Para 7.4.9 — NONCONSULT_MANUAL

2. Cartels implement this anti-competitive bid-rigging. Sometimes, a cartel of bidders quotes equal/ marginally different rates (pool rates) against a tender, whereas possibly:

a) Rates quoted (and breakup thereof) are equal, despite their manufacturing/ logistics costs being different due to their scale of production/ location. b) The rate manages to be L1. c) In a variation, the rates may not be exactly equal but may be close enough to make the Cartel members L1, L2, L3, etc. d) Respective quoted quantities by these bidders are much less than the tendered quantity, leaving no option but to distribute quantities among these bids. e) Their bids have other uncanny similarities, i.e., the same layout or typographical errors. Bids from the same IP address raise suspicion, but by itself may not be a strong indicator of a cartel. In such cases, other factors mentioned in this para should be assessed to judge cartelisation.

3. If this rate is unreasonably high, this may be an attempt to force acceptance of higher rates by undermining the negotiating power of the buyer as per rules. Even when rates are reasonable, this may be an attempt to force the Procuring Entity to distribute quantities as decided by the bidders among them, even in tenders where splitting of quantities is not envisaged.

7.4.9. Cartel Formation/ Bid Rigging 1. The Competition Act defines bid rigging as agreements that have the effect of eliminating or reducing competition or adversely affecting or manipulating the process of bidding. There are various forms of bid rigging - Collusive bidding (dividing the market, setting prices, or limiting production – involves misrepresentation of independent bids); Bid Rotation/ suppression; Complementary Bidding; etc. (For details of legal aspects please refer to ‘Appendix– 2: Legal Aspects of Public Procurement’ of the Manual for Procurement of Goods, 2024)

Manual for Procurement of Non-Consultancy Services, 2025 4. Cartels, by their very nature are secretive and thus it may not be possible to find the direct concrete evidence of their presence. The orders of the Competition Commission of India (CCI) clearly mention reliance on circumstantial evidence, both economic and conductbased, to conclude the existence of a cartel agreement. 5. Such cartel formation/ pool rates abuse the transparency of Public Procurement and are a violation of the code of Integrity for Public Procurement. Such and similar tactics by bidders to avoid/ control true competition in a tender leading to an "Appreciable Adverse Effect on Competition" (AAEC) is an offence under the Competition Act, 2002. 6. Such abnormal practices need to be severely discouraged with strong measures. To discourage such practices, Procuring Entity may include in all tender documents a Cartel Formation/ Pool Rates clause, stating inter-alia that, Procuring Entity reserves its rights to take following actions, without assigning any reasons thereof, in case a Cartel/ Anticompetitive practice is suspected in a tender: a) Specify in Tender Document that are prone to such practices, that bidders must bid for at least a quantity that is more than a minimum specified percentage (say 25%) of the tendered quantity, otherwise their offer shall be rejected. b) Warn that Procurement Entity may take any/ all punitive actions available under the Code of Integrity for Public Procurement against such bidders, including removal from the list/ panel of registered sources or debarment, besides reporting the transgression to Competition Commission, and concerned trade associations like FICCI, ASSOCHAM, NSIC for suitable punitive action. c) Please note the following in para 7.4.10-2 below: In no case, including where cartel rates are suspected, should negotiations be extended to those who had either not tendered originally or whose tender was rejected because of unresponsiveness of bid, unsatisfactory credentials, inadequacy of capacity or unworkable rates. d) Procuring Entity may decide the tender as per one or more of following provisions: i) Reject all bids from the suspected cartel formation and decide the tender accordingly. ii) place order on any one or more firms (from among the cartel) for any quantity with exclusion of the rest, with or without negotiation or counteroffering.

Note: The selection of firms for this may be based on a transparent logistics parameter i.e., quicker delivery, nearer location of source, relatively better past performance, etc. iii) Whenever tender is floated for purchase exclusively from pre-qualified/ approved sources, and cartel formation is suspected among such sources, Procuring Entity may place orders on sources outside the pre-qualified/ approved sources for any quantity. iv) Wherever a specified ratio for splitting of quantities among 2/ 3 sources is stipulated in the tender document, and cartel formation is suspected among lower 2/3 bidders, place order on any number of firms beyond such ratios or decide tender as per sub para-i) or ii) above. 7. Certain Procurement decisions facilitate Cartel formation. Need Assessment and Procurement Planning is the main stage where this menace can be addressed effectively. Please refer to para 2.4.1-7.

Chapter 7: Bid Evaluation, and Award of Contract 7.4.10. Negotiations for Reduction of Prices (Rule 173

(xiv) of GFR 2017) 1. Negotiation with bidders after bid opening must be severely discouraged. However, in exceptional circumstances where price negotiation (including in post Reverse Auction tenders) is necessary due to some unavoidable circumstances, it should be held only with the lowest acceptable bidder (L1), who is techno-commercially responsive for the supply of a bulk quantity and on whom the contract would have been placed but for the decision to negotiate. 2. In no case, including where cartel rates are suspected, should negotiations be extended to those who had either not tendered originally or whose tender was rejected because of unresponsiveness of bid, unsatisfactory credentials, inadequacy of capacity or unworkable rates. 3. The circumstances where price negotiations may not be considered except under following exceptional circumstances: a) Where, L1 price is not considered to be reasonable, and b) the procurement is done on nomination basis or c) Procurement is from single or limited sources; or d) Where there is suspicion of cartel formation which should be recorded, following provisions of para 7.4.9 above. 4. Where the requirements are urgent and the delay in re-tendering for the entire requirement due to the unreasonableness of the quoted rates would jeopardise essential operations, maintenance and safety, negotiations with L1 bidder

(s) may be done for bare minimum quantum of immediate requirements. The balance bulk requirement should, however, be procured through a re-tender, following the normal tender process. 5. The decision whether to invite fresh tenders or to negotiate and with whom, should be made by the tender accepting authority based on the recommendations of the TC. Convincing reasons must be recorded by the authority recommending negotiations. The CA should exercise due diligence while accepting a tender, ordering negotiations, or calling for a re-tender and a definite timeframe should be indicated. 6. Normally all counter-offers are considered negotiations by other means and the principles of negotiations should apply to such counter offers. For example, a counter-offer to L1, to arrive at an acceptable rate, shall amount to a negotiation. However, any counter-offer to L2, L3, and so on (at the rates accepted by L1) in case of splitting of quantities shall not be deemed to be a negotiation. Similarly dynamic bids in Reverse Auction process as per para 4.6.2 and matching of L1 price as per para 7.4.6 above are not to be considered as negotiations. 7. After the CA has decided to call a specific bidder for negotiation, the following procedure should be adopted: a) It must be understood that, if the period of validity of the original offer expires before the close of negotiations, the original offer will not be available for acceptance. The period of validity of the original offer must, therefore, be extended, wherever necessary, before negotiations; b) The bidder to be called in for negotiations should be addressed as per the format of letter laid down in Annexure 14, so that the rates originally quoted by him shall remain open for acceptance in the event of failure of the contemplated negotiation; c) A negotiations meeting should be started only after obtaining a signed declaration from the negotiating service provider as per Annexure 14; and

Manual for Procurement of Non-Consultancy Services, 2025 d) Revised bids should be obtained in writing from the selected bidders at the end of the negotiations in the format of letter laid down in Annexure 15. The revised bids so obtained should be read out to the bidders or their representatives present, immediately after completing the negotiations. If necessary, the negotiating party may be given some time to submit its revised offer. In case, however, the selected bidder prefers to send a revised bid instead of being present at the negotiation, the offer should be considered. In case a bidder does not submit the revised bid, its original bid shall be considered.