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Note: This article was first published in Construction Law
International, Vol 17 No 2, June 2022, and is reproduced by kind
permission of the International Bar Association, London, UK. ©
International Bar Association.
Introduction
The Central Vigilance Commission (CVC), the Comptroller and
Auditor General (CAG) of India and the National Institution for
Transforming India (NITI Aayog) 1, in cooperation with
the Ministry of Finance (MoF) 2, have opened the way to
the reorganisation of procurement and project management in
India.
India’s infrastructure has always been sluggish in terms of
cost and time overruns and delays, necessitating
a review of procurement and project management methods. The CVC,
CAG and the NITI Aayog examined various public procurement and
project management procedures and rules, which were implemented by
central public authorities, and recommended changes to strategies
to address current and future public procurement challenges. The
rules were developed under the guidance of the CVC after a thorough
consultation process that included experts from a variety of public
procurement and project management disciplines. Thereafter, on 29
October 2021, the Ministry of Finance issued the General
Instructions on Procurement and Project Management (the
Instructions). ‘These instructions strive to bring novel
standards for speedier, more efficient, and transparent project
execution into the sphere of public procurement in India,’ the
Ministry stated.
For the government and its agencies, completing public projects
on schedule, under budget and to a high standard has always been a
concern and a difficulty. The importance of procedure and norms, as
well as the incentives and disincentives they produce, should be
carefully examined as the government seeks to accelerate economic
development.
Sketch of the Instructions
Methods of procurement
For projects where quality characteristics are to be given
weightage, the quality cum cost- based selection (QCBS) technique
has been established as an alternative to the traditional L1
(lowest bidder) system. The Instructions allow procurement
agencies to use QCBS if the procurement is ‘claimed
to be a quality focused procedure by the competent authority’
and the projected value of the procurement is less than INR 100m.
For international competitive bidding, QCBS is the favoured method.
QCBS is used to pick bidders for transportation infrastructure
projects, roads and other projects for non-consulting services
3 where the bidder possesses both technical abilities
and is competent to improve the public– private partnership.
As a result, when the competent authority declares the procurement
as a ‘quality-orientated procurement’, this method of
evaluating offers is favoured. QCBS, the least cost
system and single source selection are the three ways of selecting
consultancy bids now included in the General Financial Rules 2017
(GFR). This list now includes one more way: fixed budget-based
selection (FBS), which can now be used to shortlist consultancy
offers. In FBS, the cost of consulting services is indicated as a
fixed budget in the tender document itself. It should be noted that
Rule 192(iv) of the GFR allows non-financial characteristics to
receive up to 80 per cent weighting in the purchase of consultancy
services.
Preliminary project report (PPR) presentation
The purchasing entity may create a PPR in accordance with the
Manual of Procurement of Works 2019 to deter mine the viability of
a project, which may then be presented to the public authority for
an overall assessment of the situation, viable choices and
mitigation measures. A presentation to the head of the public
authority may be made in the event of big projects. The transcript
of the presentation’s talks may be included in the detailed
project report (DPR) and the tender documentation/project
record.
Presentation of the DPR
Once a project has been approved by the public authority, a DPR
shall be developed and delivered to the authority for projects over
a certain threshold value, as established by the project executing
agency (PEA). A presentation to the head of the public authority
may be made in the event of very significant projects. This
presentation will give the public authority an overview of the
project’s key elements, such as the general layout, project
team composition, contractor obligations, key milestones and
potential risks and mitigation strategies. The documentation/
project record will include a record of the discussion that took
place during the presentation.
Land availability and statutory permissions
The primary conditions for starting a project are the
availability of land and the acquisition of essential clearances.
Because it is not always practicable (or even prudent) to have the
full land before awarding the contract, the Instructions state that
a minimum amount of encumbrance- free property must be made
available before the contract is awarded. In addition, public
authorities and the PEAs should plan for and closely monitor the
project’s progress in acquiring the essential clearances.
Pre-tender activities
To avoid delays in implementation, the Instructions state that
architectural and structural drawings must be completed before
tenders are invited.
Tender documents
Tender documents serve as the foundation for the public
procurement process and become part of the contract once the tender
has been awarded. Given the importance of tender documents, the
Instructions include provisions such as:
- The tender document’s provisions/ clauses should be clear
to avoid ambiguity, potential cost and time overruns and quality
compromises. - Project milestones should be recognised in a sequential and
optimal manner. - General contract conditions should not be changed unless
special contract conditions are specified. - Customization of eligibility criteria for bidders,
commensurability of payment terms with work done, quality assurance
plans and other quality assurance measures should be
considered.
Project management
Another important factor is time, which the Instructions suggest
should be used to migrate to IT-based solutions. They put the
emphasis on electronic measurement books or other modalities to
assure efficiency, transparency and superior outputs while
carefully reviewing progress and keeping an eye on schedules.
Provision of payment of interest on delay in payment of
contractors’ bills should be made within 30 working days.
Finally, if the provision of payment of interest is not within
the given timeline, then proper explanation must be given to the
concerned officers.
Contracts for engineering, procurement and construction
(EPC)
Because the execution framework in the tender documents is so
important to the success of an EPC contract, the Instructions have
clarified the following:
- contractor’s payment milestones should promote smooth cash
flow and job progress; - the tender documents should only include: general arrangement
drawings and architectural control parameters; - contractor’s submission of drawings and the competent
authority’s approval of those drawings (including penalties for
non-adherence to timelines); - technical specifications that allow the contractor to optimise
the design; and - Important commercials such as the contractor’s obligations,
the parties’ risk matrix, the latent defect liability period,
the procedure for scope changes, liability limitations and damages,
and so forth.
Arbitration and dispute resolution
The instructions also rule out litigation as the first resort in
case of any dispute that arises in the implementation of projects.
As litigation has unfavourable implications on the timelines and
overall cost of the project, the Instructions direct officials to
proceed with discussion, mediation and consultation before
resorting to arbitration/litigation.
Conclusion
The Instructions cover all aspects of a public
procurement/project cycle and prescribe best practices for
addressing inefficiencies. They will undoubtedly improve
India’s public projects landscape if implemented with the same
rigour and spirit. The Instructions will aid in the introduction of
novel standards for project execution that are speedier, more
efficient, and transparent in India’s public procurement
sector. They will enable executing agencies to make judgments in
the public interest that are faster and more efficient.
Only the federal
government and its departments are affected by the new
Instructions. Hopefully, states will see the value of the rules and
put them in place at the regional level as well. The states of
India account for more than half of all public bids in the country;
such initiatives will not only increase the quality of work being
done, but will also set new standards for bidders to demonstrate
potential project execution results. It would also contribute to
the achievement of Digital India’s 4 aim by
simplifying and standardizing the digitalization of public
procurement.
Footnotes
1. NITI Aayog, ‘Measures to revive the Construction
Sector’, 6 September 2016.
2. Department of Expenditure, ‘Office Memorandum:
Insertion of Rule 227A in General Financial Rules (GFRs) 2017
– Arbitration Award’, 29 October 2021.
3. ‘Non-consulting services’ are
defined as any subject matter of procurement (as distinguished from
‘consultancy services’) that involves physical and
measurable deliverables/outcomes, where performance standards
can be clearly identified and consistently applied, other than
goods or works, except those incidental or consequential to the
service, and includes maintenance, vehicle hiring, and outsourcing
of building facilities.
4. See www.digitalindia.gov.in. Digital India is a
flagship programme of the Indian government with a vision to
transform India into a digitally empowered society and knowledge
economy.
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