Reforms in Public Procurement and Project Management
The Ministry of Finance released revised guidelines on public procurement and project management for Government Tenders in October 2021 to improve the existing procurement process. Before the revision, the procurement process was largely driven by the L1 (Least Cost Selection Method) - under this method, ministries, public agencies, and public sector undertakings (PSUs) used to select bidders quoting the lowest amount to carry out standard or routine works/non-consultancy services like audit and engineering design of non-complex works.
The Central Vigilance Commission (CVC), Comptroller and Auditor General (CAG), and NITI Aayog flagged concerns that the L1 was not the most effective method for selecting bidders for products or services. Executing infrastructure projects requires a high level of technical expertise and therefore the guidelines for public procurement and project management were revised accordingly
Under the revised guidelines, the government now allows selection of bidders through other procurement methods like Quality-cum-Cost Based Selection (QCBS) in addition to the L1 method. Earlier QCBS was used for procurement only in cases where the quality of consultancy services was of prime concern. Unlike L1, QCBS evaluates a bidder based on a combination of technical and quality scores.
In addition to the existing methods - L1, QCBS and Single Source Selection (SSS), the revised guidelines suggest a fourth method — Fixed Budget Based Selection — for selection/evaluation of consultancy proposals. Under this method, the cost of consulting services shall be specified as a fixed budget in the tender document itself.
In addition to procurement methods, the guidelines were also revised to change the multiple bids requirement. Traditionally, single bids used to be rejected and re-bidding was undertaken to ensure multiple bids had been raised – this led to a lot of delays in the procurement process. The new guidelines state that even when a single bid is submitted, the process should be considered valid if sufficient advertising for the bid is undertaken and certain other conditions are fulfilled.
In order to avoid delays in execution of projects, cost overruns and disputes that arise because of delay in payments to contractors, the revised guidelines mandate that ad-hoc payments of at least 75% of eligible running bill be made within 10 days of the bill being raised. Payments that are delayed by more than 30 days may require public authorities to put in place a provision for payment of interest on those bills.