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Para 9.5.5 - Timely Payments | KartavyaDesk

Goods Manual

Original Rule Text

9.5.5 Payments to the Contractor and Handling of Securities 1. Payments and decisions in contract management requested by the suppliers should be made within a reasonable time. An atmosphere of lackadaisical dilatory functioning in such matters is liable to lead to bidders quoting higher prices in future bids, besides delays in supplies and disputes in the contract. It should be ensured that all payments due to the firm, including the release of the performance security, are made on a priority basis without avoidable delay as per the tender/contract conditions. Before the payment is made, the invoice should be cross-checked with the actual receipt of material to ensure that the payment matches the actual performance.

What This Means

Para 9.5.5 of the Manual for Procurement of Goods, 2017, is all about making sure contractors get paid on time and that their securities are released promptly. It emphasizes the importance of efficient contract management and timely payments. The rule applies to all government departments and organizations involved in procuring goods and services, and it directly affects the contractors or suppliers who are providing those goods and services. The core idea is that delays in payments and security releases can lead to higher bid prices in the future, slower deliveries, and potential disputes, ultimately costing the government more money and time.

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

Key Points

  • •Payments to contractors should be made within a reasonable timeframe.
  • •Lackadaisical contract management can lead to higher future bid prices.
  • •Performance security should be released without avoidable delay, as per contract terms.
  • •Invoices must be cross-checked with actual material receipt before payment.
  • •All payments due to the firm, including security release, should be prioritized.

Practical Example

The Ministry of Textiles contracted 'WeaveWell Fabrics' for supplying 10,000 meters of specialized fabric for a government project. The contract stipulated payment within 30 days of invoice submission and release of performance security within 15 days of successful project completion. However, due to internal delays, WeaveWell's initial invoice was processed after 60 days. After the project's successful completion, the release of their performance security was further delayed by another month. Because of these delays, WeaveWell, when bidding for a similar contract later, factored in a higher risk premium, increasing their bid price by 5%. This illustrates how delays in payments, as addressed in Para 9.5.5, can directly impact future procurement costs.

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

Frequently Asked Questions

What constitutes a 'reasonable time' for payment?▼
The 'reasonable time' should be defined in the tender/contract conditions. Generally, it refers to the time frame agreed upon between the procuring entity and the supplier for processing and releasing payments.
What happens if payment delays are unavoidable?▼
While avoidable delays should be eliminated, if unavoidable delays occur, the procuring entity should communicate the reasons for the delay to the contractor and make efforts to expedite the payment process as soon as possible.
How do I ensure invoices are properly cross-checked?▼
The invoice should be verified against the Goods Receipt Note (GRN) and any other relevant documentation to confirm that the goods were received in the correct quantity and quality as per the contract specifications.
What is performance security and why is its timely release important?▼
Performance security is a guarantee provided by the contractor to ensure they fulfill their contractual obligations. Timely release is important because it frees up the contractor's capital and builds trust, encouraging them to participate in future bids.
Who is responsible for ensuring compliance with Para 9.5.5?▼
All officials involved in the procurement process, including those responsible for contract management, finance, and stores, are responsible for ensuring compliance with this rule.

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 9.5.5 of the Manual for Procurement of Goods, 2017, what is a potential consequence of lackadaisical and dilatory functioning in contract management?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - 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 2Para 1Manual for Procurement of Goods, 2024 - Para 1 - Chapter 10 - Annexure 30

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