Presentation by: G A R Rao, Director (Finance) Mazagon Dock LTD.

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EVOLUTIONARY PROCESS OF GENERAL FINANCIAL RULES • 1947 : IN THE FORM OF EXECUTIVE INSTRUCTIONS

• 1963 : THE COMPENDIUM OF EXECUTIVE INSTRUCTION MODIFIED AND GENERAL FINANCIAL RULES, 1963 WERE ISSUED.

• 1963 –JUN 05: GFR. 1963 SUPPLEMENTED BY GOVT. OF INDIA DECISIONS.TASK FORCE SET UP TO

RECAST THE RULES, SINCE SOME OFTHESE HAD BECOME REDUNDANT.

• JUL 2005 : RULES RECAST AND ISSUED IN THE FORM OF GFR 2005.

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THE TOPICS COVERED IN G.F.R. 2005 ARE SHOWN BELOW

Chapter 1 : Introduction

Chapter 2 : General System Of Financial Management

Chapter 3 : Budget formulation and implementation

Chapter 4 : Government Accounts

Chapter 5 : Works

Chapter 6 : Procurement of Goods and Services

Chapter 7 : Inventory Management

Chapter 8 : Contract Management

Chapter 9 : Grants-in-Aid and Loans

Chapter 10 : Budgeting and Accounting for Externally Aided Projects

Chapter 12 : Miscellaneous Subjects

Chapter 11 : Government Guarantees

Relevant for Material Managers

Chapter 6

Procurement of Goods and Services

GENERAL FINANCIAL RULES, 2005• Fundamental principles of Public Buying (Rule 137)

“Every authority delegated with the financial powers

of procuring goods in public interest shall have the

responsibility and accountability to bring

Efficiency,Economy and Transparency

in matters relating to Public procurement and

for fair and equitable treatment of suppliers

and promotion of competition in public procurement.”

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FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING(RULE 137)

• The specification in terms of quality,type etc .,as also quantity of goods.

• Remove superfluous and non-essential features,which may result in unwarranted expenditure.

• Fair,transparent and reasonable procedure.

• Get satisfied that the selected offer adequately meets the requirement in all respects.

• Offer is reasonable and consistent with the quality required.

• Concerned procuring authority must place on record, in precise terms,the considerations which weighed with it while taking the procurement decision.

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FUNDAMENTAL PRINCIPLES OF PUBLIC BUYING

RESPONSIBILITY AND ACCOUNTABILITY TO BRING

• EFFICIENCY

• ECONOMY

• TRANSPARENCY

• PROMOTION OF COMPETITION

• FAIR AND EQUITABLE TREATMENT OF SUPPLIERS

• RECORD THE CONSIDERATIONS FOR THE DECISION

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POWER FOR PROCUREMENT OF GOODSRule 140 :

The ministries or departments have been delegated full powers to make their own arrangement for procurement of Goods

DGS &D

Delegation of Powers for CFA

Board of Directors

Procurement SubCommittee(PSC)

CMD

Functional Director

GGM,GM to the level of Manager

GFR Equivalent Procedure in MDL

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REGISTRATION OF SUPPLIERS(SR&R Dept) Rule 142:

• Eligible &Capable suppliers Credentials verification.

- Mfg. Capabilities

- Quality Control System

- Past Performance

- After Sales Service

- Financial Background

• Item-wise list of suppliers

• Registered for fixed period between(1-3 years) Suppliers willing to continue will have to apply for renewal.

• Vendor Rating

Product wise list of , Permanent and Temporary supplier

Vendor Rating is done on basis of :• Quality, Delivery, Services• Where >80% is Very good < 40% is Unsatisfactory Yearly Vendors Meet

GFR Equivalent Procedure in MDL8

-Mfg. Capabilities

-Quality Control System

-Past Performance

-After Sales Service

-- Financial Background

- Documents as per statutory requirement

- Site visits

Permanent vendors registered for 3 YrsSuppliers willing to continue will have to apply for re-registration.

PURCHASE OF GOODS WITHOUT TENDERS

• Rule 145: Upto ` 15000/- on each occassion(Certificate to be recorded by Competent authority)

• Rule 146:>` 15000/- upto ` 1Lakh by 3 Members purchase committee

• Rule 147: Purchase of goods directely under rate contract(DGS&D)

Emergency Cash Purchase for Projects :up to ` 10000 per item/service for projectsPetty Cash Purchase: up to ` 20000 for petty miscellaneous itemsPer purchase.

Equivalent procedure in MDL

Delegated power upto ` 10 Lakhs

GFR

PURCHASE OF GOODS WITHOUT TENDERS 9

Items covered under DGS&D

PURCHASE OF GOODS WITH TENDER

• Rule 150:Advertised Tender Enquiry Subject to exemptions incorporated under Rules 151 and 154.(for the value above ` 25L)

• Rule 151:Limited Tender Enquiry.(upto ` 25L)No. of supplier more than Three

Rule 154:Single Tender Enquiry

- Particular firm is the manufacturer of required goods

- In case of Emergency

• Web Tender - ` 5L to `25L• Global/Press Tender- > ` 25L

Equivalent Procedure in MDL

Upto ` 5L No of Supplier more than Five.

• Items Proprietery in nature (PAC)• Customer instruction/Requirement• Emergency Tender : Exigency due to operational or technical requirements CMD> `25L Director:Up to ` 25L-Enquiry by Fax/E-mail/Courier/Speed Post- TEF with essential conditions only.

GFR

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CONTENTS OF BID DOCUMENT

RULE 155:

• Instruction to Bidders

• Condition of Contract

• Schedule of Requirement

• Specification and allied technical.

• Price schedule

• Contract form

• Other standard form if any.

• Tender enquiry form(TEF)• Detail scope of supplies/work

specification including Insp&QA requirement.

• Price bid format.• Standard terms and condition(STACS)

along with acceptance form.• General terms and condition(GT&C)

along with acceptance form.• Shipping instruction• Statutory Requirement• Official Secret Act 1923 and Safety

clause.• Format for BG,SD,RTGS/NEFT,LC,

BID BOND ,BG for advance payment etc.

GFR Equivalent Procedure in MDL

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ADVANCE PAYMENT TO SUPPLIER

RULE 159:

• Advance payment is demanded by supplier for maintenance contract

• Advance payment is demanded by Firms against turnkey contracts/High value/Overseas supplies

Limit for Advance Payment

a) 30% to Private firm

b)40% State or Central Govt agency or PSU.

c)Maintenance Contract,Amt not exceeding the Amt. Payable for six months.

• Upto ` 1Cr contract value - No advance payment.

• > ` 1Cr contract value – 15% interest bearing (PLR+2%) against BG equivalent to the amount.

GFR Equivalent Procedure of MDL

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TRANPARENCY,COMPETITION,FAIRNESS AND ELIMIMNATION OF ARBITRARINESS IN PROCUREMENT PROCESS

Rule 160:

• Bidding document to be self –contained and comprehensive without any ambiguities

- Criteria for eligibility and qualification

-Date ,place and time for sending/opening bids

-Terms of delivery

Suitable provision for settlement of dispute.

• Reasonable time for sending bids.

• The bids should be opened in public

• The specification of required goods should be clearly stated without any ambiguity

.

Draft of tender enquiry approved by HOD(C)

GFR Equivalent Procedure in MDL

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Bid Rejection criteria is defined.Date ,place and time for sending/opening bids

Terms of Delivery:-Indian :Free delivery at MDL- Overseas: FOB

Indian arbitration and conciliation act 1996

Press Tender: 4 Wks,Web Tender : 3 WksLimited :2 Wks for local bidder , Emergency : 1 Wk for local bidder

Technical specification prepared by Design

Part I&II bids witnessed by the bidders

•TRANPARENCY,COMPETITION,FAIRNESS AND ELIMIMNATION OF ARBITRARINESS IN PROCUREMENT PROCESS

Rule 160:

• In case of turn-key projects pre-bid conference to be indicated in bid,for clarifying issues/doubts.

• Criteria /Factors for evaluating the bids

• Received bids to be evaluated as per bidding documents.

• Bidders should not be allowed to alter/modify bids.

• Negotiation in exceptional circumstances.

• Contract should be awarded to lowest evaluated bidder

Pre Bid may be scheduled as an exception rather than a rule to avoid cartel formation.

GFR Equivalent Procedure in MDL

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Bid evaluated by designated technical Evaluation Committee

Based on specific reason and beyond wide variation in prices with approval of CFA

Lowest Technically qualified bidder

Bidders cannot alter/modify bids.

Loading criteria towers deviation in delivery ,warranty & payment terms are defined in bid documents

EFFICIENCY,ECONOMY AND ACCOUNTABILITY IN PUBLIC PROCUREMENT SYSTEM

Rule 161:

• Appropriate time frame of each stage of procurement should be prescribed to reduce delay.

• Placement of contract with in original validity of bids

• Rate contract system

• Techno-commercial scrutiny- 4 Wks

• Order Placement- 6 Wks after Techno-commercial clearance

GFR Equivalent procedure in MDL

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Overall time frame within validity period

Coded items/Service/Maintenance Contract DGS&D contract with supplier consent

BUYER IN PUBLIC SECTOR• Transperacy ,Non Discrimination

& Equal Opportunity to all

• Rule based,Compliance with Government Audit(CAG) in addition to Statutory and internal Audit.

• Responsible to Public

BUYER IN PRIVATE SECTOR• Principles of Confidentiality

• Compliance with Statutory and Internal Audit

• Responsible to mainly Share Holders

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