Procurement Procedure and Preparation of Procurement Plan 30th Review Meeting of State FCs- Delhi (4th - 5th August 2011)

PROCUREMENT Strictly follow procurement procedure prescribed in Chapter IX of the revised Manual on FM&P. Manual provisions mandatory for all procurements. Follow State's financial ceilings except when not prescribed by MHRD. MHRD prescribed ceiling on 17-09-2008 MHRD’s ceilings extended up to 30-9-2012 vide letter dated 2-7-2010. Shall prevail on State ceilings.

PROCUREMENT Main Considerations Economy Efficiency Equal Opportunity Transparency

Points to be kept in view PROCUREMENT Identification of Needs. Requisition from users. Exists specific budget provision. Assessment of bulk requirement at the beginning of the financial year. Computer, Equipment, furniture, books etc in economic lots as per annual need. All purchases be made to the best advantage after comparison of competitive prices.

PROCUREMENT Strictly follow the levels of procurement provided in Para 112 of FM&P School/Community/ KGBV CRC / BRC District State 5 5

EGS/AIE/Special Training related items School/KGBV level All civil works, except buildings for BRCs, SIEMAT, Residential Schools/Hostels and KGBV. Furniture to Govt. UPS School library Teaching Learning Material School grant. Maintenance grant. Teaching Learning Equipment REMS Learning Enhancement Programme (LEP). Items required for KGBV. Uniform EGS/AIE/Special Training related items TLM, Contingency etc.

CRC/BRC level Furniture/equipment/computer etc. Office contingencies Teaching Learning Material Teacher Training Community Training Civil works for construction of BRC, augmentation of BRC and CRC Maintenance of BRC and CRC Printing work REMS

District level Office equipment for DPO Office furniture for DPO Textbooks/other books/supplementary materials Computers and accessories Aids and appliances for CWSN Office contingencies Hiring of vehicles Maintenance of equipment and vehicles District level training and workshops Printing work REMS ECCE Kit Educational Kits for girls Learning Enhancement Programme (LEP) Construction of Residential Schools/Hostel and KGBV

State level Textbooks Computers and its accessories Office equipment for SPO Office furniture for SPO Equipment for distance education Aids and appliances for CWSN Office contingencies Hiring of vehicles Maintenance of equipment and vehicles State level training and workshops Printing work Engagement of consultancy firms (service contract) Engagement of Auditors for external and internal audit Engagement of experts/resource persons Engagement of NGOs REMS Learning Enhancement Programme (LEP).

PROCUREMENT Prepare the Procurement Plan every year and upload on SSA’s website as envisaged in Para 113 of the Manual. Strictly follow financial ceiling prescribed for each method. Urged the States on 16th June 2011 to prepare the annual procurement plan for 2011-12 and upload the same on the web site. Information received from 6 States of Chandigarh, HP, Maharashtra, Meghalaya, Rajasthan and Uttarakhand. Remaining States yet to prepare the plan. Accord priority. Linkage of all procurements with plan will be looked in audits, post review and concurrent review.

Method of Procurement Open Tender (Para 115-117 of the Manual) Limited Tender (Para 118 of the Manual) Single Tender (Para 119 of the Manual) Procurement without tender / quotation (Para 120 of the Manual) Procurement through communities (Para 121 of the Manual)

Financial ceiling for each contract (In US $ equivalent) Category Open Tender Limited Tender Single Tender Community Goods >50,000 <3000,000 < 50,000 <30,000 Works >40,000 <300,000 <50,000 <40,000 Text books Upto 1 million <500.000 SIEMAT Upto 800,000 Information Technology equipment >50,000 <4 million Books, Teaching materials school facility improvement, hiring of vehicles of equipment Service Contract <200,000 Any contract in excess of the maximum limit indicated above shall not be procured using SSA funds.

OPEN TENDER Items covered: Civil works construction of BRC, Residential schools/Hostel, KGBV, SIEMAT and goods. Steps Preparation of tender documents Notification / Advertisement; Issue of tender documents; Pre-bid Conference Submission of tender documents; Public opening of tender; Evaluation; Selection of lowest evaluated responsive tender based on post qualification; Negotiation with L-1 (if necessary) Contract award; and Contract performance

Prescribe bidding documents covering : Documents user friendly, self contained, comprehensive, unambiguous and relevant to the objective of purchase. Schedule of requirements Bid form and price schedule Technical specifications Post qualification criteria Validity period Earnest money Signing of bids Pre-bid conference Submission of bids Opening of bids Evaluation criteria

Negotiation with L1 Award of contract Signing of agreement/contract Security deposit Retention money Payment terms Liquidated damages Repeat Orders Quantity as per State procedure Place order within one month from the date of last supply Prices have since not reduced Purchases not made on urgent basis Rejection of all bids Lack of competition Tenders not substantially responsive Obtain the approval of competent authority

LIMITED TENDER Items covered: goods including books, uniforms teaching learning materials, school equipment, hiring of vehicles, and operation and maintenance of equipment Invitation for quotations – Based on comparing price quotations obtained from several suppliers, usually at least 3 to ensure competitive prices. Issue a letter to the supplier to furnish the quotations for the required goods/equipment.

LIMITED TENDER Invitation for quotations – No need of publication of notification in the newspaper/website. Issue the request letters to suppliers on the approved list. The request letter should indicate description, specifications and quantity of the goods as well as desired delivery time and place. Only one quotation by each supplier. 17

LIMITED TENDER Bid Price Quote for the full quantity as described in the invitation letter. Corrections, if any, made by crossing out, dated initialing and re-writing. Include all duties, taxes and other levies payable by the Vendor/Supplier in the total price. The rates quoted by the Vendor/Supplier be fixed for the duration of the contract and not subject to adjustment on any account. The prices are quoted in Indian Rupee. 18

LIMITED TENDER Steps Identifying items; Laying down specifications; Estimating total numbers and costs of items; Need not notify in newspaper/website Identifying likely agencies borne on the approved list of contractors/ suppliers; (minimum 3, 8-10 for more competitive rates) Obtaining approvals of competent authority; Issuing letters of invitation; Processing quotations received; 19

Obtaining orders of competent authority for placing orders for supply; Issuing letters placing orders for supply and delivery period; Quoted price shall include all duties, taxes and other levies; Rates quoted be fixed and not subject to adjustment; Ensuring inspection; Ensuring timely supply: and Making payments after delivery in satisfactory condition. The financial ceiling prescribed for limited tender shall be applicable for Rate contracts of DGS & D and Rate contracts of State Governments.

SINGLE TENDER Followed in the case of articles specifically certified as of propriety nature; or manufactured by a particular firm; goods including books; teaching materials; school grant; hiring of vehicles; and operation and maintenance of equipment etc Appropriate for Extension of existing contracts Standard equipment/spare parts for existing equipments from original supplier. Items obtainable from one source Early delivery In exceptional cases such as natural disaster.

WITHOUT TENDER / QUOTATION Procurement of goods or group of goods estimated to cost the equivalent of the ceiling of State Govt. Issue suitable guidelines by the SIS THROUGH COMMUNITIES Construction of all civil works except, BRC, Hostel, KGBV and SIEMAT BRC construction if the community is technically capable Purchase of materials as per ISI certification, if available; SPD may provide simple procurement guidelines

Identify the committee locally operating in the area. Keep the following points in view: Active involvement of community in planning and implementation; Who will procure the materials or goods used in works; Goods / works have to be executed as per approved plans and specifications The name and designation of the Engineer for technical supervision and certification.

Suggested advance payments based on the certificate issued by the Supervising Engineer Advance (mobilisation advance upon start up of the work and on reaching lintel level) : 75% of total cost Plastering and completion of work : 25% of total cost School toilet and other repair works upon start up of the work) cost : 75% of total Plastering and completion of work cost : 25% of total

Procurement of major items Textbooks – Single Tender (Textbooks Corporation, NCERT etc) and Open Tender IT Equipment – Limited Tender (State approved vendors) State Electronic Corporation/IT Deptt/other State agencies provided they follow State procedure and Manual provisions Open Tender and e-procurement Printing work – Rate Contract approved by State Government, Limited Tender and Open Tender

Service Contract Preparation of Terms of Reference Preparation of Cost Estimate and Budget Advertising Preparation of short list of consultants Receipt of proposals Formation of Evaluation Committee Evaluation of Technical and Financial proposals Final discussions including negotiations and award of the contract

Non-Government Organizations Preparation of Terms of Reference Advertising Formation of Evaluation Committee Selection of NGOs Approval by Grant-in-Aid Committee

PROCUREMENT Post Review by Government of India Mis-procurement Complaint Handling Mechanism

Key Observations of Post review of Procurement Review revealed : need for tightening of procurement system especially on procedural lapses incomplete documentations irregularities diversions of funds Procedural lapses Not issued solicitation letters to the vendors for obtaining quotations. obtained Quotations by hand by visiting the premises of the vendors. In some cases, notice inviting quotations being put on the notice boards of SSA offices. In some cases, L1, L2 and L3 share the same address and telephone number.

Key Observations of Post review of Procurement Procedural lapses Engagement of contractors for construction of civil works without obtaining the prior approval of PAB. Non observance of the time limit of 30 days for submission of bids. Letter of award issued within 20 days, even though 30 days time limit was allowed for submission of bids. Entire procurement cycle completed within 2 days. Invoice date is prior to the purchase order date. Cheques drawn prior to the issue of purchase order. Splitting of orders to bring it within the financial ceiling. Contract amount exceeded without issue of repeat orders or revision of contract agreement. Not indicated Bid validity period in the bid documents.

Key Observations of Post review of Procurement Procedural lapses Procured goods not taken in the fixed asset register. Procured goods not found at site during visit, Followed single tender instead of limited tender. Followed limited tender instead of open tender. Not taken Earnest money deposit from prospective bidder. Not indicated validity period of the earnest money deposit in the tender documents. Not obtained Security deposit/performance guarantee from selected bidders. Delay in delivery period stipulated in the PAB. Made payment based on provisional bill. The date issued for work order and the delivery/invoice/payment dates on the same day.

Key Observations of Post review of Procurement Procedural lapses Not indicated validity period of the earnest money deposit in the tender documents. Not obtained Security deposit/performance guarantee from selected bidders. Not contain clauses for liquidated damages, security deposits, retention money, delivery schedule and payment schedule in Work Orders . Not charged Liquidated damages though stipulated in the purchase order. Not published advertisement in national news paper for open tender valuing more than Rs. 20 lakh. Not clearly specified Technical specifications, delivery period, payment terms etc in the tender documents.

Key Observations of Post review of Procurement Lack of training on Procurement The Head Masters were not aware of the prescribed procurement procedures under SSA. Poor understanding of procurement procedures at State and district level. Irregularities in Procurement Dates of all bids received were overwritten except the winning bidder. Vehicle providers had formed a cartel in the award of contracts for hiring of vehicle. Not selected Lowest bidder in a limited tender for construction of additional class room on the ground of his inability to handle the construction involving negotiation with second lowest bidder.

Key Observations of Post review of Procurement Irregularities in Procurement Selected same contractor on single source basis in two schools. Purchased Computers from agencies not on authorized DGS&D or State Government Rate contract entities. Assets procured were not available for physical verification. Absence of concerned staff during the course of review despite prior notification of the visit. Diversion of funds Used ACR fund for the construction of library

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