Procurement Methods

Procurement of modes in Indian Railway

a). IREPS- Indian Railway Electronic Procurement system: items not available in GeM-  Procurement will be initiated in IREPS

b). GeM- Government electronic marketplace- Procurement of common used goods and services.

c). Cash purchase/ Imprest Purchase :  Petty items and emergency items

d). Spot purchase: Purchase of Non-standard items, ex: furniture, utensils, crockery and cutlery etc.,

e). Others –From other consignees, other railways etc., : stocks available in other railways will be initiated in emergency cases.

Procurement of stores – Purchase Agencies

a). Railway Board

Rolling stock items, WTA imported Items, coal etc.,. Entering into the long term contract like Running and rate contract.

b). Zonal Railways

Almost all the items are purchasing by zonal railway up to their monitory limits

c). Divisional Railways / Depots

Divisions purchasing non-stock items and out of stock items of particular division. Depots are procuring NS and emergency stock through Local Purchase

d). Field Units:

Field units purchase in emergency cases upto 50000/- with the annual ceiling limit 10 Lakhs

Local Purchase

Local purchase refers to buying stores/materials from the local market directly, without following the formal tender process. It is used for urgent and small-value requirements.

Key features in Local purchase

• Permitted when the value of stores is small and the need is urgent
• Usually done through petty purchase or imprest cash
• The purchase officer visits the market, compares prices, and buys directly
• A local purchase committee may be formed for transparency
• Proper vouchers/bills must be obtained and accounts maintained
• Subject to audit scrutiny to prevent misuse
• The powers are delegated at different levels (Junior Scale, Senior Scale, JAG, SAG officers) with specific monetary limits
• Economy and reasonableness of price must be ensured

Local Purchase powers

• Each stores Depot and Divisional stores Depots consist Local purchase section with  in-charge of Sr.Supervisor/supervisor
• Procurement of All Non-stock items pertains workshops, Divisional requirements , HQrs Requirements and other institutes
• In addition to this stock items in case of emergency and medical items are to be purchased by the Local purchase.
• The LP Powers are same as stock purchase powers.

                           AMM/ADMM- 5 Lakhs

                          SMM/DMM- 10 Lakhs

                          Dy.CMM/Sr.DMM-1 Crs

• Procurement through GeM, IREPS, Cash & Spot purchase

IREPS Purchase- Tendering system

• Single Tender
• Limited Tender
• Open Tender/Advertised tender

Gem Purchase:

• Direct Purchase
• L1 purchase
• Bidding
• Custom Bidding

Local Purchase – other modes

In addition to tendering system the following additional purchases are available in Non-stock purchase

1. cash purchase  
2. Spot purchase  

Cash Purchase

In the case of emergencies (urgency certified by the user), items having petty value, causing anxiety which affects out turn, production etc.. cash purchase will be done.

• Up to Rs 25,000/- single quotation JS & SS,
• 50000 JAG officer
• >Rs 50,000/- more quotations(3)
  • Depot officer (JAG) has to approve the panel of firms from which the tender to be called.
  • PO will be released on technical suitable offer
  • For the cash Imprest Current account will be opened with departmental bankers or with Nationalized Banks for recoupment of cash.
  • Current account will be opened with official designation.
  • At least one recoupment to be made in a month. Cash imprest register to be maintained for registering imprest cash transactions
  • Maximum 3 times can recoup in a month.
  • Cheque will be released against the  supplies. All the vouchers will be sent to A/C dept for passing  the bills. After scrutiny of the Cash Bills A/C dept will the transaction the amount   to the concerned bank of imprest holder.

SPOT PURCHASE

Spot purchase is a method where buying is done on the spot, generally in an open market, especially for perishable or non-standard items like furniture, crockery, drappers, furnishings articles and cooking utensils, for which it is not practicable to make drawings, specifications etc.. in details covering all the alternatives available in the market through purchase committee.

• Key Points:
• Commonly used for perishable goods, seasonal commodities, and materials not available through regular sources.
• A committee of officers visits the market and makes the purchase directly.
• Negotiation is done on the spot to get the best price.
• Rate reasonableness is ensured by comparing market rates.
• All purchases must be supported by proper documentation and bills.
• Minutes of the spot purchase committee must be recorded.

SPOT PURCHASE COMMITTEE

Approval of competent authority is needed before spot purchase

The proposal first to be sanctioned by DRM/GM. The constitution of Spot purchase committee and other guide lines are as per MSOP 2018

• SAG/ DRM having powers upto 15 Lakhs- to nominate spot purchase committee for stock items
• Upto 25 Lakhs- PCMM/PHOD, above 25 Lakhs- GM has to be nominated.
• Spot purchase committee- 3 member committee
• Upto 5 Lakh- Sr. Scale officers
• 5 Lakh to  40 Lakh- JAGofficers
• Above 40 Lakhs-  SAG officer.

Bulletin Tender

Bulletin tender is a system of inviting tenders through a periodical bulletin published by the Railway.  It is nothing but open tender.

• Key Points:
• Tenders are invited through a printed bulletin circulated to registered firms/suppliers
• Firms registered with Railways or DGS&D are eligible to respond
• Rate contracts are finalized based on bulletin tenders for standard items
• It saves time and reduces administrative effort since separate tenders need not be floated each time
• Once rates are fixed through bulletin tender, purchases can be made against the rate contract throughout the validity period
• Transparency is maintained as the bulletin is widely circulated
• Used extensively for standard stock items in Railway Stores.
• At present Bulletin Tender system is abolished .

Advertised  Tender (Open Tender)

Advertised tender is the most open and competitive method of procurement where tenders are invited through public advertisement in newspapers and official websites.

• Used for high-value purchases where wide competition is desired.
• Tender value above 50 Lakhs tenders is mandatory to float open tender if urgency not certified by consignee.
• Advertisement is published in leading newspapers, Railway Gazette, and on official portals (IREPS — Indian Railways E-Procurement System)
• Below 50 Lakhs tender value items also can float open tender but not required to publish in news papers
• Any eligible firm, whether registered or not, can participate, but firm has to register in IREPS
• Provides maximum transparency and competition, resulting in best value for money
• Tender documents are sold or made available online; tender fees may be charged
• Standard procedures followed: issue of tender notice →sale of tender documents → receipt of bids → opening → evaluation → award
• Earnest Money Deposit (EMD) is collected from bidders tender value above 25 lakhs
• Security Deposit (SD) is taken from the successful bidders tender value above 25 lakhs
• Single bid or two-bid system (Technical + Financial) may be followed
• Governed by IRS conditions, GFR rules 2017 & General Conditions of Contract (GCC) of Indian Railways etc.,
• Minimum tender opening date should be 21 days from the date of publication of News paper
• The open tender opening date to be reduced to 14 Days with the approval of GM ad PFA

Advertised  Tender (Open Tender)- Powers

Tender value above 50 Lakhs needs to Tender committee

Tender acceptance – HQrs/ Depot and Divisional officers (As per MSOP 2018). Direct Acceptance upto 50 Lakhs, above 50 Lakhs TC Required

Limited Tender

Limited tender is a selective tendering method where tenders are issued only to a limited number of pre-approved or registered firms.

Limited tender used for below 50 Lakhs tender value items, but it is not mandatory, unless and until urgency certificate submitted by the consignee.

• Urgency certificate to be certified by JAG officer- Below 10 Lakhs
• Urgency certificate to be certified by SAG officer- above 10 Lakhs

Key Points of Limited Tender

• Used when the number of reliable suppliers is limited or when the value of purchase does not justify wide advertisement
• Tenders are sent directly to approved/registered vendors on the Railway’s approved vendor list
• Generally used for medium-value purchases
• At least three should be obtained to ensure competition
• Faster than advertised tender as it avoids the lengthy public advertisement process
• Suitable for proprietary items, specialised stores, or stores requiring specific technical capabilities
• Registered vendors are screened for technical and financial capability before being added to the approved list
• Records of firms approached and responses received must be maintained
• Proper justification must be recorded if less than the required number of responses are received

Types of Limited Tender

Limited tender system is 2 types 1. ordinary LT and 2. Special LT

• Limited Tender System: – ordinary LT
• Value less than 50 Lakhs
• Limited sources, on approved panel
• Demand is urgent
• Minium offers 3 maximum 8/10 offers, if more than 10 firms, Rly have to follow rotation Basis.
• Minimum 7 days to open the tender

Powers of officers in Ordinary Limited Tender

• scale officer- AMM upto 5 Lakhs
• scale officer- SMM upto 10 Lakhs
• JAG Officers- Dy.CMM Upto 50 Lakhs
• HOD/PHOD- CMM/PCMM upto 50 Lakhs

Special Limited Tender System;

Operated in emergency cases & critical position of the items

• Value above 50 Lakhs
• Limited sources, on approved panel
• Minium offers 3, maximum 8/10 offers,
• If value exceeds Rs.50 Lakhs, TC is required, Minimum tender opening date to be 7 days

Powers of officers in Ordinary Limited Tender

• scale/SS  officer- Nil Powers
• JAG Officers- Upto 1.5 Crs –Emergency & Safety items
• HOD/SAG- upto 5 Crs
• PHOD/HAG- upto 10 Crs
• AGM Upto 20 Crs
• GM Above 20 Crs

Constitution of Tender Committee

• The Tender Committee is a body of officers constituted to scrutinize tenders, evaluate offers, and make recommendations for finalizing purchases — especially for high-value procurements.
• All the tender value above 50 Lakhs , constitution of tender committee is required.
• Composition typically includes: Convenor (usually stores tender Stores officer), a member from the user department called technical member, and a member from the Accounts/Finance department
• Tender value above 50 Lakhs to 1 Cr – 2 members Tender committee-  one is stores officer as a convener and one from Accounts Department
• Tender value above  1 Cr – 3 members Tender committee- stores officer is convener, User  Dept officer and Finance officer are Members

Responsibilities of Tender Committee:

• Scrutiny of tender documents for completeness and compliance
• Technical evaluation of offers
• Commercial/financial comparison of bids
• Rejection of non-compliant or irregular offers
• Negotiation with L-1 (lowest bidder) if required
• Making final recommendation for acceptance or rejection
• The committee’s recommendations are recorded in a Tender Committee Note
• Acceptance of the TC Note is done by the competent authority as per delegation of financial powers
• Single Tender, Limited Tender, and Open Tender cases above certain values all go through a Tender Committee
• Post-tender negotiation is generally discouraged except in specific circumstances
• All deliberations must be transparent, documented, and free from bias
• Finance concurrence is mandatory for high-value cases
• Dispute in tender committee proceedings, descent note to be prepared
• Tender Accepting authority is the final authority to accept & reject the tender committee recommendations.   
• Tendering system & Tender Committee

Tender Committee & acceptance  for stores Tenders

Tender Committee & acceptance  for service Tenders Divn Level

Direct Purchase

Direct purchasing (also called Direct Procurement or Single Tender) refers to purchasing from a specific source without inviting competitive bids

Key Points:

• Resorted to only in exceptional circumstances with proper justification and urgency certificate
• Situations where direct purchasing is permitted:
• Proprietary items— PAC ‘a’ certified, where only one manufacturer/supplier exists
• Emergency/urgency— operational breakdown, safety requirement, or urgent need
• Natural monopoly— OEM (Original Equipment Manufacturer) spares
• Small value purchases— below the threshold limit

Direct Purchase

• Reasonableness of price must be certified; Last Purchase Price (LPP) is used as a benchmark
• Proper justification and financial concurrence required
• Audit objections are common in direct purchase cases if not properly justified
• Should be kept to a minimum to avoid monopolistic tendencies and lack of transparency
• Used on GeM (Government e-Marketplace) portal for direct purchases from specific sellers in eligible cases

Direct Purchase – Single Tender powers

Powers are vary based on Designation & circumstances. Normal circumstances powers are

Emergencies affecting maintenance, outturn, Operation etc.,

• PCMM/CMM upto 45 Lakhs
• DRM – 7500/-

• Safety/PA Items- PCMM/CMM- Upto 1 Crs

Steel items stock yard Qty- Single tender powers

• DyCMM- 45 Lakhs,
• CMM- 5Crs,
• PCMM- 10 Crs
• AGM-20 Crs
• GM – 20 Crs above

Single approved sources- Single tender powers

• AMM- 5 Lakhs
• SMM- 10 Lakhs
• CMM- 1 Cr
• CMM- 10 Crs
• PCMM-200 Crs

Tender finalization: Purchase Policy to be within the frame work of Constitution of India & various Public Acts and conditions:

• Indian Contract Act, 1872
• Sale of Goods Act, 1930
• IRS Conditions
• Arbitration & Conciliation Act, 1996
• Relevant Customs, Excise & Sales Tax Acts
• GST Act
• GFR 2017

All the Tenders to be followed IRS conditions & GeM contract conditions

Recommended Terms & Conditions;

• Eligibility criteria and Evaluation criteria are given in the Tender documents.  
• Delivery Terms
• Delivery schedule
• Payment terms
• Inspection clause
• Warranty, Guaranty & Commissioning
• GST, P&F, Freight extra or inclusive
• EMD, SD, PG
• PVC, along with formula & base prices

Tendering finalization

Certain important points to finalize the tender

• Offer to be technically suitable.
• Rates of lowest technically suitable offer to be examined for rate reasonability
• Check if the delivery condition offered suits our requirement
• Tenders to be finalized within the offer validity
• Approved/Developmental sources-ordering
• Negotiations – When rates are not reasonable, negotiations with L1 suitable Only
• L1-Lowest technically suitable offer eligible for bulk ordering, If L1 withdraws the offer –  Re-tender.   
• L1 not extended validity period, case to be retendered.    
• Cartel-formation    -unreasonably high rates ,same rates by all, qty splitting among themselves-report to CCI (Competition commission of India)                             

Splitting of Tender

• The Purchaser reserves the right to distribute the procurable quantity on one or more of the eligible tenderers
• Price differential between L1 and L2 Quantity distribution ratio between L1 and L2
• Upto 3% 60 : 40
• More than 3% and upto 5% 65 : 35
• More than 5% At least 65% on the L1 tenderer.

                                                   For the quantity to be ordered on the   

                                                   L2 tenderer, Rly would decide

Earnest Money Deposit:

• EMD @ 2%. No EMD for below 25 Lakh tenders, Upper limit-20 L (upto 50 Cr.); 50 L (above 50 Cr.).
• Exemption – MSE Firms, NSIC, Appd. Firms, Mfrs. & their authorised agents., Govt organizations, PAC firms

Security Deposit:

• SD @ 5 %. Upper limit – 50 L (upto 50 Cr.); 1 Cr (above 50 Cr.).
• No Exemption for Safety items.
• Exemptions- other than safety MSE, Other than safety NSIC, Approved. PSUs, PAC firms.
• Firm to be paid SD within 21 days from the date of  issuance LOA.

Price Preference in purchase – MSE  Policy

• Items Reserved for MSEs/NSIC firms-358 items-Purchase preference
• Non reserved items-for MSEs-L1+15%-counter offer -25%qty
• Khadi/Handloom-Single  tender purchase from ACASH/KVIC
• Exemption from payment of EMD
• Waiver of security Deposit

Make in India Policy 2017

• Public Procurement Order 2017- Revision issued by Govt. to encourage ‘Make in India’ in public procurement.
• Class-I local suppliers in procurement means suppliers with minimum local content of 50%. (Vandebharat trains items it should be 75% above)
• Class-II local suppliers in procurement means suppliers with local contents more than 20% but less than 50%. (Vandebharat trains items it should be 50% to 75%)
• Non-local supplier in procurement means supplier with local contents less than 20% (Vandebharat trains items it should be below 50%)
• Purchase preference shall be given to class-I local supplier in procurement having minimum local content of 50%.
• Price preference allowed for class-1 suppliers upto 50% Qty

Procurement of stores – PO vetting

• Purchase order vetting is required
• Ordinary items – PO value above 8 Lakhs
• Safety items – PO value above 15 Lakhs

Liquidated Damages:

• Penalties for Delay in supply (supply after delivery date).
• 5% per week and part of week maximum upto 10%

GeM Purchase

• What is GeM?
• Government e-Marketplace it’s a National Public procurement Portal. GeM launched on 9.08.2016
• Object of GeM: Procurement of commonly used Goods and Services for all Central, State and PSUs.
• Aims to enhance transparency, efficiency and speed in public procurement.
• Transformation of DGS&D to a digital ecommerce portal for procurement and selling of goods and services.
• GeMSPV-  (GeM Organiasation) A Section 8 (Non-Profit) Private Limited Company works under the Ministry of Commerce to develop, manage and maintain the GeM platform.
• Mandatory as per Rule No. 149 in the General Financial Rules, 2017.

Modes of Purchase- 3 types

1. Direct Purchase: (Upto Rs.50,000)
2. L1 purchase: (Rs.50,000 upto Rs. 10 lakhs)
3. Bidding/eRA (above 10 Lakhs

In addition to this PAC purchase, Automobile purchase, Custom Bid, BOQ (Bunch Bid) options are also available.

GeM Direct purchase : Purchase for low-Value items   

• The GeM Direct Order, also known as Direct Purchase, allows buyers to procure items swiftly and efficiently for amounts up to ₹50,000. This method is designed for urgent and low-value
• No need multiple quotations, simple and quick procurement method
• Ensures transparency and reduces paper work  
• Consignee /Indentor has to submit urgency certificate

L1 Direct Purchase- Medium value items

• For purchase falling between Rs.50,000/- to 10,00,000/-
• Buyer must compare at least 3 Different brands on Gem to ensure market competitiveness.
• The buyer has to select L1 Product and release the contract
• No bidding, Speedy procurement but Consignee /Indentor has to submit urgency certificate

Bidding – High value items Low-Value Needs

• For purchase value above10,00,000/-
• Buyer must bit the tender with tender conditions and bidding opening date to be provided.
• The buyer has to evaluate the bidder and select the L! Suitable offer and  release the contract
• No control on the bidders, if the same rate quoted by more than one bidders, buyer has to conduct e-RA (electronic Reverse Auction)

Acceptance & Rejections in GeM

• CRAC to be generated within 10 days of PRC.
• Rejection:  remove / lift back within 10 days. If not lifted within reasonable time period, right to dispose at the risk and cost of the seller.
• Payment: within ten (10) days of issue of CRAC.
• LD: @ 0.5% per week not exceeding 10%.
• Standard warranty: 12 Months only