Gist of CVC Guidelines

on
Works, Goods and Services
 Gist of CVC Guidelines
on
Works, Goods and Services
(Updated upto 28-01-2013)
 TRANSPARENCY
IN
PUBLIC PROCUREMENT
IS
NOT AN ETHICAL REQUIREMENT,
BUT AN OPERATIONAL NECESSITY

Shri Pradeep Kumar

CVC
 FOREWORD

The Theme for Vigilance Awareness Week

2012 is “Transparency in Public Procurement”.
The booklet that you are now reading is an
attempt to reproduce the operational part of
“CVC guidelines on Procurement of Goods,
Works and Services” to enhance transparency
in procurement. These guidelines have been
issued by the Commission over a period of time
and are available to download from CVC's
website,viz.,http://www.cvc.nic.in/proc_works
.htm.
MOD / DDP vide letter dt 29/10/2012
has directed all DPSUs to submit a quarterly
report in the succeeding Board Meeting, a
compliance report certifying that all
procurements during the intervening period
have been made as per the instructions
contained in the Procurement Manuals and
CVC guidelines to ensure transparency in the
working of Defence PSUs and OFB.
It may, however, be noted that the
operational part of CVC guidelines
reproduced in the booklet do not replace or
interpret the CVC guidelines / instructions,
which shall remain the primary
authority on the subject.
TEAM VIGILANCE
HINDUSTAN AERONAUTICS LTD.
 Index
(I) Pre Bid Stage
1. Pre-qualification Criteria (PQ) - 1
2. Integrity Pact (IP) - 3
3. Use of Brand Names in NIT - 6
4. Counterfeit and refurbished - 7
IT Products
5. Tender Sample Clause - 8
6. Turnkey contracts - 9
7. Design Mix Concrete - 10
8. Use of products with - 11
standard specification
9. Expression of Interest (EOI) - 12
10. Transparency in - 13
tendering system
11. Time bound processing of - 14
Procurement
(II) Tender Stage
12. Notice inviting tenders - 15
13. Receipt and Opening of Tenders - 16
14. Improving vigilance administration- - 17
Tenders
15. Agents - 18
16. Contracts awarded on nomination - 19
basis
17. Grant of mobilization advance - 22
18. Post Tender Negotiation - 26
19. Use of web-site in Government - 31
procurement or tender process
20. Leveraging Technology - 39
21. E-Tendering/E-Procurement - 41
(III) Contract Award / Order Execution
Stage / Contract Administration Stage
22. E-payments - 43
23. Delays in Payments - 44
24. Selection and employment of - 45
Consultants
25. Acceptance of Bank Guarantee (BG) - 47
26. If L-1 party backs out - 48
27. Back to back tie up by PSUs - 49
28. Out of turn allotments / discretion - 50
29. Banning of business dealings - 51
30. Undertaking by the Members of - 52
Tender Committee / Agency
31. Recoveries arising out of intensive - 53
examination conducted

(IV) General
32. Check list for examination of - 54
Procurement (Works/Purchases/
Services) Contracts by CVOs
33. Common irregularities / lapses - 57
observed in stores / purchase contract
34. Issues arising out of Annual review - 58
meeting of Defence sector CVOs
held by CVC in July 2012
35. Purchase Preference Policy - 60
36. Revised threshold values for submission- 61
of Quarterly Progress Report-QPR
37. Referring cases of Procurement to the - 63
Commission
PRE BID STAGE
1. Pre-qualification Criteria (PQ)
a. To ensure that the pre-qualification criteria
specified in the tender document should neither
be made very stringent nor very lax to restrict /
facilitate the entry of bidders.
b. It should be ensured that the PQ criteria are
exhaustive, yet specific and there is fair
competition.
c. It should also be ensured that the PQ criteria
is clearly stipulated in unambiguous terms in the
bid documents. (No. 98/ORD/1 Dated
04.09.2003 & No. 12-02-1-CTE-6 Dated 7th
May 2004)
d. It is necessary to fix in advance the minimum
qualification, experience and number of
similar works of a minimum magnitude
satisfactorily executed in terms of quality and
period of execution. (No. 12-02-1-CTE-6 Dt
17th December 2002)
e. Whatever pre-qualification, evaluation /
exclusion criteria, etc. which the organization
wants to adopt should be made explicit at the
time of inviting tenders so that basic concept of
transparency and interests of equity and
fairness are satisfied.

1
f. The acceptance / rejection of any bid
should not be arbitrary but on justified grounds
as per the laid down specifications, evaluation
/ exclusion criteria.
(Ref No.98/ORD/1 Dated 9th July, 2003)

g. It should be ensured that pre-qualification

criteria, performance criteria and evaluation
criteria are incorporated in the bid documents
in clear and unambiguous terms as these
criterion are very important to evaluate bids in
a transparent manner. Whenever required, the
departments/organisations should follow two-
bid system, i.e. technical bid and price bid. The
price bids should be opened only of those
vendors who were technically qualified by the
Deptt./ Organisation.
(Ref: No. 98/ORD/1 Dated 04.09.2003)

2
2. Integrity Pact (IP)
a. CVC recommends IP concept and
encourage its adoption and implementation in
respect of all major procurements.

b. Independent External Monitors (IEMs) to

review independently and objectively whether
and to what extent parties have complied with
their obligations under the pact.

c. Entering into IP would be a preliminary

qualification to participate in the bidding.

d. Based on the proposal of panel of eminent

persons to be appointed as IEMs by the
organisation, CVC would approve their
appointment.
(Ref: 007/VGL/033 Dt. 04.12.2007,
28.12.2007 & 008/CRD/013 DT 11/08/2009)

e. Adoption of Integrity Pact in an

organization is voluntary, but once adopted, it
should cover all tenders / procurements above
a specified threshold value, which should be set
by the organization itself.

f. In view of limited procurement activities in

the Public Sector Banks, Insurance Companies
and Financial Institution, they are exempted
from adopting IP.
th
(Ref: No. 007/VGL/033 Dated, the 05 August
2008) 3
g. "Standard Operating Procedure" for
adoption of Integrity Pact. Format for integrity
pact is enclosed to this Circular.
(Ref: No. 008/CRD/013 Dated: 18/5/09)
h. Organisation to select the names of the IEMs
after due diligence and should not propose the
officer serving or retired from the same
organisation (Ref: 009/VGL/016
Dt.19.04.2010). Maximum age limit for initial
appointment of three years or further
extension of two years is 70.
(Ref: 011/VGL/053 dt.23.07.2012)
Organisations to undertake a general review
and assessment of implementation of IP and
submit progress through CVO's monthly report
to the Commission.
(Ref: No. 008/CRD/013 Dated: 13/8/2010 &
008/CRD/013 DT 11/08/2009)
i The organizations, while forwarding the
names of the persons for empanelment as IEMs
should sent a detailed bio-data in respect of
the each of the persons proposed. The bio-
data should, among other things, include the
postings during the last ten years before the
superannuation of the persons proposed as
IEMs, in case the names relate to persons
having worked in the government sector.
4
The bio-data should also include details
regarding experience older than ten years
before superannuation of the persons
proposed as IEMs, if they have relevant domain
experience in the activities of PSUs where they
are considered as IEMs.

th
(Ref : 008/VGL/001 Dated 19 May 2008)

5
3. Use of Brand Names in NIT
It has come to the notice of the Commission that
some departments / organisations are issuing
tenders for purchase of computers where they
mention and insist on the international brands.
This not only encourages the monopolistic
practices but also vitiates the guidelines issued
by the Ministry of Finance, D/o Expenditure
vide its OM No. 8(4)- E.II(A) 98 dated
17.12.1998. It is therefore, advised that
departments / organisations may follow the
instructions issued by the Department of
Expenditure. No.98/ORD/1 Dated the 5th
May 2003.
(Ref: No.8(4)-E.II(A)/98 DT 17th December,
1998)

6
4. Measures to curb the menace of
counterfeit and refurbished IT products
To insist on undertaking from OEM that all the
components / parts / assembly / software
used in the Desktop and Server were original /
new components and that not refurbished /
duplicate / second hand components / parts /
assembly / software were being used or would
be used.

(Ref: No.007/CRD/008 dt. 15.02.2008)

7
5. Tender Sample Clause
a. While it is recognized that samples may be
required to be approved to provide a basis in
respect of indeterminable parameters such as
shade, feel, finish & workmanship for supplies
of such items but system of approving /
rejecting tender samples at the time of decision
making is too subjective and is not considered
suitable, especially for items which have
detailed specifications. The lack of competition
in such cases is also likely to result in award of
contracts at high rates.
b. It is thus advised that Government
Departments / Organizations should consider
procurement of such items on the basis of
detailed specifications. If required, provision
for submission of an advance sample by
successful bidder(s) may be stipulated for
indeter minable parameters suc h as,
shade/tone, size, make-up, feel, finish and
workmanship, before giving clearance for bulk
production of the supply. Such a system would
not only avoid subjectivity at the tender
decision stage but would also ensure healthy
competition among bidders and thus take care
of quality aspect as well as reasonableness of
prices.

(Ref: No. 2EE-1-CTE-3 Dated - 15.10.2003)

8
6. Turnkey Contracts
The Commission has been receiving complaints
that in turnkey contracts for networking of
computer systems a lot of unrelated products
are being included in the contracts which are
either not required or which are stand alone in
nature and can be procured separately at
much lower cost. Inclusion of these unrelated
items creates opportunities for malpractices.
The Commission is of the view that wherever
possible it will be advisable to take an
independent third party view about the scope
of turnkey projects so that the tendency to
include unrelated products as part of the
turnkey project is avoided.

(Ref: 004/ORD/8 Dated, the 3rd Nov., 2004)

9
7. Design Mix Concrete
Provisions of IS 456:2000 are to be complied
with.

(Ref : 010/VGL/066 dt.07.10.2010)

10
8. Use of products with standard
specifications
It is reiterated that the items with standard
specifications only should be stipulated in the
bid documents. In case, items with non-standard
specifications are to be procured, reasoning
for procuring such items may be recorded and
reasonability of rates must be checked before
placing order.

(Ref : 98-VGL-25 DT. 26.04.2007)

11
9. Expression of Interest (EOI)
a. There have been instances where the
equipment / plant to be procured is of complex
nature and the procuring organisation may not
possess the full knowledge of the various
technical solutions available in the market to
meet the desired objectives of the transparent
procurement that ensures value for money
spent simultaneously ensuring up-gradation of
technology & capacity building.
b. It would be prudent to invite expression of
interest and proceed to finalise specifications
based on technical discussions / presentations
with the experience manufacturers / suppliers
in a transparent manner. In such cases, two
stage tendering process may be useful and be
preferred. During the first stage of tendering,
acceptable technical solutions can be
evaluated after calling for EOI from the
leading experienced and knowledgeable
manufacturers / suppliers in the feild of the
proposed procurement.
Once the technical specifications and
evaluation criteria are finalised, the second
stage of tendering could consist of calling for
techno-commercial bids as per the usual
tendering system under single bid or two bid
system as per the requirement of each case.

(Ref : 011/VGL/014 dt. 11.02.2011)

12
10. Transparency in Tendering System
In order to maintain transparency and fairness,
it would be appropriate that organisations
should evolve a practice of finalizing the
acceptability of the bidding firms in respect of
the qualifying criteria before or during holding
technical negotiations with him. Obtaining
revised price bids from the firms, which do not
meet the qualification criteria, would be
incorrect. Therefore, the exercise of short listing
of the qualifying firms must be completed prior
to seeking the revised price bids. Moreover, the
intimation of rejection to the firms whose bids
have been evaluated but found not meeting the
qualification criteria, along with the return of
the un-opened price bid, will enhance
transparency and plug the loop-holes in the
t e n d e r i n g s y s t e m . A l l
organisations/departments are advised to
frame a policy accordingly.
th
(Ref: 004/ORD/9 Dated the 10 December,
2004)

13
11. Time bound processing of procurement.
a. The Commission has observed that at times,
the processing of tenders is inordinately
delayed which may result in time and cost
overruns and also invite criticism from the Trade
Sector.

b. It is, therefore, essential that tenders are

finalized and contracts are awarded in a time
bound manner within original validity of the
tender, without seeking further extension of
validity. While a short validity period calls for
prompt finalization by observing specific time-
line for processing, a longer validity period has
the disadvantage of vendors loading their
offers in anticipation of likely increase in costs
during the period.

Hence, it is important to fix the period of

validity with utmost care.
th
(Ref : 008/VGL/083 Dated the 6 November
2008)

14
TENDER STAGE
12. Notice Inviting Tenders
The Commission has observed that some of the
Notice Inviting Tenders (NITs) have a clause that
the tender applications could be rejected
without assigning any reason. This clause is
apparently incorporated in tender enquiries to
safeguard the interest of the organisation in
exceptional circumstances and to avoid any
legal dispute. The Commission has discussed the
issue and it is emphasized that the above clause
in the bid document does not mean that the
tender accepting authority is free to take
decision in an arbitrary manner. He is bound to
record clear, logical reasons for any such action
of rejection / recall of tenders on the file.
th
(Ref No. OFF-1-CTE-1(Pt) V Dated the 24
March 2005)

15
13. Receipt and Opening of Tenders
In general, the receipt of tenders should be
through tender boxes as suggested in our
booklets. However, in cases where the tenders
are required to be submitted by hand, it may
be ensured that the name and designation of
atleast two officers are mentioned in the bid
documents. The information about these
officers should also be displayed at the
entrance / reception of the premises where
tenders are to be deposited so as to ensure
convenient approach for the bidders. The
tenders after receipt should be opened on the
stipulated date and time in presence of the
intending bidders.

(Ref: No. 05-04-1-CTE-8 Dated : 8.6.2004)

16
14. Improving Vigilance Administration -
Tenders
Some organisations have been using the public
sector as a shield or a conduit for getting costly
inputs or for improper purchases. This also
should be avoided.
Another issue that has been raised is that many
a time the quantity to be ordered is much more
than L1 alone can supply. In such cases the
quantity order may be distributed in such a
manner that the purchase is done in a fair,
transparent and equitable manner.
th
(Ref : 98/ORD/1 Dated the 15 March,1999)

17
15. Agents:
a. In a tender, either the Indian agent on
behalf of the Principal / OEM or Principal /
OEM itself can bid but both cannot bid
simultaneously for the same item/product in the
same tender.

b. If an agent submits bid on behalf of the

Principal / OEM, the same agent shall not
submit a bid on behalf of another Principal /
OEM in the same tender for the same
item/product.

Tender conditions may be carefully prepared

keeping in view of above guidelines.

(Ref: 12-02-06-CTE/SPI(1)-2/161730
Dt.13.01.2012)

18
16. Contracts Awarded on Nomination basis
a. In the circumstances, if sometimes award of
contract on nomination basis by the PSUs
become inevitable, the Commission strongly
feels that the following points should be strictly
observed:
i. All works awarded on nomination basis
should be brought to the notice of the
Board of the respective PSUs for scrutiny
and vetting post facto.
ii. The reports relating to such awards will
be submitted to the Board every quarter.
iii. The audit committee may be required
to check at least 10% of such cases.
th
(Ref: No.005/CRD/19 Dated the 9 May 2006)

b. It is needless to state that tendering process

or public auction is a basic requirement for the
award of contract by any Government agency
as any other method, especially award of
contract on nomination basis, would amount to
a breach of Article 14 of the Constitution
guaranteeing right to equality, which implies
right to equality to all interested parties.

c. A relevant extract from the recent Supreme

Court of India judgement in the case of Nagar
Nigam, Meerut Vs A1 Faheem Meat Export Pvt.

19
Ltd. [arising out of SLP(civil) No.10174 of
2006] is reproduced below to reinforce this
point (refer circular cited below). The
Commission advises all CVOs to formally
apprise their respective Boards /
managements of the above observations as
well as the full judgement of the Hon'ble
Supreme Court for necessary observance.

(Ref: No.005/CRD/19 Dated the 5th July

2007)

All works awarded on nomination basis

should be brought to the notice of the Board of
the respective PSUs for information.

(Ref: 005/CRD/19 (Part) Dt.19.05.2010)

d. The Commission has been emphasising on
the need for observing integrity, transparency,
fairness and equity in all aspects of decision
making including in tendering and award of
contracts. In view of the complaints being
received regarding award of contracts on
'nomination basis' without adequate
justification, the Commission has decided to
reiterate their earlier instructions for strict
implementation. Further, the Commission
directs that details of all tenders awarded on
nomination basis shall be posted on website in
public domain as per Commission's office order
20
 th
of 5 July 2007 along with brief reasons for
doing so.

e. The Commission has observed that there

have been instances where government
organisations / PSUs obtain contract from other
government organisations / PSUs and further
award the same to private entities on 'back to
back tie up' basis without competitive
tendering mechanism and without any
significant value addition by the procuring
government organisation / PSU. Their practice
subverts the Commission's emphasis on
integrity, transparency, fairness and equity in
decision making.
th
(Ref No 005/CRD/19/196756 Dated 11 Dec
2012)

21
17. Grant of Mobilization Advance
a. Adequate steps may be taken to ensure
stipulation of mobilization advance only for
selected works and advance should be interest
bearing so that contractor does not draw
undue benefit. Timely execution/completion
of all projects is an essential requirement and
the contractor would like to draw interest
bearing mobilization advance only when he
needs to maintain his cash flow.

(Ref : No. UU/POL/19 Dated 08th Oct 1997)

b. Provision of mobilization advance should

essentially be need-based. Decision to provide
such advance should rest at the level of Board
(with concurrence of Finance) in the
organization in respect of interest free
advance. However, in case of interest bearing
advance, organisation may delegate powers
at appropriate levels such as CMD or
Functional Directors.

(Ref : 4CC-1-CTE-2 Dt.05.02.2008)

c. Though the Commission does not

encourage interest free mobilization advance,
but, if the Management feels its necessity in
specific cases, then it should be clearly
stipulated in the tender document and its
22
recovery should be time-based and not linked
with progress of work. This would ensure that
even if the contractor is not executing the work
or executing it at a slow pace, the recovery of
advance could commence and scope for misuse
of such advance could be reduced.

d. Mobilization advance should be released

only against furnishing of Bank Guarantee
(BG). Recovery of such advance could be
ensured by encashing the BG for the work
supposed to be completed within a particular
period of time.

e. There should be a clear stipulation of

interest to the charged on delayed recoveries
either due to the late submission of bill by the
contractor or any other reason besides the
reason giving rise to the encashment of BG, as
stated above.

f. The amount of mobilization advance;

interest to be charged, if any; its recovery
schedule and any other relevant detail should
be explicitly stipulated in the tendered
document upfront.

g. Relevant format for BG should be

provided in the tender document.

23
h. Authenticity of such BGs should also be
invariably verified from the issuing bank,
confidentially and independently by the
organization.

i. In case of 'Machinery and Equipment

advance', insurance and hypothecation to the
employer should be ensured.

j. Utilization certificate from the contractor

for the mobilization advance should be
obtained. Preferably, mobilization advance
should be given in instalments and subsequent
instalments should be released after getting
satisfactory utilization certificate from the
contractor for the earlier instalment.

(Ref No.4CC-1-CTE-2 Dated 10.04.07)

k. BG etc., taken towards security of advance

should be at least 110% of the advance so as
to enable recovery of not only principal
amount but also interest portion, if required.

l. The advance should not be paid in less than

two instalments except in special circumstances
for the reasons to be recorded. This will keep
check on contractor misusing the full utilisation
advance when the work is delayed
considerably.
24
A clause in the tender enquiry and the contract
of cases providing for interest free mobilisation
advances may be stipulated that if the contract
is terminated due to default of the Contractor,
the mobilisation advance would be deemed as
interest bearing advance at the interest rate of
____% (to be stipulated depending on the
prevailing rate at the time of issue of NIT) to be
compounded quarterly.

(Ref: 01-11-CTE-SH-100 Dt. 17.02.2011)

25
18. Post Tender Negotiation
a. The Commission has banned post-tender
negotiations except with L-1 vide its instruction
No.8(1)(h)/98(1) dated 18/11/98. This
instruction pertains to the award of work /
supply orders etc., where the Government or
the Government company has to make
payment.

b. If the tender is for sale of material by the

Government or the Government company, the
post-tender negotiations are not to be held
except with H-1 (i.e. the highest tenderer), if
required.

( Ref: 98/ORD/1 Dated the 3rd August 2001)

c. There should not be any negotiations.

Negotiations if at all shall be an exception and
only in the case of proprietary items or in the
case of items with limited source of supply.
Negotiations shall be held with L-1 only.
Counter offers tantamount to negotiations and
should be treated at par with negotiation.

Negotiations can be recommended in

exceptional circumstances only after due
application of mind and recording valid,
logical reasons justifying negotiations. In case
of inability to obtain the desired results by
26
way of reduction in rates and negotiations
prove infructuous, satisfactory explanations
are required to be recorded by the
Committee who recommended the
negotiations. The Committee shall be
responsible for lack of application of mind in
case its negotiations have only unnecessarily
delayed the award of work/contract.

Further, it has been observed by the

Commission that at times the Competent
Authority takes unduly long time to exercise
the power of accepting the tender or negotiate
or re-tender. Accordingly, the model time
frame for according such approval to
completion of the entire process of Award of
tenders should not exceed one month from the
date of submission of recommendations. In case
the file has to be approved at the next higher
level a maximum of 15 days may be added for
clearance at each level. The overall time frame
should be within the validity period of the
tender/contract.

In case of L-1 backing out there should be

re-tendering as per extant instructions.

(Ref : 005/ORD/12 Dated 25/10/2005)

d. Post tender negotiations could often be a

source of corruption, it is directed that there
27
should be no post-tender negotiations with L-1,
except in certain exceptional situations. Such
exceptional situations would include
procurement of proprietary items, items with
limited sources of supply and items where there
is suspicion of a cartel formation. The
justification and details of such negotiations
should be duly recorded and documented
without any loss of time.

e. In cases where a decision is taken to go for

re-tendering due to the unreasonableness of
the quoted rates, but the requirements are
urgent and a re-tender for the entire
requirement would delay the availability of the
item, thus jeopardizing the essential
operations, maintenance and safety,
negotiations would be permitted with L-1
bidder(s) for the supply of a bare minimum
quantity. The balance quantity should,
however, be procured expeditiously through a
re-tender, following the normal tendering
process.

f. Competent authority should exercise due

diligence while accepting a tender or ordering
negotiations or calling for a re-tender. In no
case should the overall timeframe exceed the
validity period of the tender and it should be
ensured that tenders are invariably finalised
within their validity period.
28
g. Quantity to be ordered is far more than
what L-1 alone is capable of supplying and
there was no prior decision to split the
quantities, then the quantity being finally
ordered should be distributed among the other
bidders in a manner that is fair, transparent
and equitable.

h. It is essentially in cases where the

organisations decide in advance to have more
than one source of supply (due to critical or
vital nature of the item), the Commission insists
on pre-disclosing the ratio of splitting the
supply in the tender itself.

i. Counter-offers to L-1, in order to arrive at

an acceptable price, shall amount to
negotiations. However, any counter-offer
thereafter to L-2, L-3, etc., (at the rates
accepted by L-1) in case of splitting of
quantities, as pre-disclosed in the tender, shall
not be deemed to be a negotiation.

(Ref: No.005/CRD/012 Dated the 3rd March,

2007 & 005/CRD/012 Dt. 20.01.2010)

Commissions guideline would not be

applicable in Projects funded by World Bank,
ADB, etc., if found to be in conflict with the
applicable procurement rules of the funding
agencies.
29
(Ref: No.98/ORD/001 dt. 28.10.2011 &
No.3(V)/99/9 dt 01.10.1999)
j. Reference is invited to Commission's
instructions of even number dated 25.10.2005
on the above subject. A number of references
have been received in the Commission, asking
for clarification on issues pertaining to specific
situations.

The Commission's guidelines were framed

with a view to ensuring fair and transparent
purchase procedure in the organizations. The
guidelines are quite clear and it is for the
organizations to take appropriate decision,
keeping these guidelines in view. In case they
want to take action in deviation or modification
of the guidelines, to suit their requirements, it is
for them to do so by recording the reasons and
obtaining the approval of the competent
authority for the same. However, in no case,
should there be any compromise to
transparency, equity or fair treatment to all the
participants in a tender.

(Ref : 005/CRD/12 Dated 3rd Oct 2006)

30
19. Use of web-site in Government
procur ement or tender process.
a. In addition to the existing rules and
practices regarding giving publicity of tenders
through newspapers, trade journals and
providing tender documents manually and
through post etc., the complete bid documents
along with application form shall be published
on the web site of the organization. It shall be
ensured by the concerned organization that the
parties making use of this facility of web site
are not asked again to obtain some other
related documents from the department
manually for purpose of participating in the
tender process i.e. all documents upto date
should remain available and shall be equally
legally valid for participation in the tender
process as manual documents obtained from
the department through manual process.

b. The concerned organization must give its

web site address in the advertisement / NIT
published in the newspapers.

c. If the concerned organization wishes to

charge for the application form downloaded
from the computer then they may ask the
bidding party to pay the amount by draft /
cheques etc. at the time of submission of the
application form and bid documents.

31
d. While the above directions must be fully
complied with, efforts should be made by
organizations to eventually switch over to the
process of e-procurement / e-sale wherever it
is found to be feasible and practical.

(Ref: No.98/ORD/1 Dated the 18th December,

2003)

e. The Commission has issued a directive vide

No. 98/ORD/1 dated 18th December 2003
wherein detailed instructions are issued
regarding the use of web-site for tendering
process. The objective is to improve vigilance
administration by increasing transparency.
st
The instructions were to take effect from 1
January 2004. It is noticed that many
organisations whose web-sites are functional
are still not putting their tenders on the web-
site. The Commission has desired that CVOs
should ensure compliance of the above
directive. They should regularly pursue the
Newspaper advertisements, the web-site of
their organisation and in general keep track to
ensure that the directives of the Commission on
this subject are complied with. Further, the
Commission has desired that the CVOs should
indicate in their monthly report in the column
pertaining to tender notices whether all the
tenders have been put on the web-site, and if
not, the reasons for non-compliance. The
32
explanation of the concerned officers who are
not complying with these directions should be
called and further necessary action taken.

(Ref : 98/ORD/1 Dated 5th Feb 2004)

f. In CPWD, MCD, Civil Construction Division

of Post & Telecom departments and in many
other departments/organizations, there is
system of short term tenders (by whatever
name it is called in different organizations),
wherein works below a particular value are
undertaken without resorting to publicity as is
required in the open tenders. This practice is
understandable because of cost and time
involved in organizing publicity through
newspapers. In all such cases, notice can be put
on the web-site of the department as it does not
take any time compared to giving
advertisements in the newspapers and it
practically does not cost anything. This will
benefit the department by bringing in
transparency and reducing opportunities for
abuse of power. This will also help the
organizations by bringing in more
competition.

In view of the reasons given above, the

Commission has decided that instructions given
in the Commission's circular (No. 98/ORD/1
dated 18.12.2003) for the use of web-site will
33
also apply to all such works awarded by the
department/PSEs/other organizations over
which the Commission has jurisdiction.

(Ref : 98/ORD/1 Dated 11th Feb 2004)

g. It is clarified that Commission's instructions

are with regard to goods, services and works
procured through open tender system, so these
instructions do not apply to proprietary items
and items which necessarily need to be
procured through OEMs and OESs (Original
Equipment Suppliers).

h. In many organizations goods, services and

works which as per laid down norms are to be
procured / executed through open tender
system many times due to urgency are done
through short term tenders without resorting to
wide publicity in newspapers because of time
constraint. In all such cases short term tenders
(by whatever name it is called) etc. should also
be put on the website of the dept. as it does not
involve any additional time or cost.

i. Periodic Updating of Vendor Directory:

The Commission desires that in all such cases
there should be wide publicity through the web
site as well as through the other traditional
channels at regular intervals for registration of
contractors / suppliers. All the required
34
proforma for registration, the pre-qualification
criteria etc. should be always available on the
web-site of the organization and it should be
possible to download the same and apply to
the organization. There should not be any entry
barriers or long gaps in the registration of
suppliers / contractors. The intervals on which
publicity is to be given through website and
traditional means can be decided by each
organization based on their own requirements
and developments in the market conditions. It is
expected that it should be done atleast once in
a year for upgrading the list of registered
vendors / contractors.

j. Opportunity to all registered Vendors in

L i m i t e d Te n d e r i n g : T h e c o n c e r n e d
organisation should give web based publicity
for limited tenders also except for items of
minor value. If the organization desires to limit
the access of the limited tender documents to
only registered contractors / suppliers, they
can limit the access by issuing passwords to all
registered contractors / suppliers. But it should
be ensured that password access is given to all
the registered contractors / Suppliers and not
denied to any of the registered suppliers. Any
denial of password to a registered supplier /
contractor will lead to presumption of malafide
intention on the part of the tendering authority.

(Ref: No.98/0RD/1 Dated the 2nd July 2004)

35
k. All organisations must post a summary
every month of all the contracts/purchases
made above a certain threshold value to be
decided by the CVO in consultation with the
head of organisation i.e. CEO / CMD etc. as
per Annexure-I enclosed to the Circular cited
below. The threshold value may be reported to
the Commission for concurrence.

(Ref: No.005/VGL/4 Dated the 16th March

2005)

l. The threshold limits as proposed by the

CVOs in consultation with CEOs can be taken as
the starting point which could be revised
subsequently to cover 60% of the transactions
in a year and further 100% on stabilization.
th
(Ref: No.005/VGL/4 Dated the 20 September
2005)

m. CVOs are, therefore, once again advised

to ensure that details of the tenders awarded
above the threshold value by the organizations
are uploaded in time on the organisation's
official website and are updated every month.
CVOs should also specifically bring to the
notice of the Commission, any violation of this
order.
st
(Ref: No.005/VGL/4 Dated the 1 September
2006)
36
n. The Commission, therefore, while
reiterating its aforementioned instructions
directs the CVOs to convey to the Commission
the following information latest by 30/4/07:-
i) The threshold value decided by
the organization for publishing on their
web - s i t e, d e t a i l s o f a wa r d o f
tenders/contracts;
ii) The extent to which the details of
awarded tenders are being posted on
the web-site and whether the web-sites
are being updated regularly or not;
iii) Whether first/second phase of
the Commission's circular dated 22/11/06
has been implemented or not;
iv) If not, the reasons thereof: steps
being taken by the organization to ensure
implementation of the Commission's
circular and the exact date by which both
the phases as mentioned in the
Commission's circular would be fully
implemented;.
Any failure on the part of organization to
implement the directions contained in the
Commissions circulars as mentioned above
would be viewed seriously by the Commission.

(Ref : No. 006/VGL/117 Dated 18th April 2007)

37
o) To post summary of details of
contracts/purchases awarded so as to cover
75% of the value of the transactions without
any further delay. Any failure on the part of the
organisations on this account would be viewed
seriously by the Commission. All Chief Vigilance
Officers should reflect the compliance status in
their monthly reports to the Commission after
personally verifying the same.

(Ref: No.005/VGL/4 Dated the 14th July, 2009)

38
20. Leveraging Technology
a. All Govt. Organisations discharging
regulatory / enforcement functions or service
delivery of any kind, which cause interface with
the general public / private businesses, etc.,
shall provide complete information on their
websites regarding the laws, rules and
procedures governing the issue of licenses,
permissions, clearances, etc. An illustrative list is
given in the annexure to this Circular.

b. In case of Contracts & Procurement:

i. Applications for registration of
contractors / suppliers / consultants /
vendors, etc.
ii. Status of all bill payments to contractors
/ suppliers, etc.

c. All application forms / proformas should

be made available on the websites in a
downloadable form. If the organisation
concerned wishes to charge for the application
form downloaded from the computer, the same
may be done at the time of the submission of
the application forms.

d. In the second stage, the status of individual

applications / matters should be made
available on the organisation's website and
should be updated from time-to-time so that
39
the applicants remain duly informed about the
status of their applications.

In addition to the manual receipt of

applications, all organisations should examine
the feasibility of online receipt of applications
and, wherever feasible, a timeframe for
introducing the facility should be worked out.
As a large number of Govt. organisations are
opting for e-governance, they may consider
integrating the above mentioned measures into
their business processes so that duplication is
avoided.

(Ref: No.006/VGL/117 Dated the 22nd

November, 2006)

40
21. E-Tendering / E-Procurement
a. The Commission has been receiving a
number of references from different
departments/organisations asking for a
uniform policy in this matter. The
departments/organisations may themselves
decide on e-procurement/reverse auction for
purchases or sales and work out the detailed
procedure in this regard. It has, however, to be
ensured that the entire process is conducted in a
transparent and fair manner.
th
(Ref: No.98/ORD/1 dated 11 September
2003)

b. Guidelines on security related issues in e-

tendering systems.

(Ref: No.009/VGL/002 dt. 17.09.2009)

c. Check-list for implementation of e-

tendering solutions.

(Ref: No.009/VGL/002 dt. 26.04.2010)

d. In order to ensure proper security of the e-

procurement system all departments /
organisations are advised to get their system
certified by Department of Information
Technology (DIT).

(Ref: No.010/VGL/035 dt. 23.06.2010)

41
DIT in turn requested its attached STQC
(Standardisation, Testing and Quality
Certificate) Directorate to establish necessary
processes and systems to enable certifications
of e-procurement systems. Accordingly, the
guidelines prepared by STQC in this regard
approved and notified by the DIT is available
on egovstandars website
(www.egovstandars.gov.in). The guidelines are
also available on Commission’s website. All the
Ministries / Departments / Organisations are
advised to use these guidelines for compliance
to Quality Requirements for certifying the e-
procurement systems.

(Ref: No.010/VGL/035/161731 dt.

12.01.2012)

e. All organisations should invariably follow a

fair, transparent and open tendering
procedure to select the application service
provider for implementing their e-
tendering solutions. The standard guidelines on
tendering procedure should hold good for the
procurement of these services as well.
th
(Ref : 009/VGL/002 dated 13 Jan 2009)

42
CONTRACT AWARD / ORDER
EXECUTION STAGE /
CONTRACT ADMINISTRATION
STAGE
22. E-payments
a. The payment to all suppliers / vendors,
refunds of various nature, and other payments
which the organisations routinely make shall be
made through electronic payment mechanism
at all centres where such facilities are
available in the banks. Salary and other
payments to the employees of the concerned
organisations at such centres shall also be
made through electronic clearing system (ECS)
wherever such facilities exist. As the
organisations will have to collect bank account
numbers from the vendor, suppliers, employees
and others who have interface of this nature
with the Govt. organisations, the concerned
organisations may plan to switch over to e-
payment system in a phased manner starting
with transactions with the major suppliers in the
beginning or in whatever manner is found more
convenient.
(Ref No.98/ORD/1 Dated the 8th April, 2004)
b. The Commission had directed that by July
2004, 50% of the payment transactions both in
value terms as well as in number of transactions
shall be made through ECS/EFT mechanism
instead of payments through Cheques; and
urged all Banks, PSUs and Departments to
provide an enabling environment and facilities
so that such an initiative is successful.
th
(Ref : No. 98/ORD/1 Dated 20 Oct 2004)
43
23. Delays in Payments to Contractors &
Suppliers etc. Reducing opportunities for
corruption reg

The Commission has directed that all the CVOs

should undertake a review of bills received
during the last six months. The review is meant
to primarily determine the time taken in
clearing the bills. It is suggested that the cut off
limit for bills can be Rs. 1 lakh i.e. time taken for
payment of all bills above this amount should
be seen. In smaller organisations the cut off limit
can be lower depending on feasibility and
convenience. The CVO should also review
whether payments are being made on “first-
come-first-serve” basis or not.
th
(Ref: No. 005/ORD/1 Dated 10 March, 2005)

44
24. S e l e c t i o n a n d e m p l oy m e n t o f
Consultants
a. Conflicts of Interest: A firm which has
been engaged by the PSU to provide goods or
works for a project and any of its affiliates will
be disqualified from providing consulting
services for the same project. Conversely, a
firm hired to provide consulting services for the
preparation or implementation of a project,
and any of its affiliates, will be disqualified
from subsequently providing goods or works or
services related to the initial assignment for the
same project.
b. Consultants or any or their affiliates will not
be hired for any assignment, which by its
nature, may be in conflict with another
assignment of the consultants. (No.98/DSP/3
Dated the 24th December, 2004)
c. The Commission has declared that
following guidelines be kept in view while
finalising the contracts for engaging
Consultants.
i. Conflicts of Interest:
I. C o n f l i c t b e t w e e n c o n s u l t i n g
activities and procurement of goods, works
or non-consulting services
II. Conflict among consulting assignments
III. Relationship with employer's staff
IV. A consultant shall submit only
45
 one proposal. If participates in more than
one proposal, all such proposals shall be
disqualified.

ii. P r o f e s s i o n a l L i a b i l i t y : T h e
Consultant is expected to carry out its
assignments with due diligence and in
accordance with prevailing standards of
the profession. As the consultant's liability
to the Employer will be governed by the
applicable law, the contract need not deal
with the matter. The client (purchaser) may,
however, prescribe other liabilities
depending on the requirement in each
case without any restriction on the
Consultant's liability as per the applicable
law.

(Ref: 011/VGL/063 dt.24.06.2011)

d. Some of the common irregularities /

lapses observed have been narrated in
th
the Circular No OFF 1 CTE 1 dated 25
November 2002.

(http://www.cvc.nic.in/three.pdf)

46
25. Acceptance of Bank Guarantee (BG)
a. Copy of proper prescribed format on
which BGs are accepted from the contracts
should be enclosed with the tender document
and it should be verified verbatim on receipt
with original document.

b. It should be insisted upon the contractors,

suppliers etc. that BGs to be submitted by them
should be sent to the organisation directly by
the issuing bank under Registered post (A.D.).

c. In exceptional cases, where the BGs are

received through the contractors, suppliers etc.,
the issuing branch should be requested to
immediately send by Registered Post (A.D) an
unstamped duplicate copy of the guarantee
directly to the organisation with a covering
letter to compare with the original BGs and
confirm that it is in order.

d. As an additional measure of abundant

precaution, all BGs should be independently
verified by the organisations.

In the organisation / unit, one officer should be

specifically designated with responsibility for i)
verification, ii) timely renewal and iii) timely
encashment of BGs.

(Ref: No.02-07-01-CTE-30 Dt.31.12.2007)

47
26. If L-1 party backs out
If L-1 party backs out, there should be
retendering in a transparent and fair manner.
The authority may in such a situation call for
limited or short notice tender if so justified in the
interest of work and take a decision on the
basis of lowest tender.
th
(Ref: No.98/ORD/1 Dated 24 August, 2000)

48
27. Back to back tie up by PSUs
a. It has been observed during intensive
examination of various works / contracts
awarded by construction PSUs on back to back
basis that the works are being awarded in an
ad-hoc and arbitrary manner without inviting
tenders and ascertaining the performance,
capability and experience of the tenderers. In
some cases, the works were awarded on single
tender basis / limited tender basis though
sufficient time was available with the
organisation to invite open tenders.
(Note : Observations of the Commission are
listed in the circular mentioned below)
(Ref: No. 06-03-02-CTE-34 Da ted:
20.10.2003)

b. The Commission has observed that there

have been instances where government
organisations / PSUs obtain contract from other
government organisations / PSUs and further
award the same to private entities on 'back to
back tie up' basis without competitive
tendering mechanism and without any
significant value addition by the procuring
government organisation / PSU. Their practice
subverts the Commission's emphasis on
integrity, transparency, fairness and equity in
decision making.
th
(Ref No 005/CRD/19/196756 Dated 11 Dec
2012) 49
28. Out of turn Allotments / Discretion:
To publish on the notice board and in the
organisation's regular publication(s), the
details of all such cases regarding tenders or
out of turn allotments or discretion exercised in
favour of an employee / party.
th
(Ref: No.005/VGL/4 Dated the 16 March
2005)

50
29. Banning of Business Dealings
The Commission once again reiterates its
instructions that banning of business is an
administrative matter to be decided by the
management of the organization and the CVC
does not give its advice in such matters.
th
(F.No. 000/VGL/161 Dated, the 24
March,2005)

51
30. Undertaking by the Members of Tender
Committee / Agency.
In continuation of the Commission's directions
vide Order 005/VGL/4 dated 16/3/2005
regarding transparency in the tender process,
the Commission would advise that the members
of the Tender Committee should give an
undertaking at the appropriate time, that none
of them has any personal interest in the
Companies / Agencies participating in the
tender process. Any Member having interest in
a ny C o m p a ny s h o u l d r e f ra i n f ro m
participating in the Tender Committee.

(Ref: 005/VGL/66 Dated the 9/12/2005)

52
31. Recoveries arising out of Intensive
Examination conducted by CTEO
The observations / advice of the Commission
are required to be considered by the executing
agencies in terms of the Contract and
recoveries are to be enforced as admissible as
per the conditions of the Contract.

(Ref: TE(NH)/2011/Recoveries/144262 Dt.

12.09.2011)

53
GENERAL
32. C h e c k l i s t fo r E x a m i n a t i o n o f
Procurement (Works/ Purchases / Services)
Contracts by CVOs
A. Pre-Award Stage
1. Financial and Technical sanction of
competent authority is available.
2. Adequate and wide publicity is given.
Advertisement is posted on website and tender
documents are available for downloading.
3. Convenient tender receiving/opening time
and address of the tender receiving
officials/tender box are properly notified.
4. In the case of limited tender, panel is
prepared in a transparent manner clearly
publishing the eligibility criteria. The panel is
updated regularly.
5. Pre-qualification criteria are properly
defined/ notified.
6. Short listed firms/consultants are fulfilling
the eligibility criteria. There is no deviation
from notified criteria during evaluation.
7. Experience certificates submitted have
been duly verified.
8. Tenders/bids are opened in the presence
of bidders.
9. Corrections/omissions/additions etc., in
price bid are properly numbered and attested
and accounted page wise. Tender summary
note/ Tender opening register is scrupulously
maintained.
54
10. Conditions having financial implications are
not altered after opening of the price bids.
11. In case of consultancy contracts (a) Upper
ceiling limit is fixed for consultancy fee and (b)
Separate rates for repetitive works are fixed.

B. Post-award stage
(a) General
1. Agreement is complete with all
relevant papers suc h as pre-bid
conference minutes, etc.
2. Agreement is page-numbered, signed
and sealed properly.
3. Bank Guarantee is verified from
issuing bank.
4. Insurance policies, labour licence,
performance guarantee are taken as per
contract.
5. Technical personnel are deployed as
per contract.
6. Plant and equipment are deployed
as per contract.
7. Action for levy of liquidated
damages is taken in case of
delay/default.

(b) Payments to contractors

1. Price escalation is paid only as per
contract.
55
 2. Retention Money/Security Deposit is
deducted as per contract.
3. Recovery of Mobilisation & Equipment
advance is made as per the provisions in
the contract.
4. Recovery of I.Tax & Works Contract
tax is made as per provisions in the
contract.
5. Glaring deviations are supported with
adequate justification and are not
advantageous to the contractor.

(c) Site Records

1. Proper system of recording and
compliance of the instructions issued to the
contractors is maintained.
2. Proper record of hindrances is
maintained for the purpose of timely
removal of the hindrance and action for
levy of liquidated damages.
3. Mandatory tests are carried out as
per the frequency prescribed in the
agreement.
st
(Ref: F.No.006/VGL/29 Dated, the 1 May,
2006) (http://www.cvc.nic.in/006vgl29.pdf)

56
33. A comprehensive set of guidelines issued
by the CVC on common irregularities / lapses
observed in stores / purchase contract.
Guidelines for improvement in the procurement
system.

(Ref : CVC Publication Dated 15.01.2002)

(http://www.cvc.nic.in/cte_man_2002.pdf)

57
34. Issues arising out of Annual review
meeting of Defence sector CVOs held by CVC
in July 2012
(i) Updating all Procurement/Purchase
Manuals, in alignment with the spirit of DPP &
DPM (if not already done).

(ii) The threshold value of contracts for signing

Integrity pact needs to be reviewed to cover
90% of the transactions, in a planned manner.
The progress made in %age may be intimated
on a quarterly basis.

(iii) The proportion of Limited / Single Tenders

should be gradually reduced through Vendor
development.

(iv) On line Vendor registration process should

be strictly followed so as to encourage vendor
registration. The database of vendors so
registered should be uploaded on the website,
for use by all the Divisions of the Organisation.

(v) Efforts should be made to achieve 90% of

procurements through e-procurement. The
progress made may be intimated on a
quarterly basis.

(vi) All the payments to vendors / contractors

should be through e-payment, as far as
possible.
58
(vii) Efforts may be made to prevent
cartelisation and wide variation in rates
awarded for same products, by maintaining
relevant data on vendors / rates pertaining to
previous procurements; and sharing these
details across various units in the organisation.

(viii) Computerised File Tracking should be

introduced (if not already done), in a time
bound manner.

(ix) Clearance of Bills of contractors should be

done in a transparent and time bound manner.
The contractors should be able to track the
status of their bills, on-line.

(x) CVC suggested that for transparency in

procurement, especially in proprietary items in
defence sector, a committee may be setup
which may include one industrial member and
one Academic member, for assessing
innovative products for assimilation followed
by vendor development programme so that
new products could be brought in.

(Ref: 8(94)/2012-D(Coord/DDP) dated 29th Oct

2012)

59
35. Purchase Preference Policy
(i) The Department of Public Enterprises has
i s s u e d g u i d e l i n e s v i d e O. M . N o .
DPE/13(15)/2007-Fin. Dated 21.11.2007 on
the subject cited above which reiterates DPE's
earlier guidelines dated 18.07.2005 to the
effect that the Purchase Preference Policy
would stand terminated w.e.f. 31.03.2008.
Further, it also provides that Preferential
Policy framed for the specific sectors by the
concerned Ministry/Department within
relevant Act of Parliament or otherwise don't
come within the purview of these guidelines.
However, the DPE OM. Dated 21/11/2007,
lays down that the concer ned
Ministry/Department may independently
evolve/review preferential policies for the
sectors of their concern as per their
requirement. A copy of DPE's O.M dated
21/11/2007 is enclosed for reference.

(ii) The Commission has desired that if any

Ministry/Department has evolved a Purchase
Preference Policy pursuant to the DPE
Guidelines, the same may be brought to the
notice of the Commission.
th
(Ref : 009/VGL/055 Dated 09 Nov 2009)

60
36. Revised threshold values for submission
of Quarterly Progress Report-QPR
In supersession to the Commission's earlier OMs
on the subject, the threshold limits for reporting
of the contracts in the QPR to the Commission,
are revised as under:-

Works / Contracts Revised Value

Category - I:
(a) Civil Works
(b) Turkey Works Contracts Rs.5 Crores &
(c) Stores & Purchase above
(d) PPP-Public Private Partnership [Cost /
Revenue values]
(e) Sale of Goods / Scrap / Land

Category II:
(f) Electrical/Mechanical Works /
Rs.1 Crore &
Maintenance / Service contracts including above
Electronics / Instrumentation /
Telecommunication / Manpower Supply, etc.
(g) Medical Equipment Rs.50 Lakhs &
above
(h) Consultancy contracts Rs.1 Crore &
above
Category III: Rs.10 Lakhs &
(i) Horticulture Works above

(j) Supply of Medicines 4 Largest

Value
Contracts

61
QPRs should be submitted both in softcopy (in
MS Excel format) through e-mail at
qpr.te.general@nic.in as well as hardcopy
separately for each sub-category mentioned
above. For contracts below the threshold
value, CVO may conduct CTE type of
inspections and intimate the outcome to the
Commission through their regular
monthly/quarterly reports.

The revised limits would come into effect from

July-September 2012 Quarter onwards.

Kindly refer to the explanatory notes provided

in this circular for guidance.

(Ref : No.:98-VGL-25 Dated 30/07/2012)

(http://cvc.nic.in/cir_31072012.pdf)

62
37. Referring cases of Procurement to the
Commission
The Commission has issued various
circulars/guidelines /instructions in order to
promote transparency, improve competition
and ensure equity among participants.
However, if any organization faces difficulty in
the application of any of the
circulars/guidelines/instructions issued by the
Commission, then it may approach the
Commission bringing out the difficulties along
with a proposed generic solution listing out the
ingredients of the special circumstances for
examination and review by the Commission.
References of a general nature having
elements of managerial decision making and
concerning a particular procurement should be
avoided.
th
(Ref : No 008/CRD/008 Dated 24 July
2008)

Disclaimer:
The objective of publishing this booklet is to
sensitize our colleagues to the prevailing CVC
guidelines., For detailed information, the
relevant CVC circular / instruction / directives /
guidelines may please be referred to viz.,
http://www.cvc.nic.in/proc_works.htm.
63
Public Procurement is an activity
vulnerable to corruption. While lack of
transparency and violation of laid down
procedures needs to be curbed, steps are
also required to ensure fair competition
and objectivity in selection assuring value
for money. Therefore, the Commission's
effort is to emphasize transparency,
accountability and probity in public
procurement .

Message from CVC

Vigilance Awareness Week - 2012

VIGILANCE DEPARTMENT
ISO 9001:2008 Certified
HINDUSTAN AERONAUTICS LIMITED