PURCHASE MANAGEMENT

2006

GOVERNMENT OF INDIA
MINISTRY OF DEFENCE
DEFENCE RESEARCH & DEVELOPMENT ORGANISATION
DIRECTORATE OF MATERIALS MANAGEMENT
SENA BHAWAN, NEW DELHI-110 011.

March 2006
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 Contents
Chapter 1: PREAMBLE 1

Chapter 2: BUDGET FORMULATION AND MONITORING 3

2.1 Budget Formulation 3
2.2 Budget Allocation 4
2.3 Reports 5

Chapter 3: SOURCE SELECTION, REGISTRATION AND EVALUATION 6

OF VENDORS
3.1 Source Selection 6
3.2 Registration of Vendors 6
3.3 Vendors’ Evaluation 8
3.4 Removal of Registered Vendors 8
3.5 Exchange of Vendors' Data 9

3.6 Register of Foreign Vendors 9

Chapter 4: INITIATION AND APPROVAL OF DEMANDS 10

4.0 Initiation of Demands 10
4.1 Items against Sanctioned Projects 10
4.2 Build-up Items including Setting up of Facilities 10
4.3 Maintenance Items including Repairs and Servicing of 11
Equipment/Machinery
4.4 Stores Procurement Committee (SPC) 11
4.5 Specifications 12
4.6 Authority/Levels for Initiation 13
4.7 Preparation of Demands 14
4.8 Approval of Demands 14

Chapter 5: GENERAL PRINCIPLES OF PURCHASE AND CODE OF ETHICS 15

5.1 General Principles of Purchase 15
5.2 Code of Ethics 17
5.3 Standards of Financial Propriety 17
5.4 Access to the books of Accounts 18
5.5 Integrity Pact 18

Chapter 6: PROCUREMENT OF MATERIALS: CASH PURCHASE 20

6.1 Approval and Processing of Cash Purchase 20
6.2 Drawl and Settlement of Advances 21
6.3 Special Dispensation for Remotely Located Labs/Estts 22
6.4 Purchase of Drugs/Medicines 22

Chapter 7: PROCUREMENT OF MATERIALS: LOCAL PURCHASE 23

7.1 Determination of the Mode of Purchase 23

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7.2 Common Factors for all Tenders 23
7.3 Mode of Tenders 24
7.4 Open Tenders 24
7.5 Global Tenders 25
7.6 Limited Tenders 25
7.7 Single Tender 26
7.8 Single Tender with PAC 27
7.9 Selection of Type of Tendering 27
7.10 Earnest Money Deposit (EMD) 27
7.11 Security Deposit 28
7.12 Invitation of Tenders/Quotations 28
7.13 Receipt of Tenders 28
7.14 Opening of Tenders/Bids and Evaluation 29
7.15 Constitution of Tender Purchase Committee/Negotiation 31
Committee (TPC/NC)
7.16 Conducting of TPCs/NCs 33
7.17 Guidelines for Negotiations 34
7.18 Scrutiny by TPC/NC Members 36
7.19 Dissenting Opinion 37
7.20 Single Tender/Single Tender with PAC Purchase 37
7.21 Exemption from Tendering 37
7.22 Financial Sanction of the CFA 37
7.23 Payment Terms 38
7.24 Letter of Intent 39
7.25 Preparation of Supply/Purchase Orders 39
7.26 Distribution of Supply/Purchase Orders 40
7.27 Despatch of Supply/Purchase Orders 41
7.28 Amendments to Supply/Purchase Orders 41
7.29 Repeat Orders 41
7.30 Option Clause 42
7.31 Local Purchase against DGS&D Rate Contracts 42
7.32 Entering into Rate/Running Contracts by Labs/Estts 42
7.33 Repair Contracts 45
7.34 Maintenance Contracts 45
7.35 Purchase of Computer Systems 45
7.36 Purchase of Stationery 46
7.37 Purchase of Protective Clothing and Liveries 47
7.38 Purchase of Fire-Fighting Equipment 47
7.39 Leasing/Hiring of Facilities/Capital Equipment 47
7.40 Statutory Levies/Duties 48
7.41 Buy-Back Offer 48
7.42 Transit Insurance Coverage 48
7.43 Price Escalation/Enhancement of Cost 49
7.44 Revision of Delivery Period (DP) 49
7.45 Monitoring/Reviewing of Progress 50
7.46 Liquidated Damages (LD) 51
7.47 Disputes/Arbitration/Consumer Redressal Forums 51

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Chapter 8: PROCUREMENT OF STORES: IMPORTED ITEMS 54
8.1 General 54
8.2 Projection of FE Requirements 54
8.3 Initiation/Approval of Demand 54
8.4 Invitation/Processing of Tenders 54
8.5 Indian Agents/Agency Commission 55
8.6 Tender Processing, Technical Evaluation 56
and Opening of Price Bids
8.7 Conducting of TPC/NC 57
8.8 Release of Foreign Exchange 57
8.9 Placement of Purchase Order/Contract 59
8.10 End Use Certificates 59
8.11 Import Certificates 59
8.12 Letters of Credit (LCs)/Sight Drafts 59
8.13 Insurance Coverage 61
8.14 Shipping and Air freighting 61
8.15 Customs Clearance 61
8.16 Export of Items ‘Not Repairable in India’ 62
8.17 Special Provisions for Equipment Imported for 63
Trial/Demonstration/Training
8.18 Refund Claims 63
8.19 Appeals 63
8.20 Demurrage/Warehouse Charges 64
8.21 Loss/Damage/Short-Landing 64
8.22 Draw Back Claims 64
8.23 Pay Back Demand Notice 64
8.24 Inland Transportation 64
8.25 Acceptance/Accounting of Imported Stores 65
8.26 Important Documents Used in Imports 65
8.27 Small Value Imports through TAs (Defence) in 65
HCsI/Embassies

Chapter 9: Banking Instrument 66

9.1 General 66
9.2 Letter of Credit 66
9.3 Reasons for using LC 66
9.4 Basic forms of Lsc 66
9.5 Revocable Letter of Credit 67
9.6 Irrevocable Letter of Credit 67
9.7 Confirmed Letter of Credit 67
9.8 Revolving Letter of Credit 67
9.9 Procedure for opening LC 67
9.10 Payment through Letter of Credit 68
9.11 Essential elements of LC 68
9.12 Documents to be provided by the seller 68
9.13 Extension of LC 69
9.14 Direct Bank Transfer 69

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 9.15 Advantages 70
9.16 Specified time limit and Delivery Schedule 70
9.17 Performance Bank Guarantee (PBG) 71
9.18 Essential elements of PBG 71
9.19 Salient features of Guarantees 71
9.20 Invocation of Guarantees 71
9.21 Confirmation of Performance Bank Guarantees 72
Appendix A 73

Chapter 10: Evaluation of Quotations and Price reasonability 74

10.1 Introduction 74
10.2 Economy in Procurement 74
10.3 Evaluation of Quote 75
10.4 Preliminary Examination of Quotes 75
10.5 Comparative Statement of tenders 75
10.6 Bench Marking 75
10.7 Reasonableness of prices in competitive Tendering 75
10.8 Last Purchase Price 76
10.9 Lack of Competition 76
10.10 Adaptation of Discounted cash flow technique (DCF) 77
10.11 Discounting Rate 78
10.12 Price Variation clauses/Price adjustment 78
10.13 Conditions applicable to price adjustment 79
10.14 Exchange Rate Variation (ERV) 79
10.15 Documentation for claiming ERV 79
10.16 Single Tender/Non Competitive 79
Contracts- Indigenous procurement
10.17 Single Tender/Non Competitive 81
Contracts- Foreign procurement
10.18 Data Base on cost & Prices 81
Appendix A 83
Appendix B 84

Chapter 11: PROCUREMENT OF MATERIALS: CENTRAL PURCHASE 86

11.1 General 86
11.2 Avenues for Central Purchase 86
11.3 Procedure for Procurement 86
11.4 DM R&F 87
11.5 Loan Issues 87

Chapter 12: PAYMENT/CLEARANCE OF BILLS 88

12.1 General 88
12.2 Processing of Bills 88
12.3 Lost/Misplaced Cheques and Issue of Fresh Cheques 89
12.4 Preparation of CRVs 90

Chapter 13: PROGRESS REPORT ON PROCUREMENT, 91

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 UTILISATION OF STORES AND DISPOSAL
OF OBSOLETE STORES
13.1 Annual Report by Labs/Estts 91
13.2 Review of Annual Report by DRDO Hqrs 91

Chapter 14: MAINTENANCE/WEEDING OUT OF OLD RECORDS: 92

CONTRACTS/SUPPLY ORDERS

LIST OF REFERENCES 93
ABBREVIATIONS 94
FLOW CHART - PROCUREMENT PROCEDURE 97
APPENDIX A: INCOTERMS 2000 100
INDEX 105

ADDENDUM
-----------------
CLARIFICATIONS - dated 7th Dec.2006
CLARIFICATIONS - dated 12th Jan.2007

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 Chapter 1

PREAMBLE

1. During the last over two decades, DRDO has successfully completed
major projects relating to defence hardware, which has led the
Organisation to win national prominence and global recognition. Having
achieved this confidence, DRDO is being assigned further high-value,
time-bound projects of defence relevance in the state-of-the-art
technology. This significant growth in the responsibilities/activities of the
DRDO necessitates manifold increase in expeditious procurement of
varied material resources, without impeding the project progress sched-
ules with minimum procedural effort.

1.1 A need was felt to evolve its own policies on Materials Management,
streamline and consolidate procedures and remove ad hocism while
adhering to current Government policies rather than depending upon
assorted corporate instructions issued from time to time. This will obviate
procedural delays ensuring purchase/project excellence.

1.2 A Materials Management Policy was issued vide Government letter No.
DMM/81001/Policy/1995-96/5482/D(R&D)/96 dated 29 November 1996
and 'Purchase Management' document was issued vide Govt. letter No.
DMM/81002/PUR-PRO/97-98/6407/D(R&D) dated 29 December 1997.
Subsequently 'Purchase Management 2000' document was issued vide
Govt. letter No. DMM/0000200/M/3/2563/D(R&D) dated 25 July 2000 and
“Purchase management 2003 “ document was issued vide Govt. Letter
DMM\PP\0000203\M\3045\D(R&D) dated 21 Aug 2003. The current
document (Purchase Management - 2006) is the revised version of
’Purchase Management- 2003’.

1.3 This document is intended to provide a standard reference for personnel

engaged in purchase management tasks; it will simplify procurement
methodology and remove impediments for prompt execution of purchases.
This will also help in timely realisation of the research targets without
diluting financial propriety and ensure optimal use of resources.

1.4 This document will be followed in the DRDO for purchase of all kinds of
stores. The term ‘stores’ applies generally to all articles and materials
purchased or otherwise acquired for use by Government, including not
only consumables stationery, health and hot weather items but also
articles of dead stock of the nature of plant, machinery, instruments,
equipment, fixtures, etc. This procedure will also mutatis mutandis apply
to contracts relating to repair, servicing and maintenance of stores and
equipment, transportation, printing and other services to be rendered by
Government. However this procedure will not be used for hiring of
manpower, availing consultancy services and procurement of furniture.

1.5 Approval of IF(R&D)/Govt. of India shall be obtained for any deviation

from the purchase procedure through DMM, DRDO HQrs.

1.6 Labs/Estts shall use the formats of purchase forms as given in the
Materials Management Forms (Vol-1 Purchase Forms) document. Any
modification/suggestion in the formats shall be effected with the approval
of DRDO HQrs (DMM) to enable uniformity in these forms. These forms
are numbered from DRDO.MM 01 onwards.

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1.7 Any additional information on purchase forms considered essential for the
local specific needs of the Lab/Estt may, however, be incorporated
without affecting the basic formats, under intimation to DRDO HQrs
(DMM).

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 Chapter 2

BUDGET FORMULATION AND MONITORING

2. Budgeting is a system of financial control over receipts and expenditure.

The fundamental rule on which the system of budgetary control rests is that
no item, of major public expenditure, can be procured unless provision
exists to meet the same in the approved budget estimates. Formulation,
monitoring, coordination and reporting of all budget activities will be
assigned to an identified group headed by a senior officer well conversant
with the planning and resource management functions of the Lab/Estt.

2.1 BUDGET FORMULATION: All Labs/Estts will project their annual budget
requirements under various heads including purchase of materials, to
Directorate of Budget, Finance & Accounts (Dte. of BFA), R&D HQrs to
enable them to formulate overall DRDO budget in consultation with
IF(R&D) and its onward projection to Ministry of Defence (Finance) in
accordance with the instructions issued by Dte of BFA, DRDO HQrs from
time to time. All Labs/Estts will forward a copy of their annul budget to
PCDA/CDA(R&D) offices for vetting. PCDA/CDA(R&D) will forward their
input to the IF(R&D) with copy to Lab Director within 10 working days. As
the purchase of materials form a sizeable proportion of the budget, these
requirements need to be realistically worked out to ensure progress of the
major programmes/projects and other R&D activities.

The following aspects will be kept in view while projecting budgetary

requirements:

(a) Organisational goals

(b) User’s urgency
(c) Corporate decisions
(d) Cash outgo against the commitments entered during the previous year
and against new commitments likely to be entered during the year.
(e) Maintenance of equipment, machinery, etc.
(f) Fund requirements against basic research, build-up activities and
procurement of books and journals.

2.1.1 Labs/Estts will forward their budgetary requirements to Dte. of BFA,

DRDO HQrs in the prescribed formats so as to reach them by the
specified dates. These formats facilitate to assess the cash flow
requirement of various activities in different areas for ensuing year
under the prescribed accounting code heads as laid down in the
Classification Handbook - Defence Services.

2.1.2 While formulating forecast budget in respect of materials, the

following priorities will be borne in mind:

(a) Obligatory expenditure on past contractual liabilities, essential

maintenance requirements and minimum office contingencies
including liveries and protective clothing, will be listed as first
priority.

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 (b) Proposed expenditure on procurement of materials for ongoing
programmes/projects will be included as second priority.
(c) Expenditure on fresh programmes/projects to be undertaken
during the year, project-related build-ups and training/ seminars
will be taken as third priority.
(d) The expenditure on materials procurement under build-up will
be considered as last priority for inclusion in the forecast
budget report.
(e) Expenditure on urgent, unforeseen, unplanned tasks/ activities
will however, be accommodated.

2.1.3 Based on the projection of funds made by the Labs/Estts, a

consolidated financial profile will be projected by DRDO HQrs to the
Ministry of Defence (Finance) for appropriation, out of the
consolidated fund of India. Budget for DRDO will be made available
in the Defence Services Estimates under the following Heads:

Revenue Account : Major Head 2080

Capital Account : Major Head 4076, Sub-major Head 05,
Minor Head 111.

2.2 BUDGET ALLOCATION: Funds are allotted to Labs/Estts by Dte of BFA,

DRDO HQrs under various Budget Heads against their projected
requirements considering availability of funds, past commitments, priority
of projects and utilisation pattern of funds, allowing specified rate of
growth.

2.2.1 Periodic allocations are made to Labs/Estts based on the actual

expenditure vis-a-vis the anticipated expenditure as mentioned
below:

(a) Provisional allotment (vote on account)

(b) Initial allotment
(c) Revised allotment
(d) Final allotment

2.2.2 Provisional Allotment: This allotment is made at the beginning of

the year to meet obligatory expenses till the budget is approved by
the Parliament and the connected appropriation bill is assented to by
the President. On the first day of every financial year, DRDO HQrs
will allocate an amount not more than 1/6th of the final allotment
made in the preceding financial year. In case the allocation is
inadequate, an ad hoc additional allotment may be asked for “on
required basis”.

2.2.3 Initial Allotment: Based on the Forecast Budget, this allotment will
be made by the first week of June every year. This will include the
provisional allotment previously made.

2.2.4 Revised Allotment: This allotment will be made in September/

October and may increase or decrease the initial allotment based on
utilisation pattern.

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 2.2.5 Final Allotment: This is based on modified appropriation towards
the close of the financial year.

2.3 REPORTS: To watch the progress of expenditure, laboratories are required

to furnish certain periodic reports to Dte of BFA, DRDO HQrs which are
regulatory in nature and form an essential part of budgetary and monitoring
process. These reports constitute micro level database, which is used for
linkage and correlation with macro level expenditure profile received from
CGDA periodically. Accordingly, these reports need to be prepared with
utmost care and scrutiny to minimise large-scale deviation during the
correlation stage and also to provide a benchmark for resource
mobilisation efforts.

2.3.1 The usual reports required in this connection are:

(i) Preliminary Estimates - based upon 3 months actuals

(ii) Revised Preliminary - based upon 5 months actuals
Estimates
(iii) Revised Estimates - based upon 7 months actuals
(iv) Modified Appropriation - based upon 10 months actuals

2.3.2 In addition to these reports, HQrs from time to time require certain
additional reports of periodic and ephemeral nature to develop
linkage between expenditure on projects and actual expenditure
incurred under the various accounting code heads, under which
budget allotment is made. Some of the reports in this category are
annual action plan, quarterly expenditure returns, contractual
payment details, etc. The formats of such reports will be forwarded
to Labs/Estts as required from time to time by Dte. of BFA.

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 Chapter 3

SOURCE SELECTION, REGISTRATION AND EVALUATION OF VENDORS

3. The objective behind identification of proper sources of supply, registration

of vendors and their periodic evaluation is to obviate the necessity of
denovo search of a supplier for each demand. An exhaustive directory of
reliable vendors dealing with different categories of stores is an essential
prerequisite for prompt initiation of purchase action and to ensure fair and
healthy competition and to include genuine
manufacturers/stockists/distributors/dealers of the product relevant to the
requirement of Lab/Estt. It is essential that the directory of vendors is
periodically updated by exploring new vendors and by sharing of such
information between Labs/Estts with emphasis on indigenous sources of
supply.

3.1 SOURCE SELECTION: The selection of vendors with potential to

successfully execute supplies against orders placed by Labs/Estts, will be
done on the basis of information obtained through the following sources:

(a) User divisions/groups/sections.

(b) Written suggestions from scientists after proper verification and
market survey.
(c) Central purchase organisations of Government of India, e.g.,
DGS&D/DMR&F.
(d) Industrial directories/trade journals.
(e) Advertisement through renowned media sources.
(f) Inter-Service organisations/Government/scientific or research
institutions/ other DRDO Labs/Estts, etc.
(g) Technical literature circulated by firms.
(h) Responses received against ‘Open Tender Enquiries’.

3.2 REGISTRATION OF VENDORS: The vendors will be registered by

Labs/Estts for different categories of stores, e.g., raw materials, chemicals,
machine tools, instruments, electronics and electrical items, timber,
fabrication jobs and other general stores etc. The credentials of firms
seeking registration will be verified to ascertain their credibility with regard
to financial standing i.e. annual accounts, capacity, reliability, bonafides
(income-tax returns, sales tax No. etc.) and past performance, etc. For
this purpose, specialists from the respective fields will be included in the
Vendor Registration Committee while examining the applications of
vendors seeking registration. The registration committee will be appointed
for one financial year. The constitution of the vendor registration committee
will be as follows:

1. Scientist- F Chairman
2. Scientist- D/E Member
3. Head MMG or Rep Member Secy.

The Chairman can co-opt specialist members if considered necessary.

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The Directors may re-nominate one or all members for the next year. The
Directors may, however use their discretion to appoint a suitable Scientist
as Chairman.

The committee will carry out scrutiny of such applications and offer their
recommendations to the Directors of Labs/Estts for approval of vendors for
registration/removal. The registration will be awarded to the vendors who
are manufacturers, authorised stockists/distributors/ dealers who fulfil
above basic requirements.

3.2.1 Registration will be initiated by issuing a notification through Director

of Advertising and Visual Publicity (DAVP) or by publication in the
Indian Trade Journal or by responding to firm’s advertisements or
through trade fairs and exhibitions or through market surveys.

3.2.2 No formal application for registration is necessary for the firms

already registered with DGS&D/other Inter-Service organisations/
Government deptts/reputed scientific institutions/ NSIC etc. The list
of such firms may be obtained from DGS&D or Central/State
Government deptts/scientific institutions periodically. If a vendor
produces a certificate of registration from any of the above, the
registration committee may consider the registration certificate
produced by the vendor in accordance of para 3.2.7. No formal
application may be insisted upon for registration from firms of repute
enjoying monopolistic stature. For such firms of repute or already
registered firms with other departments/Labs/Estts the screening
committee as defined in Para 3.2 will recommend for registration to
the Director.

3.2.3 The firms seeking registration with the Labs/Estts will have to apply
in the prescribed application form available with respective
Labs/Estts, on payment of a non-refundable nominal fee of Rs 100/-
payable by bank draft drawn in favour of the Director. The specimen
of "Application Form for Registration of Firms" is given at DRDO.MM
01.

3.2.4 For each category of stores, the application forms received for
registration will be screened by the registration committee appointed
by the Director of Lab/Estt as mentioned in Para 3.2.

3.2.5 In case the registration committee desires, the antecedents of the

firm, may be got verified through the police department/ bankers of
the firm as per the proforma for "Verification of antecedents of the
firms" given at DRDO.MM 02.

3.2.6 Capacity verification of the firms seeking registration may be carried

out, wherever considered necessary by the registration committee
based on the data furnished by them in DRDO.MM.01.
Recommendations of the Vendors Registration Committee will be put
up to the Director as per the "Vendor Registration Report" given at
DRDO.MM 03.

3.2.7 The satisfactory performance report of the firms claiming to have

been registered with other Government organisations, may be
obtained from the concerned organisation, to assess their suitability.

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 3.2.8 After examination of the application forms and the reports mentioned
above, the firms found acceptable to the Screening Committee for
registration, will be recommended to the Director for approval.

3.2.9 The firms approved for registration for one or more categories of
stores will be allotted a registration number, which shall remain valid
for a period of five years. The intimation informing firm's registration,
as approved vendor will be sent to them as per form DRDO.MM.04.
On completion of five years, such registration may be renewed
based on the performance evaluation during the intervening period
for a further period of five years.

3.2.10 A register for allotment of registration numbers will be maintained

by Labs/Estts, which will include names of all vendors registered
with them. The list of registered vendors will be sent to DRDO HQrs
(DMM) and the local CDA (R&D) office. This list will be updated from
time to time, preferably on-line, for easy reference and a copy of
updated/amended list will be forwarded to DRDO HQrs (DMM) and
local CDA(R&D) office biennially.

3.3 VENDORS’ EVALUATION: The performance of registered vendors should

be monitored regularly to assess their evaluation. Their rating of
performance will be based on their adherence to delivery schedules,
consistency in quality and competitive costs. The following aspects will,
however, be taken into consideration:

(a) Latest income tax and sales tax clearance

(b) Number of orders placed and executed
(c) Number of orders executed within original delivery schedules
(d) Number of times, part supplies made
(e) Number of times, orders cancelled or supplies rejected
(f) Number of times, items replaced after rejection
(g) Quality of goods supplied
(h) Average delay in delivery period

3.3.1 JSG015:02:1995 provides “Guidelines for Assessment and

Registration of Vendors for Defence” and relevant BIS guidelines for
development of vendor rating system which may be referred to while
evaluating vendors. The JSG can be obtained from Dte of
Standardisation, Ministry of Defence, New Delhi.

3.4 REMOVAL OF REGISTERED VENDORS: Removal of approved suppliers

from the list will be considered on the following grounds:

(a) The performance is rated below par during the evaluation process.
(b) The firm fails or neglects to respond to three consecutive invitations to
tender within the range of products for which it is registered.
(c) The firm fails to execute a contract/order
(d) The firm has no longer the required technical manpower/
equipment/machines.
(e) The firm is declared bankrupt or insolvent.

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 (f) The firm fails to furnish the income tax clearance certificate or any
other document when called for.
(g) The registration of a firm is cancelled under a Government notification
(from list of vendors) by another Government department/organisation.
(h) The integrity of the firm is suspected or it is found indulging in
unethical practices.

3.4.1 BAN and Black Listing: When the misconduct of a firm or its
continued poor performance justifies imposition of ban on business
relation with the firm or untimely its blacklisting, this action should
be taken by the appropriate authority after due consideration of all
factors and circumstances of the case. Ban for a specified period of
time may be imposed by DRDO/procurement agency or the MOD.
For blacklisting of firms Labs/Estt will forward the case with their
recommendations, justification and supporting documents to DMM,
DRDO Hqrs. DMM will forward the case to Dte of Vigilance &
Security for their recommendation and blacklisting will be done with
the approval of Secretary (R&D).

3.5 EXCHANGE OF VENDORS’ DATA: Inter-Lab/Estt exchange of information

on the established vendors with good performance record, will help in a
long way, to minimise delays in locating proper sources of supply and
prompt placement of orders/contracts. As such, Labs/Estts should
circulate lists of registered vendors, among them periodically. The list of
vendors whose performance has not been satisfactory in executing the
orders placed with them or who have shown laxity in providing after-sales
service, will also be circulated to other Labs/Estts with a copy to Dte of
Materials Management, DRDO HQrs.

3.6 REGISTER OF FOREIGN VENDORS: Registration may not be feasible in

respect of foreign firms. Labs/Estts should maintain a register of foreign
vendors dealing in various types of items based on their satisfactory
experience. Details such as type of items, address, telephone/fax number,
etc., may be recorded in the register. A list of such vendors will be updated
regularly and circulated amongst Labs/Estts, with a copy to DRDO HQrs
(DMM).

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 Chapter 4

INITIATION AND APPROVAL OF DEMANDS

4.0 INITIATION OF DEMANDS: Action on demands will be initiated, based on

the budgetary projections made to R&D HQrs for Project/build-
up/maintenance items and for any other unforeseen urgent requirements.
The demands are generally classified in the following categories:

(a) Items against sanctioned projects

(b) Build-up items including setting up of facilities, and
(c) Maintenance items including repairs and servicing of equipment/
machinery.

The demands under all the above categories will be spread out evenly to
ensure uniform flow of expenditure throughout the year.

4.1 ITEMS AGAINST SANCTIONED PROJECTS: Procurement action will be

initiated on major project items, budgeted against the funds catered for in
the project sanction under materials and equipment, transport and
stationery heads. Such project items (costing above Rs 1 lakh), will be
recommended by the Stores Procurement Committee (SPC) of the Lab/Estt,
with due consideration to all aspects of their justification for approval of
procurement by the Director.

4.1.1 For specific projects/programmes where special sanctioning powers

have been delegated, these requirements will be put up to the
respective management boards/project directors for acceptance of
necessity and approval.

4.1.2 Items costing below Rs 1 lakh will be exempted from scrutiny of SPC
and action on their procurement can be initiated directly by the
concerned user/project group.

4.1.3 All demands against projects will be routed through ‘Project Stores
Accounting Cells’ to record commitments of expenditure and confirm
availability of funds within the sanctioned cost and PDC of the
project.

4.2 BUILD-UP ITEMS INCLUDING SETTING UP OF FACILITIES: Procurement

action for major items and setting up of facilities (costing above Rs 1 lakh)
which have been provided for in the budget, will be taken after their
necessity has been scrutinised and recommended by the SPC for approval
by the Directors if they fall under their delegated powers.

4.2.1 Stores demands, budgeted and falling beyond Director’s powers, will
be referred to Directorate of Materials Management, DRDO HQrs by
Planning/Tech-Coord/Materials Management Group of the Lab/Estt
for acceptance of necessity (i.e. EPC approval), along with a
"Questionnaire for Acceptance" as given at DRDO.MM 05. Further
action on procurement of such items will be taken subsequent to
acceptance accorded by DRDO HQrs.

4.2.2 For EPC approval from DRDO HQrs, MMG will forward a copy of the
demand along with duly completed proforma at DRDO.MM 05 and

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 recommendations of Lab/Estt SPC, to Dte. of Materials Management,
DRDO HQrs. After receipt of DRDO HQrs' approval, these demands
will be processed for initiating purchase action.

4.2.3 Items costing below Rs 1 lakh will be exempted from the scrutiny by
SPC and will be put up for approval of the Competent Financial
Authority.

4.3 MAINTENANCE ITEMS INCLUDING REPAIRS AND SERVICING OF

EQUIPMENT/MACHINERY: All requirements of maintenance/repairs/
servicing will be dealt with as per the guidelines given in Para 4.2.
Emergent breakdown requirements will be processed even if not budgeted.

4.4 STORES PROCUREMENT COMMITTEE (SPC): Labs/Estts will constitute

Stores Procurement Committees to scrutinise/recommend the demands for
approval by Director for materials and equipment costing above Rs 1 lakh,
arising from projects (except for major programmes/projects where specific
management boards/committees have been constituted for this purpose),
build-up and maintenance requirements, based on budgeted projections.
The Committee will be constituted on annual basis and will have members
from Budget/Planning Group, Materials Management Group (MMG) as
permanent members besides Chairman and user scientist, and a technical
member from other than the user group of the Lab/Estt, as co-opted
members. The Chairman will be a scientist not below the rank of Scientist
F. In the Labs/Estts where scientists of these levels are not available, the
SPC will be chaired by an appropriate senior officer nominated by the
Director.

4.4.1 The SPC shall include an expert from the relevant field as a
member. Such an expert can be a Sc-E or above from a sister
Lab/Estt or an expert from another Govt. deptt./educational/
research institution, for only build-up/maintenance items costing
above Rs. 10 lakh.

4.4.2 The SPCs will meet periodically and make recommendations not only
reiterating the technical necessity of the items, but also take into
account the following additional aspects since the time of budgeting:

(a) To verify, if the new requirements can be met by upgrading

existing facilities.
(b) To recommend approval and purchase of high-value items
bearing in mind the long lead-time for procurement and full
exploitation of the warranty period.
(c) To examine the requirement of costly items on their anticipated
full time utilisation. Alternatively, SPCs will consider meeting of
such requirements either by time-sharing of the items from
other Labs/Estts or by leasing from industry or other
organisations.
(d) To consider standard indigenous product, with additional
interface as substitute for import when required as a sub-
system or main system development to save foreign exchange.
(e) Evaluation of draft technical specifications put up by the
demanding officers.

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 (f) Justification of the quantity demanded, priority of procurement
and mode of tendering.
(g) To ascertain availability of funds in RE and FE.
(h) To make efforts to bulk purchase common use items, PCs,
spares for other standard equipment/machinery to derive price
discount.
(j) Specify a realistic time for MMG to process the approved
demand till the supply order which normally should not exceed
one year, failing which revalidation of the SPC/EPC approval
would be necessary with reasons recorded on the file.

4.4.3 The members of the SPC representing Materials Management/

Budget & Planning Groups will monitor progress from the stage of
the demand approval till the items are taken on charge and
payments made. They will periodically report progress to the Director
of Lab/Estt.

4.4.4 SPC will consider details put up to them in the demands by the
demanding officers as per "Demand for Local Purchase" placed at
DRDO.MM 06 and endorse their recommendations on the demand in
Part-II.

4.4.5 Dissenting Opinion: The cases of dissenting opinion, if any, will be

referred to the Director of the Lab/Estt. The negative
recommendations of SPC/ dissenting opinion of any of its members
can be overruled by the Director of Lab/Estt up to the limit of his
financial powers for reasons to be recorded in writing by him. For
items beyond his financial powers, such recommendations/
dissenting opinion may be sent to DRDO HQRS (DMM) with
Director's comments thereon, for a final decision.

4.5 SPECIFICATIONS: With the increasing complexity of the projects being

handled by DRDO, the materials and equipment needs have also become
exacting, requiring professional skill in drawing up the specifications. Such
explicit specifications supported by drawings, specifying standard units of
measure accompanying the tender enquiries, will ensure elimination of
ambiguity, minimise apprehension of vendors on the level of risks they are
expected to assume and elucidate precise standards to which the
commodity under purchase will be tested/inspected. This will reduce
chances of inflating their prices.

4.5.1 Unambiguous and detailed specifications help in methodical

evaluation by assigning percentage marks to each individual
attribute and establish a viable techno-commercial link between
performance/quality standards and costs, for fair price assessment/
comparison by TPC/NC of all the offers.

4.5.2 Directors of Labs/Estts will observe adequate caution while working

out detailed specifications of an intended procurement that these are
not tailor made to suit a particular brand of product. Broad coverage
of the functional performance and environmental parameters will be
spelled out in the specifications to allow competition. For this
purpose a computer-based data bank of similar products, along with
broad specifications will be maintained and updated frequently so as
to facilitate fair competition in purchases.

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 4.5.3 Working out of specifications, if there is lack of information or
inadequacy in the Labs/Estts, could be based on:

(a) Drawing the broad performance/environmental parameters from

the product catalogues of reputed manufacturers with a view to
seek detailed technical specifications from different vendors in
response to our enquiries made verbally or official
correspondence or through press notification.
(b) Expert advice from educational institutions/engineering
colleges/IITs and other scientific organisations having
specialised knowledge and expertise.
(c) Assignment of design contracts to suitable professional
agencies/consultants for drawing up of detailed specifications
and evaluation parameters.
(d) BIS/DEF specifications, if applicable and can be quoted
obviating the necessity to work out specifications.

4.5.4 For hiring of services for high -tech items as defined in Para 4.5.3
(b) & (c) above, Directors are empowered to sanction the
consultancy charges up to a maximum of 2 % of the estimated cost
or Rs. five lakh, whichever is lower.

4.5.5 Director’s of Lab/Estt will ensure that there is no waiver/amendment

to Essential parameters after issue of tender enquiry.

4.6 AUTHORITY/LEVELS FOR INITIATION: Demands for indigenous stores

against projects, build-up, maintenance and general use will be initiated on
the proforma at DRDO.MM 06 by scientists of the level given in the
succeeding paragraphs with a proviso that:

(a) Funds are available.

(b) Requirement of proprietary items will be accompanied by a
"Proprietary Article Certificate" (PAC) as per format at DRDO.MM 07
duly countersigned by the Director after recommendations of the SPC.
(c) Demands below Rs 1 lakh will be exempted from scrutiny by SPC.
(Refer Para 4.2.3)
(d) "Demands for Imported Items" will be initiated as per the format at
DRDO.MM 08 for consideration of SPC wherever required.
(e) Draft specifications, wherever applicable, will be enclosed.
(f) The demand will clearly indicate inspection/acceptance procedure, the
mode of transport and requirement of insurance cover where needed
along with other special instructions, if any.
(g) Non-availability endorsement will be made by the MMG for centrally
stocked items except in cases of service or maintenance
contracts/orders.

4.6.1 Demands for items costing up to Rs 1 lakh will be initiated by a Scientist

B or above and countersigned by Head of the Division/ Group. If required,
such demand could also be initiated by TO`B` or TO`C` engaged in
project/material management activities and countersigned by Head of the
Division/Group”.

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 4.6.2 For demands for stores above Rs 1 lakh, the levels for initiation for
putting up to SPC/DRDO HQrs/various committees with delegated
powers under various programmes and projects, will be as under:

(a) Rs 1 lakh to Rs 15 lakh: Initiation by Scientist C and above,

countersigned by project or group head.
(b) Rs 15 lakh to Rs 50 lakh: Initiation by Scientist D and above,
countersigned by project or group head.
(c) Rs 50 lakh and above: Initiation by Scientist E and above and
countersigned by project or group head.

4.6.3 In Lab/Estt where it is not possible to get initiated by the levels

mentioned above, the Director will use his discretion to specifically
assign these responsibilities by authorising other officers of
appropriate level keeping in view that a demand has been initiated
and countersigned by different scientists/officers.

4.6.4 If the need arises, DRTC officers (i.e. T.O. ‘B’ & T.O. ‘C’ having
minimum qualification of B.Sc or diploma in Engineering with 5 years
experience) may also be deployed for Materials Management related
functions at the discretion of the director of Lab/Estt.

4.7 PREPARATION OF DEMANDS: All demands will be prepared in triplicate

in proforma at DRDO.MM 06. Demanding officer will retain one copy. Other
two copies will be handed over to MMG for further action as under:

(a) Up to Rs 1 lakh: For obtaining CFA’s sanction and initiating purchase

action.
(b) Above Rs 1 lakh: For recommendation of SPC.

4.7.1 However, recommendation of SPC for demands approved by project

boards, is not required and purchase action may be initiated by
MMG.

4.8 APPROVAL OF DEMANDS: Directors of Labs/Estts are the competent

authority to approve all demands up to the limit of financial powers vested
in them, based on the recommendations of SPC, where applicable. The
Directors may, however, authorise such of his own powers to the extent
considered necessary to a suitable senior officer for approving these
demands on his behalf to the extent of their financial powers vide
Government of India, MOD letter No.93916/RD-26/(ii)/5242/D(R&D) dated
15.10.85 as amended from time to time.

4.8.1 The authorities specifically so designated will accord approval

of demands for specific programmes/projects.

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 Chapter 5

GENERAL PRINCIPLES OF PURCHASE AND CODE OF ETHICS

5. The authorities vested with the approval and processing of purchases in all
Government departments shall adhere to the time tested procedures and
maintains financial propriety as per the instructions issued from time to
time. The decision for purchase will be based on the recommendations of
an appropriate committee, consisting of a number of specialists, thus
ensuring transparency and objectivity.

5.1 GENERAL PRINCIPLES OF PURCHASE: In purchasing materials for

Government use, the officers/staff will observe adequate vigilance as a
safeguard against infructuous expenditure from public funds and exercise
prudence, as they would normally do in respect of their personal expend-
iture. To ensure this, all expenditure on purchases will only be need-based
and Government funds will not be spent on anticipatory requirements, not
having immediate use. The authorities should invariably refrain from
exercising powers of sanctioning expenditure, which will be directly or
indirectly to their own advantage.

5.1.1 The following further cautions will be observed for purchasing stores:

(a) Bulk purchases will normally fetch quantity discount. This

should, however, not lead to over-stocking resulting in expiry of
shelf life or redundancy due to obsolescence.
(b) Purchase orders will not be split-up to avoid the necessity for
obtaining sanction of the higher authorities.
(c) Open tendering should be adopted to ensure fair competition,
unless it is considered expedient to follow other modes of
tendering due to urgency. Purchases will be made from the
lowest acceptable tenderer. Adequate care would be exercised
to ensure that delivery from the vendor is within the specified
time schedule.

5.1.2 The present policy of the Government stipulates the following order
of preference for all public purchases:

(a) Indigenous items of acceptable quality to boost indigenous

industry.
(b) Items indigenously manufactured with foreign collaboration/
materials.
(c) Imported items available on rupee payment with due exemption
from Custom levies as applicable to DRDO and are cost
effective.
(d) Imported items, if unavoidable, with a view to subsequent
indigenisation wherever cost-effective.

5.1.3 General guidelines for placement of supply order are as follows:

(a) The terms of supply order will be unambiguous with no room for
misconstruction.
(b) Changes in terms and conditions, having financial implications,
will not be allowed after the acceptance of the order.

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 (c) Adequate safeguards will be provided for Government property
entrusted to the vendors for execution of the orders/contracts,
by way of bank guarantee. The option of indemnity bond on
stamped paper of appropriate value may be accepted from
PSUs/Government organisations/universities and educational
institutions.
(d) No supply order involving an uncertain and indefinite liability or
any conditions of an unusual character shall be placed without
the prior consent of the CFA.

5.1.4 Not withstanding the safeguards enumerated above, additional

flexibility/delegation for DRDO is essential for materials
procurement. For execution of the R&D projects, time is the essence
for their successful fructification. Strict adherence to inflexible
procedures leads to avoidable delays and invisible expenditure,
leaving no option for the user services but to import the equipment.

5.1.5 The following specific features are pertinent in respect of DRDO

purchases for projects and programmes:

(a) Any marginal additional expenditure at the prototype

development stage is well worth a sacrifice to complete the
project in time, without slippage of its PDC. The rigid economy
aspects could be taken care of at the time of effecting bulk
purchases required for induction of equipment into the Services.
(b) Due to dilution of purchases through DGS&D/ISMs, the total
purchasing responsibility has been assigned to individual
departments/Labs/Estts. Requirement of professional training
for staff handling purchases has assumed paramount
importance to improve purchasing efficiency.
(c) Stockpiling of critical components will be allowed for important
projects to ensure their uninterrupted availability.

5.1.6 For high technology projects in progress, the materials/components

required are obtainable only from a few monopolistic
manufacturers/vendors of repute. In such cases flexibility will be
allowed to effect purchases on PAC/Limited Tender basis.

5.1.7 The vendors after identification and satisfactory evaluation should

not be changed till successful completion of technical/user trials for
supply of components/sub-systems. Such procurement will,
therefore, be treated as proprietary. It is, however, advisable to work
out reasonableness of cost in such cases.

5.1.8 The negotiating authority should take into account, the initial cost
added to installation and maintenance cost, expenditure on special
environment, effective warranties, spares requirement, etc. while
making the final selection. This concept will generally apply to
procurement of all capital equipment/facilities.

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5.2 CODE OF ETHICS

(a) To consider first the total interest of one’s organisation in all

transactions without impairing the dignity and responsibility to one’s
office.
(b) To buy without prejudice seeking to obtain the maximum ultimate
value for each rupee of expenditure.
(c) To subscribe and work for honesty and truth in buying and selling; to
denounce all forms and manifestations of commercial bribery and to
eschew anti social practices.
(d) To accord prompt and courteous reception as far as conditions will
permit to all that calls up on legitimate business mission.
(e) To respect one’s obligations and those of one’s organisation
consistent with good business practice.

5.3 STANDARDS OF FINANCIAL PROPRIETY : Every officer incurring or

authorizing expenditure from public moneys should be guided by high
standards of financial propriety. Every officer should also enforce financial
order and strict economy and see that all relevant financial rules and
regulations are observed, by his own office and by subordinate disbursing
officers. Among the principles on which emphasis is generally laid are the
following: -

(a) Every officer is expected to exercise the same vigilance in respect of

expenditure incurred from public moneys, as a person of ordinary
prudence would exercise in respect of expenditure of his own
money.

(b) The expenditure should not be prima facie more than the occasion
demands.

(c) No authority should exercise its powers of sanctioning expenditure to

pass an order which will be directly or indirectly to its own
advantage.

Expenditure from public moneys should not be incurred for the

benefit of a particular person or a section of the people, unless –
(i) A claim for the amount could be enforced in a Court of Law, or
(ii) The expenditure is in pursuance of a recognized policy or
custom.

(e) The amount of allowances granted to meet expenditure of a

particular type should be so regulated that the allowances are not on
the whole a source of profit to the recipients.

(f) The responsibility and accountability of every authority delegated

with financial powers to procure any item or service on Government
account is total and indivisible. Government expects that the
authority concerned will have the public interest uppermost in its
mind while making a procurement decision. This responsibility is not
discharged merely by the selection of the cheapest offer but most
conform to the following yardsticks of financial propriety:-

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 (i) Whether the offers have been invited in accordance with
government rules and after following a fair and responsible
procedure in the prevailing circumstances.
(ii) Whether the authority is satisfied that the selected offer will
adequately meet the requirement for which it is being
procured.
(iii) Whether the price on offer is reasonable and consistent with
the quality required.
(iv) Above all, whether the offer being accepted is the most
appropriate one taking all relevant factors into account and in
keeping with the standards of financial propriety.

(g) Wherever called for, the concerned authority must place on record in
precise terms, the considerations which weighed with it while taking the
procurement decision.

5.4 ACCESS TO THE BOOKS OF ACCOUNT S: In case it is found to the

satisfaction of the Buyer that the seller has engaged an Agent or paid
commission or influenced any person to obtain the contract as described in
clauses relating to Agents/Agency Commission and penalty for use of
undue influence, the Seller, on a specific request of the Buyer shall provide
necessary information/inspection of the relevant financial
documents/information.

5.5 INTEGRITY PACT: An “Integrity Pact” would be signed between DRDO and
the bidder for purchases exceeding Rs. 100 crores. This is a binding
agreement between the agency and bidders for specific contracts in which
the agency promises that it will not accept bribes during the procurement
process and bidders promise that they will not offer bribes. Under the IP,
the bidders for specific services or contracts agree with the procurement
agency or office to carry out the procurement in a specified manner. The
essential elements of the IP are as follows:

(a) A Pact (contract) between the Government of India (Ministry of

Defence) (the authority or the “principal”) and those companies
submitting a tender for this specific activity (the “bidder”);

(b) An undertaking by the principal that its officials will not demand or
accept any bribes, gifts, etc. with appropriate disciplinary or criminal
sanctions in case of violation;

(c) A statement by each bidder that it has not paid, and will not pay, any
bribes;

(d) An undertaking by each bidder to disclose all payments made in

connection with the contract in question to anybody (including
agents and other middlemen as well as family members, etc., of
officials); the disclosure would be made either at time of tender
submission or upon demand of the principal, especially when a
suspicion of a violation by that bidder emerges;

(e) The explicit acceptance by each bidder that the no-bribery

commitment and the disclosure obligation as well as the attendant
sanctions remain in force for the winning bidder until the contract
has been fully executed.

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 (f) Undertaking on behalf of a bidding company will be made “ in the
name and on behalf of the company’s chief executive officer.”

(g) The following set of sanctions shall be enforced for any violation by
a bidder of its commitments or undertakings:-

(i) Denial or loss contracts;

(ii) Forfeiture of the bid security and performance bond;
(iii) Liability for damages to the principal and the competing
bidders; and
(iv) Debarment of the violator by the principal for an appropriate
period of time.

(h) Bidders are also advised to have a company code of conduct (clearly
rejecting the use of bribes and other unethical behavior and
compliance program for the implementation of the code of conduct
through out the company.

5.5.1 While the “Access to the Books of Accounts” clause would be applicable in
all cases, signing of “Integrity Pact” would be mandatory in respect of
purchases above Rs. 100 crores.

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 Chapter 6

PROCUREMENT OF MATERIALS: CASH PURCHASE

6. a) Cash purchase will normally be resorted to up to Rs. 10,000/-per

item in respect of the following cases:

(i) For petty small value items.

(ii) For procurement of unanticipated, emergent and shut-down
purchases required to be made at a short notice in the event of
breakdown or crisis.
(iii) To meet urgent requirements of parts/components for trials of
major equipment and systems at outstation.

CFA will ensure that splitting of demands is avoided.

b) In the following types of cases, even though the value does not
exceed Rs 10,000/- (Rs ten thousand) regular purchase orders may
also be placed:

(i) Foreign purchase,

(ii) Where the sale procedure of a particular supplier does not
provide for cash sale, and
(iii) Where the nature of transaction makes it necessary to issue a
regular purchase order.

c) Relaxation in the normal cash purchase procedure will be allowed for

Labs/Estts located in remote/snowbound areas such as FRL, DRL,
DARL, DFRL, SASE, ITM etc, for purchasing perishable items or for
procurements involving high fluctuations in prices. The monetary
limit for such relaxation will be Rs 20,000/- only.

6.1 APPROVAL AND PROCESSING OF CASH PURCHASE: The Directors may

delegate cash purchase powers vested in them to various project leaders
or group heads, to meet urgent requirements. All cash purchases made
under such delegated powers, will be compiled for every week/month and a
report, as given in a format at DRDO.MM 09 will be submitted to CFA
through Head (MMG) by seventh of the following month. Heads of divisions
should ensure that all bought items have been brought on Charge (BOC).

6.1.1 The project leaders/group heads will be authorised to approve cash

purchases up to the limit of cash purchase powers vested in the
Directors. For this purpose, a team comprising minimum two
officials, including one officer nominated by the officer competent to
approve cash purchase, will be deputed to make cash purchases.
The cash purchases will be made on the verbal enquiries by this
team on the spot. Preference should be given to authorised
dealers/agencies.

6.1.2 This team will certify in respect of each item that the purchase made
by them was the cheapest or alternatively record reasons for the
purchase at higher cost.

6.1.3 Cash Purchase by Trial Team Leaders at Outstation: For

outstation trials, the trial team leaders will be specifically authorised

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 by the Directors for hiring of vehicles and making on-the-spot urgent
cash purchases for each individual item up to Rs 10,000/-. These
purchases will be effected through verbal enquiries by a group of two
persons, from the local market. The trial team leader will record a
certificate as per Para 6.1.2. For this purpose, the trial team leader
will be authorised to carry a lump sum amount as required for each
trial. The settlement of such advances will be completed within 15
days after completion of the trials.

Note: For definition of trial, see Para 21.1 of the Materials

Management Policy (1996).

6.1.4 When cash purchase from outstation is necessitated to meet

emergency/special requirements, due to non-availability at the local
station, approval of the Director will be necessary to make such
purchases within the authorised financial limits.

6.2 DRAWL AND SETTLEMENT OF ADVANCES: Project leaders/group heads

will consolidate their requirements against demands for which cash
purchase has to be effected on a particular date and forward the same to
the Accounts Officer, one day in advance. A copy of each approved "Cash
Purchase Demand" as per proforma at DRDO.MM 10 will be sent to the
Accounts Officer for payment of cash.

6.2.1 On the intended day of cash purchase, the designated officer will
draw cash advance from the Accounts Officer to effect the cash
purchases.

6.2.2 Cash purchases will be completed within one day from the date of
drawl of cash.

6.2.3 The printed Cash Memo/Receipt will be obtained in duplicate, clearly

indicating description of stores, unit of accounting, prices and taxes
charged.

6.2.4 Before entry of the cash purchase items into the Lab/Estt, these will
be entered into the register maintained at the gate security office,
which will be authenticated by the security staff on duty, on the
reverse of the Cash Memo/Receipt.

6.2.5 After completion of the cash purchase, prompt action will be taken
for settlement of advance. One copy of each Cash Memo/Receipt will
be handed over to the Accounts Officer/Advance Paying Officer
along with the consolidated statement of advance drawn and the
amount actually spent on the cash purchase. The relevant proformae
to be used up to the final settlement are given in DRDO.MM 10 (on
reverse). Balance amount will be refunded in full settlement of
advance within a day after completion of the cash purchase.
However, for Debit Voucher (DV) settlement, user must give receipt
voucher within ten days. The Labs/Estts may allow the divisions to
institute simplified accounting procedure by maintaining expendable
registers to record receipts and expenses, to meet the audit
requirement and for preparation of a list of cash purchase items as
per Para 6.1 on DRDO.MM 09.

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 6.2.6 One copy of the Cash Memo/Receipt will be sent to MMG for
centralised accounting of cash purchase items.

6.3 SPECIAL DISPENSATION FOR REMOTELY LOCATED LABS/ESTTS: The

day-to-day requirements of perishables and other commodities for food and
agricultural laboratories are unique in comparison with the role and needs
of other DRDO Labs/Estts. Some of these Labs are located in snowbound
and remote areas, which are communication-wise, industrially and
commercially under developed. These laboratories, besides their normal
activities, are called upon to provide support to the Services and local
population in disaster management, provide emergency Compo-pack ration
and processed food in exceptional circumstances to the troops in forward
areas/difficult terrain and to expeditions undertaken at national level. In all
these cases, timely procurement of essential commodities is of paramount
importance. Directors/Officers-in-charge of these laboratories will,
therefore, be authorised to evolve their own prudent methodology
consistent with economy and prevailing local conditions/ trade practices for
procurement of daily/seasonal requirements either by concluding annual
rate contracts as resorted to by ASC (Supplies) or purchase ‘on as
required basis’ from their respective dependent markets, viz,
Delhi/Guwahati/Calcutta/Chandigarh/Mysore, etc. The Labs/Estts may
approach Dte of BFA, DRDO HQrs for augmentation of their imprest/cash
assignment, if considered necessary.

6.4 PURCHASE OF DRUGS/MEDICINES: The medicines in the Labs/Estts may

be procured to meet the immediate day-to-day requirements of MI
Rooms/Dispensaries located within the premises of the Labs/Estts. The
normal source of supply for the medicines is AFMSDs or Govt. medical
store depots. The Labs/Estts will place their quarterly demands on the
nearest AFMSD or Govt. medical store depot to ensure regular supply.

6.4.1 In the event of non-materialisation of normal supply through the

AFMSD/ Govt. medical store depots or to meet immediate
requirements, the Labs/Estts may resort to cash purchase of the
medicines within their delegated powers. Such purchases should be
effected from the authorised wholesale distributors of the
manufacturers or through super bazars/co-op stores/ stockists, etc.

6.4.2. In case the purchase of medicines exceeds the limit of cash

purchase powers vested in the Directors, Labs/Estts may procure the
same as per the normal local purchase procedure outlined in
Chapter 7.

6.4.3. It will be ensured, at the time of taking delivery from the vendors,
that the medicines produced in the latest available batch with
maximum shelf life only are accepted.

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 Chapter 7

PROCUREMENT OF MATERIALS: LOCAL PURCHASE

7.1 DETERMINATION OF THE MODE OF PURCHASE: On receipt of the stores

demand in the MMG, the officer concerned, after satisfying that the
demand is complete in all respects, shall obtain approval of the competent
authority. The mode of purchase will be decided with regard to all the
relevant factors, such as nature of the demand, i.e., whether the
stores/equipment are general purpose or specialised item(s); likely sources
of supply, expected competition, known sources of supply, delivery
schedule for the supplies, urgency, etc. Purchases will be processed
based on recognised modes of purchase in accordance with well-
established guidelines by one of the following methods of calling tenders:

i. Open tenders
ii. Global tenders
iii. Limited tenders
iv. Single tender
v. Single tender with PAC

7.2 COMMON FACTORS FOR ALL TENDERS: The common factors required to
be indicated for invitations of all types of tenders are:

(a) Proper nomenclature with clear specifications, user's requirements,

evaluation, testing and acceptance criteria including inspection
process chart and test schedules (as already evolved at the time of
initiation of demand - Para 4.5)
(b) Clauses for security deposit and earnest money deposit (EMD)
(c) Delivery schedule
(d) Liquidated damages clause
(e) Payment terms
(f) Insurance, if required
(g) Inspection agency, as applicable
(h) Mode of dispatch with place of delivery
(j) Validity period of the quotation
(k) Requirement of installation, commissioning and training, if applicable.

7.2.1 Other General Guidelines

(i) Due date and time of submission of quotations, due date and
time of opening of quotations will be clearly mentioned in tender
enquiries. Time gap between submission of quotations and
opening of quotations will be kept within 24 hours. However, in
respect of two bid quotations, only techno-commercial bid will
be opened on the date of opening.
(ii) The day selected for opening the tenders should be a working
day. Mondays or days followed by a series of holidays should
be avoided, as far as possible.

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 (iii) Time allowed to the tenderers to submit quotations should be
reasonable. Normally, three to six weeks will be allowed; time
likely to be taken to secure and study specifications/drawings
by the firm will be taken into account, wherever applicable.
(iv) Realistic validity period of the quotations will be specified in the
tender inquiry. This period will be fixed keeping in view the
nature of stores and post-tender formalities. A bid shall remain
valid for 90 days in case of single bid tender enquiry and 120
days in case of two-bid system, unless otherwise specified,
from the date of opening of tender.
(v) Tender enquiries will be signed for and on behalf of ‘President
of India’.
(vi) Suitable clauses regarding trial/guarantee run, warranty period,
after sale service and availability of spare parts, wherever
applicable, will be included in the tender inquiry.
(vii) Drawings/specifications will be supplied to the tenderers on
payment of reasonable charges along with tender documents,
wherever considered appropriate.
(viii) All correspondence with vendors regarding calling of tenders
and supply order, etc., may be by an officer from MMG duly
authorised by Director.
(ix) Expression of Interest (EOI): When the estimated cost of
stores/works/service is above Rupees 25 lakh, if desired, an
enquiry for seeking ‘Expression of Interest’ from prospective
bidder/service provider may be published in at least one
national daily and the website of DRDO. The website address
should also be given in the advertisement. Enquiry for seeking
Expression of Interest should include in brief, the broad scope
of work or service, inputs to be provided by the Lab/Estt,
eligibility and the pre-qualification criteria to be met by the
prospective supplier/service provider and their past experience
in similar work or service. The prospective supplier/service
provider may also be asked to send their comments on the
objectives and scope of the work or service projected in the
enquiry. Adequate time should be allowed for getting responses
from interested prospective suppliers/service providers.

7.3 MODES OF TENDERS: In general, open/global tender should be called for

to generate as much competition as possible. However, if the situation so
warrants, other modes of tendering may also be used in accordance with
the prescribed procedure. Brief description of the modes of tendering and
likely situations where they may be used is given in the succeeding Paras
7.4 to 7.8.

7.4 OPEN TENDERS: All purchases should generally be made by open tender.

7.4.1 This system will essentially be followed for items where the limited
tendering, irrespective of its estimated value, has not resulted in
creation of expected competition and getting the best offer.

7.4.2 Open tender system involves wide publicity through advertising

media (press, trade journals, etc.) to ensure extensive competition.
Open tender notifications will also be sent to Director General of

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 Commercial Intelligence and Statistics, Calcutta for publication in
their weekly issue of the Indian Trade Journal and to the DAVP, New
Delhi for publication in leading newspapers. Directors may issue
advertisements directly inviting open tender offers through the
leading newspapers, if considered expedient after recording reasons
for the same on the file.

7.4.3 Simultaneously, attention of renowned prospective suppliers may

also be drawn to the advertised tender notice to enable them to offer
the quotations after buying the tender documents from the
Labs/Estts concerned.

7.4.4 Bidders not registered with any Lab/Estt or any other Government
department will be asked to apply for such registration. This
requirement, however, may not be insisted upon from the firms of
repute and Labs/Estts will enlist such firms themselves in the
registers as per Para 3.2.2.

7.4.5 The tender documents will be sold at the following rates, depending
upon the estimated value of the stores. Tender documents may be
supplied free to registered vendors only. Tender documents are not
transferable.

Estimated value Rate

Up to Rs 50 lakh Rs 100/-

Above Rs 50 lakh Rs 500/-

7.5 GLOBAL TENDERS: Global tendering is to be resorted to for items of

foreign origin, where competition from more than one source from different
countries is envisaged. Concurrent to the publication of tenders in
newspapers/journals, as applicable to open tender system, adequate
copies of the global tender documents will be endorsed to the respective
Indian Embassies and High Commissions, to seek offers through their
liaison. The payment of the cost of tender documents will not be insisted
upon and left to the discretion of the respective Embassies/High
Commissions abroad.

7.5.1 In the event of a single or two responses against open/global

tenders, the TPC/NC can recommend the purchase, considering the
merits of the case, dispensing with the need for retendering. Such
cases of single response will not be treated as Single Tenders.

7.6 LIMITED TENDERS: This mode of tendering may be chosen for the
following cases:

(a) When the sources of supply are definitely known and are limited.
(b) When it is not in the public interest to call for open tenders due to
reasons of security or when superior authorities have issued specific
instructions in this regard.
(c) When Government policies designate specific agencies.
(d) When open tender system adopted during previous one year has
established sufficient and assured sources of supply at competitive
rates.

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 (e) When the requirement of stores is urgent and the desired delivery
schedule cannot be met if open tenders are invited, the indenting
officer must place on record, the nature of the urgency and why the
demand could not be anticipated earlier. Urgency of such cases will
be specifically monitored till the placement of order.

7.6.1 Limited tender enquiries will be issued to vendors registered with

R&D Labs/Estts, DGS&D, NSIC, other Government departments and
to the firms of national repute who will be registered before their bid
is considered as per Para 3.2.2. Such tenders may also be invited
from the Government designated agencies. While inviting limited
tender enquiries, due care will be observed in selecting vendors,
especially in the case of traders who are not the actual
manufacturers/authorised agent, to ensure better after sale service.

7.6.2 For imported items, help of Indian Embassies/High Commissions may

be sought to locate sources of supply, if feasible.

7.6.3 The limited tender enquiries will be floated to all registered firms
with a minimum of seven such firms for the concerned item(s). In a
case where the number of registered firms is less than seven, these
enquiries will be issued to all known firms dealing with the stores
and efforts made in this regard will be recorded on the file.

7.6.4 Quotations received from at least three firms against limited tender
enquiries are mandatory to process the purchase. In the event of
response from less than three firms, action in accordance with
succeeding Paras 7.6.5 & 7.6.6 will be taken.

7.6.5 In case only two valid and acceptable quotations are received,
retendering is required if the rates quoted are higher than our
estimates/LPR. Retendering is not required if the rates quoted are
within reasonable limits as compared to our estimates/LPR. In
exceptional cases where retendering is not considered fruitful inspite
of the higher rates quoted, a valid justification is to be recorded by
the user and approved by the Director. TPC/NC may consider such
purchase.

7.6.6 In case only one valid and acceptable quotation is received after re-
tendering, mode of tender should be changed to single tender
without PAC and appropriate approval of CFA as per delegated
powers is obtained before negotiations.

7.6.7 Unsolicited offers will not be considered. When an addressed

manufacturer refers the tender inquiry to his authorised sales outlet
or its branch office for dealing on their behalf, under intimation to
Lab/Estt, such response/quotation will not be deemed an unsolicited
offer.

7.7 SINGLE TENDER: This system will be adopted in respect of the following
cases, with the approval of CFA as per delegated powers:

(a) Non-proprietary items, when only single response is available, in spite

of limited tendering on more than one occasion.

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 (b) For items to be purchased from a source specified by Government or
by the user (duly approved by the CFA).

7.8 SINGLE TENDER WITH PAC: This system will be adopted in respect of
following cases on certification by the Director of Lab/Estt that no other
make/brand can be used.

(a) Proprietary articles which are monopoly product of a single

manufacturer. If possible, a certificate in this regard may be obtained
from the concerned firm, before Director signs the PAC.
(b) Spare parts, attachments, accessories, etc for existing equipment.

7.9 SELECTION OF TYPE OF TENDERING: Directors may decide any mode of

tendering within their delegated powers to be adopted for each purchase
on the basis of the technical complexity of the item and known sources of
supply etc. as elaborated below.

7.9.1 Dir of Lab/Estt is the competent authority to decide on the mode of

tendering, i.e. Global/Open, Limited, Single or PAC within the overall
cost of the project for the purchase of materials as per the
delegation of financial powers in vogue.

7.9.2 In cases of items other than projects, beyond Director's powers,

Director's recommendation should be sent along with EPC approval
to DRDO HQRS (DMM) along with list of vendors being
recommended for approval in case mode of tendering is other than
open/global.

7.10 EARNEST MONEY DEPOSIT (EMD): All tenderers other than those
registered with DGS&D/any DRDO Lab or Estt/any other Government
Deptt, offering their quotations in response to open tender enquiries, will
be asked to remit EMD, an amount equivalent to 2 per cent of the
estimated value subject to a maximum of rupees two lakh along with their
bids, by way of a bank draft drawn in favour of the Director of the Lab/Estt.
Organisations such as KVIC, Kendriya Bhandar/NSIC will be treated as
registered vendors. In terms of Para 7.6.1, limited tender enquiries are to
be issued to registered vendors only, who are exempted from remitting
EMD. Requirement of EMD prevents non-serious vendors from making
infructuous offers. EMD will be refunded in full to the unsuccessful bidders
after finalisation of the supply order. In case of successful bidder, this
amount will be refunded after submission of the security deposit.

7.10.1 Forfeiture of EMD: EMD will be forfeited, if the tenderer withdraws

or amends or derogates from the tender in any respect within the
period of validity of his tender. If the successful tenderer fails to
furnish the required "Security Deposit" as defined in Para 7.11, EMD
furnished will be forfeited.

7.10.2 In case of 2 bid system; Earnest Money Deposit (EMD) will be

enclosed with the price bid, which will be opened during the
TPC/NC. The tenderers will certify in the Techno Commercial bid
that EMD amount as applicable has been enclosed in the price bid
without disclosing the amount. However, if Earnest Money Deposit
is not found enclosed with the price bid when opened by TPC/NC,

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 such offers would not be considered by TPC/NC and would be
treated as technically rejected.

7.11 SECURITY DEPOSIT: Directors of Labs/Estts will ask the qualified vendors
to deposit the ‘Security’ equivalent to an amount, not exceeding 10 per
cent of the value before release of the supply order. Security deposit is
intended to safeguard the Govt. interest and to ensure successful
execution of the supply order/contract. This deposit will be made in favour
of CDA(R&D) Account and will not be held in the Public Fund Account of
the Lab/Estt. However, this deposit can be accepted by way of a bank
guarantee at the discretion of the Director. This requirement may not be
insisted upon for PSUs and Government Deptts.

7.11.1 EMD and Security Deposit may not be insisted upon from foreign
vendors, except for high value long-gestation orders.

7.11.2 (a) For orders costing less than Rs. 1 lakh; no security deposit is
required.

(b) CFA is authorized to waive off security deposit from small

vendors for orders costing between Rs. 1 to 5 lakh after
recording the reasons for such waiver in writing as per para
7.11.3.

(c) For orders valuing greater than Rs. 5 lakh, CFA is authorized
to waive off the requirement of security deposit based on the
recommendation of TPC/NC as per para 7.11.3.

7.11.3 TPC/NC and CFA should take into account the past performance of
the vendor in terms of timely delivery, quality of supply and also the
fact whether the vendor is registered with the Lab/Estt while
recommending waiver of security deposit or approving such waivers
respectively.

7.12 INVITATION OF TENDERS/QUOTATIONS: Tenders/quotations having

techno-commercial and price bids in a single envelope are termed as
single/combined bid and tenders/quotations having techno-commercial and
price bids in separate envelopes is termed as two bids. Tender/quotations
may be invited in a single bid/ two bid depending upon the technical
complexity of the item. Single bid system may be used for general use
items/raw materials, where specifications are well established (BIS, DEF,
etc.) and technical clarifications are not required. Bids for technically
complex items, which need a thorough technical evaluation, should be
called for, in two separate envelopes, i.e., techno-commercial and price
bids. However, cases up to Rs. five lakh may be invited in a
combined/single bid as no TPC is required and procurement can be
finalised by CST and CFA approval.

A specimen proforma for ‘Invitation of Tender/Quotation’ is given at

DRDO.MM 11 (for other than open tender cases). Specimen of tender
document (for open tender cases) is given at DRDO.MM 12.

7.13 RECEIPT OF TENDERS: A tender box, locked and sealed, will be placed at
the security gate or any other secured convenient place in the Lab/Estt to

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 facilitate uninhibited access to the tenderers to drop their quotations. This
box will be removed from the place or made inaccessible to the vendors at
the time of closing as specified in the tender inquiry. The key of the tender
box will be kept in the personal custody of a responsible officer. Quotations
received through the couriers/by post will be put immediately into the box
without opening. Price bids received from indigenous vendors by
telegram/telex/fax/e-mail, except in cases of PAC/Single Tender will not be
accepted. However, for imported items, the quotations received from
foreign vendors by telegram/telex/fax/e-mail may be considered if the same
are received before expiry of the prescribed date and time. Price bids
received by fax in Director's office may be kept in his personal custody and
placed before TPC/NC.

7.13.1 Extending of Date and Time for Opening of Tenders: When a

decision for postponement of the date of opening of a tender is
taken either to meet the requirement of the Lab/Estt or at the
request of vendors, it will be communicated to all the firms
addressed originally in case of limited tenders and all the firms who
have purchased tender documents in case of open tenders. Such
communication will be issued well in advance of the date of opening
of tenders originally stipulated.

7.13.2 Late/Delayed Tenders: All tenders or modifications thereto

received beyond the specified time for opening and those received
after the specified time of receipt, but before that for opening, shall
be marked as ‘Late’ and ‘Delayed’ respectively and will not be
considered.

7.13.3 Scrapping of Tenders: Scrapping of tenders will be resorted to in

the following cases with the approval of the Director:
(a) Change in basic specifications governing supplies after opening
of tenders.
(b) Non-receipt of offers as per specifications laid down.
(c) Sudden downward market trend.
(d) Prices quoted being very high/unreasonable.
(e) Large/manifold variation in tendered prices.

7.14 OPENING OF TENDERS/BIDS AND EVALUATION: Following procedure

will be followed for opening of tenders/bids and their evaluation.

7.14.1 a) Tender Opening Committee (TOC): The Directors of Labs/Estts

will appoint a Tender Opening Committee for opening the tenders
on the date and time specified. The Tender Opening Committee
may comprise representatives from MMG, vigilance officer/security
officer and duty officer of the day. Any two of the committee
members may be authorised to open the tenders.

b) All quotations received and opened will be entered in the tender

register indicating the names of the firms, quotation reference
number, file number and other pertinent details. The serial number
allotted in the register will be marked on the respective
tenders/quotations. Overwriting/crossed-outs etc in the tenders will
be identified and initialed by at least two members of the TOC.
These members will initial pages of tenders and write their names
below their initials.

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 7.14.2a) Opening of Tenders/Quotations: The bids for items costing up to
Rs. 5 lakh, for which no TPC/NC is required, will be opened by TOC
and MMG will prepare CST as per Para 7.14.5 and refer to the
Officer-in-Charge of the user division for recommendation of the
vendor on whom the order should be placed. While recommending
the user should keep in view the CVC guidelines of considering L1
only. The CST will be submitted to CFA for approval.

b) Tenders for items above Rs. 5 lakh coming in a single bid, in which
no technical evaluation is required, will be opened by the TPC/NC.
Negotiations, if required, will only be carried out with L1.

c) In case of two-bid quotations, TOC will open only the techno-

commercial bids and hand over to a Technical Evaluation Committee
(TEC) formed by the Director as per Para 7.14.3 for techno-
commercial evaluation, while price bids will be opened as per Para
7.14.4 after TEC report is finalized. In case of two bids, vendors who
fail to submit in two bids will not be considered.

d) The desiring vendors or their authorised reps may be allowed to be

present while opening of tenders/bids.

7.14.3 a) Evaluation of Techno-commercial Bids: The need for carrying out

a thorough technical evaluation of offers is a very important step in
purchasing to ensure processing of only technically acceptable
offers. Based on the details furnished by the firms in their techno-
commercial offers, a comparative evaluation will be carried out by a
Technical Evaluation Committee (TEC) appointed by the Director.
This Committee will comprise of technical expert(s) from the Lab/Estt
and a representative each from MMG and the user group. The
Directors may at their discretion include a technical expert (SC-D or
above) from sister Lab/Estt or an outside expert from other Govt.
Deptts./Academic Institutions, in the TEC to derive technical
advantage based on their expert opinion. In cases where techno-
commercial evaluation includes financial/commercial issues, a rep
from IF(R&D)/ CDA(R&D) shall be co-opted.

b) TEC may also bring about the commercial terms such as payment
terms, taxes, duties etc. and uniformity within the framework of Govt.
policy. All technically acceptable vendors may be given the uniform
commercial terms and allowed to revise their price bid, if necessary.
If inspite of the efforts made by the TEC, variations persist in
commercial terms, this will not form the sole basis for rejection of
technically acceptable offers. In such cases TPC/NC will normalise
techno-commercial terms before opening price bids.

c) TEC will shortlist the offers to be considered for negotiations by the

price negotiating committee only after bringing technical uniformity
on the basis of standardised specifications/technical parameters and
prepare their recommendations. For the purpose of proper
assessment/evaluation, the TEC will also prepare a techno-
commercial CST as per format at DRDO.MM 13 bringing out the
comparison between the specifications/other terms asked for and
offered by vendors. Reasons for rejection of any offers will be

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 recorded clearly in the recommendations. TEC recommendations will
be put up to TPC/NC for consideration.

d) There should be at least three technically acceptable offers with a

rating allotted by TEC. In case the technically acceptable offers are
less than three, further action will be taken in accordance with Paras
7.5.1, 7.6.5 and 7.6.6.

e) Specifications will not be revised after TEC report is finalised and

price bids are opened during TPC/NC meeting after fresh inputs are
received. In such cases scrapping of tenders may be resorted to with
the approval of TPC/NC.

7.14.4 Opening of Price Bids: Price bids for two bid quotations will only be
opened after TEC report is finalised and approved by the Director.
Price bids will be opened by TPC/NC. Negotiations if required will
only be carried out with L1.

7.14.5 Preparation of Commercial CST: The CST will be as per the format
given at DRDO.MM 14. The CST will indicate all details of offers,
i.e., nomenclature, price, sales tax, duties, insurance, packing and
forwarding charges, etc., as given in the quotations. Detailed
specifications and the TEC report along with warranty stipulations,
maintenance support, availability of spares wherever applicable, will
be annexed to the price bid CST. For fair comparison with a view to
ascertain the real cost of procurement, details as given in the
quotations such as delivery ex-godown or FOR destination,
transportation, inspection costs etc will be reflected in the CST. Last
purchase price, wherever available, will also be indicated in the
CST, if similar item was purchased earlier. The CST will be signed
by the member secretary/rep MMG.

7.15 CONSTITUTION OF TENDER PURCHASE COMMITTEE/NEGOTIATION

COMMITTEE (TPC/NC): The constitution of TPCs/NCs will be based on the
concept of “Standing TPCs/NCs” for all purchases, including proprietary
items and those from foreign sources up to tender value of Rs 1.00 Cr.
This will ensure uniformity and obviate delays in handling purchases and
allied issues. For procurement above Rs. 1.00 Cr , TPC/NC will be
constituted on a case-to-case basis by DMM, DRDO HQrs. The standing
TPCs/NCs will be constituted for specified duration of one year according
to financial limits given in (a) and (b) below:

(a) For Tenders above Rs 5 lakh and up to Rs 50 lakh: These

TPCs/NCs will be constituted by the Director of Lab/Estt by
nominating officers of the following levels:

(i) Scientist F/equivalent or above Chairman

(ii) Specialist technical officer from a sister Member
Lab/Estt not below Scientist D
(iii) Local CDA (R&D) rep Member
(iv) An officer from the user group Member
(v) Head (MMG) of Lab/Estt or his rep Member Secy

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 In the Lab/Estt where an officer of Scientist ‘F’ levels is not available,
the senior-most officer next to the Director may be nominated to
preside over the TPC/NC. The Chairman may co-opt any other
officer/specialist from the Lab/Estt or any other organisation, at his
discretion, for this Committee.

(b) For Tenders above Rs 50 lakh and up to Rs 1 Crore: These

TPCs/NCs will be constituted by the Director of Lab/Estt and will have
the following composition:

(i) Director of Lab/Estt or Sc ‘G’/equivalent Chairman

(ii) Local CDA (R&D) rep Member
(iii) Specialist Technical officer from a sister Member
Lab/Estt not below Sc ‘E’/equivalent
(iv) An officer of user group (Sc ‘D’ and above) Member
(v) Head MMG of Lab/Estt or his rep Member Secy.

The Chairman may co-opt any other officer/specialist from the

Lab/Estt or any other organisation at his discretion for this committee.
In case of Labs/Estt located in remote areas such as FRL, DRL,
DARL, DFRL, SASE, ITM and Single Lab/Estt in the whole station
such as NMRL, NPOL and NSTL, for constituting the TPC/NC a
specialist technical office of suitable rank may be taken as a member
from any Govt organization / Academic Institutions, if not available
from DRDO Lab/Estt.

(c) For Tenders above Rs 1 Crore and upto Rs 3 Crore: Dte of MM,
DRDO HQrs, will constitute these TPCs/NCs for individual cases by
nominating officers of the following levels:
(i) The Director of the Lab/Estt or an officer
of Scientist G/equivalent Chairman
(ii) DFA(R&D)/ Director (Fin/R&D) or his rep Member
(iii) Technical Director (DRDO HQrs) or his rep. Member
(iv) Director, ECS (DRDO HQrs) or his rep Member
(For computer items only)
(v) Director, DMM (DRDO HQrs) or his rep. Member
(vi) Head of the user group or next senior most
Officer Member
(vii) Head MMG of Lab/Estt or his rep Member Secy.

The Chairman may co-opt any other officer/specialist from the

Lab/Estt or any other organisation, at his discretion, for this
Committee.

(d) For Tenders above Rs 3 crore: These TPCs/NCs will be constituted

by Dte of MM, DRDO HQrs for individual cases and will have the
following composition:

(i) CCR&D or Director of Lab/Estt Chairman

(with approval of CCR&D)
(ii) Addl FA (R&D) or his rep Member

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 (iii) Director of indenting Lab/Estt or his rep Member
(iv) Technical Director at DRDO HQrs or his rep Member
(v) Director MM (DRDO HQrs) or his rep Member
(vi) Director, ECS (DRDO HQrs) or his rep Member
(For computer items only)
(vii) Head (MMG) of Lab/Estt or his rep Member Secy.

The Chairman may co-opt any other officer/specialist from DRDO

HQrs/Labs/Estts or any other organisation, at his discretion, for this
Committee.

7.15.1 The estimated value will be the criteria for deciding the level of
TPC/NC. In case the actual value exceeds more than 10% of the
limit of the TPC/NC, concurrence of higher TPC/NC will be required.

7.15.2 The timetable for scheduling of TPCs/NCs will be evenly spread

throughout the year to ensure uniform annual expenditure.

7.15.3 The evaluation of techno-commercial bids will be made by TECs

specifically formed and approved by Director of Lab/Estt for each
item. The TEC recommendations will be put up to TPCs/NCs for
consideration (Para 7.14.3 c refers)

7.15.4 Wherever the response from vendors is considered adequate,

prices/other commercial terms are found reasonable and price
negotiations with vendors is not considered necessary, option of
‘conducting of TPC by circulation’ along with the file containing all
relevant papers including TEC report, may be adopted. This
methodology may also be adopted for FE cases where negotiations
with foreign vendors are not feasible.

7.15.5 The option to constitute TPCs/NCs, for special items will however,
remain with DRDO HQrs (DMM).

7.15.6 Chairman and other members of TEC and TPC should be different
as far as possible except for user member(s).

7.16 CONDUCTING OF TPCs/NCs: The Directors of Labs/Estts will appoint

“Standing TPCs/NCs” for levels mentioned in Para 7.15 (a) & (b) at the
beginning of the financial year. Calendar for scheduling of all these
TPCs/NCs will be drawn up by the concerned Chairman in consultation with
sister Lab/Estt/Local CDA (R&D).

7.16.1 Labs/Estts will forward their proposals to DRDO HQrs (DMM) for
constitution of the TPCs/NCs for the tender value above Rs 1
crores. Labs/Estts shall ensure for validity of quotation, EPC
approval, Availability of Funds before conducting TPC/NC meeting.
The proposal will contain approved demand, techno-commercial
report of TEC and TPC/NC Information Proforma as given at DRDO.
MM15. The date and venue for scheduling of these TPCs/NCs will
be decided by the Chairman in consultation with IF(R&D)/DMM.

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 7.16.2 The member secretary will issue notice, indicating date/time and
venue for scheduling of the meeting. He will compile agenda
papers duly supported by technical brief and justification furnished
by the user groups in support of the requirements. The agenda
papers along with approved demand, techno-commercial report of
TEC and other briefing papers, if any, including TPC/NC Information
Proforma will be sent to all members so as to reach them at least 10
days in advance.

7.16.3 Where negotiations are contemplated, concurrently the respective

vendor(s) will be informed so as to enable them to be present on
the day of the meeting.

7.17 GUIDELINES FOR NEGOTIATIONS: Before scheduling negotiations, it

may be advisable to work out estimated reasonable rate, based on the
material and labour content of the item to assess reasonableness of the
prices quoted by the vendors. While fixing reasonable rate, the advice of
IF(R&D)/CDA(R&D) representative and an outside expert/consultant may
be sought, if considered necessary.

7.17.1 In case of tenders where there is adequate competition and

prices quoted are considered reasonable, with reference to
estimate/Last Purchase Price (LPP), the option of “conduction of
TPC” by circulation may also be considered.

7.17.2(a) When negotiations are considered necessary, out of all firms

whose offers fully meet the techno-commercial requirements as
per the technical evaluation, only the firm whose price-bid is the
lowest (L1) will be called for negotiations by TPC/NC.

(b) The purchase preference for central public sector enterprise will
be allowed, as per the current policy of GOI if the price quoted by
them is comparable with L1. However, the Labs/Estts are
cautioned not to use such preference as a shield or a conduit for
getting costly inputs or for improper purchases, as per the
guidelines issued by the Central Vigilance Commission (CVC).

(d) If L1 does not have the capacity to supply within the delivery
period as per tender enquiry, after loading L1 fully as per its
capacity and past delivery, order can be placed on L2, L3………
for the balance quantity at L1’s rate.

(e) When it’s not possible to obtain L1’s rate and there is an
operational or production compulsion, CFA can approve the price
differential upto 5%, within his financial powers in consultation
with CDA(R&D)/IF(R&D) as applicable.

(f) For any price differential above 5% approval of Secretary(R&D)

would be necessary for procurement of stores costing up to Rs.
15 cr.

7.17.3 Apart from the price, the offer should meet the quality requirement,
delivery schedule and time profile of the project needs. Overall
economy of the offer after taking into account the maintenance cost,
etc. should be considered before selecting a vendor. To achieve

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 value for money, DRDO Labs/Estts will consider all price and non-
price factors that are significant in any individual procurement.
Such factors include fitness for purpose, whole life cost, fair market
prices, timely delivery, post-delivery support and effective
warrantees.

7.17.4 The cost of post-warranty maintenance contracts for high value

complex equipment will be included in the initial price-negotiations
by the TPC/NC to seek price concession.

7.17.5 The payment terms considered most favourable to Government will

be negotiated. Where the firms offer sizeable discount conditional
to cash payment, such an offer may be considered favourably by
TPC/NC and payments disbursed by A/C payee cheques promptly.

7.17.6 Penalty by way of Liquidated Damages (LD), forfeiture of deposit,

etc., will be negotiated with a view to imbibing caution in the
minds of vendors to meet delivery schedule.

7.17.7 The Central Public Sector Undertakings will be allowed purchase

preference as per the Government orders issued from time to
time. Price preference, will be allowed to Khadi and Village
Industries Commission (KVIC)/Women Development
Corporation/Small Scale Units as per the Government policies.

7.17.8 For items/stores channelised by Government through designated

sources of supply, negotiations are not essential pre-requisite for
placement of orders.

7.17.9 In case of all items from Indian vendors delivery should be F.O.R
destination as far as possible. In cases of imported stores, transit
insurance may be considered as per Para 7.42.

7.17.10 Wherever performance warranty is required, Bank Guarantee (BG)

for 10 % of the value may be asked for from the vendor. Indemnity
bond (IB) in lieu of bank guarantee may be considered in case of
PSUs. Academic institutions/Govt. Deptts may be considered for
exemption of BG/IB on the recommendation of TPC/NC by CFA.

The case for waiver of performance bank guarantee (PBG) shall be

referred to DMM/DRDO Hqrs after recommendation of TPC/NC for
obtaining of approval of CFA.

7.17.11 Issue of Stores: Whenever Govt. stores are issued to

contractor/vendor for some fabrication/repair/maintenance either
during warranty period or after warranty period, the necessary BG
may be obtained to safeguard the Govt. interest. Cases may arise
where the contractor/vendor may not agree to such Bank
Guarantee; these cases may be decided as per provisions given
below:

(a) Whenever the cost of the Govt stores to be issued by the

Lab/Estt for use in the contract, is more than 100% of the
contract cost, the necessary BG may be obtained for the value
of contract cost and for the remaining cost of the free issue of

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 material, insurance shall be provided by the vendor in the
favour of Lab/Estt Director.

(b) Indemnity bond may be taken from Government

Departments/PSUs in place of BG.

Any deviations of the above may be referred to the DRDO HQrs

(DMM) for approval in consultation with Integrated Finance.

7.17.12 While conducting negotiations, recent publication on “Guidelines

for Negotiations” authored by Shri R Ramanathan, Addl FA(R) and
AS and any other relevant publications, may be consulted.

7.18 SCRUTINY BY TPC/NC MEMBERS: An officer from MMG or member

secretary will complete as far as possible the "TPC/NC Information
Proforma" as given at DRDO.MM 15 for consideration of all TPC/NC
members. All papers relating to the item i.e., SPC recommendations,
approval for mode of tender etc will be made available for scrutiny by
TPC/NC members, if required. The TPC/NC members will examine the
following points in respect of stores intended to be purchased, during
preliminary discussions:

(a) Description of the item and its estimated cost.

(b) Purpose of requirement, i.e., project/build-up/maintenance.
(c) PDC of the project, If for project.
(d) Likely availability of funds.
(e) Likely cash outgo during current financial year.
(f) Mode of tendering: Global/open/limited/single/single with PAC.
(g) If the mode of tendering is ‘limited’, whether the tenders were invited
from registered/reputed vendors?
(h) Mode of inspection/inspection facilities available.
(j) Facilities for installation and commissioning are available/are covered
in the firms’ quotations.
(k) Requirement of specialised training, if any.
(l) Warranty period and availability of post-warranty facilities.
(m) Validity of quotations.
(n) Reasonableness of quoted price.
(o) Registration status of Indian agent if any, commission payable and
currency in which payable.
(p) Payment terms.
(q) Delivery period.
(r) Other commercial terms e.g. taxes and duties, packing and forwarding
charges, mode of dispatch, transit insurance cover, place of delivery,
etc.

7.18.1 TPC/NC members will thoroughly scrutinize the techno-

commercially acceptable offers of the vendors in relation to all
points mentioned in Para 7.18 above, with a view to derive
maximum advantage for successful materialization of the
procurement within time schedule at the most favorable rate and
payment terms. In order to determine L1 the financial implication

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 should be considered on the basis of all inclusive cost (viz. basic
price, taxes, freights, insurance etc. payable by the DRDO Lab/Estt
after availing various benefits of exemptions from taxes/duties as
applicable to DRDO from time to time) to the State on delivery to
the designated consignee i.e. L1 determined on the basis of total
cash out flow from Lab/Estt”.

7.18.2 Minutes of the TPC/NC meeting will be prepared after the

deliberations of the meeting, recording all discussions held during
the meeting and highlighting the recommendations made by the
committee. In case the procurement is not finalised during the
meeting, any useful discussion may be recorded for use by
subsequent TPC/NC. The minutes will be finalised immediately and
not later than 7 days after conclusion of the TPC/NC meeting. A
copy of the accepted minutes will be sent to DRDO HQrs (DMM),
local CDA(R&D) office and Director (Fin/R&D), as applicable. If the
minutes are not finalised within 30 days, the demand will have to be
revalidated by the next higher authority.

7.18.3 The minutes of TPC/NC duly signed by all members will be put up to
Director for approval.

7.19 DISSENTING OPINION: Dissenting opinion, wherever expressed, will be

recorded in the minutes and referred to the Directors of the Labs/Estts (if
they are not chairman of TPC/NC) up to the financial powers vested in
them and to DRDO HQrs above this value, for decision. The competent
financial authority will record sufficient reasons in arriving at a ruling on
such cases.

7.20 SINGLE TENDER/SINGLE TENDER WITH PAC PURCHASE: The

quotations received in response to single tender/single tender with PAC
enquiries, will be assessed for techno-commercial suitability by TEC,
delivery schedule and other commercial terms by an appropriate TPC/NC
for cases above Rs. 5 lakh, before approval of the competent authority and
placement of orders.

7.21 EXEMPTION FROM TENDERING: Tendering procedures need not be fol-

lowed for purchase of items/products of following categories where:

(a) Prices are fixed by the Government such as steel from Government
yards, oil and petroleum products from Indian Oil Corporation, Bharat
Petroleum and Hindustan Petroleum, etc.
(b) The prices and distribution are controlled by Government or any other
statutory authority.
(c) Materials are marketed by the state trading agencies, i.e., STC,
MMTC, etc.
(d) Sales outlet is through Government-controlled retail shops such as
super bazars, cooperative societies, State-managed fair price shops,
Canteen Stores Deptt (CSD) etc.

7.21.1 The above does not dispense with the requirement of holding
TPC/NC meetings.

7.22 FINANCIAL SANCTION OF THE CFA: The purchase file containing all the
relevant papers along with the CST and TPC/NC minutes will be put up to

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 the Director/CFA of the Lab/Estt for financial sanction up to the financial
powers delegated to them.

7.22.1 Cases beyond the Directors’ powers will be referred to DRDO HQrs
(DMM) along with approved TPC/NC minutes and copy of accepted
quotation for according financial sanction by the competent
authority.

7.23 PAYMENT TERMS: The normal terms of payment are 100 per cent within
30 days after receipt/acceptance of stores in good condition or the date of
receipt of the bill whichever is later. In cases where the risk during
performance warranty is required to be covered, Labs/Estts may withhold
an amount not exceeding 10 per cent of the value of the order or obtain
performance bank guarantee for an equivalent amount for the duration of
warranty period before release of final payment. The requirement of
performance bank guarantee may be waived by CFA on recommendation of
user for low value procurement costing up to Rs. 5 lakh. However, the
following payment terms may be agreed to by TPC/NC on the merits of the
case:

7.23.1 Whenever insisted upon by the vendor, payment up to a maximum

of 95 per cent plus statutory levies in advance may be made on the
strength of inspection & despatch documents or on receipt and
acceptance of stores in the Labs/Estts and bank guarantee for an
amount not exceeding 10 per cent of the value of the order when
such a guarantee is required. The cheque for advance payment up
to 95% plus statutory levies may be drawn against a proforma
invoice received from the firm. Such cheque, whenever drawn, will
remain in the custody of Lab/Estt representative for handing over
to the firm after satisfactory inspection and receipt of dispatch
document at firm's premises/receipt & acceptance in the Lab/Estt.
Balance 5 percent will be paid after receipt of stores in full and
good condition, satisfactory installation and setting to work within
45 days.

7.23.2 In cases, where firms insist for advance payment on release of

documents through a bank, this will be acceptable for vendors of
repute after inspection as per the limits specified in Para 7.23.1.
Wherever Labs/Estts have established revolving Letters of Credit,
to make payments against indigenous supplies, such payments will
be regulated against these LCs. All LC and other charges, if any
are to be borne by the supplier.

7.23.3 Payment up to 100 % against delivery when insisted upon by the

vendor for consumable stores such as chemicals, gases, etc., can be
made up to a limit of Rs. 5 lakh. For such cases above Rs. 5 lakh,
prior approval of DRDO HQrs (DMM) in consultation with IF(R&D)
will be obtained.

7.23.4 Advance Payment: As per the current policy of the Govt. no

advance should be offered in the tender enquiry and the first stand
of the CFA should be of no advance. However, in exceptional cases
of contract for manufacturing of equipment, system or that for a
project with long execution time, advance payment up to 30% for the
ordered supplies may be approved by CFA. On recommendation of
TPC/NC, against valid BG from a scheduled bank. However, in some

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 cases, stage payment at pre-defined stages of contract completion
may be approved by the CFA if considered appropriate.

7.23.5 Payment to PSUs/Government Deptts: Wherever justified,

PSUs/Government Deptts will be allowed up to 100 per cent advance
payment whenever insisted upon either in one go or in stages as per
negotiated terms. All advances and warranty stipulations will,
however, be covered through a suitable Bank Guarantee/Indemnity
Bond on a stamped paper of appropriate value, wherever applicable.
Samples of bank guarantee and indemnity bond are given in Forms
DRDO.MM 28 and DRDO.MM 29 respectively. Requirement of Bank
Guarantee or Indemnity Bond may not be insisted upon for
Government Deptts. / reputed Academic Institutions such as IITs,
etc., at the discretion of CFA.

7.23.6 Payment to Foreign Firms: Payment by Letters of Credit/sight

drafts/tele-transfer is to be made for imported supplies.

7.23.7 Stage payments linked with completion of milestones may be

accepted by CFA on assessing the expenditure of the completed
tasks, if recommended by TPC/NC.

7.23.8 Payment against Service/Maintenance Contracts: Advance

payment up to 100 per cent on account of charges payable in
respect of contracts for periodical servicing and maintenance, defect
investigation/repairs, etc., may be allowed against Bank Guarantee.

7.23.9 Deviation from Standard Terms of Payment: Any deviations from

the above mentioned terms of payment will, however, be allowed in
exceptional circumstances on the specific recommendations of
TPC/NC by CFA in consultation with Integrated Finance (R&D).

7.23.10 Bank charges on account of all Bank Guarantees will be borne by

the vendors.

7.24 LETTER OF INTENT: It may, at times, be necessary to conclude the pur-

chase by issue of a letter of intent or telegraphic/telex/fax acceptance due
to imminence of expiry of the quotation or any other reason. In such cases,
the letter of intent/telegraphic or telex/fax acceptance amounts to final
acceptance of the offer. It is, therefore, imperative that all-important and
relevant aspects such as description of stores, quantity, price, delivery
period, etc are properly reflected in the advance communication. It will be
ensured that in such cases there is no variation between the letter of intent
and the formal supply order issued subsequently. The advance
communication should specifically confirm acceptance of the offer and
state that the formal supply order showing full details will follow. The
formal supply order will be issued without any avoidable delay.

7.24.1 The letter of intent is a legally binding document and could be issued
based on the recommendation of TPC/NC if the negotiated amount
does not exceed the amount approved by EPC.

7.25 PREPARATION OF SUPPLY/PURCHASE ORDERS: For items below Rs 5

lakh the supply/purchase orders will be prepared only after the CST has
been recommended by the user group and approved by the CFA.

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 7.25.1 For items above Rs 5 lakh, the supply/purchase order will be
prepared after acceptance of TPC/NC minutes by CFA/Director.
The orders will incorporate only such terms and
conditions/instructions as have been agreed to by the firm and
approved by TPC/NC.

7.25.2 For imported items, release of Foreign Exchange by competent

authority is an essential pre-requisite before placement of the order.

7.25.3 It will be ensured that sufficient budget is available at the time of

delivery of items for this supply order.

7.25.4 The following details will be incorporated in the supply/purchase

orders:
(a) Supply/purchase order number and date.
(b) Supplier’s quotation reference and date.
(c) Description of items/stores with detailed specifications.
(d) Quantity required and the accounting unit.
(e) Rates both in figures and words including discount, if any.
(f) Total number of items and their aggregate value shown below
the list of items.
(g) Delivery date (words such as ‘immediate’ or ‘as soon as
possible’ will not be used).
(h) Packing, dispatch, insurance, mode of transportation,
instructions and terms of delivery.
(j) Payment terms liquidated damages clause for delayed supplies.
(k) Orders will be signed for and on behalf of ‘President of India’ by
an officer specifically so authorised by the Director.
(l) Acknowledgement and acceptance of Supply/Purchase Order.
(m) Provision for part/stage payments against part supplies may be
included, wherever applicable.
(n) A suitable Arbitration clause may be added, if considered
appropriate, as per Para 7.45.
A specimen format of Supply/Purchase Order is placed at
DRDO.MM 16 and its acknowledgement is placed at DRDO.MM 17.
Standard terms and conditions are mentioned in the form DRDO.MM
16. However any new conditions or any modifications duly approved
by TPC/NC may be incorporated in the same.

7.25.4 Supply Order Progress Register: Labs/Estts should maintain a

‘Supply Order Progress Register’ or ‘Computer Entry System’
wherein all supply orders will be entered as per the serial numbers.
These registers/computer records will be updated with stages of
progress of supply orders relating to amendments, if any, stage/part
payments, delivery details, final payment details with cheque Nos.
and date, etc.

7.26 DISTRIBUTION OF SUPPLY/PURCHASE ORDERS: Distribution of

Supply/Purchase Orders will be as follows:

(a) Supplier – 2 copies including original with a request to return the

original copy duly acknowledged for settlement of bills.

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 (b) Local CDA (R&D) authority – 1 copy (ink-signed)
(c) Demanding officer – 1 copy
(c) Stores Movement Control Div. (Receipt & Dispatch Section) - 1 copy
(e) Bill Payment Section – 1 copy
(g) Case file – 1 copy

7.27 DESPATCH OF SUPPLY/PURCHASE ORDERS: The purchase orders will

be dispatched to the supplier along with required number of blank bill forms
by registered post acknowledgement due. However, other modes such as
speed post, courier, etc. may be adopted at the discretion of Head, MMG.
On receipt of the order acknowledgement/acceptance from supplier, as
given in DRDO.MM 17, any deviations proposed by the vendors will be
dealt with in an appropriate manner, as per the prescribed rules.

7.28 AMENDMENTS TO SUPPLY/PURCHASE ORDERS: Minor corrections to

Supply/Purchase Orders, not affecting the prices and specifications, will be
issued by the authorised officer. Amendments affecting delivery period will
not be made as a matter of routine. In exceptional cases, where supplier
has asked for revision of delivery period justifying with sufficient reasons,
the concurrence of demanding officer and CFA for acceptance of the delay
will be obtained before granting such extension. Each such case will be
examined on merit for imposing/waiving off the liquidated damages.
Decision on imposing/waiving off liquidated damages as per clause 7.44.1.

7.28.1 Amendments on account of increase in statutory levies will be

admissible after approval of the CFA. Any amendment to issue
exemption certificate for CD/ED etc. will be done with the approval
of CFA on recommendation of TPC/NC (if applicable).

7.28.2 Amendments due to variation in supplies up to 5 per cent

necessitated by exact multiples of the standard units of measure,
etc., or when requirement is of repetitive nature or where it is
difficult to mention exact quantity (weight) in the case of steel
plates, etc., may be allowed.

7.29 REPEAT ORDERS: If a demand is received for an item or items previously

ordered by Labs/Estts or other DRDO Labs/Estts or other Government
scientific research institutions, the repeat order may be placed without
fresh tendering/negotiations provided that:

(a) Items ordered have been delivered successfully.

(b) The repeat order is not placed to split the requirement to avoid
sanction of the next higher CFA.
(c) The original order was placed on the basis of lowest price negotiated
by TPC/NC wherever applicable and technically acceptable offer and
was not on delivery preferences.
(d) The repeat order is placed within twelve months from the date of
supply order and only once by the Lab/Estt, the total quantity to be
ordered /purchased on repeat order does not exceed 100% of original
order.
(e) The requirement is for stores of identical description/specifications.

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 (f) The supplier’s willingness to accept the repeat order on the same
terms and conditions as per the original order is obtained.
(g) The CFA is satisfied that there is no downward trend in the market
price of the item and a clear certificate is appended to that effect if the
enquiry is floated afresh, the expenditure is not likely to be less.
(h) The cost of repeat order does not exceed the original supply order.
(j) Quantity discount is sought from the vendor, if applicable.
(k) The additional taxes and transportation charge as applicable on the
date of placement of repeat order are paid.

7.30 OPTION CLAUSE: The purchaser retains the right to place orders for
additional quantity up to a maximum of 50% of the originally contracted
quantity at the same rate and terms of the contract. Such an option is
available during the original period of contract provided this clause has
been incorporated in the original contract with the supplier. Option
quantity during extended DP is limited to 50% of balance quantity after
original Delivery Period.

(a) Option clause can be exercised with the approval of CFA under
whose powers total value of supplies of original contract plus 50%
option clause falls. This option is normally exercised only when there
is no downward trend in prices as ascertained through market
intelligence. CVC have also reiterated the need to look at the
downward trend before exercising option clause.

(b) In case of single vendor OEM, option clause should be normally

operated up to 50% subject to there being no downward trend.
However, in multi vendor contracts, great care should be exercised
before operating option clause up to 50%.

(c) In case provision of option clause has been opted, repeat order
option will not be applicable.

7.31 LOCAL PURCHASE AGAINST DGS&D RATE CONTRACTS: They may

place orders against valid DGS&D rate contracts for items/equipment
acceptable to them, for expeditious materialisation of supplies and cutting
short the tendering and TPC/NC formalities.

7.31.1 List and details of rate contracts concluded by the DGS&D can be
obtained by Labs/Estts directly.

7.32 ENTERING INTO RATE/RUNNING CONTRACTS BY LABS/ESTTS:

Labs/Estts may enter into rate/running contracts based on open tenders for
common-use items such as laboratory chemicals, solvents, glass apparatus,
electronic components, electrical items or similar items which are in regular
demand and prices of which are not subject to appreciable market
fluctuations after getting the TPC constituted from DMM, DRDO HQrs as per
Para 7.32.3. A format for Rate Contract is placed at DRDO.MM 30

7.32.1 Definition: The definition of rate/running contracts is given

hereunder:
(a) Rate Contract: It is a contract for the supply of stores at a
specified rate during the period of contract. No quantity is

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 mentioned and the contractor is bound to accept any order,
which may be placed on him.
(b) Running Contract: It is a contract for supply of an
approximate quantity of stores at a specified price for a
certain period.

7.32.2 Guidelines for Entering into Rate/Running Contracts: All stores

of standard types required in bulk quantity which are in common
and regular demand, and for which the price is not subject to
appreciable market fluctuations, shall be purchased against rate or
running contracts based on assessed future consumption.

7.32.3 Rate and running contracts will normally be entered into for stores,
if the annual drawls against the contracts are expected to exceed
Rs 50,000/-. For such contracts station-wise consolidation should
be made and considered by an appropriate TPC/NC formed by
DRDO HQrs (DMM) having members from local CDA(R&D) and
DMM. DRDO HQrs (DMM), on request from Labs/Estts will identify,
station-wise, a nodal Lab/Estt to finalise rate and running contracts
against which the local Labs/Estts can procure their requirements.

7.32.4 Normally the duration of a rate or running contract should be for a

period not exceeding two years. In special cases, with the
approval of CFA, a shorter or longer period of contract may be
entered into. No extension to validity of the contract is required
when deliveries against outstanding supply orders continue after
expiry of the validity period. The contract will remain alive for the
purpose of delivery for all the stores ordered during the validity of
the contract until deliveries are completed.

7.32.5 No new rate contract should be placed with the firms having
backlog against existing contracts and also if the backlog is likely
to continue for the major portion of the new contract period.

7.32.6 Rate contract should be placed only on registered and/or reputed

and established firms, which are capable of supplying the stores
as, required.

7.32.7 Quotations for rate contracts should be invited for slab quantities
and contracts concluded, accordingly.

7.32.8 In cases where a firm has already a rate contract with any other
Government Department, Central/State Public Undertaking, etc., it
should be ensured that the contract is entered into on not less
favourable terms and conditions than those agreed to by it with the
other Departments, Undertakings, etc. The contract will contain a
stipulation to the effect that, if during the currency of the contract,
the contractor sells the goods at a price lower than the contract
price, he will be paid only that lower price. Such a stipulation is
commonly known as the Fall Clause and may be stipulated on the
following lines:

Fall Clause:(i) The prices charged for the stores supplied under
the contract by the Contractor shall in no event
exceed the lowest price at which the contractor

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 sells the stores of identical description to any other
person/organisation during the period till
performance of all supply orders placed during the
currency of the rate contract is completed.
(ii) If, at any time, during the said period, the
Contractor reduces the sale price of such stores or
sells stores to any other person/organisation at a
price lower than the price chargeable under the
contract, he shall forthwith notify such reduction or
sale to the concerned Head of the Department; and
the price payable under the contract for the stores
supplied after the date of coming into force of such
reduction or sale shall stand correspondingly
reduced.

The above stipulation will, however, not apply to:

(a) Export by the Contractor.

(b) Sale of goods as original equipment at prices lower than the
prices charged for normal replacement.
(c) Sale of goods such as drugs, which have expiry dates.

While submitting his bills to the Government for the goods

supplied against the rate contract, the Contractor shall give the
following certificate also:

“I/We certify that the stores of description identical to the stores

supplied to the Government under the contract herein have not
been offered/sold by me/us to any other person/organisation up to
the date of bill/the date of completion of supplies against supply
orders placed during the currency of the rate contract, at a price
lower than the price charged to the Government under the
contract.”

If the Contractor sells any goods at lower than the contract

price except covered by any of the three exceptions indicated
above; such sales have also to be disclosed in the aforesaid
certificate to be given by the Contractor to the Government. The
obligations of the Contractor in this regard will be limited with
reference to the goods identical to the contracted goods sold or
agreed to be sold during the currency of the contract.

7.32.9 In addition to the usually applicable standard terms and conditions,

the following clauses should also be included in the rate/running
contracts:

(a) The purchaser reserves the right:

(i) to enter into parallel rate contracts, simultaneously, or at
any time during the period of the rate contract with one or
more tenderers.
(ii) to place ad-hoc contract or contracts, simultaneously or
at any time during the period of the rate contract with one
or more tenderers.
(iii) to terminate the contract by giving one month’s notice.

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 (b) The successful tenderer shall maintain stocks at the station and
shall make deliveries against supply orders from such stocks
within the specified period.

7.33 REPAIR CONTRACTS: The tendering and TPC/NC methodology laid down
above for local purchase of stores will also apply to conclusion of contracts
for repair and overhaul of equipment/machinery. The bill for such contracts
has to be supported by the following specific certificates from the user
group, that:

(a) The repair was not carried out during warranty/guarantee period.
(b) The repair was necessitated through fair wear and tear.
(c) The facilities for the repair are not available in the Lab/Estt.
(d) The parts recovered during repair have been accounted for.
(e) The equipment/machinery is functioning satisfactorily after repair.
(f) The equipment/machinery is not covered by any other maintenance
contract.

7.33.1 On satisfactory completion of the repairs, the Director should

obtain a certificate from the repairing agency for defect-free
performance of the equipment/machinery for a specified period.

7.34 MAINTENANCE CONTRACTS: The maintenance contracts will be

regulated as per the procedure applicable to local purchase orders. To
derive maximum benefit and ensure sustained serviceability of equipment,
such contracts should be assigned to original manufacturers/
representatives, who have successfully performed during warranty/
guarantee period or to reputed third parties. Effort should be made to club
the maintenance contracts of similar equipment held by different
Labs/Estts, located at a station. DRDO HQrs (DMM) may nominate a nodal
Lab/Estt, station-wise, for this purpose.

7.34.1 The maintenance contracts for computers, equipment and

machinery, will be entered for a period of one year initially after the
warranty/guarantee period is over. If the service is found
satisfactory the existing contract can be renewed, under the
powers of the Director of the Lab/Estt, for an additional period of
one or two years without going into the formalities of a new
contract provided that:

(a) There is no downward trend in the prices.

(b) The escalation in cost is not more than 10 per cent.

7.34.2 Alternatively, the maintenance contracts for equipment, machinery

and computers not likely to run into obsolescence, may be
negotiated for a period of three years at the outset with suitable
‘down-time’ penalty clauses. This mode of contracting will be
adopted to ensure sustained serviceability of the facility and would
prove more cost-effective as compared to annual contracts.

7.35 PURCHASE OF COMPUTER SYSTEMS: The tendering and purchase

procedure for computers and their peripherals would be the same as for
other equipment. The points given in the succeeding paragraphs are

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 considered relevant and should be borne in mind while processing such
procurement:

7.35.1 Due to rapid development in computer technology, obsolescence of

any system acquired is very fast. Caution is, therefore, necessary
to purchase the latest system which commensurates with the price
paid, before being rendered obsolete.

7.35.2 Computers for autonomous use or as dedicated systems are

essential ingredients of any complex system. Hence the number of
acquisitions at a station could be standardised to seek volume
discount and to facilitate common maintenance effort, provisioning
of spares and peripherals.

7.35.3 While procuring computers/peripherals, preference will be

accorded to the systems where upgradation is possible to meet
future needs. Ease of connectivity may also be given due
consideration.

7.35.4 Quantity for procurement should be so restricted to meet the

present needs only as there is an all round downward trend in
prices due to tremendous advancement in computer production
technology.

7.35.5 While procuring costly software, it is essential to ensure that the

original software with documentation is procured instead of the
pirated copies so as not to infringe on the intellectual property
rights of the originator and to avoid any legal repercussions.

7.35.6 Considering the security risk associated with hiring of computers it

is desired that practice of hiring/leasing computers from private
firms should be done away within all the vital/sensitive
organisations of Govt. of India on ground of security.

7.36 PURCHASE OF STATIONERY: The authorised channel for supply of all

common stationery items is Government of India Stationery Depot,
for all Ministries/Government Deptts. It is experienced that
procurement of stationery through the above channel involves lot of
delay and many items are not available for supply to Labs/Estts.
Labs/Estts will, however, continue to place their annual demands for
stationery items to the Stationery Depot, Calcutta, but shall meet
their periodical requirements through local purchase, without waiting
for a formal Not Available (NA) certificate from the Stationery Depot.

7.36.1 For requirement of items of repetitive nature, which are commonly

used by many Labs/Estts, it would be preferable to enter into
rate/running contracts on DRDO HQrs/local basis.
Requirements/suggestions for the same may be sent to DMM,
DRDO HQrs.

7.36.2 The cost of procurement of stationery items will be debitable to LP

budget head. For all project-related work, items of stationery
including drawing office stationery may be provided from project
funds.

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 7.36.3 The DMR&F also concludes rate contracts for general purpose and
special stationery items as well as for a variety of office equipment,
e.g., electronic typewriters, photo-copying machines, ammonia
printing machines, etc, from time to time. Labs/Estts may obtain
their requirements for such items through the DMR&F.

7.37 PURCHASE OF PROTECTIVE CLOTHING AND LIVERIES:

Purchase of items of protective clothing for example, Overall
Combinations, Aprons, Protective Shoes, Protective Goggles,
Welding Hand gloves, First Aid Kits, etc., as recommended by the
local Chief Inspector/Inspector of Factories (under the Factories Act,
1948), will be effected as per the normal local purchase procedure.
The cost of such procurement will be debited to the local purchase
budget head.

7.37.1 Items of liveries for entitled categories of employees, as per the

scales laid down by Department of Personnel from time to time, will
be purchased as per the normal purchase procedure and their cost
will be debitable to Misc. budget head.

7.37.2 For purchase of liveries, preference will be accorded to

Government-sponsored production units run by social welfare
organisations for upliftment of women/handicapped persons/
weaker sections of society.

7.37.3 Option of placing SWODs on Ordnance Clothing Factories to meet

requirements of livery items, may also be excercised, if considered
expedient.

7.38 PURCHASE OF FIRE FIGHTING EQUIPMENT: Purchase of fire-fighting

equipment will be made as per the directions of Chief Fire Adviser, Ministry
of Defence and/or Central/State Government Fire Service authorities.
These purchases will be processed as per the normal local purchase
procedure and the cost debited to LP budget head.

7.39 LEASING/HIRING OF FACILITIES/CAPITAL EQUIPMENT: In cases where

progressing of projects require use of major facilities or capital equip-
ment/machinery for the duration of the project, it may not be worthwhile to
make huge investments in acquiring/setting up of such facilities and
additional expenditure on their subsequent maintenance. The alternative of
hiring/leasing of these facilities/capital equipment from the local industry,
will be in order in such cases. This is in line with the policy stipulations
made in Para 4.2 of the ‘Material Management Policy (1996)’.

7.39.1 Before deciding upon leasing or hiring of the costly facilities/capital

equipment, cost-effectiveness of such proposals will invariably be
examined in detail, considering the following aspects:

(a) Huge investment on purchase of such costly facilities is not

commensurate with its utilisation.
(b) Leasing/hiring meets the project needs and doesn’t
compromise the security aspect.
(c) The terms of leasing/hiring are such that these are
economically beneficial to the State.

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 7.39.2 In all cases of leasing/hiring of facilities/capital equipment, the
normal local purchase procedure will be applicable. However, the
terms and conditions of such contracts may have to be specifically
evolved in each case and finalised after the approval of the
competent authority.

7.40 STATUTORY LEVIES/DUTIES: DRDO Labs/Estts and their

projects/programmes have been granted exemption from payment of
customs/excise duties under special sanction from Ministry of Finance
(Deptt of Revenue) for items of R&D nature. While processing procurement
where such an exemption exists, payment of duties will not be made. If
duties have to be paid, reasons for that must be recorded by the TPC/NC
and approved by the Director.

7.40.1 For availing concessional rates of tax in respect of purchases

involving inter-state transactions, Labs/Estts will issue ‘Form D’ to
the supplier before dispatch of the consignment. Supply/Purchase
Orders will incorporate such clause while placing the orders.

7.40.2 While purchasing imported stores on rupee payment through an

indigenous source, exemption from customs duty will be sought
from the appropriate authority by issuing CDECs, if agreeable to
the vendor. In all such cases, a suitable clause must be added in
supply order on the recommendations of TPC/NC giving
items/value of items.

7.41: BUY-BACK OFFER: When it is decided with the approval of the competent
authority to replace an existing old item(s) with a new and better version,
the department may trade the existing old item while purchasing the new
one. For this purpose, a suitable clause is to be incorporated in the bidding
document so that the prospective and interested bidders formulate their
bids accordingly. Depending on the value and condition of the old item to
be traded, the time as well as the mode of handing over the old item to the
successful bidder should be decided and relevant details in this regard
suitably incorporated in the bidding document. Further, suitable provision
should also be kept in the bidding document to enable the purchaser either
to trade or not to trade the item while purchasing the new one.

7.42 TRANSIT INSURANCE COVERAGE: As per the existing rules, stores

costing above Rs 2.5 crore may be insured. For stores costing less than Rs
2.5 crore, Directors of Labs/Estts may, however, use their discretion to
insure. This may be done through a nationalised insurance agency or their
subsidiaries, against loss or damage in transit for the
sensitive/delicate/fragile/costly stores/equipment/ machinery and scientific
instruments where probability of loss or damage is considered very high.
Efforts should be made to seek replenishment of damaged/lost items
instead of monetary compensation so that project progress is not
hampered. Insurance cover will invariably be obtained from the insurance
agency before dispatch of the consignment by the supplier.

7.42.1 Sanction of the CFA will be accorded as per the financial powers
delegated from time to time.

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7.43 PRICE ESCALATION/ENHANCEMENT OF COST: Purchase will normally
be made on firm prices. Variations on account of following contingencies
will, however, be allowed for delivery period of more than one year
provided the same is recommended by TPC/NC and included as part of
purchase order/contract:

(a) In respect of Indian firms for supply of imported stores, where

payment is to be made in rupees provided that:

(i) The cost variation is attributable to variation in official currency

rates.
(ii) Supplies are made within the stipulated delivery period or
extension is solely attributable to delays on the part of Lab/Estt.

(b) Variations in the rates of statutory levies, i.e., Customs/Excise Duty

and Sales Tax.

7.43.1 Price increases as a result of Paras 7.43 (a) and (b) above will be
approved by the authority who approved the purchase in the first
instance provided that the revised amount is within his financial
powers. Increases on account of statutory levies during extended
delivery period beyond the originally agreed delivery date will not
be considered except where delays in delivery are attributable to
the user/demanding officer.

7.43.2 In specific cases where essential condition of sale requires that the
prices charged will be those ruling on the day of delivery, it will be
in order to include such a clause in the Supply/Purchase Order.

7.43.3 The price escalation cases other than those mentioned in Paras
7.43 (a) and (b) above will be referred to DMM, DRDO HQrs for
approval in consultation with the Integrated Finance.

7.44 REVISION OF DELIVERY PERIOD (DP): Any correspondence with the

firms after delivery date with reference to a supply order is tantamount to
extension of delivery period. Extension of delivery date stipulated in the
order can only be considered with the consent of both parties, i.e., Lab/Estt
as well as the vendor. Action for extension of delivery date at the request
of the supplier will be considered taking the following factors into account:

(a) Urgency of the requirement and whether delay involved has or will
cause any loss or inconvenience to the Lab/Estt.
(b) Advances given and no downward market trend is noticed.
(c) Whether difficulties advanced by the suppliers are genuine and
whether they have conducted themselves, since placement of the
order, in such a manner as to indicate that they have genuine
intention to execute the order.
(d) In case of project requirements, the revised DP falls well within the
PDC of the project.
(e) For build-up/maintenance, the extension of DP will be subject to the
condition that budgetary provisions do not lapse as far as possible.
(f) All DP revisions will normally be approved within the expiry of
contracted delivery schedule, to obviate the need for ex-post-facto
sanction.

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 7.44.1 Directors of Labs/Estts are authorised to extend DP of all
contracts/supply orders up to a period of one year beyond the
stipulated delivery schedule in the supply order. Beyond this
period, such extensions will be approved by the Directors, in
consultation with local audit authorities.

7.44.2 Ex-Post-facto sanction for DP revision - Directors are authorised

to accord ex-post-facto sanction, under special circumstances,
limited to the following contingencies:

a) Where vendor has requested for extension within the DP

stipulated in the supply order.

b) When delays are attributable to Labs/Estts to fulfil their

contractual obligations such as supply of drawings, samples or
carrying out pre-delivery inspection, etc.

c) The ex-post-facto sanction of revised DP, authorised by

Directors as at (a) and (b) above, will not exceed one year
from the date of original delivery period.

d) Price increase due to revision of statutory levies, exchange

rate variation, upward revision of price of Government
controlled stores etc will not be admissible during the extended
delivery period except at (b) above.

e) All cases of ex-post-facto sanction, not covered above, will be

sent to DRDO HQrs (DMM) for CFA/Government sanction along
with full justification and recommendation of review TPC/NC in
respect of cases costing more than Rs 5 lakh and of Director of
Lab/Estt for cases costing up to Rs. 5 lakh. The constitution of
review TPC/NC will be same as that of original TPC/NC. The
review TPC/NC may be held by circulation, if considered,
appropriate by members.

7.44.3 Extension of delivery period will be approved without prejudice to

the right of the Lab/Estt to recover liquidated damages depending
upon the merit of the case.

7.45 MONITORING/REVIEWING OF PROGRESS: After placement of the orders,

the progress made by the vendors will have to be constantly
monitored to facilitate timely action to prevent delays in
materialisation of supplies and take appropriate corrective
measures. For this purpose, Head MMG of Lab/Estt will institute a
manual or computer-aided system for day-to-day monitoring of the
progress. This monitoring will lead to:

(a) Judicious assessment of genuine difficulties expressed by the vendors

for their mitigation.
(b) Curtailment of any indifference on the part of the vendors towards
execution of the order by imposing necessary checks.
(c) Examination of vendor’s competence or otherwise to ensure timely
execution of the orders. In case slippage of delivery period is noticed

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 beyond the prescribed limit, timely action may become necessary to
cancel the order or revise its delivery period.

7.45.1 ‘Progress Review Teams’ consisting of the Purchase Officer and

the Demanding Officer will be nominated in respect of high-value
supply/purchase orders with long delivery schedules, to aid Head
MMG for progress monitoring.

7.46 LIQUIDATED DAMAGES (LD): In compliance with Indian Contract Act,

liquidated damages imposed on the contractor, are to be based on the
extent of demonstrable loss due to delayed delivery. The LD clauses are
included in the supply orders/contracts to ensure prompt delivery and not
as a measure of penalty on the contractor. The quantum of LD to be
charged shall be 1/2 per cent per week subject to a maximum of 5 per cent
depending on the merit of each case. Constructive assessment of reasons
contributing to delayed delivery will be the deciding factor to waive/impose
LD.

7.46.1 Directors of the Lab/Estt are authorised to impose / limit / waive

off LD for cases up to Rs 5 lakh. For Procurement of stores
costing more than Rs 5 lakh waiver of LD will be done based on
the recommendation of the review TPC/NC (para 7.44.2(e) refers).
The cases for waiver of Liquidity damage (LD) shall be
forwarded by Lab/Estt to DMM/DRDO Hqrs for approval of CFA.

7.47 DISPUTES/ARBITRATION/CONSUMER REDRESSAL FORUMS: All the

clauses, terms and conditions of the contract/supply order will be explicit
and unambiguous to avoid disputes. To facilitate expeditious settlement of
disputes, inclusion of a suitable clause in the long duration supply orders,
may be considered by the Directors.

7.47.1 Essential Elements: Essential elements of an arbitration

agreement as per the Arbitration and Conciliation Act, 1996 are:

(a) Arbitration agreement means an agreement by the parties to

submit to arbitration all or certain disputes which have arisen or
which may arise between them in respect of a defined legal
relationship, whether contractual or not.
(b) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(c) An arbitration agreement shall be in writing.
(d) An arbitration agreement is in writing if it is contained in:
(i) a document signed by the party,
(ii) an exchange of letters, telex, telegrams, or other means
of telecommunication which provide a record of the
agreement, or
(iii) an exchange of statement of claim and defence in which
the existence of the agreement is alleged by one party
and not denied by the other.
(e) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract.

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7.47.2 The sample clause for inclusion in the contracts/supply orders,
drawn in consultation with Ministry of Law & Justice (Department of
Legal Affairs) is given below:
"In the event of any question, dispute or difference arising under
this contract or interpretation of the terms of, or in connection with
this contract (except as to any matters the decision of which is
specially provided for in this contract) the same shall be referred to
the sole arbitration of the Chief Controller of Research &
Development (CCR&D) DRDO or of some other person appointed
by him. Each of the parties hereby specifically waives his right to
raise any objection that the Arbitrator so appointed is a
Government Servant. The award of the Arbitrator shall be final and
binding on the parties to this contract. The parties also agree that:

(a) If the Arbitrator be the CCR&D (DRDO), (i) in the event of his
being transferred or vacating his office by resignation or otherwise,
it shall be lawful for his successor in office either to proceed with
the reference himself or to appoint another person as Arbitrator, or
(ii) in the event of his being unable to act; unwilling to act;
becoming incapable of acting for any reason; or the award given by
him having been set aside by a Court of Law it shall be lawful for
him to appoint another person as Arbitrator .

(b) If the Arbitrator be a person appointed by the CCR&D (DRDO), in

the event of his dying, neglecting or refusing to act, or resigning or
being unable to become or incapable to act, for any reason or his
award being set aside by the Court for any reason, it shall be
lawful for the CCR&D(DRDO), to remove such Arbitrator and to
terminate his mandate and either to proceed with the reference
himself or to appoint another person as Arbitrator (in place of the
outgoing Arbitrator). In every such case, it shall be lawful for
CCR&D (DRDO), or the Arbitrator appointed in place of the
outgoing Arbitrator, as the case may be to act on the record of the
proceedings as then taken in the Arbitration, or to commence the
proceedings de-novo; as he may in his discretion decide.

(c) Upon every and any such reference, the assessment of the cost
incidental to the reference and award respectively shall be at the
discretion of the Arbitrator.

(d) Subject as aforesaid, the Arbitration and Conciliation Act 1996 and
the rules thereunder and any statutory provisions thereof for the
time being in force shall be deemed to apply to the Arbitration
proceedings under this clause.

(e) Unless determined otherwise by the Arbitration Tribunal, the place

of Arbitration shall be the city where the contract is concluded.
The Arbitration Tribunal may, however, meet at any place it
considers appropriate for conducting any of the Arbitration
proceedings. "

7.47.3 In case where the vendor/contractor insists for the option of

institutional arbitration through the Indian Council of Arbitration,
the following arbitration clause will be included in the
contracts/supply orders:

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 "Any dispute or difference whatsoever arising between the parties
out of or relating to the construction, meaning, scope, operation, or
effect of this contract or the validity or the breach thereof shall be
settled by arbitration in accordance with the Rules of Arbitration of
the Indian Council of Arbitration and the award made in pursuance
thereof shall be binding on the parties."

7.47.4 The departmental arbitration cases (Para 7.47.2 above), will be

referred to DRDO HQrs (respective technical Director) for
approval/consent of the concerned CC (R&D). The cases of
institutional arbitration (Para 7.47.3) will be taken up directly with
Indian Council of Arbitration whose present address is: Federation
House, Tansen Marg, New Delhi-110 001.

7.47.5 The cases for expenditure involved in respect of institutional

arbitration through ICA will be referred to DRDO HQrs (DMM) for
CFA sanction.

7.47.6 Foreign Arbitration: The Arbitration and Conciliation Act 1996 has
provision for international commercial arbitration which will be
applicable if one of the parties has its central management and
control from any foreign country. The salient features of this law
are:
(a) The parties can choose either Indian or any foreign law
governing arbitration.
(b) To minimise interference of courts in stalling arbitration
proceedings.
(c) Arbitrator can be changed by mutual consent without
approaching court.
(d) Vesting of enhanced powers to arbitrator.
(e) Clearly defining the obligations of the arbitrator.
(f) Arbitrator’s award to be enforceable as if it were a decree of
the court.

The Ministry of Law, Justice and Company Affairs have, however, advised
that the arbitration clause included in the contract should specify that the
arbitration proceedings shall be conducted in India under this Act.

7.47.7 All disputes arising out of or in connection with the present contract
shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce by one or more arbitrator
appointed in accordance with the said Rules in India.

7.47.8 For dispute redressal, besides Arbitration and Reconciliation Act

1996, shelter of Consumer Protection Act can also be taken.

7.47.9 Consumer Redressal Forums: Consumer Redressal Forums may

be approached for redressal of any complaints against the vendors
for materials/machines/equipment supplied by them to seek
expeditious award.

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 Chapter 8

PROCUREMENT OF STORES: IMPORTED ITEMS

8.1 GENERAL: Import of equipment, materials and subsystems are essential

for completing/pursuing the high technology projects, where indigenous
competence is not available. Components, subsystems, materials will
normally be imported for developing a new technology/hardware for the
prototypes and subsequent indigenisation.

8.1.1 It will, however, be necessary to scrutinise each requirement of

import by the Director/Project Director to keep the self-reliance goal
in mind, in spite of countrywide liberalisation.

8.2 PROJECTION OF FE REQUIREMENT: Based on the individual require-

ments furnished by various Project Leaders/Group Heads, the Budget
Planning Group of the Lab/Estt will consolidate the FE requirements every
year by February end for next financial year and forward the same to DMM,
DRDO HQrs as per proforma for "FE Requirement" at DRDO.MM 18.
Priority-wise requirements will be projected in the following order:

(a) Outstanding payments against past commitments,

(b) Project requirements,
(c) Maintenance requirements, and
(d) Build-up requirements.

8.2.1 FE requirements for actual cash outgo during the year and FE
commitment for the future years will be separately compiled and
forwarded to DMM, DRDO HQrs. Labs/Estts will ensure that funds
are available when these LC's retire as FE release does not amount
to allotment of funds.

8.3 INITIATION/APPROVAL OF DEMAND: Procedure and levels for

initiation/approval of demands for the imported items will be the same as
applicable to other purchases as defined in Chapter 4. Such demands,
however, will be restricted to the list already projected to HQrs with the
exception of emergency and unforeseen requirements.

8.3.1 The foreign vendors unless represented by the Indian agents, are
normally not registered with the Labs/Estts and access to their
products is through trade catalogues/other technical literature. The
demands initiated by the demanding officers should, as far as
possible, include names of likely foreign suppliers, to help
addressing tender enquiries to them, based on the response to
exploratory communications.

8.3.2 Labs/Estts may keep record of foreign vendors on the specific

recommendation of user and approval of Vendor Registration
Committee (refer Para 3.2) with details of past record, if any.

8.4 INVITATION/PROCESSING OF TENDERS: The tendering procedure for

inviting quotations and their processing for the imported stores, will be the
same as outlined in Chapter 7 except that the vendors will be asked to
quote using proper Incoterms see Appendix A (at the end), i.e., on

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 FCA/FOB basis. The following features may, however, be noted for
guidance:

(a) Adequate copies of tender documents under Global Tendering will be

forwarded to respective Indian Embassies/High Commissions. The
payment of the cost of tender documents will not be insisted upon and
left to the discretion of the respective Embassies/High Commissions
abroad.
(b) Stipulation regarding EMD may not be necessary in respect of foreign
vendors. Security deposit, however, will be insisted upon for the
performance, by way of a bank guarantee, whenever considered
appropriate.
(c) A specimen proforma for "Invitation of Tender for Import" is at
DRDO.MM 31.

8.5 INDIAN AGENTS/AGENCY COMMISSION: It is not the policy of

Government per se to look for, encourage or engage agents. Wherever it is
possible to secure supplies and ensure after-sale-services etc; on
reasonable terms without the intercession of agents, there is no need for
engaging any such agent. In all other cases, the employment of Indian
agents by foreign suppliers for purchases made by DRDO, as may be found
necessary shall be regulated by the following, on a case to case basis:-

8.5.1 Indian Agents of foreign suppliers (Authorised Representatives/

Agents/Sales Consultants or by whatever name called) employed by
foreign suppliers for the promotion of their product must be
registered with the DGS&D/Ministry of Defence/Labs/Estts of DRDO.
The Indian agents/Indian representatives of foreign firms/original
equipment manufacturer who are registered /enlisted with DGS&D
and Ministry of Defence need not be required to register again but
those who are not registered with either of these agencies may be
registered with DRDO after obtaining following details:-
(a) Name of foreign firm/ Original Equipment Manufacturer
represented by the Indian representative/ Indian agent
(b) Agency Agreement
(c) PAN Number, name and address of bankers in India and
abroad
(d) The nature of services to be rendered by Indian agent/ Indian
representative and
(e) Percentage of Commission payable to Indian agent/ Indian
representative by Principal/ Original Equipment Manufacturer
(OEM).

8.5.2 The amount of commission payable would be brought on record and

made explicit so as to ensure compliance of tax laws and prevent
leakage of foreign exchange. Lab/Estt Director would ensure that the
commissions payable are paid in Indian Rupees only, in compliance
with the provisions of FEMA and the Hand book on Import/Export
procedure. Lab/Estt Director would ensure at source deduction of the
Income tax as per prevailing rules from the agency commission
payable to the vendor in order to avoid tax evasion.

8.5.3 An undertaking would be obtained from the Indian

representative/Indian agent to the effect that agency commission

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 would be accepted in Indian rupees only. Where the agency
commission is payable directly by the foreign Principals/Original
Equipment Manufacturer, such commission shall be received through
inward FFE remittance through banking channels and disbursed to
the Indian agent in rupees only.

8.5.4 The nature of services to be rendered by Indian agent/ Indian

representative of OEM/foreign suppliers and the commission payable
to Indian agent / Indian representative shall unambiguously be
reflected in the supply order/contract. All particulars relating to
agency commission should be reported by Lab/Estt to the
Enforcement Directorate. Ministry of Defence has instructed that in
all future contracts with the foreign suppliers, the following clauses
will be included in all supply orders/contracts for supply of costly
equipment

(a) Penalty for the use of undue influence

(b) Access to books of accounts
Detailed text of above clauses as approved by Min of Law,
Justice and Company Affairs is included in the Form MM-23.

8.5.5 Ministry of Defence has since constituted a Committee for

considering procurement of items, which cannot be procured directly
from the manufacturers. DRDO has, however, been exempted from
reference to this Committee to import components, materials, sub-
assemblies, equipment (process/test evaluation) in small numbers
and critical technology items (equipment, components, sub-
assemblies and materials) which original manufacturers (OEMs)
currently do not manufacture or the equipment is obsolete and
procurement from OEM is not possible. Such cases need not be
referred to the Committee if the cost of import is below Rs. 50 crore.
The procurement can directly be made under the existing delegate
powers from the established sources of supply other than OEMs.

8.5.6 Where regional offices of foreign firms have been authorised and set
up within the country, they will not be treated as agents of the
foreign firms and the financial dealings with such regional offices will
be restricted to the norms stipulated by the RBI for each specific
case. Such regional offices form integral part of the foreign vendors
and their functions are totally controlled by their corporate office
abroad and are hence not entitled to any agency commission.

8.5.7 Where Indian/regional offices of foreign firms are to provide post-

sale services, such as installation, setting to work, execution of
warranty operations and post-warranty maintenance etc; such
stipulation will explicitly be made in the terms and conditions of the
supply order/contract. Payment on this account will be made in
Indian rupees, except for the cost of spares/services required from
abroad for post-warranty maintenance.

8.6 TENDER PROCESSING, TECHNICAL EVALUATION AND OPENING OF

PRICE BIDS: The procedure for tender processing, technical evaluation,
opening of price bids will be as per the guidelines given in Paras 7.12, 7.13
and 7.14.

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 8.6.1 If any clarifications on the offers received are required from the for-
eign firm, the same will be obtained through correspondence /
fax/e_mail.

8.6.2 As the validity of offers from the foreign firms is often for a short
period, the tender processing, technical evaluation, etc. should be
done promptly to avoid expiry of quotations and revision of prices.

8.7 CONDUCTING OF TPC/NC: Normal procedure for constitution and

conducting of TPC/NC for imported stores (above Rs 5 lakh value) will be
the same as outlined in Paras 7.15 to 7.21.

8.7.1 If the price offered is considered reasonable or is in conformity with

the catalogue price and other commercial terms are acceptable, the
TPC/NC may take decision without the necessity of negotiations.

8.7.2 Where the offers have been received through the Indian
representatives of foreign principals or through the regional offices
(located in India) of foreign firms, participation of firm’s
representatives in the negotiation meetings may be possible. TPC
will always negotiate with the lowest technically acceptable offer. In
respect of quotations received from abroad, it may not be always
possible for the foreign vendors to come for TPC/NC meeting except
for high value items. In such cases TPC/NC may invite revised best
offer with all terms clarified from the lowest bidder through
fax/e_mail before finalising the price.

8.7.3 After deliberations of the TPC/NC, the final recommendations along

with the case, will be submitted for financial sanction to the CFA and
release of FE as mentioned in the succeeding paragraphs.

8.8 RELEASE OF FOREIGN EXCHANGE: Allocation of bulk FE will be made

by DRDO HQrs (DMM) to the DRDO Labs/Estts/Major CCPA
Programmes/LCA in consultation with the Integrated Finance and MOD (D-
Budget). This allocation will be made at the beginning of financial year and
on as-required basis depending upon the exigencies.

8.8.1 FE Release by the Lab/Estt Directors (up to Rs 15 lakh): The

Directors of Labs/Estts are delegated with powers to release FE up
to Rs 15 lakh in each proposal/contract only on cash outgo basis in
the same financial year up to allocated ceiling. The amount of all
such FE releases will be noted by the local office of the CDA (R&D)
on case to case basis.

8.8.2 FE Release above Rs 15 lakh: The FE release above Rs 15 lakh

will be made on case-to-case basis by DMM, DRDO HQrs against
the proposals forwarded by Labs/Estts. The noting of such FE
releases will be made by the Integrated Finance (R&D). All releases
on commitment basis for any amount will be processed through
DMM, DRDO HQrs.

8.8.3 Norms for Release of FE (Paras 8.8.1 and 8.8.2): The essential
conditions governing release of FE, required to be observed, are
indicated hereunder:

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 (a) All cases of FE release, complete in all respects, will be
submitted to the appropriate sanctioning authority along with
the following documents:
(i) Valid quotation(s),
(ii) PAC or CST, as applicable,
(iii) TPC/NC minutes with specific recommendations/ approval,
(iv) Proforma as per DRDO.MM 19/DRDO.MM 20,
(v) Anticipated amount of cash outgo within the current
financial year and commitment in the ensuing year(s),
(vi) Request for financial sanction in cases beyond Director’s
delegated powers, and
(vii) Checklist for scrutiny of FE proposal as given at DRDO.MM
21/DRDO.MM 22.

(b) The proposals shall not be split merely to bring them within the
delegated powers.
(c) The import in question is covered by an appropriate rupee
budgetary support during the financial year.
(d) The approved FE ceiling for a financial year is intended to cover
the outgo in respect of all previous commitments as well as
fresh commitments made during the year. No further
commitment will be made unless it is ensured that adequate
provision exists for the same.
(e) The FE is released and noted on CIF/CIP basis. It may,
therefore, be ensured that even if the freight and insurance are
paid in Indian rupees, the same will be noted against the
foreign exchange allocation, as these are treated as charge
against foreign exchange.
(f) The noting will be made on cash outgo basis against the
financial year in which the payment is to be made. If the foreign
exchange released is not utilised during the year in which it was
noted, the same will be got denoted for the current year and
noted for the next financial year after the fresh allocation is
made.
(g) Allocations made to Labs/Estts shall not be exceeded in
anticipation of additional funds. Additional allocations will be
sought from DRDO HQrs well in advance to ensure timely
allotments.

8.8.4. Customs Duty Exemption/Prompt Clearance: Government has

exempted all imports made by DRDO from payment of Customs Duty
vide various notifications issued from time to time. These benefits
will be availed on all imports. As such, close liaison will be
maintained with the Air Consolidation Agents to ensure clearance of
goods from customs without payment of customs duty and within
the prescribed period of free limit so as to avoid payment of
demurrage/warehousing charges.

8.8.5. FE Release for Major Programmes and LCA Project: The release
of FE under the Major Programmes/Projects is regulated on the
basis of approval accorded by the CCPA and competent authorities
from MOD (Fin) and Ministry of Finance. The authorities under such

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 delegated powers will release the FE, on as-required basis. FE
beyond the delegated powers will be referred to DRDO HQrs (DMM).

8.8.6. FE Noting:
(a) FE released by the Directors of Labs/Estts under their
delegated powers (up to Rs 15 lakh in each case) will be noted
by the concerned local CDA (R&D) offices.
(b) FE released by DRDO HQrs (DMM), above Rs 15 lakh value in
each case, will be noted by IF (R&D).
(c) FE released under delegated powers vested in various
authorities of Major Programmes and LCA Project will be noted
by the DFAs/JCsDA and DG, ADA respectively.

8.8.7. Reporting and Monitoring: The status of FE release notings made

at Labs/Estts level will be reported periodically to DRDO HQrs
(DMM) as per directives issued by them from time to time. The
DRDO HQrs (DMM) in consultation with Integrated Finance (R&D),
will monitor the FE status for reporting to Ministry of Defence (D-
Budget), as per their requirement.

8.9 PLACEMENT OF PURCHASE ORDER/CONTRACT: After release of FE,

the purchase order/contract will be placed on the foreign supplier for the
required items as per the quotation and approval accorded by the CFA. All
Supply/Purchase Orders will be placed on FCA/FOB basis and shall include
special instructions, if any, governing packing/forwarding, insurance,
airfreight, transportation, etc. Specimen proforma for supply orders is
placed at DRDO.MM 23. Acknowledgement proforma is placed at
DRDO.MM 24.

8.9.1 All Supply/Purchase Orders will be signed by the authorised officer

only ‘for and on behalf of the President of India’.

8.10 END USE CERTIFICATES: Wherever required, Labs/Estts will render end
use certificates to appropriate authorities to enable the consignor to seek
clearance for export of items from the country of origin, keeping in view the
guidelines provided by C-Tech at DRDO HQrs.

8.11 IMPORT CERTIFICATES: For certain category of stores, Import

Certificates are required for facilitating export by the vendors from their
country due to restrictions imposed by some foreign Governments. Such
certificates will be issued by C-Tech, DRDO HQrs when required by the
Labs/Estts.

8.12 LETTERS OF CREDIT (LCs)/SIGHT DRAFTS: The normal terms of

payment to foreign vendors are 100 per cent payment through Letters of
Credit/Sight Drafts with 10% performance bank guarantee, wherever
required. The LCs covering 100 per cent net FOB (gateway airport) value
of supply order, will be opened by Labs/Estts through
CDA(R&D)/JCDA(R&D) in State Bank of India after receipt of order
acknowledgement from the foreign supplier. For LC opening in any other
nationalised bank, prior approval from DRDO HQrs through DMM is
required. Normally, irrevocable LCs will be established. In exceptional
cases when insisted upon by the supplier, establishment of confirmed LCs,
involving higher banking charges, will, however, be allowed. Advance
payment of margin money will not be made at the time of submission of LC

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application. Only after the bank receives shipping documents, the actual
amount will be paid. In the event of cancellation of a supply order/contract
due to reasons beyond control of the Lab/Estt., Directors are authorised to
regularise the banking charges already incurred in respect of LC's
opened/cancelled, under LP budget head.

8.12.1 Requisite number of copies of the following documents will be

forwarded to the CDA/JCDA(R&D) for opening LCs:

(a) Application addressed to bank for opening LC (specimen copy

illustrated at DRDO.MM 25),
(b) Application to open irrevocable/confirmed documentary credit
(specimen copy illustrated at DRDO.MM 26),
(c) 'Form A1' (specimen copy illustrated at DRDO.MM 27),
(d) Supply Order and amendments, if any,
(e) FE release letter, and
(f) Order acknowledgement (DRDO. MM 24) received from the
vendor.

8.12.2 Sight Drafts: This is another mode of payment for remittance of

money to foreign vendors who do not accept payment through LC,
for small value orders. In such cases, payment is released after
receipt of the consignment based on complete set of dispatch
documents negotiated through bankers. Full payment to the extent
of 100 per cent FOB (gateway airport) value can be released
through Sight Drafts. In case of sight drafts all documents listed at
Para 8.12.1 except (b) will be forwarded to CDA/JCDA(R&D).

8.12.3 Advance Payments: Advance payments should be avoided as far

as possible. However, in case of import of capital equipment and
high value items, Labs/Estts may pay advance up to 30 per cent of
FOB (gateway airport) value of the supply order/contract to the
foreign firm against proforma invoice and bank guarantee (format
placed at DRDO.MM 28), when insisted upon by the firm or standby
letter of credit from first class banks. Before affecting payment,
bank guarantee/standby letter of credit shall be got vetted and
accepted by the SBI/any other designated bank through whom the
payment has to be affected so as to ensure their genuineness.

8.12.4 For low value orders up to Rs. 2 lakh in foreign exchange can be
paid as advance to the firms of repute/having good past record
through Tele-transfer/advance draft when no other mode of payment
is acceptable to the firm. Directors are authorised to approve such
advances if considered appropriate.

8.12.5 In case of orders placed on departments of foreign governments,

government research institutions etc, the Labs/Estts may make
payment of 100 per cent advance on demand from the foreign
government agency against proforma invoice for the like amount
against suitable guarantees such as Bank Guarantee Bonds,
standby LCs, etc.

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 8.12.6 The advance payments to the foreign suppliers by all Labs/Estts
should follow the RBI rules in force on the date of payment, and the
policy laid down by DRDO HQrs from time to time.

8.12.7 Payment of Training, Installation and Commissioning Charges:

For purchase of capital equipment and its training, installation and
commissioning, the foreign firms may insist on payment of training,
installation and commissioning charges separately. In these cases,
the Labs/Estts will make such payments after obtaining approval
from RBI and the ‘No Objection Certificate’ from Income Tax Deptt
for payment of service charges. These payments will be made by
opening separate LC or by Sight Draft as mutually agreed upon.

8.13 INSURANCE COVERAGE: Directors of Labs/Estts will use their discretion

to insure through a nationalised insurance agency, against loss or
damages in transit, the sensitive/delicate/fragile/ costly stores/ equipment
/machinery and scientific instruments where probability of loss or damage
is very high. Further details on insurance coverage will be in conformity
with Para 7.42.

8.14 SHIPPING AND AIRFREIGHTING: The consignment will be despatched by

the foreign suppliers as per the shipping instructions contained in the
purchase orders/contracts on freight-collect basis by Indian vessels/Air
India.

8.14.1 Where the mode of transportation is by sea, the Lab/Estt will follow
the shipping instructions issued by the Ministry of Shipping &
Transport, Parivahan Bhawan, Sansad Marg, New Delhi-110 001
and ship their consignments through the agents of the Ministry of
Shipping. All contracts/supply orders should be placed on
FCA/FOB basis and freight charges paid in Indian currency at the
destination point.

8.14.2 For dispatch of consignments by air, the Labs/Estts will follow the
instructions given as per the rate contract concluded by DMM,
DRDO HQrs with a consolidation agent.

8.14.3 In special cases, Labs/Estts may use the services of other

agents/Embarkation HQrs for import of stores. In such cases,
Lab/Estt will make a separate arrangement with the consolidation
agent/Embarkation HQrs for completing other formalities like
customs clearance, etc.

8.14.4 In case the goods are not insured during transit, the value of the
consignment should be declared to the carrier before dispatch of
the consignment by sea. This would enable claiming the full
amount from the carrier on the basis of value of the consignment
rather than according to weight, in case of loss while in the custody
of the carrier.

8.15 CUSTOMS CLEARANCE: Imports by DRDO are generally exempted from

customs duty by giving an appropriate Customs Duty Exemption Certificate
(CDEC).

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 8.15.1 Direct Imports: Whenever the Lab/Estt is importing directly, from a
foreign supplier by paying in FE, it is considered a direct import.
For this DRDO HQrs issues a certificate signed by CC R&D (R).
This certificate enables Lab/Estt Directors to issue CDECs for all
direct imports.

8.15.2 Third Party Imports: These imports are those where the purchase
order is placed on a third party who will import on behalf of
Lab/Estt, get custom cleared and then deliver the stores. These
CDECs will also be issued by Lab/Estt Directors and countersigned
by CC R&D (R) through DMM. These imports with CDEC must be
kept to the minimum.

8.15.3 Labs/Estts will prepare all their documents including CDECs well in
advance to avoid delay and demurrage in clearing the
consignments. The format and instructions are given in DRDO.MM
32.

8.15.4 For direct imports, the following documents will be made available
to the clearing agency well in advance of the landing of
consignment to facilitate clearance of air/ship consignments
without payment of Customs Duty on landing at destination:

(a) Original Bill of Lading duly endorsed by bank and consignee

(for ship consignments),
(b) Original Air Way Bill (AWB) or bank delivery order (for air
consignments),
(c) Invoice,
(d) Packing list,
(e) Copy of purchase order,
(f ) Technical write-up and descriptive illustrated
catalogue/literature,
(g) CDEC, and
(h) Any other relevant documents.

8.15.5 On arrival of the cargo or based on the manifest filed by the

carrier, the bill of entry is made by the clearing agency and
submitted to the appraiser who will, in turn assess the Customs
Duty, if leviable or exempt the consignment from duty. As DRDO is
mostly exempted from the payment of Customs Duty, it is essential
to ensure that the nomenclature/description of stores along with
their code numbers, if any, tally with each other on all these
documents together with the imported value obviating the scope for
any doubt. Any discrepancy in documentation may lead to
imposition of Customs Duty, which should be avoided.

8.16 EXPORT OF ITEMS ‘NOT REPAIRABLE IN INDIA’: Occasions arise when

imported equipment need repair after the warranty period, either by the
firm who supplied the item or by their authorised agency located abroad.
The repairable items, at times, are also required to be sent abroad after
receipt of the free replacement. Items may need repairs abroad during
warranty period. For all such repairs/replacements, the equipment needs to
be exported either free of charge or on payment. In such cases, the
following documents will be produced while exporting the items:

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 (a) Export proforma,
(b) Requisition for carriage,
(c) Packing note-cum-invoice,
(d) Airworthy certificate,
(e) Airlift sanction,
(f) Firm’s letter of acceptance,
(g) FE release certificate,
(h) ‘Not Repairable in India’ certificate by the Director of Lab/Estt,
(j) Initial import details like Bill of Entry, AWB, etc, and
(k) Reserve Bank of India clearance, wherever necessary as per
Exchange Control Regulations.

8.17 SPECIAL PROVISIONS FOR EQUIPMENT IMPORTED FOR TRIAL/

DEMONSTRATION/TRAINING: Special items which are not available nor
are manufactured in India, and are needed for the purpose of trial or
demonstration of defence equipment, can be imported by DRDO Labs/Estts
under Customs Notification No. 42/74 and 150/94, as amended from time to
time. If such items are to be re-exported after trial/demonstration, a
certificate to that effect should be obtained from the Deputy/Under
Secretary, Ministry of Defence (R&D) and produced to the Customs
authorities. Such items are required to be re-exported within a period of
six months from the date of clearance. Extension of time can be availed
from the concerned Asstt Commissioner of Customs on a written request.
If these items are to be consumed/are consumed in the trial/demonstration,
a certificate to that effect will be obtained from the Deputy/Under
Secretary, Ministry of Defence (R&D) and produced to the Customs
authorities.

8.18 REFUND CLAIMS: If Customs Duty is paid for any consignment which is
otherwise eligible for duty-free import, the refund claims will be filed with
Customs immediately. All relevant and supporting documents will be
enclosed along with the claim for submission to Asstt. Commissioner of
Customs (Refunds) for claiming refunds.

8.19 APPEALS: The refund claims, however genuine, are at times rejected by
the Asstt. Commissioner of Customs (Refunds) due to various technical
reasons like:

(a) Relevant documents not produced by the consignee,

(b) Discrepancies exist in the documents produced,
(c) Customs Notification under which exemption is claimed is not
mentioned or mentioned inaccurately, and
(d) Delay in filing refund claim, etc.

Adequate care should be taken to ensure that customs refund appeals are
not rejected due to procedural lapses.

8.19.1 In such cases appeals can be filed with the Commissioner of

Customs (Appeals) within mandatory period as decided by
Customs to avoid rejection. If this appeal is also rejected, and
Lab/Estt considers the refund claim should be processed further,

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 an appeal can be filed with Central Excise & Gold (Control)
Appellate Tribunal (CEGAT), New Delhi within six months of
rejection, on payment of prescribed fees. Generally, the decisions
of CEGAT are final and binding. The appeals can, however, be
taken up with the Special Cabinet Committee (High Power
Committee) constituted to study inter-departmental disputes
through DRDO HQrs giving chronological history of events leading
to rejection, in special cases only. This committee does not
consider cases below Rs. 2 Lakh. Therefore, all such cases may be
closed after necessary loss statement and approved by DRDO
HQrs (DBFA).

8.19.2 Labs/Estts will maintain a register for 'Refund Claims for Customs
Duty' which will be updated with the latest progress of each case.
Director and Head, MMG of the Lab/Estt will periodically inspect
this register. An annual report based on this register may be sent
to DMM, DRDO HQrs.

8.20 DEMURRAGE/WAREHOUSE CHARGES: Free clearance of the imported

stores should be ensured within the stipulated clearance period.

8.20.1 Any expenditure incurred as demurrage/warehouse charge is

construed as cash loss and will need approval of the CFA for
regularisation. Hence, Labs/Estts should endeavour to clear all
foreign consignments promptly to avoid payment of
demurrage/warehousing charges.

8.21 LOSS/DAMAGE/SHORT-LANDING: Defence consignments are not

normally opened by the Customs. If loss/damages are suspected, a survey
can, however, be conducted at the behest of the consignee/clearing agent
in order to ascertain such loss/damage by a Survey Board duly constituted
by Director of Lab/Estt. Representatives from the Lab/Estt, clearing agent,
carriers, insurance company (if stores are insured) are to be present in the
Survey Board. A survey report will be prepared and sent to the Lab/Estt
and clearing agent. Notice of liability for the loss/damage will be sent to
the supplier/carrier as the case may be, within 14 days of the survey and
claim for the loss/damage/short-landing lodged within 120 days from the
date of Airway Bill/Bill of Landing.

8.22 DRAW BACK CLAIMS: Sometimes goods imported by paying Customs

Duty are to be exported back to the country of origin, on non-returnable
basis. If the duty paid has not been refunded, a draw back claim can be
preferred on the Customs. Procedure for such claims is laid down in
Customs Act, 1962, Chapter X.

8.23 PAY BACK DEMAND NOTICE: All refund claims, which have been passed
and refund cheque issued, undergo scrutiny of Central Revenue Audit. If
any discrepancy in the claim is found during such audit scrutiny, Custom
authorities issue Pay Back Notice to the importer for returning the amount
refunded forthwith, along with the reasons for making such untenable
refund claims. In such cases, Labs/Estts will interact briskly to sort out
problems promptly. Inept handling of such cases will complicate the
situation and invite adverse criticism from the higher authorities.

8.24 INLAND TRANSPORTATION: For air consignments, the consolidator will

arrange transportation to the Labs/Estts on prescribed rates as per the

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 existing rate contract. In case of ship consignments, concerned Lab/Estt
can authorise Embarkation HQrs in specific cases to arrange for
transportation by rail/road. The payment of transport charges in such
cases will be borne by the respective Lab/Estt. Alternatively, the Lab/Estt
can depute representatives for collection from Embarkation HQrs or from
the port directly.

8.25 ACCEPTANCE/ACCOUNTING OF IMPORTED STORES: The procedure for

acceptance, inspection and accounting of imported stores will be the same
as applicable for indigenous items.

8.26 IMPORTANT DOCUMENTS USED IN IMPORTS: In international purchas-

ing, special documents, not used in indigenous purchases are required. A
brief description of commonly used documents, for clear understanding, is
given in the following:

(a) Bill of Lading/Airway Bill: These documents are evidence of the fact
that the goods have been despatched by the exporter by sea/air and
give the importer title to the goods and enable them to claim the
goods on arrival in India.
(b) Invoice: The commercial invoice describes the merchandise, indicates
the price, identifies the buyer and the seller, vessel/name of the
carrier, port of discharge, export and import permit numbers, etc.
(c) Certificate of Origin: This is required by the Customs authorities for
clearance and for assessment of duty, as duties on imported goods
are not same for all countries.
(d) Weight Certificates: These certificates help in organising best mode
of arrangements for the carriers and freight forwarders and
transporters.
(e) Insurance Policy: It is a contract between the insurer and the
insured. The insurer pays a premium and the insured agrees to
indemnify against loss/damage and other perils of sea/air carriage.
(f) Packing List: A packing list indicates the exact nature, quantity and
quality of contents together with address, dimensions, weight, etc of
each package in a shipment and helps in clearance through Customs.

8.27 SMALL VALUE IMPORTS THROUGH TAs (DEFENCE) IN

HCsI/EMBASSIES: For requirement of small value items where tendering
action may not attract any response or is not considered worthwhile, the
services of Technical Advisers (TAs) of High Commission of India (HCI),
London/Indian Embassy in USA, may be availed for import/purchase of
such items.

8.27.1 Labs/Estts intending to avail such services, will seek release of FE

and place funds at the disposal of HCI, London/Indian Embassy
(USA), to enable them (TAs) to make prompt payments at the time
of purchase from the foreign vendors.

8.27.2 The normal procedure for Customs clearance of the stores in

question will apply in these cases on arrival of the consignment in
India.

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 CHAPTER 9

BANKING INSTRUMENT

9.1. GENERAL: Import is regulated by the Directorate General of Foreign

Trade (DGFT) under Ministry of Commerce and Industry, Department of
Commerce, Government of India. Authorised dealers, while undertaking
import transaction, should ensure that the imports into India are in
conformity with the Export Import Policy in force and Foreign Exchange
Management.

9.1.1 Importer should follow normal banking procedures and adhere to the
provisions of Uniform Customs and Practices for Documentary
Credits (UCPDC) while opening Letters of Credit for import into
India.

9.2 LETTER OF CREDIT (LC): A letter of credit is a written understanding

given by the buyer’s bank (the issuing bank) on behalf of and at the request
of its customer (the applicant) routed through the agency of a bank in the
seller’s country (advising bank) to the seller that it (issuing bank)
guarantees to pay the seller for the goods within a specified time provided
that the conditions laid down in documentary credit are fully satisfied. A LC
can be established in any of the 27 Public Sector banks besides SBI.
Ministry of Finance, Banking Division ID No. 19/1/2002-BOA dated 24-6-
2002 is placed at Appendix ‘A’ (at end of chapter) in this regard.

9.3 REASONS FOR USING LC: In international trade, buyer and seller being
located in different countries may not know each other well. The two
countries will have different legal systems, currencies, trade and exchange
regulations. Due to this fact both the Buyer and Seller, need some
conditions to be fulfilled, to suit their requirements, before releasing the
payments and goods respectively. The buyer and seller want the following:
-

(a) Seller would want: -

(i) To be paid as soon as he ships the goods

(ii) An assurance that he will be paid by the buyer or his bank as

per contractual obligations.

(iii) Convenience of receiving payments in his own country.

(b) Buyer would want: -

(i) To pay for the goods only after they are shipped by the seller.

(ii) An assurance that seller will ship the goods ordered for and
deliver them in time.

9.4 BASIC FORMS OF LSC : - Basic forms of LsC as applicable to Defence

Departments are enumerated below:-

(a) Revocable letter of credit.

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 (b) Irrevocable letter of credit.

(c) Confirmed letter of credit.

(d) Revolving letter of credit

9.5 REVOCABLE LETTER OF CREDIT: A revocable letter of credit is one which

may be amended or cancelled by the issuing bank at any moment without
prior notice to the beneficiary. Therefore such a type of letter of credit does
not give complete sense of security to the beneficiary. However when the
revocable letter of credit is made available at a branch of a bank concerned,
the notice of amendment or cancellation is effective only upon receipt of
such notice. If such a bank has undertaken liability (i.e. Paid, negotiated or
accepted) against documents, which appear on the face of it to be in
conformity with the terms and conditions of the credit before notice of
amendment/cancellation, then the issuing Bank is bound to reimburse such
a bank. If the letter of credit is silent as to whether it is revocable or
irrevocable, the credit is deemed as IRREVOCABLE.

9.6 IRREVOCABLE LETTER OF CREDIT: when the issuing Bank gives a definite,
absolute and irrevocable undertaking to honour its obligations provided the
beneficiary complies with all the terms and conditions such a credit is
known as an irrevocable letter of credit. That means that the letter of credit
cannot be amended, cancelled or revoked without the consent of the parties
to the letter of credit. This gives the beneficiary definite protection.

9.7 CONFIRMED LETTER OF CREDIT: A confirmed letter of credit is one when

another Bank in the beneficiary’s country adds its confirmation at the
request of the issuing Bank. This undertaking of the confirming Bank to
pay/negotiate/accept is in addition to the undertaking of the issuing bank.
This is an added protection to the beneficiary. This is not to be agreed as it
undermines the credibility of our Nationalized Banks.

9.8 REVOLVING LETTER OF CREDIT: In such credits, the amount is restored,

after it has been utilized, to the original amount. Such credits are used
when the buyer is to receive partial shipment of goods at specific intervals
for a long duration. It can be cumulative or non-cumulative in nature. It
avoids opening letter of credit for each and every consignment.

9.8.1 The above LsC can be divisible, non-divisible. Divisible LsC are
opened when more than one Beneficiary is allowed and payment has
to be made as per consignment.

9.9 PROCEDURE FOR OPENING LC: The procedure for opening of an LC

would generally include steps as given below: -

(a) Step-1: Receipt of PBG and Readiness of Goods. Contract

concluding Dte/MoD receives readiness of goods for shipment as per
contractual terms from the supplier.

(b) Step-2: The Contract concluding authority / Dte seeks FFE release
from the appropriate authority. The IFA is to note the FFE and
budget outgo and the approval of CFA is obtained.

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 (c) Step-3: On release of FFE the contract concluding authority forwards
the case for opening of LC to CDA (R&D) who after proper scrutiny
of all details for correctness, authorizes the bank to open LC. The
bank establishes the LC and intimates the CDA (R&D) and the
contract concluding authority.

9.10 PAYMENT THROUGH LETTER OF CREDIT: - The letter of credit

mechanism works as follows: -

(a) Buyer requests the issuing bank to open an LC.

(b) Issuing Bank conveys LC through advising bank.

(c) Advising bank advises the credit to beneficiary.

(d) Beneficiary after complying with terms and conditions against

stipulated documents gets the value either from the Advising bank or
Nominated bank as per the terms of LC.

(e) After passing on the value, negotiating Bank claims reimbursement

from the opening Bank or nominated bank as per the terms of LC.

(f) Ultimately opening Bank recovers the amount from the applicant. It
Is the definite commitment of Opening Bank to reimburse to the
negotiating bank whether applicant provides the value of negotiation
or not.

9.11 ESSENTIAL ELEMENTS OF LC: Following essential elements are to be

clearly stipulated while opening LC: -

(a) Type of LC

(b) Name and address of applicant and beneficiary

(c) Amount of credit and currency

(d) Validity of LC

(e) Latest shipment date (delivery date as per contract)

(f) Basis of delivery (FOB/FCA/CIP/CIF)

(g) Contract No. and date

(h) Shipment from …………. To …………

(j) Consignee and ultimate Consignee

(k) Part shipment allowed/not allowed

(l) Documents required to be produced by the beneficiary for release of

payment from LC

(m) LD Clause

(n) Any other special instructions.

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9.12 DOCUMENTS TO BE PROVIDED BY THE SELLER: Paid shipping
documents are provided to the Bank by the Supplier as proof of dispatching
goods as per contractual terms so that the supplier gets his payment from
LC. The Bank forwards these documents to the Buyer for getting the
goods/stores released from Port/Airport. Documents include: -

(a) Clean on Board Airway Bill/Bill of Lading

(b) Original Invoice

(c) Packing List

(d) Certificate of Origin from Seller’s Chamber of Commerce

(e) Certificate of Quality and current manufacture from OEM

(f) Dangerous Cargo Certificate, if any.

(g) Insurance Policy of 110% if CIF/CIP contract.

(h) Certificate of Conformity & Acceptance test at PDI, signed by

Buyer’s and Seller’s QA Deptt.

(j) Phyto-sanitary/Fumigation Certificate.

(k) Performance Bond/Warranty Certificate

(l) Authenticated signature of the supplier or his authorised rep should

be available with the bank and verified by them before releasing LC
payment.

The above details should form part of the contract.

9.13 EXTENSION OF LC: Following points should be checked before

initiating the case for extension of LC by Contract concluding
Directorate/MoD: -

(a) Extension of delivery date in the contract and corresponding

amendment in LC for latest date of shipment.

(b) Performance Bank Guarantee (PBG) extension.

(c) Onus of charges for LC extension.

9.13.1 IFA clearance and CFA approval should be obtained prior to

extension of LC.

9.14 DIRECT BANK TRANSFER: A transferable credit is a credit under which

the Beneficiary may request the bank authorised to pay, incur a deferred
payment undertaking, accept or negotiate or in the case of a freely
negotiable credit, the bank specifically authorised in the credit as a
transferring bank to make the credit available in whole or in part to one or
more than one beneficiaries. Direct Bank Transfer shows high degree of
trust between parties. Buyer ensures that the payment is released only
after receipt of the following:-

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 (a) Clean on Board Airway Bill/Bill of Lading

(b) Original Invoice

(c) Packing List

(d) Certificate of Origin from Seller’s Chamber of Commerce

(e) Certificate of Quality and current manufacture from OEM

(f) Dangerous Cargo Certificate, if any.

(g) Insurance Policy of 110% if CIF/CIP contract.

(h) Certificate of Conformity & Acceptance test at PDI, signed by

Buyer’s and Seller’s QA Deptt.

(j) Phyto-sanitary/Fumigation Certificate.

(k) Performance Bond/Warranty Certificate

The above details should form part of the contract.

9.14.1 After obtaining the above documents, the concerned Dte. Authorizes
CDA(R&D) for Direct Bank Transfer. CDA(R&D) in turn authorizes
the Buyer’s bank to make direct transfer of funds to Seller’s bank
account.

9.15 ADVANTAGES: Following advantages accrue in comparison to payments

through LsC: -

(a) Payment released only after receipt of goods.

(b) Payment to be made only after full satisfaction to the quality,

quantity etc.

(c) Cost-effective-inexpensive compared to LsC.

For contracts below USD 50,000.00, DBT payment terms should be insisted
upon, at the time of concluding the contract.

9.16 SPECIFIED TIME LIMIT AND DELIVERY SCHEDULE The normal delivery
schedule for spares procurement in case of LC and DBT payment terms
should be as follows: -

(a) L/C Payments :- Six months from the date of signing of contract
which will include :-

(i) Obtaining export license and giving notification of readiness

for opening of L/C by seller – 45 days.

(ii) Obtaining Foreign Exchange Release and opening of L/C

through CDA(R&D) by buyer – 45 days

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 (iii) Validity period of L/C – 90 days. The LC will be opened three
months prior to the expiry of delivery period only.

In case the spares under procurement are in large quantity or their

technical production cycle is long as specified by the seller in the
tender enquiry, then the LC shall be opened for more than one
quarter as agreed by the TPC/CNC.

(b) DBT Payments :- Preferably within three months of signing of the

contract

9.17 PERFORMANCE BANK GUARANTEE (PBG): A written undertaking

through the bank to perform the promise/terms and conditions of the
contract and to ensure the discharge of liability of supplier in case of his
default. Format of performance bank guarantee is given in MM forms.

9.18 ESSENTIAL ELEMENTS OF PBG: Essential elements of PBG are :-

(a) Amount.

(b) Address of Beneficiary, Applicant and Bank.

(c) Validity date.

(d) Contract Number and Date.

(e) Bank should release the amount without any demur on receipt of a
written order from beneficiary.

9.19 SALIENT FEATURES OF GUARANTEES: Salient features of Guarantees

are given below:-

(a) Guarantees are absolute in character and independent of underlying

contract.

(b) Obligation to pay not to perform.

(c) Un-conditional and without demur payment against valid claim.

(d) For specified amount and period.

(e) Issued against matching counter-guarantee from the applicant.

9.20 INVOCATION OF GUARANTEES: Guarantees can only be invoked after

fulfilling the following conditions:-

(a) Should reach issuing Bank on or before expiry date.

(b) Should be in strict conformity with Guarantee terms.

(c) Issuing Bank not to enquire into merits of claimer or take views on
dispute between applicant and beneficiary.

(d) On compliance of terms of guarantee, payments effected

immediately and unconditionally.

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9.21 CONFIRMATION OF PBG. Advice of SBI should be taken as to whether
the foreign bank providing Bank Guarantee for advance is a first class
bank of international repute before taking a decision whether such PBG
should be further confirmed by SBI, BOB, Canara Bank and BOI.

- 72 -
 Appendix ‘A’

Government of India
Ministry of Finance
Banking Division
BOA Section
*****

Sub: Opening of letter of Credit and other related transactions through Public
Sector Banks.

Ministry of Defence (Finance Division) may please refer to their ID note no.
230(13)96/BII dated 18.03.2002 on the subject above and to say that no specific
instructions have been issued by the Banking Division in this regard. However,
Ministry of Defence may enter into banking arrangements of any kind including letter
of credit with any of the 27 Public Sector Banks.

Sd/-
(MRS. KIRAN S KHULLAR)
SECTION OFFICER (BOA)

Banking Division ID Note No. 19/1/2002-BOA dated 24.06.2002

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 CHAPTER 10

EVALUATION OF QUOTATIONS AND PRICE REASONABILITY

10.1 INTRODUCTION: In any purchase decision, the core issues to be decided

by the CFA are whether the offered items meet the essential tender
requirements, prices being charged are reasonable and the procedures
followed are proper, fair and transparent. In this regard, provisions in
General Financial Rules, 1963 (GFR) are as follows: -

“The responsibility and accountability of every authority delegated with

financial powers to procure any item or service on Govt. account is total
and indivisible. Government expects that the authority concerned will have
public interest upper most in its mind while making procurement decision.
This responsibility is not discharged merely by selection of cheapest offer
but must conform to the following yardsticks of financial propriety: -

(a) Whether the offers have been invited in accordance with the
governing rules and after following fair and reasonable procedures in
prevailing circumstances.

(b) Whether the authority is satisfied that the selected offer will
adequately meet the requirement for which it is being procured.

(c) Whether the price of the offer is reasonable and consistent with the
quality required.

(c) Above all, whether accepted offer is the most appropriate one taking
all relevant factors into account and keeping with the standards of
financial propriety.
(Min. of Finance O.M. No. F23 (10).E 11(A)/86 dt. 29.-06-89

10.2 Provisions relating to economy in procurement of stores estimated cost for

purchase of stores in the GFR is reproduced below: -

(a) Rule 103 “Purchases shall be made in most economic manner in

accordance with the definite requirements of the public service.”

(b) Rule 105(1) All indents sent out shall state clearly and accurately
the grant number and the head of account to which the cost of stores
is debit able, the amount of appropriation provided and an estimate
of cost of each item.

10.2.1 In many cases CVC had observed that the estimated rates were
worked out in an unprofessional and perfunctory manner. CVC
further observed that estimated rates are vital element in
establishing the reasonableness of prices and therefore, should be
worked out in realistic and objective manner on the basis of
prevailing market rates, last purchased price, economic indices for
raw material / labour, other inputs costs, and assessment based on
intrinsic value etc.

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10.3 EVALUATION OF QUOTE: The first step in arriving at the decision regarding
reasonability of price or otherwise is to know the exact cost of the
proposal. In order to do this, all valid quotes have to be ranked as per the
criteria indicated in the tender enquiry. In order to ensure that all offers
are compared in an equitable and fair manner and the vendors are
provided a level playing field, all elements of cost, including the terms and
conditions with financial implications are to be taken into account while
ranking quotes.

10.4 PRELIMINARY EXAMINATION OF QUOTES: The purchase cell/officer

should examine the quotations to determine whether they are complete in
all respects, and check for any computational errors will be rectified on the
following basis: -

(a) If there is a discrepancy between the unit price and the total price
that is obtained by multiplying the unit price and quantity, the unit
price shall prevail and the total price shall be corrected.

(b) If there is a discrepancy between words and figures, the amount in

words shall prevail.

10.5 COMPARATIVE STATEMENT OF TENDERS (CST): On receipt of all

accepted tenders, the purchase cell is to collate them in the form of
Comparative Statement of Tenders (CST). The CST will be exhaustive and
is to include all details given in the quotations. Deviation from the tender
documents is to be brought out in the CST. LPP, wherever available,
should be indicated for a fair comparison of the offered prices. CST will be
vetted by the IF(R&D)/CDA(R&D) representative (for cases above Rs 5
Lakh) with regard to original quotations, indents and other supporting
documents. The IFA(R&D)/CDA(R&D) representative and purchase officer
will sign the CST.

10.6 BENCH MARKING: Before scheduled negotiation (wherever considered

necessary) it would be advisable to work out estimated reasonable rate. In
case of single tender cases, a technical team should make an assessment
of estimated cost based on available information. The approach to be taken
for assessing reasonability in different contingencies is given below.

1 0 .7 REASONABLENESS OF PRICES IN COMPETITIVE TENDERING: In the

case of competitive tendering where two or more vendors are competing
independently to secure a contract, the competitive bids form the basis for
pricing. Database maintained on cost based on concluded contracts, price
of the product available through market should also be used to assess
reasonableness of the price offered.

(a) Evaluation of tenders is made on the basis of the ultimate cost of the
user.

(b) As a general principle, no offer involving any uncertain or indefinite

liability or any condition of unusual character should be considered.

(c) The reasonability of the price proposed has to be established by

taking into account the competition observed from the response of
the trade to the enquiry, last purchase price, estimated value as
given in the indent, database maintained on costs based on the past
contracts entered into, market price wherever available and changes

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 in the indices of various raw materials, electricity, whole sale price
index, and statutory changes in wage rates etc.

(d) Procurement of spare parts, consumables and small value contracts

which are supplied in the past, the price reasonableness can be
determined after comparing with last purchase price after factoring in
changes in price indices published by the Government sources.

(e) The reasonability of price may also be examined, by resorting to

Cost Analysis in situations where there is a wide variance over the
LPP not explained by corresponding changes in indices.

(f) Effort should be made to check cost break up details as per format
placed at Appendix ‘A’ (at the end of chapter) to the extent possible.
A Book examination clause should be invariably provided in the
Tender Enquiry.

10.8 LAST PURCHASE PRICE (LPP): LPP is one of the relevant factors
in deciding the price reasonableness. However, following needs to
be considered while comparing the quoted rates with the LPP:-

(a) LPP of more than three years vintage is not taken as a real scale for
comparison. However, such LPP could be used as an input for
assessing the rates.

(b) LPP should pertain to a past successfully executed order of similar

magnitude and scope of supply.

(c) Factors like basket price and bulk discount offered need to be taken
in to account while using LPP as a scales for comparing prices.

(d) Price variation clause, if any, and the final cost paid by the Govt. in
respect of last purchase to which LPP pertains to be considered.

(e) Factors like items supplied against LPP being of current production
or ex-stock supply need to be taken into account..

(f) Market conditions and extraneous factors like re-starting production

lines due to obsolescence may also have to be considered.

10.9 LACK OF COMPETITION: Exists in the following situation:-

(a) The number of acceptable offers is less than three.

(b) Ring prices have been quoted by all tenderers (Cartel formation).

(c) The product of only one manufacturer has been offered by all the
tenderers irrespective of the number of quotations.

(d) Store under purchase is chronically in short supply against which a

number of acceptable offers never exceeds two.

10.9.1 In the case of single tender not covered under para 13.9 above,
analysis of the costs and price structure may be done to ensure that
the price quoted is reasonable with reasonable profit margin. In this

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 regard GFR rule 102 (1) and para 9 of the annexure containing
instructions for purchase of stores is reproduced below: -

“Where the lines of manufacture are the monopoly of a single firm or a

group of firms, or where a significant increase over the purchase price, not
explained by a corresponding increase in price of raw material or of labour
charges, is being asked for, the reasonableness of the offer is determined
with reference to the actual cost of production plus a reasonable margin of
profit. In such cases, the indigenous manufacturer should be asked to
accept the order on actual cost plus a reasonable fixed margin of profit,
with quoted price being the ceiling subject to adjustment after necessary
cost check. Prior consent of the competent financial authority should be
obtained by the purchases offer before entering into a contract relating to
uncertain conditions, wages, and cost of raw materials. Wherever
possible, the right to examine firm’s books should also be reserved, except
where details furnished by the firm provide an adequate check and are
satisfactory in all respects.”

10.10 ADAPTATION OF DISCOUNTED CASH FLOW TECHNIQUE (DCF): The

Discounted Cash Flow is defined as “method of evaluation by which cash
flow of the future are discounted to current levels by the application of a
discount rate with a view to reducing all cash flow to common denomination
and make comparison” : DCF is also defined as “ a method of investment
appraisal under which today’s cash outflows are compared with today’s
cash inflows”

10.10.1 The DCF procedure is to reduce both cash inflow and out-flows
into net present values (NPV) through the DCF methods, which
would be more scientific and reliable. The use of Net Present Value
(NPV) analysis in Cost and Price Analysis is based on the concept of
time value of money. The money has a time value because of the
opportunity to earn interest or the cost of paying interest on
borrowed capital. This means that a sum to be paid today is worth
more than a sum to be paid in a future time. The cash out
flow/inflows and the average cost of capital i.e., cost of borrowing
becomes an important constituent in evaluation process. The NPV
of a stream of cash flows is described as follows: -

C1 C2 C3
NPV = ------- + -------- + -------- + ------
1+r (1+r) 2 (1+r) 3

or

∑ Cn
NPV = ---------
(1+r) t

In the formula
C is the expected payoff at a period mentioned by the subscript n.
r is the rate of interest.
t is the period after which the payment is done.
n is payment schedule as per the payment terms and conditions.

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 10.10.2 The alternative with the smallest payment of net present value
in the procurement is the obvious choice. The DCF may be
made use of to facilitate determination of L1 in following
procurement situations: -

(a) To compare different payment terms of the vendors to a

common denomination for determining L1 status.

(b) To deal with the cases where entering into AMC over a period
of 10 to 11 years is part of the contract for evaluating for L1
status.

10.10.3 Ministry of Finance has also clarified that determination of L1

by merely adding arithmetic values spread over 12 to 13 years
(2 years warranty and 10 to 11 year AMC) would be an
incorrect procedure for determining L1 and the correct
procedure would be reduced cash out flows into present
values through the DCF technique for which the discount rate
to be adopted should form part of the tender enquiry.

10.11 DISCOUNTING RATE: The cost of borrowing to the Government is the

relevant discounting rate for the purpose of evaluation. The Ministry of
Finance and Company Affairs prescribes the lending rates of the loans
to be charged by the Central Government from State Governments,
Public Sector Undertakings and Financial Institutions etc. At present
this rate is 9%.

10.11.1 In the tender enquiry, where DCF method is to be used, a

clause may be incorporated in the tender enquiry as follows: -

“The buyer reserves the right to evaluate the offers received

by using Discounted Cash Flow method at a discounting rate
of ______%”.

10.11.2 In case cash flow involves more than one currency, the same
to be brought to a common denomination, say Rupees by
adopting exchange rate as on the date of the opening of price
bids. “Excel” or any standard spreadsheet has the features
for carrying out this exercise.

10.11.3 Ministry of Finance & Company Affairs letter dated 11 Nov

2002 placed as Appendix ‘B’ (at the end of chapter) also
clarifies the position on DCF.

10.12 PRICE VARIATION CLAUSES/PRICE ADJUSTMENT: Normally contract

should be entered into on firm price basis. Nevertheless in the fluctuating
market conditions, supplier often quotes variable prices, particularly when
contract period exceed 12 months. DGS&D Manual has provided
Standardised Price Variation Clauses. These clauses should be indicated
in the tender enquiry. A sample clause is indicated below:-

P1 = P0 (a+b L1/ L0 + c M1/M0) - P0

Where P1 = Adjustment amount payable to the contractor

P0 = Contract Price (Base Price)
a = Fixed element representing Profit & Overloads

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 in contract price
b = Estimated % of labour component
c = Estimated % of Material component
L0 & L1 = Labour indicates applicable to appropriate
Industry on the base date & date of adjustment
respectively.
M0 & M1 = Material indicates for raw material on base
date & date of adjustment.
The sum of the three coefficients a, b & c shall be (1)

10.13 CONDITIONS APPLICABLE TO PRICE ADJUSTMENT:

(a) Base dates shall be due dates of opening of Tenders

(b) Date of adjustment shall be midpoint of Manufacture.

(c) Price adjustment will be applied only if the resulting increase or

decrease is more than 2% of contract price
(d) No price increase is allowed beyond original DP unless the delay is
attributable to the buyer

(e) Total adjustment will be a maximum of 10% of contract price

(f) No price adjustment shall be payable on the portion of contract price

paid to the contractor as an advance payment. The Price Variation
Clause and its implication should be got vetted by
IF(R&D)/CDA(R&D) (for cases above Rs 5 lakh).

10.14 EXCHANGE RATE VARIATION (ERV) : In case delivery period exceeding

one year from the date of contract involving import (foreign exchange),
ERV clause is to be provided. The offer should indicate import content. In
case DP is re-fixed / extended, ERV will not be admissible if this is due to
default of supplier. Base exchange rate of each major currency used for
calculating FE content of the contract is to be indicated. The base date for
ERV would be contract date and variation on the base date can be given
upto the midpoint manufacture unless firm has already indicated the time
schedule within which material will be exported by the firm. Other
conditions as above for price adjustment would be applicable.

10.15 DOCUMENTATION FOR CLAIMING ERV:

(a) A bill of ERV claim enclosing worksheet

(b) Banker’s Certificate / debit advice detailing FE paid & Exchange

rate.
(c) Copies of import orders placed on the suppliers

(d) Invoice of supplier for the relevant import orders

10.16 SINGLE TENDER/NONCOMPETITIVE CONTRACTS – INDIGENOUS

PROCUREMENT:

Where after the analysis of technical bids only one party remains
competing for a contract for supply of a product or service or where one
vendor has been nominated including Defence Public Sector Undertakings,
such a case becomes a non-competitive contract or a single vendor/tender

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contract. The cost and the price offered by the vendor in such cases,
particularly when, in the recent past reasonable quantities of such items
have not been procured which will facilitate any comparison, needs to be
scrutinized to assess that the price offered is reasonable and economical.
To assess the reasonable price the following steps could be considered for
the projects supplied in the past indigenously or by an Indian vendor.

(a) In case of products, which have been supplied in the past, the actual
cost of production of the completed contract or supplies may be
obtained in addition to the price quotation. The current Cost of
Production may be assessed keeping in view the actual cost of
production duly updated to current rates.

(b) The break up of the material cost into the imported and indigenous
material. In case of imported material, break down of Foreign
Exchange content, foreign currencies involved, exchange rate
adopted and other costs to be obtained. In respect of Direct Material,
various types of material used, their spec(s), unit rates and usage
factor and credit for scrap arising should be assessed by a Technical
Team and rates vetted by IF (R&D)/CDA (R&D) (for the cases above
Rs 5 lakh).

(c) The man-hour rate (MHR) rate and Total Standard man-hours (SMH)
should be assessed.

(d) Cost Break up should be obtained as per format placed at Appendix

‘A’ (at the end of the chapter).

(e) Balance sheets and profit and loss accounts during the last three
years should be analysed, wherever made available.

(f) In case where advance or progressive payments are required to be

paid, the advantage of advance in terms of lower cost of production
should be considered.

(g) Where the order is for larger quantity, the benefit of economy of
scale due to higher capacity utilisation and reduction of overheads
particularly fixed overheads should be taken into account.

(h) There should be clear linkage between price negotiated and

quantum of advance.

WEB SITES

(j) In regard to price indices of indigenous items, website of Ministry of

Industry www.eaindustry.nic.in should be accessed for the latest
indices/trends. For metals and other minerals access
www.mmr.online. com for updates. The other useful sites are
www.tradintelligence.com and www.cmie.com. The monthly report
of CMIE (Centre for Monitoring Indian Economy). Prowess Package
of CMIE giving updates on performance of listed Indian companies,
RBI monthly bulletin, Economic survey and its Appendix containing
statistical tables are excellent reference material for market trends.
The World Economic Outlook – a monthly report from IMF, gives
inputs on price trends of different countries. LME (London Metal

- 80 -
 Exchange) gives price trends of nonferrous details, which often show
volatile trends. Indices of electronic items often show lower trends.
Instructions issued by Ministry of Finance on its web site
www.finmin.nic.in should be assessed as also CVC’s site
www.cvc.nic.in.

(k) The price should normally be on ‘Firm Price’ basis. When contracts
are concluded with provisions for variation in price, the formula on
which price variation is based should be clearly spelt out indicating
the base price of the raw material, labour, overheads and duties etc.,
on which price variation is to be allowed. Price variation should be
considered up to the schedule date of delivery. Escalations beyond
scheduled dates may be considered when the delay in execution of
contract is attributed to the buyer.

(l) Tender enquiry should invariably contain a book examination clause in

addition to the clauses on Agents and Agency Commission & Undue
Influence. Costing expert should be associated in the TPC/NC for cost
assessment etc. For cases beyond Rs 20 crores (single vendor cases)
in addition to DRDO’s costing expertise.; Adviser (Cost) under MOD
(Fin) can be consulted who could be made a part of TPC/NC to render
advice on cost examination till such time a full time cost expert is
available as a part of DRDO HQ.

10.16.1 The format in which data is to be sought from single vendor is placed at
Appendix ‘A’ (at the end of chapter). Validation of total Standard man-hour SMH
figures could be a time consuming affair. These are indicative guidelines and
should not hold up finalisation of TPC/NC negotiations.

10.17 SINGLE TENDER / NONCOMPETITIVE CONTRACTS – FOREIGN

PROCUREMENT:(for cases above Rs. 20 Cr) Apart from the parameters
enumerated at Para 10.16 regarding analysis cost break up and price indices
wherever feasible, efforts should be made to analyse.

(a) The price fixation procedure/methodology prevailing in the country of

the vendor.

(b) Compare with the prices of similar products, systems and

subsystems wherever available should be referred. The database
maintained in the respective division connected with the procurement of
such type of stores should be accessed.

(c) Other Production Agencies (if any) would be involved in assessing

the reasonability of prices in such cases of high value.

(d) The foreign vendor may be asked, to provide the details of past
supplies and contract rates if any of similar kind of product to other buyers.

10.18 DATA BASE ON COST & PRICES:

10.18.1 DRDO should have costing expert as part of Directorate of Materials

Management. Costing expert would advise on reasonableness of price,
escalation clauses, cost verification where prices are fixed subject to a
ceiling price. DRDO should maintain data base on past contracts showing
details of items procured, their essential spec(s), unit rate, quantity, total
value, mode of TE, number of tenders received, number of tenders

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 considered acceptable, reasons of exclusion of overlooked tenders, un-
negotiated rate of L1 and contract rates in order to help in ascertaining
reasonableness of prices of future procurements. In case of DRDO HQ, the
costing expert would function under the overall administrative jurisdiction
of Director of Materials Management and Chief Controller Research &
Development (Resources & Management) and would also provide required
costing expertise to Integrated Finance.

10.18.2 For price indices, Internet facility should be accessed by officers dealing
with purchases/associated with TPC/NC from important sites as
enumerated at para 10.16(i) above. The Directorate of Material
Management (DMM) and IF(R&D) should subscribe to important
publications like RBI Monthly Bulletin, CMIE’S monthly report, Economic
Times/Financial Express, MMR etc.

10.18.3 Expert agencies should be approached for market intelligence forecasting

trends and best practices. Public Sector Banks, particularly SBI, should be
consulted before firming up major payments involving LC, Performance
Bank Guarantee, reputation of foreign banks etc.

10.18.4 In assessing the reasonableness, general analysis of Financial/Cost

ratios from published accounts and evaluation of Commercial/Technical
information of the Vendor/Bidder may be undertaken. The allocation of
overheads should be as per established principles of costing.
Assessment should be made on the vendor’s approach to controlling cost,
adherence to delivery schedule, Cost Accounting System and other
factors affecting contractor’s ability to meet cost/schedule targets.

10.18.5 Even when only one bid is submitted, it may be considered valid if the bid
is satisfactorily advertised and price quoted is reasonable in comparison
to market value and assessed price.

10.18.6 Assessing of reasonability may be an arduous task, especially where

price data is not available or in case of overseas purchases. In such
cases it is important to place on record efforts made for arriving at a price
and taking procurement decision.

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 APPENDIX-A

FORMAT OF COST ANALYSIS

Dept / Wing Break- Up of Fixed Price Quotation Appendix-I
Produce
Base Year of Quote
Quantity:
(Rs. in Lakhs)
S.N.O Particulars Previous Year of Remarks
Year Quote
Rs. Rs.
1 MATERIAL
1.1 Imported
i) Raw Materials
Rejection ( % on (i)
ii)Bought Out items
Rejection ( % on (ii)

Sub-total-1.1
1.2 Indigenous
i) Raw Materials
Rejection ( % on (i)
ii)Bought Out items
Rejection ( % on (ii)
iii)ATF
Sub-total-1.2
Total – 1.1 + 1.2
1.3 Freight & Insurance Charges
( % of (1.1 + 1.2)
1.4 Storage & Handling Charges
( % of (1.1 + 1.2)
Material Cost sub- Total-1
2 CONVERSION COST
Manhours x MHR

Sub-Total – 2
3 NON-RECURRING COST
Sub-Total – 3
4 SUNDRY DIRECT CHARGES
Sub-Total – 4
5 FINANCING COST
Sub-Total 5
6 Total of Sub-totals (1 to 5)
7 Warranty Cost
( % of 6)
8. Total Cost (6+7)
9. Profit ( % of 8)
10. Selling Price (8+9)

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 Appendix ‘B’

No.8 (6)/CAB/2002
Ministry of Finance & Company Affairs
Department of Expenditure
Cost Accounts Branch
Lok Nayak Bhawan,
2nd Floor “C” Wing,
New Delhi – 110003
Dated 11th November 2002

OFFICE MEMORANDUM

The undersigned is directed to refer to I.D. No. 2376/DFA

(Acq)/2002, dated 9th September 2002 on the subject “Adoption of
Discounted Cash Flow (DCF) Technique for Defence Procurement”.

In this connection, the paragraph-wise views of this office are as

under:-

(a) & (b): Generally the technique of DCF is adopted to evaluate

the projects, when the outflow/inflow of cash is over a period of
time. In the instant case, the charges for AMC are to be paid over
a period of 13 to 14 years. Consequently the total outflow of cash
won’t be in one year but in installments over a period of time.
Hence in such circumstances, it is always advisable to evaluate
the project under DCF. As regards the question of whether DCF
for determining the lowest tender is being adopted in all cases
universally by the DOE, this office is not in a position to respond.
DOE may kindly be addressed in this regard.

(c) It can be conveyed to the vendors at the time of inviting the

bids itself. However, there is no harm in applying this technique
even at the time of evaluation of tenders uniformly in respect of
all the bids.

(d) The lending rate prevailing at the time of evaluating the

project can be adopted as discounting factor.

(e) Yes, keeping in view the outflow/inflow of cash over a

period of time, it is always desirable to apply the discounting
factor to arrive at Net Present Value (NPV) for the preparation of
Comparative Statement Table (CST) to take a decision.

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 Ministry of Defence may refer to this office for any clarification/Price
fixation or Book examination leading to determination of the cost of
production/Fair Selling prices or any other assistance relating to
Costing/Financial analysis as and when the need for the same arises.

Sd/-
(RK Paul)
Adviser(Cost)
Tel: 4618913
Fax : 4698179

Shri Bulbul Ghosh

Additional Financial Advisor & JS,
Ministry of Defence,
R.No. 134-A, South Block,
New Delhi-110001

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 Chapter 11

PROCUREMENT OF MATERIALS: CENTRAL PURCHASE

11.1 GENERAL: In compliance with the latest Government policies, the

purchases of all Government departments have been decentralised.
Consequent to this, the DRDO Labs/Estts have been authorised to process
their own purchases based on their respective purchase procedures.

11.1.1 Due to dilution of the purchase activity in the DGS&D, they have
been relieved of the responsibility of making central purchases for
the Government departments. They, however, conclude rate
contracts for general use items required by Government
departments, against which DRDO Labs/Estts can place direct
orders as per the procedure defined in Para 7.30.

11.2 AVENUES FOR CENTRAL PURCHASE: The eventualities and avenues open
for effecting central purchase are:

(a) Restricted items of supply such as ammunition, propellants, small

arms, weapons or components/sub-systems of defence hardware
required for R&D work.
(b) In cases where Labs/Estts feel it convenient to procure their
requirements of certain category of items through inter-service
channels.
(c) Where specific Government instructions exist to procure certain items
through inter-service channels, e.g., standard MT vehicles, FOL,
medical supplies, other ASC/Military Farm supplies.
(d) Option to procure common office equipment, general purpose and
special stationery items and certain category of publications through
DMR&F.

11.2.1 Various sources of procurement for central purchase in respect of

above category of stores are as follows:

(a) Central Ordnance Depots/Ordnance Depots,

(b) Naval Stores Depots,
(c) Air Force Depots,
(d) Armed Forces Medical Stores Depots/Govt. Medical Stores
Depots,
(e) ASC Supply/Petroleum Depots/Military Farms,
(f) Ordnance Factories, and
(g) DMR&F.

11.3 PROCEDURE FOR PROCUREMENT: The following procedure shall be

adapted for procurement of stores from the three Services
Depots/Ordnance Factories, etc:

(a) The requirement will be based on standard scales or on actual

requirements, duly approved by CFA.

- 86 -
 (b) The demand will be prepared in proper form duly signed by an
authorised officer and submitted to Services Depots/Ordnance
Factories.
(c) Controlled/census category of stores contained in the master list of
control/ census for the Army and equivalent publications in the Navy/
Air Force, will not be demanded by the Labs/Estts directly from the
Services Depots but got released from the respective service HQrs by
concerned Technical Directorate by submitting proper statement of
case justifying the necessity.

11.3.1 Ordnance Factories: Certain stores peculiar to Ordnance Factories

either stocked by them or manufactured by them, shall be procured
from the factories in the following manner:

(a) Factory Stocked Stores (FSS): Demands for such items shall be
raised directly on the factories concerned, with a copy to Ordnance
Factories Board (OFB).

(b) Factory Manufactured Stores (FMS): Such items shall be

procured by raising Syllabus Work Order Demand (SWOD) on OFB
with copies to concerned factory and their respective accounts office.

(c) For unrestricted items/stores/fabrication work, the Labs/Estts may

place supply orders/contracts after negotiating the price and other
terms.

11.3.2 Copies of all demands placed on OFB may be endorsed to DRDO

HQrs (DBFA) and the concerned pay office. For all central
purchases, Labs/Estts will send a quarterly report to DBFA along
with payment details, if any.

11.4 DMR&F: Procurement of common office equipment, e.g., electronic

typewriters, photo-copying machines, ammonia printing machines,
ammonia rolls, general purpose and special stationery items and certain
category of publications, under central purchase can be made by placing a
demand on the DMR&F directly.

11.5 LOAN ISSUES: Requirements of loan issues from other services will be
taken up with the appropriate controlling authorities at Service HQrs. The
approval of such issues will be taken by the concerned Technical
Directorate through DBFA at DRDO HQrs. Loan issues are made by
services for a specified period. Action for timely return or extension of loan
period will be taken promptly to avoid objections.

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 Chapter 12

PAYMENT/CLEARANCE OF BILLS

12.1 GENERAL: After the stores have been received in good condition,
inspected to the satisfaction of the user and Brought on Charge (BOC), it
becomes obligatory on the part of Lab/Estt to clear the contractor's bills
promptly. It is the responsibility of the officer who signs the supply
order/contract to ensure that the contractor's bills are paid as per terms
and conditions stipulated in the supply order/contract.

To prevent any misuse, all payments will be made by A/c payee cheque
indicating banker's name, branch and A/C No of the supplier. The supply
orders/contracts may include a clause asking the suppliers to quote their
banker’s name, branch and A/C No in their bills as a measure of safety so
as to enable the paying authority to draw /issue payment cheque
accordingly.

12.2 PROCESSING OF BILLS: All bills received will be registered centrally and
processed for payment. The following checks will be carried out:

(a) Prompt action should be taken with the suppliers for any discrepancy
detected in the contractor's bills.
(b) Bills prepared on prescribed form are pre-receipted bearing revenue
stamp on all bills exceeding Rs. 500/- in value.
(c) Amounts are shown both in words and figures and are rounded off to
the nearest rupee.
(d) The nomenclature of the items and the quantities are in accordance
with the supply order.
(e) The amounts claimed on account of incidental charges are
admissible as per terms and conditions of the order.
(f) Cash receipts/certificates are enclosed in support of packing and
forwarding charges and original cash receipts for postage and
insurance are enclosed wherever applicable.
(g) The Sales Tax Certificate is enclosed wherever Sales Tax is
claimed.
(h) No Sales Tax is claimed on forwarding charges.
(j) E.D., wherever it is necessary to be paid should be supported by the
E.D invoice duly signed by the authorized signatory of the company
in terms of E.D. notification.
(k) Original supply order is enclosed along with the bill. In case the
original supply order is lost, a certificate to that effect may be
demanded from the supplier. In case of any amendment to the
supply order, the original copy will be enclosed along with the bill.
(l) CRV/Inspection Report (IR) should invariably accompany the bills
being sent after accepting of goods without waiting. Nomenclature
of the items on CRV/IR should exactly correspond to those shown in
the supply order and the contractor's bill. Rates and total value of
all items, should be shown in the CRV/IR.
(m) Receipted copy of the delivery challan is enclosed with the bill.
(n) The arithmetical accuracy of the bills will be thoroughly checked
before clearance.
(o) Deductions will be made from the bills on account of
demurrage/wharfage paid by Labs/Estts on consignments due to late
receipt of RR/LR (Railway Receipt/Lorry Receipt).
(p) Income tax will be deducted, where leviable.

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 12.2.1 Time Schedule for Clearance of Bills: Expeditious processing of
bills, after acceptance of stores, is essential to ensure the payment
to the supplier to avoid legal repercussions leading to payment of
penal interest on delayed payments. For this purpose, the
Directors of Labs/Estts will issue local orders fixing time schedules
for completion of inspection, accounting and clearance of bills to
the paying authority for release of payment.

12.2.2 The bills for accepted stores along with copies of receipt voucher,
original purchase order and approved CST, shall be forwarded by
Lab/Estt (MMG) to local CDA(R&D)/ paying authority for issuing the
cheque directly to the contractor with bank A/C details under
intimation to the Labs/Estts. On the receipt of the cheque
slip/intimation from the paying authority, the cheque number, date
and amount will be entered in the bill register and cheque slip
inserted in the purchase file.

12.2.3 Balance Payment: Necessary entries in this regard will be made

in the progress register for advance payment. All advance
payments of 95 or 100 per cent shall be entered in the progress
register. The bills for the balance of 5 per cent payments to the
contractors shall be supported by CRV/IR and other connected
documents and linked with the advance drawn before forwarding to
local CDA(R&D)/paying authority for settlement.

12.2.4 Adjustment to Advances: All advances are to be settled within six

months from the date of receipt of stores. In the event of delay on
the part of vendor in claiming balance 5 per cent payment, such
settlement of advances (95 per cent), and bills along with CRV/IR
will be sent to paying authority for settlement.

12.2.5. Advance payments made to the vendors, will be entered in the

Advance Payment Register and submission of the adjustment /final
claims regulated with reference to this register.

12.2.6. All Labs/Estts will maintain a Register of Bank Guarantees,

Security Deposits, etc., accredited by the firms to the Labs/Estts,
to ensure their validity during currency of the contracts/supply
orders and release at appropriate time under the instructions of an
authorised officer not below the rank of Scientist E/equivalent,
entrusted with such responsibility by the Directors.

12.3 LOST/MISPLACED CHEQUES AND ISSUE OF FRESH CHEQUES: In the

event of loss/misplacement of cheques, the following procedure will be
followed:

(a) The beneficiary must lodge a written complaint to the Lab/Estt

regarding loss/misplacement of the cheque issued in his favour and
non-realisation of payment against a legitimate supply/service
rendered by him within the validity period of the cheque. After expiry
of validity period, the Lab/Estt will obtain a Non-Payment Certificate
(NPC) from the bank stating that the cheque has not been honoured
and no payment released to the beneficiary.

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 (b) The contractor/supplier will execute an indemnity bond on the
appropriate non-judicial stamp paper stating the fact of
loss/misplacement of the cheque ( No. __________Date_______
Amount___________) and non-encashment during the period of
validity.

(d) The original document at sub-para (a) and an attested copy of sub-
para (b) above will be forwarded to the concerned paying authority for
onward transmission to the CDA (R&D) with a request to issue a non-
payment certificate.

(e) The CDA(R&D), after verification and confirmation that the cheque in
question has not been encashed, will issue NPC to the paying
authority for issue of a fresh cheque.

(f) If, after verification, the CDA(R&D) finds that the cheque has been
paid, they (CDA, R&D) will send a photocopy of the cheque to the
paying authority concerned to take up the matter with the bank for
reconciliation and settlement.

12.4 PREPARATION OF CRVs: Labs/Estts will prepare CRVs immediately after

receipt, inspection and acceptance of stores. All efforts will be made to
prepare CRVs within 15 days of inspection and acceptance of stores at
Lab/Estt. Such CRVs will be sent immediately to paying authority (i.e. local
CDA) for settlement of advance, if any. In cases where bill for 5-10%
payments are received later, CRV No. and CRV date should be mentioned
while sending these bills for payment for linking by paying authority.

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 Chapter 13

PROGRESS REPORT ON PROCUREMENT, UTILISATION OF STORES AND

DISPOSAL OF OBSOLETE STORES

Plant, equipment and material are the vital inputs for research and
development activities of DRDO Laboratories/Establishments and the cost
of their procurement constitutes a significant portion of the R&D Budget. It
is, therefore, imperative that timely action is initiated and appropriate
monitoring mechanism is put in place in each and every case of
procurement, installation and commissioning of equipment/machine. As
such an Annual Action Plan for procurement, installation and
commissioning of equipment/machine should be meticulously drawn well in
advance. Annual Actions Plans must also be quarterly reviewed (as on 31st
March, 30th June, 31st October and 31st December) by Lab/Project
Director with a view to ensuring that timely procurement of stores helps in
completing the objectives of projects without any cost and time over runs.

13.1 ANNUAL REPORT BY LABS/ESTTS: Labs/Estts would forward reports to

DMM/DRDO HQrs at the close of each financial year covering instances of
abnormal delay adversely affecting completion of R&D Projects. Annual
reports while covering the following instances or delay should also
incorporate the reasons for delay and recommend reasons for minimizing
adverse effects of delay on completion of R&D project.

(a) All cases, where internal lead-time is more than one year i.e. where
more than one year is taken from demand initiation for procurement of
stores and issue of supply order.

(b) Instances of abnormal delay of more than one year in installation after
the receipt of machine/equipment in Lab/Estt.

(c) Any abnormal under utilization of equipment due to delay in

repair/servicing/upgradation etc.

(d) Any equipment lying unused for a period exceeding six months.

(e) All cases where machines/equipment costing more than Rs. 5 Lakh are
received after the closure of the project or at the fag end of the project i.e.
3 months ahead of PDC.

(f) Delay of more than six months in disposal of surplus/obsolete

equipment after being recommended for disposal.

13.2 REVIEW OF ANNUAL REPORT BY DRDO HQRS: DRDO HQrs will review
the annual report during first quarter of next financial year and submit the
same to the Secretary Defence R&D. Recommendations and remedial
measures suggested are to be scrupulously adhered to by the Laboratory
Director/Project Directors.

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 Chapter 14

MAINTENANCE/WEEDING OUT OF OLD RECORDS:

CONTRACTS/SUPPLY ORDERS

14.1 Constant review of old records/files will help to distinguish between the
documents essentially required to be maintained and those to be
destroyed. Weeding out of unwanted old records/files makes available
valuable space and helps in prompt retrieval of the desired files.

14.2 While undertaking the weeding out of records/files, it will be ensured that
the following types of files are not destroyed:

(a) Files containing Government sanctions, important policy decisions,

precedents, audit rulings, till they cease to have relevance.
(b) Files having historical value of information.
(c) Records pertaining to court cases and audit objections till their
finalisation/settlement.
(d) Registers for EMD/Security Deposits, Bank Guarantee Bonds,
Indemnity Bonds, Insurance Policies, etc.
(e) Contracts and supply orders files/documents not completing a period
of 7 years after materialisation or till completion of the test audit,
whichever is earlier.

14.3 All old records/files will be maintained in the Central Record Room by
Labs/Estts and access facilitated by feeding their location details into
Central Computerised Management Information System.

14.4 Destruction/weeding out will be approved by the Director, based on the

recommendation of a committee appointed for this purpose; certification
will be made by the head of the respective user group that the records
intended for destruction are no longer required.

14.5 A list of all files weeded out will be retained for record for a further period
of 5 years from the date of actual destruction.

14.6 All contracts/supply orders files weeded out, will be destroyed by burning
or shredding and will not be disposed off as waste paper to any private
party.

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 LIST OF REFERENCES

1. Policy Document on Materials Management in DRDO, 1996.

2. Joint Services Guide on Assessment and Registration of Vendors for

Defence JSG015:02:1995.

3. Rationalised Purchase Procedure, CSIR, 1988.

4. Purchase Procedure of Department of Atomic Energy, 1984.

5. Purchase Procedure of ISRO, Department of Space, 1983.

6. Purchase Instructions of Tata Institute of Fundamental Research, 1984.

7. Purchase Manual of Ordnance Factories Board.

8. Orders on Formation of Standing Negotiating Committee as followed by

ADA.

9. Guidelines for Negotiations, 1996 by Shri R Ramanathan, AS&Addl

FA(R&D), Ministry of Defence.

10. Buying Made Safer, Selling Made Simpler by Government of India,

Department of Supply, Ministry of Commerce.

11. Australian Government Purchasing Policies: First Report, 1995.

12. Export/Import Trade Control Policy, 1992-97 by Government of India,

Ministry of Commerce.

13. State Bank of India, Pune Branch Circular No. IBD/GEN/96-97/21 dated 02
May 1996 regarding Import Transactions (International Banking).

14. FRI Part I (1963 edition).

15. India Today, 30 November 1995.

16. Central Vigilance Commission directive No. 8(1) (h)/98(1) dated. 18

November 1998 and 08 March 1999.

17. MoD; DDP&S letter No.4 (3)/89/D(S-II) dated 17 June 1999.

18. INCOTERMS-2000 - Export, Costing & Pricing by Shri Paras Ram.

19. Defence Procurement Manual- 2005 ( Revenue Procurement)

- 93 -
 ABBREVIATIONS

1. A/c No Account Number

2. AD Acknowledgement Due
3. ADA Aeronautical Development Agency
4. Addl FA Additional Financial Advisor
5. Addl FA&AS Additional Financial Advisor & Additional Secretary
6. AFMSD Armed Forces Medical Stores Depot
7. AS Additional Secretary
8. ASC Army Supply Corps
9. A/U Accounting Unit
10. AWB Air Way Bill
11. BER Beyond Economic Repairs
12. BG Bank Guarantee
13. BIS Bureau of Indian Standards
14. BOC Brought On Charge
15. CCPA Cabinet Committee for Political Affairs
16. CDA Controller of Defence Accounts
17. CCR&D Chief Controller Research & Development
18. CDA(R&D) Controller of Defence Accounts (Research & Development)
19. CDEC Customs Duty Exemption Certificate
20. CEGAT Central Excise & Gold (Control) Appellate Tribunal
21. CFA Competent Financial Authority
22. CGDA Controller General Defence Accounts
23. CIF Cost, Insurance and Freight
24 CIP Carriage and Insurance Paid
25. CMC Computer Maintenance Corporation
26. CNC Contract Negotiation Committee
27. CRV Certified Receipt Voucher
28 CSD Canteen Stores Department
29. CST Comparative Statement of Tenders
30. CSIR Council of Scientific and Industrial Research
31. CVC Central Vigilance Commission
32. DECS Directorate of Electronic and Computer Science
33. DARL Defence Agriculture Research Laboratory
34. DAVP Director of Advertising and Visual Publicity
35. DBF&A Directorate of Budget Finance and Accounts
36. DBT Direct Bank Transfer
37. DCF Discounted Cash Flow Technique
38. DD Demand Draft
39. DDO Direct Demanding Officer
40. DEF Defence
41. DFA Deputy Financial Advisor
42. DFRL Defence Food Research Laboratory
43. DG Director General
44. DGFT Directorate General of Foreign Trade
45. DGS&D Director General Supplies and Disposals
46. DGQA Director General Quality Assurance
47. DMM Directorate of Materials Management
48. DMR&F Director Military Regulations & Forms
49. DP Delivery Period
50. DRDO Defence Research & Development Organisation
51. DRL Defence Research Laboratory
52. DTD&P (Air) Directorate of Technical Development & Production (Air)

- 94 -
53. DV Debit Voucher
54. ECIL Electronics Corporation of India Limited
55. EDEC Excise Duty Exemption Certificate
56. EMD Earnest Money Deposit
57. EPC Equipment Procurement Committee
58. ERV Exchange Rate Variation
59. ESTT Establishment
60. FBE Forecast Budget Estimates
61. FCA Free up to Customs Area
62. FE Foreign Exchange
63. FIFO First In First Out
64. FIN Finance
65. FMS Factory Manufactured Stores
66. FOB Free On Board
67. FOL Fuel Oil & Lubricants
68. FOR Free on Rail
69. FRI Financial Regulations of India
70. FRL Food Research Laboratory
71. FSS Factory Stocked Stores
72. GOI Government of India
73. GST Government Sales Tax (State)
74. HAL Hindustan Aeronautics limited
75. HAWB House Air Way Bill
76. HCI High Commission of India
77. IB Indemnity Bond
78. IBD International Banking Division
79. I/C In charge
80. IIT Indian Institute of Technology
81. IF(R&D) Integrated Finance (R&D)
82. IR Inspection Report
83. IS Indian Standard
84. ISI Indian Standards Institution
85 ISMs Indian Supply Missions
86. ISO International Standards Organisation
87. ISRO Indian Space Research Organisation
88. JCDA Joint Controller of Defence Accounts
89. JSG Joint Services Guide
90. KVIC Khadi and Village Industries Commission
91. L1 Lowest Acceptable Bidder
92. LAB Laboratory
93. LAO Local Audit Office
94. LC Letter of Credit
95. LCA Light Combat Aircraft
96. LD Liquidated Damages
97. LP Local Purchase
98. LIBOR London Inter Bank Offer Rate
99. LPP Last Purchase Price
100. LR Lorry Receipt
101. MES Military Engineering Service
102 MHR Man Hour Rate
103. MI ROOM Medical Inspection Room
104. MM Materials Management
105. MMG Materials Management Group
106. MMTC Mineral and Metal Trading Corporation
107. MOD Ministry of Defence
108. MT Mechanical Transport

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109. MSTC Metal Scrap Trading Corporation
110. M/s Messrs
111 NA Not Applicable
112. NB Please Note
113. NC Negotiation Committee
114. NPC Non Payment Certificate
115. NPV Net Rate Variation
116. NSIC National Small Industries Corporation
117 OEM Original Equipment Manufacturer
118. OFB Ordnance Factories Board
119. OGL Open General Licence
120. QTY Quantity
121. PABX Private Automatic Branch Exchange
122. PAC Proprietary Article Certificate
123. P/B/M Project/Build-up/Maintenance
124. PC Personal Computer
125. PDC Probable Date of Completion
126. PBG Performance Bank Transfer
127. PSU Public Sector Undertaking
128. R&D Research & Development
129. RBI Reserve Bank of India
130. RE Rupee Exchange
131. RR Railway Receipt
132. SASE Snow & Avalanche Study Establishment
133. SBI State Bank of India
134. S/L/O/P Single/Limited/Open/ Proprietary
135. SPC Stores Procurement Committee
136. SSU Small Scale Unit
137. STC State Trading Corporation
138. SWOD Syllabus Work Order Demand
139. TA's Technical Advisor's
140. TEC Technical Evaluation Committee
141. TPC Tender Purchase Committee
142. VPP Value Post Parcel
143. WDC Women Development Corporation

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 FLOW CHART – PROCUREMENT PROCEDURE

User Demand

MMG

No If available Yes
Issue

Purchase Process

Up to Rs 10000/- From Rs 10000-and above

Cash purchase
(Refer Chapter 6)

Project (With Special Powers)

Build-up,
Maintenance &
Project items
Project Stores SPC
Accounting Cell Recommendations
Demand Approval

Within Delegated Powers Beyond Delegated

Powers

Approval of Demand by
CFA/Director/Proj Dir
Approval by Director EPC Approval by R & D
HQrs (DMM)

Tendering Action

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 Tendering Action

Up to Rs 5 lakh > Rs 5 lakh

a) Techno Commercial/Price CST a) Techno Commercial CST

b) User Recommendations with TEC approval
c) Acceptance by CFA/Director b) Price bid Opening &
Negotiations by TPC/NC
With L1
c) TPC/NC Minutes & its
acceptance

Issue of Financial Sanction, Release of FE (if required)

Director of Lab/Estt/ Project Director DRDO HQrs (DMM)

a) Issue of Supply Order

b) Order Acknowledgement
c) Opening of LC (if required)

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 Levels of TPC

<= 1.00 Cr >1.00 Cr

Standing TPC/NC Case to case by DRDO HQrs (DMM)

a) From Rs. 5 lakh upto Rs. 50 lakh a) Above Rs.1.00 Cr upto Rs 3.00 Cr
Chairman: Sc ‘F’/equivalent or above Chairman- Director of Lab/Estt

b) Above Rs. 50 lakh upto 1.00 Cr b) Rs. 3.00 Cr and above

Chairman Director of Lab/Estt or Chairman- CCR&D
Sc ‘G’/equivalent

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 APPENDIX-A

INCOTERMS 2000
(In force from 01 Jan 2000)

EX WORKS (EXW)
(.......................named place)

"Ex Works" means that the seller delivers when he places the goods at the
disposal of the buyer at the seller's premises or another named place (i.e.,
works, factory, warehouse, etc.) not cleared for export and not loaded on
any collecting vehicle.

This term thus represents the minimum obligation for the seller, and the
buyer has to bear all costs and risks involved in taking the goods from the
seller's premises.

However, if the parties wish the seller to be responsible for the loading of
the goods on departure and to bear the risks and all the costs of such
loading, this should be made clear by adding explicit wording to this effect
in the contract of sale. This term should not be used when the buyer
cannot carry out the export formalities directly or indirectly. In such
circumstances, the FCA term should be used provided the seller agrees
that he will load at his cost and risk.

FREE CARRIER (FCA)

(.......................named place)

"Free Carrier" means that the seller delivers the goods, cleared for export,
to the carrier nominated by the buyer at the named place. It should be
noted that the chosen place of delivery has an impact on the obligations of
loading and unloading the goods at that place. If delivery occurs at the
seller's premises, the seller is responsible for loading. If delivery occurs at
any other place, the seller is not responsible for unloading.

This term may be used irrespective of the mode of transport, including

multimodal transport.

"Carrier" means any person who, in a contract of carriage, undertakes to

perform or to procure the performance of transport by rail, road, air, sea,
inland waterway or by a combination of such modes.

If the buyer nominates a person other than a carrier to receive the goods,
the seller is deemed to have fulfilled his obligation to deliver the goods
when they are delivered to that person.

FREE ALONGSIDE SHIP (FAS)

(.......................named port of shipment)

"Free Alongside Ship” means that the seller delivers when the goods are
placed alongside the vessel at the named port of shipment. This means

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 that the buyer has to bear all costs and risks of loss of or damage to the
goods from that moment.

The FAS term requires the buyer to clear the goods for export.

This is a reversal from previous Incoterms versions, which required the

buyer to arrange for export clearance.

However, if the parties wish the buyer to clear the goods for export, this
should be made clear by adding explicit wording to this effect in the
contract of sale.

This term can only be used for sea or inland waterway transport.

FREE ON BOARD (FOB)

(.......................named port of shipment)

"Free on Board” means that the seller delivers when the goods pass the
ship's rail at the named port of shipment. This means that the buyer has to
bear all costs and risks of loss of or damage to the goods from that point.
The FOB term requires the seller to clear the goods for export. This
term can be used only for sea or inland waterway transport. If the parties
do not intend to deliver the goods across the ship's rail, the FCA term
should be used.

COST AND FREIGHT (CFR)

(.......................named port of shipment)

"Cost and Freight" means that the seller delivers when the goods pass the
ship's rail in the port of shipment.

The seller must pay the cost and freight necessary to bring the goods to
the named port of destination BUT the risk of loss of or damage to the
goods, as well as any additional costs due to events occurring after the
time of delivery, are transferred from the seller to the buyer.

The CFR term requires the seller to clear the goods for export.

This term can be used only for sea and inland waterway transport. If the
parties do not intend to deliver the goods across the ship's rail, the CPT
term should be used.

COST, INSURANCE AND FREIGHT (CIF)

(.......................named port of destination)

"Cost, Insurance and Freight" means that the seller delivers when the
goods pass the ship's rail in the port of shipment.

The seller must pay the costs and freight necessary to bring the goods to
the named port of destination BUT the risk of loss of or damage to the
goods, as well as any additional costs due to events occurring after the
time of delivery, are transferred from the seller to the buyer. However, in
CIF the seller also has to procure marine insurance against the buyer's risk
of loss of or damage to the goods during the carriage.

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 Consequently, the seller contracts for insurance and pays the insurance
premium. The buyer should note that under the CIF term the seller is
required to obtain insurance only on minimum cover. Should the buyer wish
to have the protection of greater cover, he would either need to agree as
much expressly with the seller or to make his own extra insurance
arrangements.

The CIF term requires the seller to clear and goods for export.

This term can be used only for sea and inland waterway transport. If the
parties do not intend to deliver the goods across the ship's rail, the CIP
term should be used.

CARRIAGE PAID TO (CPT)

(.......................named port of destination)

"Carriage Paid To..." means that the seller delivers the goods to the carrier
nominated by him but the seller must in addition pay the cost of carriage
necessary to bring the goods to be named destination. This means that
the buyer bears all risks and any other cost occurring after the goods have
been so delivered.

"Carrier" means any person who, in a contract of carriage, undertakes to

perform or to procure the performance of transport by rail, road, air, sea,
inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination,
the risk passes when the goods have been delivered to the first carrier.

The CPT term requires the seller to clear the goods for export.

The term may be used irrespective of the mode of transport including

multimodal transport.

CARRIAGE AND INSURANCE PAID TO (CIP)

(.......................named port of destination)

"Carriage and Insurance Paid To" means that the seller delivers the goods
to the carrier nominated by him, but the seller must in addition pay the cost
of carriage necessary to bring the goods to be named destination. This
means that the buyer bears all risks and any additional cost occurring after
the goods have been so delivered. However, in CIP the seller also has to
procure insurance against the buyer's risk of loss of or damage to the
goods during the carriage.

Consequently, the seller contracts for insurance and pays the insurance
premium.

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 The buyer should note that under the CIP term, the seller is required to
obtain insurance only on minimum cover. Should the buyer wish to have
the protection of greater cover, he would either need to agree as much
expressly with the seller or to make his own extra insurance arrangements.

"Carrier" means any person who, in a contract of carriage, undertakes to

perform or to procure the performance of transport by rail, road, air, sea,
inland waterway or by a combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination,
the risk passes when the goods have been delivered to the first carrier.

The CIP requires the seller to clear the goods for export.

This term may be used irrespective of the mode of transport including

multimodal transport.

DELIVERED AT FRONTIER (DAF)

(.......................named place)

"Delivered At Frontier" means that the seller delivers when the goods are
at the disposal of the buyer on the arriving means of transport not
unloaded, cleared for export, but not cleared for import at the named point
and place at the frontier, but before the Customs border of the adjoining
country. The term "frontier" may be used for any frontier including that of
the country of export. Therefore, it is of vital importance that the frontier in
question be defined precisely by always naming the point and place in the
term.

However, if the parties wish the seller to be responsible for the unloading
of the goods from the arriving means of transport and bear the risks and
costs of unloading, this should be made clear by adding explicit wording to
this effect in the contract of sale.

This term should not be used irrespective of the mode of transport when
goods are to be delivered at a land frontier. When delivery is to take place
in the port of destination, on board a vessel or on the quay (wharf), the
DES or DEQ terms should be used.

DELIVERED EX-SHIP (DES)

(.......................named port of destination)

"Delivered Ex-Ship" means that the seller fulfils his obligation to deliver
when the goods have been made available to the buyer on board the ship
uncleared for import at the named port of destination. The seller has to
bear all the costs and risk involved in bringing the goods to the named port
of destination before discharging. If the parties wish the seller to bear the
costs and risks of discharging the goods, then the DEQ term should be
used.

The term can only be used only when the goods are to be delivered by sea
or inland waterway transport on a vessel in the port of destination.

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DELIVERED EX-QUAY (DUTY PAID) (DEQ)
(.......................named port of destination)

“Delivered Ex-Quay (duty paid)” means that the seller fulfils his obligation
to deliver when he has made the goods available to the buyer on the quay
(wharf) at the named port of destination, cleared for importation. The
seller has to bear all risks and costs including duties, taxes and other
charges of delivering the goods thereto.

This term should not be used if the seller is unable directly or indirectly to
obtain the import license. If the parties wish the buyer to clear the goods
for importation and pay the duty, the words "duty unpaid" should be used
instead of "duty paid".

If the parties wish to exclude from the seller's obligations some of the costs
payable upon importation of the goods (such as Value Added Tax (VAT)),
this should be made clear by adding words to this effect: "Delivered Ex-
Quay, VAT unpaid (... named port of destination)”.

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 INDEX

A Page No.

Abbreviation 94
Adaptation of Discounted Cash Flow Technique (DCF) 77
Adjustments to Advances 89
Advance Payments (FE) 89
Advance Payment Register 89

Agency Commission/Indian Agents 55

Allotment 4-5
Final
Initial
Provisional
Revised
Amendment to Supply Order 41
Annual Report by Labs/Estts 91
Appeals (Imported Items) 63
Approval of Demands 14
Arbitration 51-53
Arbitration-Foreign 53
Authority Level for Initiation of Demands 13
Avenues for Central Purchase 86

Balance Payment 89
Bank Guarantee 16,28,35
Bench Marking 75
Budget Allocation 04
Budget Formulation & Monitoring 03
Build Up Items 10

Capacity Verification 07
Carriage & Insurance Paid 102
Cash Outgo 03
Cash Purchase Approval & Processing 20
Cheques Lost/Misplaced 89
Classification Handbook 03
Code of Ethics 17
Common Factors for all Tenders 23
Comparative statement of Tenders 75
Competent Financial Authority 11,37,77
Computer System's Purchase 45
Conducting of TPC 33
Confirmation of PBG 72
Contract for Maintenance 45
Contract for Repair 45
Consumer Redressal Forum 51,53
Cost & Freight 101
CRV/Inspection Report 88,90
CST 31
Custom Clearance 61

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Custom Clearance- Third party import 62
Custom Exemption 58

Data Base on cost and prices 81

Delivery Period For ex-post-Facto Sanction 49
Delivery Period Revision 49
Demand Initiation 10
Demurrage Charge 64
Deviations from Standard Terms of Payment 39
DGS&D Rate Contracts 42
Direct Bank Transfer 69
Discounting Rate 78
Disputes/Consumer Redressal Forum 51
Dissenting Opinion 12,37
Distribution & Despatch of Supply Orders 40
DMR&F 87
Draw Back Claims 64
Drawl and Settlement of Advances 21
Drugs and Medicines 22

Earnest Money Deposit 27

End use Certificate 59
Entering of Rate Contract 42
EPC Approval 10
Evaluation of Quotes 75
Evaluation of Techno-Commerical Bids 30
Evaluation of Vendors 08
Exchange of Vendors Data 09
Exchange Rate Variation (ERV) 79
Exemption from Tendering 37
Export of Items 62
Extension of LC 69

FE-Demand Approval 54
FE Noting 59
FE Release for Major Programmes 58
FE-Requirement Projection 54
FE-Tender Processing 54
Fee for Registration 07
Financial Sanction of CFA 37
Fire Fighting Equipment Purchase 47
Flowchart - Procurement Procedure 97-99
Forecast Budget Report 05
Foreign Arbitration 53
Formats 01
Formulating Budget 03

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G

General Guidelines for Placement of Supply Order 15

Global Tenders 25
Guidelines for Negotiation 34
Guidelines - Rate/Running Contract 43

High Technology Projects 16

Hiring of Services 13

Import Certificate 59
Imported Stores:
Acceptance 65
Advance Payment (FE) 60
Conducting of TPC (FE) 57
Custom Clearance 61
HCI/Embassies 65
Important Documents 65
Placement of Contract (FE) 59
Procurement (Imported Items) 54
Release of FE 57
Reporting and Monitoring-FE Release 59
Small Value Imports through TAs in 65
Incoterms (2000) 100-104
Indemnity Bond 16,35
Initiation of Demands 10
Inland Transportation 64
Insurance Coverage 61
Invitation of Tenders 28
Irrevocable Letter of Credit 67

Late/Delayed Tenders 29
Leasing of Capital Eqpt. 47
Letter of Credit 59,66
Letter of Intent 39
Limited Tenders 25
Liquidated Damage 51
Loan Issues 87
Local Purchase Against DGS&D 42
Loss/Damage Claims 64
Lost Cheques 89

Maintenance of Old Records 92

Material Management Policy 01
Mode of Tenders 24
Monitoring of Progress 50

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N

Negotiation - Guidelines 34

Obligatory Expenditure 03
Open Tenders 24
Organisation Goals 03

Payment Clearance of Bills 88

Payment of Training Inst. & Commissions (FE) 61
Payment Terms 38
Performance Guarantee 37
Preliminary Examination of Quotes 75
Preparation of Demands 14
Price Escalations 49
Price Variation clauses/Price adjustment 78
Principles of Purchase 15
Procurement Procedure -CP 86
Flow Chart 97
Procurements of Materials (LP) 23
Processing of Bills 88
Progress Review Teams 51
Protective Clothing and Liveries Purchase 47
Purchase/Supply Order Preparation 39

Refund Claims 63
Register of Foreign Vendors 09
Registration of Vendors 06
Removal of Registered Vendors 08
Repeat Orders 41
Review of Annual Report by DRDO Hqrs 91

Scrapping of Tenders 29
Scrutiny by TPC 36
Security Deposit 28
Selection of Type of Tenders 27
Selection of Vendors 06
Shipping and Air Freighting 61
Single Tender 26
Single Tender with PAC Purchase 37
Source of Vendors 06
Special Dispensation with Remotely Located Labs 22
Special Provision for Imported Eqpt. for Trial 63
Specifications 12
Stationery Purchase 46
Statutory Levies 48
Store Procurement Committee (SPC) 11
Supply Order Progress Register 40

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Supply/Purchase Order Amendments 41

Tender-Common Factors 23
Tenders Exemption of 37
" Global 25
" Invitation 28
" Late/Delayed 29
“ Open 24
" Scrapping of 29
" Single With PAC 27
Time Schedule for Clearance of Bills 89
TPC - Constitution 31
Transit Insurance Coverage 48

Vendors Registration Report 07

Vendors Evaluation 08
Vendor Registration Committee 06
Verification of Firms 07

Waiver of EMD/Security Deposit 28

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