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Para 9.7.2 - Loaned Assets | KartavyaDesk

Goods Manual

Original Rule Text

For the performance of certain contracts, the Procuring Entity may have to loan stores, drawings, documents, equipment, and assets (such as accommodation, identity cards, gate passes, and so on) to the contractor. In certain situations, the contractor may also be supplied electricity, water, cranes, and weighing facilities on a payment/hire basis. Whenever stores or prototypes, or sub-assemblies are required to be issued to the firm/contractor for guidance in fabrication, these should be issued against an appropriate bank guarantee. In addition to the bank guarantee, appropriate insurance may be asked for if it is considered necessary. For low-value items of less than Rs. 1,00,000 (Rupees One Lakh) or for sending spares for repairs to the OEMs, this stipulation of the bank guarantee may be waived and, if feasible, an indemnity bond may be taken. The Contractor shall use such property for the execution of the contract and no other purpose whatsoever. These assets shall remain the property of the Procuring Entity, and the contractor shall take all reasonable care of all such assets. The contractor shall be responsible for all damage or loss from whatever cause caused while such assets are possessed or controlled by the contractor, staff, workers, or agents. As a measure of transparency, the possibility of provision of such resources by Procuring Entity should have been announced in the tender document or at least requested by the contractor in the tender and written in the contract. Before the final payment or release of PBG/SD, a certificate may be taken from the concerned Department that the contractor has returned all documents, drawings, protective gear, material, equipment, facilities, and assets loaned, including all ID cards and gate passes, and so on, in good condition. Further, it should be certified that payment from the contractor has been received for the usage of electricity, water, crane, accommodation, weighing facility, and so on.

What This Means

Para 9.7.2 of the Manual for Procurement of Goods, 2017, deals with situations where the government (the 'Procuring Entity') lends resources to a contractor to help them perform a contract. These resources can include things like equipment, drawings, or even access to facilities like electricity or water. The rule ensures that these resources are used properly, protected from damage, and returned in good condition after the contract is completed. It affects both government departments and the contractors they hire.

Essentially, this rule is about accountability and transparency. It outlines the process for lending these resources, including the need for security (like a bank guarantee) to cover potential losses. It also emphasizes that the possibility of the government providing these resources should be clearly stated in the tender documents or requested by the contractor in their bid. This prevents misunderstandings and ensures everyone is on the same page. Finally, it mandates a check to confirm all loaned items are returned and payments for usage are made before the contractor receives their final payment or their security deposit is released.

In simpler terms, imagine lending your tools to a friend for a project. You'd want to make sure they use them carefully, return them when they're done, and pay for any materials they used. This rule is the government's way of doing the same thing when it lends resources to contractors.

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

Key Points

  • •Procuring Entity may loan resources (stores, drawings, equipment, etc.) to contractors for contract performance.
  • •A bank guarantee is generally required for loaned items, especially valuable ones, but can be waived for low-value items (under Rs. 1,00,000) or repairs to OEMs, potentially replaced with an indemnity bond.
  • •Contractors are responsible for the safekeeping and proper use of loaned assets and liable for any damage or loss.
  • •The possibility of resource provision by the Procuring Entity must be disclosed in the tender document or requested by the contractor.
  • •Verification of returned items and payment for resource usage is required before final payment or release of security.

Practical Example

The Ministry of Defence awards a contract to 'Astra Engineering' to manufacture specialized radar components. To assist Astra, the Ministry loans them detailed technical drawings and a precision milling machine. As the machine is valued at Rs. 5,00,000, Astra is required to provide a bank guarantee for that amount. The tender document clearly stated that the milling machine would be provided by the Ministry.

During the contract, a minor accident damages a part of the milling machine. Astra Engineering is responsible for repairing the damage at their own cost. Before the Ministry releases Astra's performance bank guarantee, the relevant department verifies that all drawings have been returned, the milling machine is in good working order, and Astra has paid for the electricity consumed while using the machine. Only after this verification is complete is the bank guarantee released.

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

Frequently Asked Questions

What happens if the contractor damages the equipment loaned to them?▼
The contractor is responsible for all damage or loss to the loaned assets while they are in their possession or control. They are liable for the cost of repair or replacement.
Is a bank guarantee always required when the Procuring Entity loans assets?▼
Generally, yes. However, for low-value items (less than Rs. 1,00,000) or for sending spares for repairs to the OEMs, the bank guarantee may be waived and an indemnity bond may be taken if feasible.
Where should the possibility of the Procuring Entity providing resources be mentioned?▼
The possibility of the Procuring Entity providing resources should be announced in the tender document or at least requested by the contractor in the tender and written in the contract.
What is an indemnity bond?▼
An indemnity bond is a written agreement where one party (the contractor) promises to protect another party (the Procuring Entity) against any loss or damage. It's a less stringent form of security than a bank guarantee.
What if the contractor refuses to return the loaned assets?▼
The Procuring Entity can take legal action to recover the assets and may also forfeit the contractor's bank guarantee or security deposit. This would also likely result in the contractor being blacklisted from future government contracts.

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 9.7.2 of the Manual for Procurement of Goods, 2017, what is the primary security required when the Procuring Entity issues stores or prototypes to a contractor for fabrication guidance?

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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