De-mystifying Government IT Procurement Policy

De-mystifying Government IT & Procurement Policy

NASSCOM

September, 2017

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Contents

Technical evaluationIV

Scope of work developmentV

BackgroundI

II Procurement Modes

Pre-QualificationIII

Key Legal and Contract termsVI

GFR 2017 – Key ChangesVII

Objective of todays session :

1) Make you understand the Government procurement rules

2) How to work with buyer to improve the quality of the tender documents so that it is a win-win proposition

3) Key changes made in GFR 2017

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Why IT procurement is different from other procurements?

Highly affected by changing business

objectives

Technical content which is diverse &

hard to define

Success is dependent on

institutional capacity

!

Rapid technological change over

project lifecycle

Combination of professional engineering

services and supply of diverse HW & SW

Specialized bidding documents are necessary to facilitate IT procurement.

This exercise aimed to facilitate successful installation, integration, and operation of a range of information

technology procurements — from straightforward supply and maintenance of technology products, to

complex development, integration and operation of mission-critical information systems.

Complexity of Project phases: Pre go-live,

Go-live & Post go-live

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Model RFP exercise by MeitY

Break-up of Industry issues

Reviewed with government perspective

covering key risks:

1. High cost of procurement

2. E-Gov projects not taking off

3. IAs abandoning projects midway

4. Non-compliance to notified e-Gov

standards

Best practices from:

1. World Bank RFP for Information

Systems

2. PPP In India, Ministry of Finance,

Government of India

3. Model Request for Proposals and

Quotations for PPP Projects,

Department of Expenditure, Ministry of

Finance, Government of India

4. General Financial Rules (2017),

Government of India

5. Manual for Procurement of Goods and

Services, Department of Expenditure,

Ministry of Finance

Acceptance3%

Arbitration2%

Blacklisting2%

Change requests4%

Enforcement5%

Escrow2%

Evaluation2%

Exchange Rate Variation

2%

Generic16%

Integrity Pact2%

IPR2%

Liability5%

Liquidated damages

5%

Payment11%

Scope5%

SLA6%

Subcontracting2%

Termination3%

Others 21%

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Industry Feedback : Key Issues

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International Bidders

Taxes and Out-of-Pocket Expenses

, Exit Management

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Key Rules & Procedures governing Government Procurement

Central Government

1. General Financial Rules (2017)

2. CVC : Guidelines on Tenders

3. Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012

4. Defence Procurement Procedures (updated)

Central PSUs

1. PSU : Purchase Procedure / Manuals

State Government

1. State Government procurement policies

State PSUs

1. Largely follow State Government procurement policies

Principles of Public Procurement

1. Transparency

2. Openness

3. Integrity of Process

4. Integrity of Procurement Officers

5. Accountability

6. Competition

7. Fairness

8. Economy

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High Level conformance required

1. The description of the subject matter of procurement to the extent practicable should -

• be objective, functional, generic and measurable and specify technical , qualitative and performance characteristics.

• not indicate a requirement for a particular trade mark, trade name or brand.

2. the specifications in terms of quality, type etc., as also quantity of goods to be procured, should be clearly spelt out keeping in

view the specific needs of the procuring organisations. The specifications so worked out should meet the basic needs of the

organisation without including superfluous and non-essential features, which may result in unwarranted expenditure.

3. Where applicable, the technical specifications shall, to the extent practicable, be based on the national technical regulations

or recognized national standards or building codes, wherever such standards exist, and in their absence, be based on the

relevant international standards. In case of Government of India funded projects abroad, the technical specifications may be

framed based on requirements and standards of the host beneficiary Government, where such standards exist. Provided that

a procuring entity may, for reasons to be recorded in writing, adopt any other technical specification.

4. Care should also be taken to avoid purchasing quantities in excess of requirement to avoid inventory carrying costs.

5. offers should be invited following a fair, transparent and reasonable procedure.

6. the procuring authority should be satisfied that the selected offer adequately meets the requirement in all respects.

7. the procuring authority should satisfy itself that the price of the selected offer is reasonable and consistent with the quality

required.

8. at each stage of procurement the concerned procuring authority must place on record, in precise terms, the considerations

which weighed with it while taking the procurement decision.

9. a complete schedule of procurement date of issuing the contract should be published when the tender is issued.

10. All Ministries/Departments shall prepare Annual Procurement Plan before the commencement of the year and the same

should also be placed on their website.

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Procurement Procedure

How it has been covered in Model RFP

1. Suggested standard guidelines / checklist for the Department to help in deciding the right procurement mode. This

should cover the following :

• Define threshold values /conditions for various modes of procurement (3 Stages 0.5L, 0.05-30 L and above 30 L)

• Conditions where all the scope of work should be clubbed in a single bid vs. multiple bid

New Developments

2. A single window (a website/portal) for all Governance procurements - Government e-Marketplace (Rule 149)

3. Registration of suppliers (Rule 150) DGS&D (or concerned departments for specialized goods) to empanel the

Consultants and Solution Category for various types of work and categories. Post this empanelment, the empanelled

companies should be not be evaluated on the a) Eligibility a) Financials b) Number of projects carried out BUT they

should be evaluated on the quality of solution proposed by the bidders (or quality of Consultants provided). These

empaneled suppliers will be considered for Limited tenders and also exempted from EMD (Rule 150 (i)).

Key Observations/Challenges

• EOI & RFQ and RFP (limited & open) : When to use what

• No single official window for accessing e-Governance tenders

Alternative Actions / Standardization Methodology

• The Ministries or Departments are delegated powers to

do procurement of goods. In case, it does not have the

required expertise, it may may do so through DGS&D

• Apart from use of Rate Contract / GeM (Rule 148-150), a

clear cut guideline on how & when to use the EOI, RFE,

RFP (Limited & open) and Nomination

• A guideline provided to cover entire scope of work in one

bid process or it should be broken in several bids as per

the goods/service categories

• Guidance to use rate contract in empanelments

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Single Source : Rule 166 ,

194 & 205

Rule 183 : Consulting and Rule 164 : Two stage bidding

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• Unfavorable pre-Qualification and Technical qualification

criterion – Manpower, Turnover, PoA, Net worth

• Disproportionate project worth to turnover requirements

• Lack of conditions to promote competitive bidding

• Client certified Proof of experience certificates tough due

to NDA

• CV commitments and related penalties

• Blacklisting clause application restricting competition


• Guidelines on providing the pre-qualification criterion

and evaluation criterion. Best practices to be taken

from International Funding Organizations

• Reasons for Debarment and centralising the

debarment process


4. Standard Guidelines for drafting the eligibility criterions.

• Wherever possible, linked it with the requirement of the project (for e.g. turnover should be 5/10 times the

estimated value of the project)

• Usage of certifications, only when relevant

5. Revisit stringent clauses/provide Guidelines :

• Allowing of consortium , where it helps bring value to the Department Or generates healthy competition

• The OEMs should not be asked to provide the work orders, as generally the work order is not shared by the SI

vendor to the OEM

• Organization should not be allowed to participate only where Service Provider has committed fraud or was

involved in corrupt activities or code of integrity (max 3 years by DGS&D and max 2 years by concerned

Ministry/Department)

Evaluation Methodology (PreQual/Eligibility)2a

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• High weightage given to Company profile & past project

experience / Even post empanelment, Corporate profile is

given undue weightage in evaluation

• Issues on using QCBS for SI RFPs

• Lack of transparency : final technical scores not published

/announced before opening of financial bids


• Guidelines ensuring transparency

• Sharing of information to potential bidders to the

extent possible to provide equal platform for

competitive bidding. This is quite prevalent in the

tenders released by the International donor agencies

in India


6. Standardization of conditions pertaining to turnover, work related turnover , Certifications, manpower requirements,

credentials

7. Categorised the RFPs on the basis of outcome or input

8. Templatization of the details required for the scope of work

Guidelines

• The technical evaluation should be done on a maximum marks of 1000 marks so that comparative evaluation can be

done for areas having small weightage in evaluation

Evaluation Methodology (Technical Evaluation)2b

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• Sketchy & only high level requirements

• Segregation of requirements basis the

nature of procurement

• Performance requirements not furnished

• Funds for the project not enough for

DPRs

• In the PPP tenders information provided

by the Department mostly limited and all

the risk is to be borne by the bidder


• Checklist template on SoW to be provided to ensure

• Appropriate level of details with clarity on In-scope/ Out-scope

definition, Scalability needs, Interoperability needs

• The above needs to be provided with respect to:

• Networking, Data Digitization, State Data Centre, Application

requirements (Functional and Non Functional)

• Site Preparation (if at all), Capacity Building & Training

• Hardware, Operations & maintenance support for the above activities

• Either doing detailed DPR or formal review while budgeting for

requirements


9. Standards to be defined for provisioning information in the RFP (any type of SI bid)

• Level of details to be provided for software / Details to be provided for Non-Functional and Performance Levels in

RFP involving software implementation

• Hardware, Network, Data Centre, Data Digitization, Site preparation – Specific requirements to be provided

10.Develop Model RFPs on whether it is an “outcome based RFP” or “input based RFP” In case this is “outcome

based RFP”, the payment terms, risks, penalties etc. to be different from an “input based RFP”

Suggestions

• A Revised Estimates budget to be calculated / approved, post tendering process

• Lowest bid is not always helpful… process to be defined for analysing the reasons for deviations and a suitable

incentive / disincentive may be introduced

Clarity in Scope of Work3a

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Pertaining to SLAs

• While it is good to have aggressive SLA’s, it also

can be a tricky situation when abnormal

penalties may have to be levied for no fault of

the vendor.

• SLA’s not consistent with the technical and

functional specifications provided for solution

development


11. Introducing both Options (depending on suitability) in defining the SLAs.

12. Introducing counter SLAs on other stakeholders to delivery may have to be included to avoid SLAs becoming one

sided

Guidelines

• SLA should be realistic (Consultant to study the requirement and certify the attainability of the SLAs). A suitable

incentive / disincentive structure to be evolved which encourages a) attainment of SLAs b) improvement in case of

non-attainment of the SLAs.

• The RFP should also provide for the measures / control in place to measure the SLAs. In case of dependencies from

the other stakeholders, the same also should be measured. In the absence of infrastructure / process for

measurement, the SLA should not be put as a penal SLA.

• The timelines set for any project should be based on similar project implemented in India. The SLA for meeting the

SLA should be for all the stakeholders and mutual commitment should be provided for timely completion of the project.


Option 1:

• SLA & Penalties should be based on practicability of attaining them

(based on historic performance). As per international best

practices, there is an opportunity given to vendor to earn back the

penalty amount through better performance / improvement in the

SLAs.

Option 2:

• Minimum SLAs should be prescribed and for performance above

the minimum SLAs, a premium should be paid to the System

Integrator. This would reward the bidder to propose & deploy a

robust solution

SLAs defined for Scope of Work3b

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• The bidder has minimal information to prepare a solution

and more often this results in huge variation in the financial

quotes

• The decision whether to retain the current solution or to go

for a new solution should be done before the SI bid and

should not be left to the bidder. The decision taken by bidder

can be counter productive

• The bill of material should be a firm one and should not be

left as indicative (for input based RFPs).

• Timelines /Deadlines set in the RFP are unrealistic and

quite aggressive.


13.Define predictability in outcomes /Deliverables : Only those specifications (even if indicative) should be mentioned

which do not translate towards a preference to a particular brand/OEM.

• In case such specifications are mentioned (even indicative) in the RFP, then the Buyer/Consultant should be

responsible for the performance.

• In case specifications are not mentioned then the stacks (and other areas of high risks) should be identified before

publishing RFP.

• For other (low risk areas), bidders can propose specifications (at their own risk)

Guidelines

• The Deliverables should be linked to the controllable factors. All stakeholders should commit deliverables from their

side. The commitment purely from SI/Consultants for attaining a deliverable is liable to miss the timelines.


• The bill of material should be a firm one

• The RFP document (for input based RFPs) should

have last level of clarity on:

• Solution Architecture, Leveraging SDC, Network /

SWAN

• Licenses, Support, Proprietary vs. Open

• Security Architecture, Deployment Model

• All models and brands comprising of 80% of the

market share should be evaluated and should result

in a firm Bill of Material even for PPP /Turnkey

Solution provider model

Scope of Work (Deliverables)3c

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• CV committed are not deployed by bidder

• Confidentiality clause restriction to share international

projects details / Non-acceptance of bidder Authorized

client certificates

• Duplication of administrative requirements - Request for

Organizational details redundant are paper intensive &

lead to delays

• Different RFPs need different forms of of Power of

Attorney

• Encouragement to MSMEs


14.Review the Technical evaluation criterions to rationalise the weigtages given to CVs

15.Registration of suppliers basis their organizational details, abilities etc. to avoid administrative delays linked to bid

participation terms. Subsequent evaluation to be focused on solution proposed / CVs deployed

16.MSMEs encouraged and in each bid, there should be a condition for the bidders to use a certain percentage of work

(in value terms) should be earmarked for the MSMEs.

17.For Bids which require innovative solutions / solutions yet to be deployed successfully in India, international

experience is allowed with authorized confirmation

Guidelines:

• International firms should not only be evaluated for participation on the proof of their experiences but also on the

strength of their proposed solutions

• Acceptance of Power of Attorney (PoA) in its variant forms to be agreed to by Government buyers


• Either the weightage given for CV evaluation is

reduced OR the client department commits the start

time of the project, which if delayed, the bidder should

have the flexibility to change resources of similar or

higher experience

• Either encourage MSME through dilution in pre-qual

/Technical evaluation OR mandate a specific % of

work to be outsourced to MSMEs

• Requirements of documentation for bidder experience

details/credentials/ certificates to be reviewed

Bid Participation Terms4

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• PPP models have not succeeded in ICT projects in

india / Business model put in the RFP need many pre-

approvals

• The System Integrator is at negative cash flow, as the

deliverable based payments are low in value as

compared to the costs incurred by SI

• Bidders in eagerness may quote a financially unviable

price


18.Provided situations where PPP projects should be used. It would provides for institutional processes to deal with the

changes required.

19.Guidelines on selection of the kinds of PPP project applicable to E-Gov and the model to apply, as many types of

PPPs exist.

20.Provide clarity in terms of payment mode decisions: Based on resource input (people, products, time based service)

or outcome/deliverable

21.Need for rationalization in payment terms in line with the cash outflow AND increase the PBG amount

22. Introduce incentives in payment terms for High risk or high value projects as success fee for encouraging continuous

improvements


• Clarity on usage of PPP RFPs OR include the costing /

business model of the bidding agency, as a part of the

evaluation process / delink from L1

• Increase PBG to secure the commitment of the SIs (as

per rule 172 can seek advance from client against BG)

Payment Models and Payment Terms5

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• Commercial bids contain items with no certainty on

procurement at a later stage.

• The business model / PPP model decided during the

bidding process is carried out with inadequate due

diligence and buy-in from concerned stakeholders

• Having multiple quotes for various transactions in a

PPP bid may result in a drain in the exchequer (for

e.g. Income Tax)

• The bidder bears the risk on any changes in the

taxes and OPEs


23.A template for commercial bids (for various types of RFPs) to be provided

24.Any changes in the taxations structure should be compensated by the buyers, as per the private industry practice

25.Out of Pocket Expenses should be at actuals (may be estimated by the buyers and budgeted as percentage of the

total value of the bid)

Guidelines

• “Most favored purchaser” clause is not relevant for an IT project as the cost of the IT product / services are dependent

on various events / terms and conditions. Hence this clause should be avoided for IT projects


• A clear guideline on the “dos” and “don’ts” for commercial

bid

• Any change in the procurement plan should not result

in the change in L1 or H1

• Commercial bid for a PPP bid should ideally be only

one single quote for a transaction.

• OPEs should be extra OR exact requirements may be

provided to compute OPEs

Commercial Bid & Evaluation6

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• Risk exposure to the Bidding Organization

from Non-Controllable events

• Higher delivery costs for bidder

• Prone to litigations

• Unviable delivery conditions


• Review the following terms and conditions in consultations with all

the key stakeholders, studying the best international practices from

other leading e-Governance countries and alignment with the

current guidelines already published by Department of Expenditure,

Ministry of Finance (GoI), Central Vigilance Commission, General

Financial Rules (Ministry of Finance) etc.:


26.Align the Legal Terms and conditions based on the international practices in mature market and contextualise it to

Indian situations in the areas of :

• Ownership of the deliverables, Intellectual property rights, Sharing of Source Code,

• Arbitration clauses, Warranties, Limitation of liability, Damages

• Governance, Audit, Access & reporting

• Terms of payment, Penalties, Performance Bank Guarantee

• Breach, Rectification & Termination , Exit Management Schedule

• Transfer of Assets, Confidentiality & Security of data

• Post Termination responsibilities, Invoicing & Settlement

• Sub-contracting, Service Level Agreements, Change Requests

• Key Personnel, Environmental, Health and Safety

• Indemnification, Disputes

Legal & Contract Terms7

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1. Mandatory use of Government e-Market place (GeM) and introduction of clause on ‘Electronic

Reverse Auction’

2. Revision of financial limits for different various purchasing methods :• Up to Rs.50,000/- through any of the available suppliers on the GeM, meeting the requisite quality,

specification and delivery period.

• Above Rs.50,000/- and up to Rs.30,00,000/- through the GeM : Seller having lowest price amongst the

available sellers, of at least three different manufacturers, on GeM, meeting the requisite quality,

specification and delivery period. The tools for online bidding and online reverse auction available on

GeM can be used by the Buyer if decided by the competent authority.

• Above Rs.30,00,000/- through the supplier having lowest price meeting the requisite quality,

specification and delivery period after mandatorily obtaining bids, using online bidding or reverse

auction tool provided on GeM.

2. Introduction of clause on ‘Debarment from bidding’

3. Code of Integrity Guidelines

4. Special provision for start-ups & MSME

5. Submission of declaration by supplier in place of EMD

6. Submission of EMD & performance Guarantee by on-line methods

7. Separate section for consulting & non Consulting services

8. Changes in Quality and Cost Based Selection (QCBS) for Consulting services

Key Changes in GFR… Model RFP updated

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Thank YouRamendra Verma

Public Service Delivery Transformation Leader & Partner, IGH

KPMG Advisory Services Private Limited

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De-mystifying Government IT Procurement Policy

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Transcript of De-mystifying Government IT Procurement Policy