Para 7.4.9 - Price Negotiation | KartavyaDesk

Original Rule Text

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

What This Means

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

Key Points

• •Negotiations after bid opening are strongly discouraged.
• •Negotiations are only allowed in exceptional circumstances, such as unreasonable L1 price, suspicion of cartel formation, or procurement from a single source.
• •Negotiations are only to be conducted with the lowest acceptable bidder (L1) who is techno-commercially responsive.
• •The tender accepting authority must record convincing reasons for recommending negotiations.
• •Counter-offers to L1 are considered negotiations, but counter-offers to L2, L3, etc. for splitting quantities are not.

Practical Example

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

Frequently Asked Questions

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