8. A suitable provision should be incorporated in the tender enquiry document and the resultant maintenance contract, indicating that the prices charged by the maintenance contractor should not exceed the prevailing rates charged by him from others for similar services. While claiming payment, the contractor is also to give a certificate to this effect in his bill. 9. If the goods to be maintained are sophisticated and costly, the tender enquiry document should also have a provision for obtaining performance security. The amount of performance security will depend on the nature of the goods, the period of maintenance, and so on. 10. Sometimes, the maintenance contractor may have to take the goods or some components of the goods to his factory for repair, and so on. On such occasions, before handing over the goods or components, valuing more than Rupees One Lakh, a suitable bank guarantee is to be obtained from the firm to safeguard the purchaser's interest. 11. Sometimes, during the tenure of a maintenance contract, especially with a longer tenure, it may become necessary for the purchase organisation to withdraw the maintenance contract due to some unforeseen reasons. To take care of this, there should be a suitable provision in the tender document and in the resultant contract. Depending on the cost and nature of the goods to be maintained, a suitable notice period (say one to three months) for such cancellation to come into effect is to be provided in the documents. A model clause to this effect is provided below:
"The purchaser reserves its right to terminate the maintenance contract at any time after giving due notice without assigning any reason. The contractor will not be entitled to claim any compensation against such termination. However, while terminating the contract, if any payment is due to the contractor for maintenance services already performed in terms of the contract, these would be paid to it/him as per the contract terms".
(Rule 169 of GFR 2017)

GOODS_MANUAL

8.4. Annual Maintenance Contract (AMC) (Rule 169, GFR 2017) 1. Some goods, especially sophisticated equipment, and machinery, need proper maintenance for trouble-free service. For this purpose, the purchase organisation may enter into a maintenance contract. It must, however, be kept in mind that the maintenance contract is to start after the expiry of the warranty period, during which period the goods are to be maintained free of cost by the supplier. 2. The maintenance contract may be entered into either with the OEM manufacturer/supplier of the goods or with a competent and eligible firm, not necessarily the manufacturer/supplier of the goods in question. The purchase organisation should decide this aspect on a case-to-case basis on merit. 3. If the maintenance contract is to be made a part of the procurement of equipment (refer to para 8.3 above), then suitable clauses for this purpose are to be incorporated in the tender enquiry document itself. While evaluating the offers, the cost component towards the maintenance of the goods for the specified number of years is also to be added to the evaluated tender value on an overall basis to decide the inter se ranking of the responsive bidders. Equipment with a lower quoted price may carry a higher maintenance liability. Therefore, the total cost (all-inclusive, based on total outgo from the pocket) on purchase and maintenance of the equipment over the period of the maintenance contract should be assessed to consider its suitability for purchase. While evaluating the bidders for maintenance of goods covering a longer period (say, three to five or more years, depending on the life span of the equipment), the quoted prices pertaining to maintenance in future years are to be discounted to the Net Present Value (NPV, please refer to para 8.5 below) as appropriate for comparing the tenders on an equitable basis and deciding the lowest evaluated responsive tender. 4. However, if the maintenance contract is to be entered into with a competent and eligible supplier separately, then a separate tender enquiry is to be floated for this purpose, and tenders are evaluated and ranked accordingly for placement of the maintenance contract.
Here, the OEM supplier of the goods may also quote, and his quotation, if received, is to be considered along with other quotations received. In some situations, OEM manufacturers/suppliers of goods authorise certain service providers to provide AMC support. In such cases, the Service provider must produce such authorisation/ letter from the OEM, confirming technical and spares support to the service provider. 5. The details of the services required for the maintenance of the goods, the required period of maintenance and other relevant terms and conditions, including payment terms, are to be incorporated in the tender enquiry document. The terms of payment for the maintenance service will depend on the nature of the goods to be maintained as well as the nature of the services desired. Generally, payment for maintenance is made on a halfyearly or quarterly basis. 6. A Service Level Agreement (SLA) may be incorporated in complex and large maintenance contracts. SLA should indicate guaranteed levels of service parameters like - %age uptime to be ensured, Performance output levels to be ensured from the equipment, a channel for registering service requests, response time for resolving the request, Channel for escalation of a service request in case of delay or the unsatisfactory resolution of the request, monitoring of Service Levels etc. This would include the provision of helplines, complaint registration and escalation procedures, response time, percentage of uptime and availability of equipment, non-degradation in performance levels after maintenance, maintenance of an inventory of common spares, use of genuine spares, and so on. The maintenance contract may also include penalties (liquidated Damages) for unacceptable delays in responses and degradation in the performance output of machines, including provisions for terminations. 7. It should be indicated in the tender documents whether the maintenance charges would be inclusive of visiting charges price of spares (many times, consumables such as rubber gasket, bulbs, and so on, are not included, even though major parts may be included), price of consumables (fuel, lubricants, cartridges, and so on). If the costs of spares are to be borne by the procuring entity, then a guaranteed price list should be asked for along with the bids. It should also be clarified whether room/space, electricity, water connection, and so on would be provided free of cost to the contractor. 8. A suitable provision should be incorporated in the tender enquiry document and the resultant maintenance contract, indicating that the prices charged by the maintenance contractor should not exceed the prevailing rates charged by him from others for similar services. While claiming payment, the contractor is also to give a certificate to this effect in his bill. 9. If the goods to be maintained are sophisticated and costly, the tender enquiry document should also have a provision for obtaining performance security. The amount of performance security will depend on the nature of the goods, the period of maintenance, and so on. 10. Sometimes, the maintenance contractor may have to take the goods or some components of the goods to his factory for repair, and so on. On such occasions, before handing over the goods or components, valuing more than Rupees One Lakh, a suitable bank guarantee is to be obtained from the firm to safeguard the purchaser's interest. 11. Sometimes, during the tenure of a maintenance contract, especially with a longer tenure, it may become necessary for the purchase organisation to withdraw the maintenance contract due to some unforeseen reasons. To take care of this, there should be a suitable provision in the tender document and in the resultant contract. Depending on the cost and nature of the goods to be maintained, a suitable notice period (say one to three months) for such cancellation to come into effect is to be provided in the documents. A model clause to this effect is provided below:
"The purchaser reserves its right to terminate the maintenance contract at any time after giving due notice without assigning any reason. The contractor will not be entitled to claim any compensation against such termination. However, while terminating the contract, if any payment is due to the contractor for maintenance services already performed in terms of the contract, these would be paid to it/him as per the contract terms".
(Rule 169 of GFR 2017)

Para 8.4 — GOODS_MANUAL

Original Rule Text

Para 8.4 — GOODS_MANUAL

Original Rule Text