Public Procurement - India

This Chapter was first published in Getting the Deal Through

Public Procurement 2009 (Global Competition Review)

Legislative framework

1 What is the relevant legislation and who enforces it?

India has a federal constitution, with the responsibility for

governance divided between the central and state governments. The

Union List, the State List, and the Concurrent List in the Indian

Constitution govern the legislative functions of the central, union

and state governments. State procurement does not figure in any of

the lists as a distinct subject. Under such circumstances the Union

Parliament has the exclusive power to make any laws on the subject

of procurement. Parliament has not enacted any specific legislation

on the subject. Hence Public Procurement is performed through

Government policies. The subject is primarily covered by: the

General Financial Rules 1963, framed by the Ministry of Finance by

executive order, and the Delegation of Financial Powers Rules 1978

(again framed by the said Ministry). Further, the Directorate

General of Supplies & Disposals (DGS&D) Manual on

Procurement and the Central Vigilance Commission (CVC) Guidelines

prescribe the procurement procedure to be followed by all central

ministries. In furtherance to these Rules, in August 2006 the

Central Government, through the Ministry of Finance carried out a

detailed exercise and issued three Manuals providing for

procurement of Goods, Works and Services. These Manuals are meant

to be guidelines to the Government Ministries / Department / Public

Sector Undertakings. They are very detailed in nature.

The state governments generally follow the same

procedure as the central government.

The procurement rules are enforced by the respective

ministries and departments (ie, the procuring authority in the

first instance). Judicial review of administrative action is vested

in the high courts. Each state of the union has a high

court.

2 In which respect does the relevant legislation supplement the

EU procurement directives or the GPA?

India has not acceded to the GPA.

3 Are there proposals to change the legislation?

No. At present there is no bill pending in parliament to

bring about any change to the legislation.

4 What is the relevant legislation for the procurement of

military equipment?

As part of the implementation of the report of the Group

of Ministers on reforming the National Security System, new Defence

Procurement Management Structures and Systems were set up in the

Ministry of Defence (MoD) order No. SA/01/104/2001, dated 10

September 2001 and No. 17179/2001-Def Secy/IC/2001, dated 11

October 2001. To implement the provisions laid out in the said

Defence Procurement Management Structures and Systems, the

procedure for defence procurement laid down in MoD ID No.

1(1)/91/PO (Def), dated 28 February 1992 was revised. The Defence

Procurement Procedure – 2002 (DPP- 2002) came into effect

from 30 December 2002 and was applicable to procurements flowing

out of 'Buy' decisions of Defence Acquisition Council

(DAC). The scope of the same was enlarged in June 2003 to include

procurements flowing out of 'Buy and Make through Imported

Transfer of Technology (TOT)' decisions. This procedure was

reviewed and DPP – 2005 came into effect from 1 July 2005

and later 2006. The Defence Procurement Procedure – 2006,

has been reviewed and revised based on experience gained in

implementation and DPP 2008 came into existence with effect from

August 2008.

The Defence Procurement Procedure – 2008

provides comprehensive policy guidelines for all capital

acquisitions undertaken by the Ministry of Defence, Defence

Services, the Indian Coast Guard both from indigenous sources and

exports and imports, the Defence Research and Development

Organisation (DRDO), and the Ordinance Factory Board

(OFB).

Applicability of procurement law

5 Which, or what kinds of, entities have been ruled not to

constitute contracting authorities?

The rules governing public procurement are binding only on the

State as defined in Article 12 of the Constitution of India. This

expression ("State") is widely defined and interpreted to

include not only the Government but also agencies and other

autonomous bodies directly or indirectly controlled by it. Hence

private bodies not under the control of the Government are not

bound by the procurement procedures described in Question 1.

Further the Constitution of India vide article 299 stipulates that

all contracts made by the Union or State shall be expressed to be

made in the name of the President of India or the Governor of the

State (as the case may be). Accordingly any person who has not been

so authorized shall not be competent to be a contracting

authority.

6 For which, or what kinds of, entities is the status as a

contracting authority in dispute?

This would always be a question of fact in each case. In a

series of judgments Indian Courts have laid down tests for

determining the status of contracting authority i.e. whether it

would be considered to be a "State" or not for the

application of procurement procedures.

7 Are there specific domestic rules relating to the calculation

of the threshold value of contracts?

The Procurement Rules & Policies mention In Question

1 are applicable for all contracts except those having very low

value (generally US $ 500 or below).

8 Does the extension of an existing contract require a new

procurement procedure?

The existing contract would not be extended as a matter

of routine, and only in exceptional circumstances for reasons to be

recorded in writing, with the approval of the competent authority,

can the contract be extended. In all other cases, a new Procurement

Procedure...