Para 9.5 — NONCONSULT_MANUAL

a) The contractor submits an invoice to the Procuring Entity detailing the expenditures for personnel and out-of-pocket items. b) The documents, which are needed from the contractor for release of payment, are to be clearly specified in the contract. The paying authority is also to verify the documents received from the contractor with corresponding stipulations made in the contract before releasing the payment. The invoice submitted by the contractor shall be verified and signed by the contract manager and pay order form or any other relevant forms shall be prepared by the procuring entity and signed by an officer authorised to sign pay-orders. c) Before the payment is made, the invoice should be cross-checked with the actual receipt of services to ensure that the payment matches the actual performance; d) In normal practice, if any item needs further scrutiny before the Procuring Entity can approve payment, payment of undisputed items/ services should be made. But payment of any disputed items/ services will be withheld until the circumstances are clarified.

9.5. Cost Control: Billing and Payments 9.5.1. Payment to Service Providers 1. Periodic Payments: a) Payment is made to the contractor based on a schedule agreed on in contract, often based on certain milestones or outputs. b) Release of payment and settlement of the final bill should be processed through the Associated/ integrated Finance as per the terms and conditions of the contract; c) No payments to contractors by way of compensation or otherwise outside the strict terms of the contract or more than the contract rates should be allowed; d) All correspondence with the contractor will be handled by procuring entity.

e) While claiming the payment, the contractor must also certify on the bill that the payment being claimed is strictly in terms of the contract and all the obligations on his part for claiming this payment have been fulfilled as required under the contract. There should also be a suitable provision for verification of the authenticity of the person signing the invoice, and so on, to claim the payment.

3. Deductions of Taxes: Deduction of applicable taxes at source from payments to service provider shall be done as per the existing law in force during the currency of the contract. As soon as possible, but not later than the date of submission of tax returns, the procuring entity must provide the statutory certificates for the taxes deducted from the contractor so that he can claim set-offs and refunds from the concerned authorities. Detailed payment advice showing the calculations and reasons for the amounts disallowed and taxes deducted must be issued to the contractor along with payment.

4. Timely Payment: a) In a services contract, delivery of services is the essence of the contract for the purchaser. Similarly, receiving timely payment for the services is the essence of the contract for the service provider. A healthy buyer-contractor relationship is based on the twin foundation of timely and quality service, on the one hand, and prompt and full payment to the contractor, on the other. It should be ensured that all payments due to the firm, including release of the performance security, are made on a priority basis without avoidable delay as per the tender/ contract conditions. Any foreseeable payment delays should be communicated to the contractors in advance. Payments and decisions in contract management requested by the contractors should be made within a reasonable time. An atmosphere of lackadaisical dilatory functioning in such matters is liable to lead to bidders quoting higher prices in future bids, besides delays in services and disputes in the contract. b) Additionally, procuring entities are encouraged to ensure final bill payments are processed within three months of project completion. For contracts with payments exceeding Rs.100 crore annually, it is recommended to implement an online system to track bill submissions and payments, providing contractors with transparency and timely updates85.

5. Delay in payment to the contractors: a) Public authorities may put in place a provision for payment of interest in case of delayed payment of bills by more than 30 working days after submission of bill by the contractor. Where interest is to be paid, the rate of interest should be the rate of interest of General Provident Fund. In case of unwarranted discretionary delays in payments, as prescribed above, responsibility shall be fixed on the concerned officers. There should be a system to monitor delays in payments and to identify such unwarranted delays including an online system for monitoring of the bills submitted by contractors. Such system shall have the facility for contractors to track the status of their bills. It shall be mandatory for all contractors’ bills to be entered into the system with date of submission and date of payment. 86 b) As far as MSE contractors are concerned, MSME Act 2006 has provisions (refer to para 1.10.1-4-b) for details) for timely payments within 45 days and a levy of penal interest for delayed payment and arbitration/ conciliation for related complaints by Micro and Small Enterprises Facilitation Councils.

6. Handling Securities: Proper procedures for safe custody, monitoring and return of bank guarantees and other instruments may be followed. Chapter 6 has more details in this regard. Before making a final payment or before releasing the performance bank guarantee, a ‘No Claim Certificate’ (Annexure 20) may be insisted upon from the contractor to prevent future claims. Whenever a bank guarantee is released following due procedure and safeguards, acknowledgement thereof should also be taken from the contractor. 7. Advance Payment, as per Contract: The terms and conditions of such payments are set out in the contract wherein the amount of advance payment is specified, as are the timing of the payment and the amount of advance payment security to be provided by the Service Provider. The advance payment is set off by the Procuring Entity in equal instalments against monthly billing statements until it has been fully set off. Once an advance has been provided, requests for any additional advance are not considered until the service provider liquidates the previous advance. The advance payment security is then released. In some contracts there may be provision for mobilization fee to be paid. (Please refer to para 6.4) 8. Electronic Bill (e-Bill) processing system was announced in Union Budget 2022-23, as part of ‘Ease of Doing Business and Digital India eco-system’ to bring broader transparency and expedite the process of payments. It will enhance transparency, efficiency, and faceless-paperless payment system. Contractors shall submit their bills electronically through the e-Bill portal, wherever such facilities are available. Concerned authorities verify these bills for discrepancies, authenticity, and adherence to rules. Once verified, the bills shall be approved for payment. The approved bills are integrated with the electronic payment systems. Funds are allocated from the relevant budget heads. The system generates payment orders. The e-Bill system allows real-time on-line tracking of bill processing by Contractors.