Para 1.4 - Mixed Procurements | KartavyaDesk
Original Rule Text
i) bespoke software development; ii) Cloud-based services and iii) Composite IT system integration services involving design, development, deployment, and commissioning of an IT system, including hardware supply, software development, bandwidth, and operation/maintenance of the system for a defined period after go-live, etc. c) 8 Composite Contracts: Composite contracts may involve mixed elements of Goods, Works, and Services. For example, in the Procurement of large machinery, some works and services like Installation, Commissioning, Training, Annual Maintenance Contract (AMC) or a Comprehensive Maintenance Contract (CMC), and so on may be incidental to the supply of goods. The relationship of primacy between the goods element and the works/ services element may be examined, irrespective of the relative values. A possible alternative approach could be to have separate but linked contracts for such elements of Goods, Works, and Services, but implementation may become challenging. If the primary objective is the Procurement of goods with services/ works being incidental to it, it may be processed as procurement of Goods. However, if the primary objective is Procurement of Works/ services with Procurement of goods being incidental, then it should generally be processed as Procurement of works/ services (as the case may be), irrespective of the relative values. i) Procurement of “new product” viz. Mechanical, Electrical or ICT assets, etc, of the nature of Machinery and Plant with incidental works/ services like fabrication, installation, erection, commissioning, AMC/CMC should be handled as procurement of goods, except for procurement of IT Projects as specified above. ii) AMC/ CMC of existing Mechanical, Electrical or ICT assets of the nature of Machinery and Plant should be treated as procurement of Non-Consultancy Services.
What This Means
Para 1.4 of the Manual for Procurement of Non-Consultancy Services clarifies how to categorize procurements that involve a mix of goods, works, and services. It's all about figuring out the *primary* objective. If you're mainly buying goods, and services like installation are just part of the package, treat it as a 'procurement of goods.' Think buying a new machine and having someone install it. However, if the main goal is a service, and the goods are just needed to make it happen, then it's a 'procurement of services' or 'works.' This applies to all government departments and agencies involved in procurement, and it affects how they classify and process tenders.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Determine the primary objective: goods, works, or services.
- •If goods are primary, with incidental services, it's 'procurement of goods'.
- •If services/works are primary, with incidental goods, it's 'procurement of services/works'.
- •New machinery with installation is generally 'procurement of goods'.
- •AMC/CMC of existing assets is 'procurement of Non-Consultancy Services'.
Practical Example
The Ministry of Agriculture needs to purchase 100 new tractors for a subsidized farming program. The purchase includes delivery, assembly, and initial training for the farmers. Since the primary objective is acquiring the tractors (goods), and the delivery, assembly, and training are incidental to the tractor purchase, this procurement should be classified as 'procurement of goods'.
On the other hand, the Department of Urban Development wants to implement a smart city project. This involves installing sensors, setting up a data center, and providing ongoing maintenance and data analysis services. While hardware like sensors is involved, the primary objective is the data analysis and maintenance service. Therefore, this would be classified as 'procurement of Non-Consultancy Services'.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What if the value of goods and services is roughly equal in a composite contract?▼
How does this rule apply to software development?▼
What is the difference between AMC and CMC, and how are they classified?▼
If we are upgrading an existing IT system with new hardware and software, how do we classify it?▼
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 1.4 of the Manual for Procurement of Non-Consultancy Services, how should the procurement of a new MRI machine for a government hospital, including its installation and a 3-year Comprehensive Maintenance Contract (CMC), be generally categorized?
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