Para 7.5.1 - Letter of Acceptance | KartavyaDesk
Original Rule Text
2. Prior to the expiry of the period of bid validity, the successful bidder will be notified (briefly indicating therein relevant details such as quantity, description of the services ordered, prices, and so on) in writing by a registered letter or any other acknowledgeable and foolproof method that his bid has been accepted. Legal communication of acceptance of the offer is considered complete as soon as it is submitted to postal authorities (please refer to para 2.9-1) of ‘Appendix– 2: Legal Aspects of Public Procurement’ of the Manual for Procurement of Goods, 2024). A template for the Letter of Acceptance (or Notice of Award, or Acceptance of Tender) is given in Annexure 16. In the same communication, the successful bidder is to be instructed to furnish the required performance security within a specified period (generally 14 (fourteen) to 28 (twenty-eight), depending on the amount). Letter of Award - LoA shall state the sum (hereinafter and in the contract called the "Contract Price") that the Procuring Entity shall pay the contractor in consideration of the supply of the Services. The Letter of Award (LoA) shall constitute the legal formation of the contract if it is not conditional on submission of Performance Security (as in tenders below Rs 50 Lakhs). In case Performance Security is stipulated it would amount to a contract only after the furnishing of performance security as per the provisions of the para 7.5.3 below. The Procuring Entity, at its discretion, may directly issue the contract subject only to the furnishing of performance security, skipping the issue of LoA.
What This Means
Para 7.5.1 of the Manual for Procurement of Non-Consultancy Services outlines the process of formally accepting a successful bidder's offer. Once a bid is selected, the procuring entity (the government department doing the buying) must notify the bidder in writing, detailing the specifics of the service, quantity, and price. This notification, often called a Letter of Acceptance (LoA) or Notice of Award, is a crucial step in forming a legally binding contract.
The rule also specifies that the successful bidder must furnish a Performance Security within a set timeframe, usually between 14 to 28 days, depending on the contract value. This security acts as a guarantee that the bidder will fulfill their obligations. The LoA becomes a legally binding contract either immediately (for tenders below Rs 50 Lakhs where no Performance Security is required) or after the Performance Security is submitted. The procuring entity also has the option to skip the LoA and directly issue the contract, provided the Performance Security is furnished.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •The procuring entity must formally notify the successful bidder in writing.
- •The notification should include details like service description, quantity, and price.
- •The successful bidder is required to furnish a Performance Security within a specified period (typically 14-28 days).
- •The Letter of Acceptance (LoA) forms the contract, either immediately or upon submission of Performance Security.
- •The procuring entity can directly issue the contract after Performance Security is furnished, skipping the LoA.
Practical Example
The Ministry of Rural Development floated a tender for providing sanitation services to 50 villages. After evaluating the bids, M/s Swachh Bharat Services was selected. The Ministry sent a Letter of Acceptance to M/s Swachh Bharat Services, detailing the scope of work, the number of villages, and the contract price of Rs. 75 Lakhs. The LoA instructed M/s Swachh Bharat Services to furnish a Performance Security of Rs. 3.75 Lakhs (5% of the contract value) within 21 days. Once M/s Swachh Bharat Services submitted the Performance Security, the contract was legally formed. However, if the contract value was Rs. 45 Lakhs, and the Ministry didn't require a Performance Security, the LoA itself would constitute the legal contract.
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 successful bidder fails to provide the Performance Security within the stipulated time?▼
Is the Letter of Acceptance (LoA) always required?▼
What details should be included in the Letter of Acceptance (LoA)?▼
What is the purpose of the Performance Security?▼
Where can I find a template for the Letter of Acceptance?▼
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 7.5.1 of the Manual for Procurement of Non-Consultancy Services, what is the typical timeframe given to a successful bidder to furnish the required performance security after receiving the Letter of Acceptance?
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