OVERVIEW ON PURCHASE POLICY

OVERVIEW ON PURCHASE POLICY Sib Sankar Banik, W.B.A&A.S, INTERNAL AUDIT OFFICER, FINANCE (INTERNAL AUDIT) DEPARTMENT

General guidelines • Government purchases are guided by some very stringent financial rules framed by the Government in this respect. The general principles to be observed while entering into contracts or agreements for the purpose of making purchases are contained in Rule 47 of the West Bengal Financial Rules Volume I as amended from time to time. The last extensive and important amendment was effected through G.O. No. 10500-F dated 19/11/2004. Subsequently amended by G.O.No. 5400-F(Y) Date, Kolkata, the 25th June, 2012

Essential condition governing expenditure from public fund • No authority may incur expenditure or enter into any liability involving expenditure from public fund until it has been sanctioned by the general or special order of the Governor or any authority on his behalf. • The expenditure should also be provided for in authorised grants and appropriation for the year (Rule – 34)

Standard of Financial propriety set by F.R (Rule – 35) • Every public officer is expected to exercise same vigilance at the time of incurring public money as a person of ordinary prudence would exercise while spending his own money. • The expenditure should not be prima facie more than the occasion demands. • No authority should exercise powers of sanctioning expenditure for his own advantage • Public money should not be spent for the benefit of particular section of people unless provided for. • The amount of allowance granted should be so regulated that it does not become of source of profit to the recipient.

Control of expenditure (Rule – 37) Duties of controlling officer are:- • Total expenditure is kept within the limit of authorised appropriation. • Funds allotted to the spending units are expended in the public interest and upon objects for which it was sanctioned. • He must be aware of the total expenditure so far made, commitment and liabilities and amounts to be incurred about these. • He is responsible for any instance of excess or financial irregularities brought to notice by audit scrutiny or otherwise.

Rule 38. • In the discharge of his ultimate responsibilities for the administration of an appropriation or part of an appropriation placed at his disposal, every officer incurring or authorising expenditure from public fund must satisfy himself not only that adequate provisions exist within the departmental organisation for systematic internal checks calculated to prevent and detect errors and irregularities in the financial proceedings of his subordinate officers and to guard against waste and loss of public money and stores, but also that the prescribed checks are effectively applied.

To meet emergency nature of expenditure To meet emergency nature of expenditure each head of office is allowed to draw a permanent advance for the office considering extent of work and nature of job attached . The Head of Office shall scrutinize before making such payments and claims for reimbursement in T.R. 34 . Head of Office is also responsible for informing A.G,W.B regarding total amount of permanent advance held by him to A.G. W.B within 15th April each year.

Delegation of Financial Power Rule, 1977 • It mainly deals with the financial power of various administrative authority to incur expenses under the head office expenses, other charges etc. It also deals with delegation of DDO’s role by Head of Office.

CONTRACTS AND TENDERS RULES (West Bengal Financial Rules provisions) Rule 47. The following principles are laid down for the guidance of all officer who have to enter into contracts or agreements :- (1) No contract shall be made by a subordinate authority which has not been directed or authorised to do so by or under the orders of the Governor in terms of Clause (1) of Article 299 of the Constitution. The Governor shall be made a party to every contract of the Government and the words "for and on behalf of the Governor of West Bengal" should follow the designation of the officer authorised in this behalf under Article 299 of the Constitution and executing the contract appended below his signature.

Rule 47. CONTD.. • Note-1. - The various classes of contracts and assurances of property, authorised by the Governor in exercise of the powers conferred by Clause (1) of Article 299 of the Constitution which may be executed by different subordinate authorities of the Government are specified in the notification issued by the Judicial Department from time to time. • Note-2. - The limitations upon the powers of subordinate authorities, the condition under which such power should be exercised and the general procedure prescribed with regard to various classes of contracts and assurances of property, such as calling for and acceptance of tenders, etc. are laid down in Delegation of Financial Power Rules, 1977, and the appropriate Departmental regulations and orders.

Rule 47. CONTD • (2) The following general principles shall be observed by all offices empowered to enter into contracts or agreements for obtaining supply and execution of works and services on behalf of the Government and involving expenditure from public fund. • The terms of contract must be precise and definite and there must be no room for ambiguity or misconstruction therein. • (c)No contract involving an uncertain or indefinite liability or any condition of an unusual character should be entered into without the previous consent of the Finance Department. • Where escalation in respect of labour overheads, customs duties, freight charges etc. is provided for in a contract the basis for the calculation of the same should be clearly indicated.

Public Procurement • Government procurement, also called public tendering or public procurement, is the procurement of works, goods and services on behalf of a public authority, such as a government agency. A well functioning procurement system can be said to be in place if it achieves the objectives of transparency, competition, economy, efficiency, fairness and accountability.

Principles of Procurement Transparency: Transparency is letting everyone know ,not only the facts and figures of procurement but also the mechanisms and procedures followed Equal Opportunity and Fairness: Being objective and ensuring impartial, unbiased and equitable treatment of tenderers by conforming with rules and standards free from discrimination and dishonesty

Principles of Procurement Economy: Achieving economy is getting the right thing at the right price -Value for Money (vfm) Efficiency: With economy in price and choice of item, ensuring its arrival in the right place at the right time for its intended use is Efficiency -Money for Value(mfv)

Methods of Procurement • Direct Purchase i.e. without quotation/tender • Procurement by inviting quotation • Procurement by inviting tender /bid

Procurement without tender/ quotation Purchases uptoRs. 10,000.00 may be made without any tender or quotation. The purchasing authority shall certify that the purchase has been made at reasonable market price in cases of purchase from the open market without tender / quotation. [Consult:10500-F & 5400-F(Y) Dated:19.11.2004&25.06.2012]

Procurement by inviting quotation • Purchase above Rs.10,000.00 and upto Rs.1,00,000.00 shall be made after inviting quotations from at least four reliable firms which shall be opened in presence of willing agents. In such cases of purchase by invitation of quotation, procurement shall be finalized on recommendation of Local Purchase Committee to be constituted in each office.

Procurement by inviting quotation In respect of offices outside Kolkata, the notice for quotation shall be issued through the notice board of the concerned office, the offices of the District Magistrate and the Sub-Divisional Officer and the Panchayat, Municipality of that locality. In Kolkata, such notice shall be circulated by displaying in the notice board of Local Bodies and by sending the same to suppliers, etc. [Consult:10500-F &5400-F(Y) Dated:19.11.2004&25.06.2012]

Procurement by inviting open tender/bid For the purpose of these guidelines, the words “bid” and “tender” shall have the same meaning. Subject to the special rules or order or procedure that may be prescribed by the Govt. in respect of a particular department, open tender shall invariably be invited for the supply of articles or stores or for execution of works and services worth Rs.1,00,000.00 or more. [Consult:10500-F &5400-F(Y) Dated:19.11.2004&25.06.2012]

Pre-tendering stage The period before “calling for Tenders for price comparison” shall be treated as ‘Pre-tendering stage’. This stage involves: • Preparation of Estimates • Vetting of Detailed Cost Estimates • Administrative Approval • Technical Sanction & • Expenditure Sanction

Procurement by inviting open tender/bid • Tender notice shall always be given due publication through the leading dailies in English, Hindi and Bengali. The use of intermediate general suppliers should be discouraged. Open tender for supply of articles or stores or for execution of works worth Rs.1,00,000.00 or more shall be invited in the following manner:

Publication of NIQ/NIB • For supply of articles or stores or for execution of works and services with estimated value exceeding Rs.10,000.00 and upto Rs.1,00,000.00 (One Lakh). • By means of- Publication of the work on the notice board and on the official website of the administrative department if maintained.

Publication of NIQ/NIB • For supply of articles or stores or for execution of works and services with estimated value exceeding Rs.1,00,000.00 (one Lakh) and upto Rs.5,00,000.00( Five Lakh) . • By means of- Publication of the work on the notice board and on the official website of the administrative department if maintained and also brief referral advertisement in one daily Bengali newspaper [in case of hill areas of Darjeeling District in Nepali newspaper].

Publication of NIQ/NIB • For supply of articles or stores or for execution of works and services with estimated value exceeding Rs.5,00,000.00 ( Five Lakh) and upto Rs.10,00,000.00( Ten Lakh). • By means of- Publication of the work on the notice board and on the official website of the administrative department if maintained and also brief referral advertisement in two daily newspapers, one in Bengali [in case of hill areas of Darjeeling District in Nepali newspaper] and the other in English.

Publication of NIQ/NIB • For supply of articles or stores or for execution of works and services with estimated value exceeding Rs.10,00,000.00 • By means of- Publication of the work on the notice board and on the official website of the administrative department if maintained and also brief referral advertisement in three daily newspapers, one each in Bengali [in case of hill areas of Darjeeling District in Nepali newspaper],in English and in Hindi

Publication of NIQ/NIB • For Tender Value of Rs. 50 lakhs and above,e-tendering through the centralized e-tender portal, wbtenders.gov.inis mandatory in addition to publication in print media.

Two Bid System • For high value purchase exceeding Rs.10,00,000.00 or for purchasing plant, machinery, etc. of complex and technical nature, bids may be invited in two parts under Two-Bid System.

Two Bid System • Selection of agency should be made on the basis of at least three tenders which shall be opened in presence of the willing agents. If the number of tenders received is less than three, tender should be invited afresh.

Two Bid System For high value purchase exceeding Rs.10 lakhsor for purchasing plant, machinery, equipment, etc. of complex and technical nature, bids shall be invited in two parts as under: • Technical Bid consisting of all technical details along with commercial terms and conditions & • Financial Bid including item wise price for the items mentioned in the Technical Bid

Two Bid System The technical bid and the financial bid should be sealed by the bidder in separate cover duly super scribed and both the sealed covers are to be put in a bigger cover which should also be sealed and duly super scribed.

Two Bid System • The technical bids shall be opened by the purchasing department/office at the first instance and evaluated by a competent committee or authority. Financial bid should not be openeduntil the technical bid is opened and assessed for selection of the qualified bidder.

Two Bid System At the second stage, financial bids of only the technically acceptable offers shall be opened for furnishing value and ranking before finalization and awarding of the contract. After evaluation, the lowest rate financial bid from amongst the technically qualified bidders shall be accepted.

Tender/Bidding Procedure One Bid per Bidder: A Bidder who submits more than one Bid for one particular work will cause all such particular bids rejected and the Bidder shall be disqualified and his earnest money shall be forfeited.

Tender/Bidding Procedure Bid Validity Bidders/tenderers shall be required to submit bids/tenders valid for a period specified in the Bidding Documents that shall be sufficient to enable the competent authorities to complete the comparison and evaluation of bids in order to award the contract within that period to the successful bidder..

Tender/Bidding Procedure Earnest Money A contractor intending to participate in the tender process shall deposit earnest money as provided for in the notice inviting tender. Earnest money shall be released to the unsuccessful tenderers/bidders, once the contract has been signed with the successful bidder.

Tender/Bidding Procedure Security Deposit The successful tenderer shall be required to execute a formal agreement in duplicate within the time stipulated in the Bidding Document, failing which his tender shall liable to be rejected and his earnest money forfeited.

What is A Contract • Contract is a legal document between the two parties for carrying out the described work or supplies. • It specifies clearly the obligations to be performed by both the parties. • It also species the compensation to be paid by the defaulting party to the other affected party.

Security Deposit On execution of such agreement he shall be required to deposit in one or more installments as may be specified in the agreement, security money of such amount which together with the earnest money already deposited, shall amount to ten per cent of the total value of the work as quoted by him.

Security Deposit • Security Deposit may also be deducted from the payments due from time to time on account of work done and supplies made under a contract in such manner that final security deposit comes to ten percent of the value of work done or supplied with.

Release of Security Deposit • The Security Deposit of a contractor shall not be refunded till the final bill for the relative work for supplies has been prepared and passed for payment, or the period specified in the agreement in this behalf expires, whichever is later.

Notification No.10500-F dated 19th November 2004 Purchase up to Rs 20,000/- for a financial year is to be processed through inviting quotation . Any purchase above Rs 20,000/- attracts invitation of tender. The tender notice shall be circulated at important dailies through Director of Information and Culture who has been authorized by the Govt. to select the daily newspapers where from the tender notice will be circulated. ( This rule has been amended ) There are four categories of officers named in the financial rules Such as a) Sub-Divisional Officer status , b) District Officer status , c) Director and Head of the Departmental status , d) Departmental Secretary status

Purchase Procedure • Cash transaction upto to Rs 10000/- may be made without quotation or tender. • Transaction above Rs 10000/- up to Rs 100000/- shall be made after inviting quotation from at least 4 reliable firms. • Open Tender shall be invited for supply of articles or stores or execution of works and services above Rs 100000/-

Contracts and Tenders (Rule – 47 duly modified) Salient features:- • No contract shall be made by a subordinate authority which has not been directed under the order of Governors. • Terms of Contracts should be precise and definite. There should not be any room for ambiguity. • Terms of a contract, once settled, should not be materially varied without previous consent of the authority and if permitted reasons should be recorded in writing.

Contracts and Tenders (Rule – 47 duly modified) contd…. Salient features:- • All contract should have a clause for liquidated damages for default on part of contractor. • Cost plus contract should be avoided. • Quantity of work to be done should be expressed clearly. • There should be a provision for security deposit. • High value contract should be invited in consultation with the Law Officers.

Following points to be noted while making purchases • Registered SSI units of WB are to be given 15% price preference in comparison to large, medium industrial unit. • All industrial units owned or managed by Govt. of WB should be given 10% price preference. • State based medium scale units shall be given 10% price preference vis-à-vis large industrial unit and SSI of other states. • If Govt. stationary office fails to supply stationary articles same can be purchased from Co-operative Societies without tender or quotation like Confed, Samabayika etc.

Items to be purchased from WBSIDC, Khadi Industries, WB Handloom and Powerloon Development Corpn., CADC etc • A- I • A – II • A – III • A – IV, V, VI, VII AND VII OF 1500-F dated 19.11.2004

It is absolutely necessary that all purchases should be made within delegated financial powers of Head of the Office.

Earnest money - exemption • Suppliers registered with DGS&D, Govt. of India. • SSI registered with Dte. Of SSI, Govt. of West Bengal • RIC • Lighthouse for the blind • Trading Corporation of India Ltd • Labour Co-operative Societies • M/s Mackintosh Burn Ltd.

Selection of Tender Following points should be kept in kind in selecting the lowest bidder:- • No. of tenderers should be at least three. Otherwise re-tendering should be done. • The bid should be opened in the presence of members of Selection Committee • Comparative analysis of rate and value. • Lowest tenderer should be awarded order. If not, reason should be specified. • Credentials and turnover of the firm.

TDS (Tax Deduction at Source) It is the duty of the DDO to see that taxes are deducted as per provisions of the following sections of I.T Act:- • Sec – 192 (TDS from Salaries). • Sec – 194C (TDS from Contractor). • Sec – 194J (TDS from Profession Service)

OVERVIEW ON PURCHASE POLICY