Local Purchase of Ordnance Stores Placing of Repeat Orders: Defence Financial Management

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DEFENCE FINANCIAL MANAGEMENT

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LOCAL PURCHASE OF ORDNANCE STORES

PLACING OF REPEAT ORDERS
1. Reference paragraph 717 Pegs EME and EMER (1) WS/K-100 No.1
issue 8 of 1963.
2. EME Officers are empowered to make local purchase of stores to
meet immediate or requirements when the concerned stores are not
available from the normal source of supply or the urgency of the task
precludes its reference to the depot: On certain occasions, continued
non-availability of an item from the normal source of supply the
workshops constrained to make repeat purchases at short intervals to
meet immediate shop floor requirement.
3. With a view to obviate the complete drill involving time, paper work
and effort in effecting purchases it has been decided that EME
officers may place "Repeat Orders" without inviting quotations,
subject to the following restrictions:-
(a) Repeat orders are placed on the same supplier/firm against a
previous order recent -but in any case within six months from the date
of placement of the initial order.
(b) The same is placed only for an urgent or emergent demand.
(c) The officer empowered to place such orders will certify that he
is satisfied that there as no downward trend of prices since the
original order was placed and the placing of repeat order was placed
and the placing of repeat order is considered to be in the interest of
the State.
(d) The new demand does not exceed the quantity originally
ordered in case of indent for lakh or less in value and 50%, of the
quantity originally ordered in other cases. The total of repeat order
will not however, exceed the financial powers of purchasing officer in
case.
4. The powers envisaged in this letter will be subject to the limits
prescribed in MOD letter 6(1)/97/0(0-1) dated 8-4-97.
5. The following information/certificate will be furnished in respect of
each "Repeat Order":
(a) Number and date of the original supply order on the basis of
which a "Repeat Order" placed.
(b) A certificate that Local Purchase Repeat order has been made
from the regular/reputed dealing with the store(s)/item(s) and will be
attached to the bill.
6. The expenditure involved will be met from budget heads
110(C)/a 415/01 and 110(C)/c 417/CI.
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RTC-KOLKATA 041.00 1
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7. This letter issues with the concurrence of the Ministry of Defence

(Finance) vide their ID 135/02/98 dated 12 Mar 98.
Implementation of enhanced financial powers delegated to Ordnance

and EME functionaries vide MOD letter No.6 (1 )/97/0 (a-i) dt 8/4/97 as
amended from time to time including the MOD letter of 11/10/99.
Consequent upon delegation of financial powers for implementation

of Financial Management Strategy of MGO Branch -1997, a system of
Integrated Financial Advisors and Authority Cum Responsibility Centres
(ARCs) was introduced in the MGO branch vide Govt. of India, MOD
Letter No. 6(1)/97/0(01) dated 8th April 1997, as amended from time to
time, especially vide MOD letter dated 11th October 1999. The Financial
Management Strategy aims at introducing efficiency in performance,
financial control, establishing linkage between utilisation of resources
allotted and targets achieved and speedy decision making.
Comments on the implementation of Financial Management Strategy

'A' at the level of AHQrs.
2. The Govt. letter dated 8th April 1997 envisages linking of

Provisioning and Procurement planning with availability of financial
resources, However, such a linkage between the two is conspicuous by its
absence. The provisioning action for Technical Stores starts in, the OS
Directorate in the month of April and that for GS & C items in the month of
October. This is required to be completed by 31st March i.e. before the
commencement of the next financial year. As the budget allocation normally
comes later in the next financial year, a linkage between allocations and
Provisioning and Procurement plans remains missing.
3. The Financial management Strategy expects the entire procurement

exercise to flow from an accepted provisiong and annual procurement plans,
already vetted, which is also required to be reviewed by budget centers
every year as a pre-budget exercise on a three years roll- on basis. No
Provisioning plan is being made on a three-year roll-on basis. Also, the
annual procurement plan is being made only for Class A Technical Stores,
No, Annual Procurement Plan for, other than General Stores Clothing, is
being made for Class B stores and spares.
4. The I&BC Cell at the Army HQrs. is required to forward consolidated

provisioning and procurement plans to the IFA by 31st Jan for scrutinizing
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liabilities worked out and for onward submission to MoD/MoD(Fin). The

provisioning plans are not submitted to IFA. The annual procurement plan is
being made by MGO branch without reference to the provisioning plan and
without any consultation with the IFA.
5. The provisioning review cycle of Glass B stores runs from Ist April to
31st March for the next financial year. In respect of Technical stores it is
carried out from April to March and for General stores and clothing from
October to March of the year. This time schedule is, however not complied
with. Delays and slippages are a normal feature of the provisioning review.
Also, the as Directorate tries to include the requirements identified for the
next financial year in the Annual Priority Procurement Plan of the previous
year itself. (Illustration-2. Annexure A)
Areas of involvement of IFA, problems encountered and, suggestions for

improvement
6. The financial Management Strategy provides for the involvement of

IFA in the following areas: -
(a) Provisioning
(b) Procurement
(c) Post contract cases
(a) Provisioning
(i) The Directorates/CODs have evolved their own working sheets for
assessing deficiency in the course of provisioning review. The methods
adopted in many cases for calculating deficiencies are not found covered in
the relevant DGQS instructions. The as Directorate sometimes changes the
method of calculation of deficiency as per their own convenience. The as
Directorate does not provide complete information pertaining to previous
APRs of last three to five years for assessing deficiency. In the case of
technical stores, photocopy of working sheets are placed for vetting the
quantity, without previous years' data of issues, dues-in, dues out etc. In
cases of overhaul and medium repairs, copies of relevant SPRDs
(Supplementary Provision Review) are not made available along with the
case. The procurement and issues made for overhaul requirements in last 2-
3 years are not being linked. In view of computerization, tendency is not to
state that previous years figures are available on computer (as is being done
by COD, Delhi Cantt). It is felt that a suitable format, which may provide
complete information needs to be introduced, (Illustration-3. Annexure-A)
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(ii) It is observed that the I&8 Cells located in the COOs or CP Cell at
AHQrs do not vet the provisioning proposals adequately. They just note the
budget commitments against the proposals. In many cases, the deficiencies
are recalculated at the TPC stage and savings made to the State.
(Illustration-4. Annexure A). This has also been highlighted by the CAG in
its Review of Inventory Management in Ordnance Services.
(b) Procurement
(i) The OS Directorate insists on conducting TPC at a short notice on the

plea of urgency, though similar urgency is not observed in progressing cases
prior to TPC stage.
(ii) The comparative statements of rates are not prepared correctly and
information with regard to registration/ past supplier status, destination of
stores, delivery schedule etc. is either not appropriately endorsed or
endorsed incorrectly or selectively. The ED/ST is also included up to the
maximum limit without looking into commitments in the tenders quoted.
(iii) The CFA's approval of necessity and acceptance for initiating
procurement action i.e. copy of provisioning review duly accepted by CFA
are not being placed along with the TPC brief/CST for verifying correctness
of the requirement.
(iv) In case of technical stores, two-bid system, as prescribed, is not being
followed. The technical vetting of the AHSP is being ascertained on
commercial bids.
(v) It is noticed that sometimes AHSP gives their recommendations
thrusting their views on TPC to reject firms or off load quantity on some
firms. The views of AHSP and the views of rep of DGQA are found
contrary to each other in many cases.
(vi) In TPC, no attentation is giving to fixing of reasonable rates before
considering quotes. The technical rep normally shows his inability to give
price break-up; last purchase price with 5% escalation per annum is taken as
a thumb rule- for calculating reasonable rate. In many cases, rates actually
achieved are lower than the LPP.
(vii) Unauthorized persons (Dir Proc, AD Proc) are asked to attend TPC's
by the CFA and given opportunity to involve themselves in discussion on
various issues and influence TPC decisions.
(viii) While summary of decision is recorded on the spot, the minutes are,
however, prepared after a gap of 2-3 weeks. The finalized minutes are also
not forwarded to the all concerned, including IFA.
(ix) A number of deficiencies are observed in draft SOs -budget code
assigned not mentioned or mentioned incorrectly, date for submission of
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advance sample and specific date for completion of delivery not indicated,
SO not marked to IT/ST offices or their complete office address not
mentioned.
(x) There are inordinate delays in placement of draft supply orders after
TPC decision.
(xi) In cases of ex-import purchase, the POV (Priced on Vocab) rates are
not correctly calculated to compare with quoted price.
(c) Post-contract stage.
(i) The MoD letter dated 8.4.97 requires consultation with IFA in all post
contractual matters. The IFA is, however, not consulted in issues other than
delivery period extension, ST/ED revision etc. such as levy I
recovery/waiver of liquidated damages and risk purchases, amendment or
modification in terms of contract/tender/supply order etc. The cases for DP
extension are sent to IFA with great reluctance.
(ii) As per procedure laid down, advice of LA (Def) is to be obtained
only after CFA refuses to concur in DP extension and suggests risk purchase
against defaulting firm. However, the as Directorate refers all cases to LA
(Def) as a matter of routine, prior to consulting the CFA.
(iii) It is noted that cases of liquidated damages/general damages are

forwarded to IFA, after more than 2 to 3 years of completion of supplies by
the firm.
(iv) In all cases, the as Directorate recommends recovery of token LD
even though the concerned firm has adduced no exceptional circumstances
for delay in supplies. The basis for levying token LD is based on no loss
certificate issued by the COD/consignee, which are issued in a very routine
manner, stating either no inconvenience suffered out could not be calculated
in monetary terms.
7. General issues and suggestions
(i) Psychological barriers appear to exist in accepting IFA as the

financial wing of AHQrs. The IFA is perceived in "audit" role alone. There
is a need for change in such an attitude. Wholesome financial inputs would
only enable GFA to make correct decisions.
(ii) The IFA should be involved in budget allocation exercise. At present
the 1 & BC cell at as Directorate collects demands from various units carries
out their technical vetting. There is practically no financial vetting.
Involvement of IFA in this will lead to better financial resource
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management than is being done at present. It would be seen from the data
of financial expenditure against budget allotment under revenue head for the
years 1998-2001 that there is rush of expenditure during last quarter and
major surrender of funds.
(Rs in Crores)
YEAR ALLOTMENT Expenditure EXCESS/SAVING
-1267.32
1998-1999 5115.22 3847.90
1999-2000 8221.21 8053.70 - 167.51
2000-2001 3715.23 2749.55 - 975.97
(iii) It is observed quite often and particularly in last quarter of a financial

year that there is variation between expenditure figures submitted by various
Directorates and in compiled actual. A close liaison between AHQ and
CsDA would minimise such occurrences. IFA is ideally suited to perform
this role.
(iv) As per FMS, the provisioning review is to be based on DGOS
instructions 037 and 040 for class A and Class B stores respectively, which
are being followed by the OS Directorate. These instructions are, however,
not in consonance with the concept of roll-on plan for three years. It is also
pertinent to mention here that if assessment of requirement is not done on
roll-on basis then it is also not possible to carry out effective budget
formulation and financial management. Therefore, there appears to be need
for a new provisioning policy to be followed for provisioning on rollon
basis for three years, in place of DGOS Instructions 037 & 040.
(v) No standard operating procedures for procurements under FMS are
available in as Directorate. Instructions on procurement issued by Mod in
1990 and 1992 and those in Schedules B & C of General Conditions of
Contract 1989 are being followed. In the absence of SOP, as a number of
officers involved in procurement are from the DGS&D, the procurements
are based on the DGS&D manual without the same having been formally
adopted by MoD.
B. At Command HQrs and below
8. Areas of concern and suggestions for improvement
(i) The scheme of Financial Management Strategy has been in operation

for four year now. However, its full potential is not being exploited. The
proposal received by the IFA are confined mainly to local purchase,
purchase on single tender /PAC, local repair contract, purchase of NIV and
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NS items of plant machinery, civil hired transport, procurements out of

DGEME cash grant, purchase out of I&M Grant and at best some stray
cases of consultancy proposals for ISO certification in respect of Army Base
Workshops. The inputs received from various Controllers' offices amply
bear out that the FMS has not got operationalised to the desired extent. The
statistics furnished by COO Agra and Hors Base Workshop Group EME
indicate that the system is operational in some selective areas only. Hardly
any cases of taking over surplus stores on charge, condonation of unlinked
CRVs, and local purchase of stores for development of product
improvement devices of equipment and repairs thereto, etc. are received for
IFAs concurrence. COA Secunderabad and PCOA (NC) Jammu have
intimated that local purchase is being resorted to by the executive under
their inherent powers. No TPC has been held till date in Northern Command
under delegated powers.
(ii) Splitting up of transactions

The inputs rendered by the various CsDA clearly indicate that the
executives resort to splitting up of transactions to bring them within their
own powers. A few instances of splitting up of transactions by ordnance
functionaries for local purchase of ordnance stores and by EME for
purchases out of DGEME Cash Grant have been reflected in. The instances
of splitting up abound in respect of Miscellaneous Expenditure Grant.
(iii) Instances of approaching higher CFAs by lower formations

instead of their own IFA
There are numerous such instances where lower formations prefer to
seek sanction of their higher CFA instead of referring such proposals to
their own IFA. An instance has also come to notice where DGEME could
have sanctioned the purchase in consultation with IFA but sanction was
instead obtained from Govt. of India Ministry of Defence. (Note under
illustration No.4 of Annexure '8'.)
(iv) Procurement of stores exceeding Rs. One lath in value without

TPC
Even the instances where financial powers were required to be
exercised by the executive in consultation with IFA but were exercised
unilaterally are not uncommon. Such cases come to notice only at payment
stage when liability has already been incurred and stores/services received.
Payments are released on provisional basis pending regularization action for
deviation from procedure prescribed in Govt. instructions.
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(v) Non-furnishing of requisite inputs to CFA's Rep by the

Executives –
It has been experienced that vital inputs such as Annual Provisioning
and Procurement Plan approved by AHQrs is not made available to COA's
rep in the absence of which the Finance rep can not verify quantity approved
for procurement. This could sometimes result in over provisioning/splitting
up of transactions.
Secondly, though under the Financial Management Strategy I it is
mandatory for the CFA to certify availability of funds within the allotted
budget while entering into fresh commitments for procurement, the
certificate is not given in many cases thus putting the CDA's red in an
embarrassing situation at the time of TPC.
(vi) Non-receipt of Advance Notice/ Relevant Papers by IFA for TPC

Most of the Controllers have intimated that the requisite papers for
TPC meeting are not being received in advance. It deprives the IFA of
opportunity to study and scrutinize papers in advance and to brief his rep
suitably wherever required. Non-receipt of papers in advance adversely
affects the performance of IFA's rep in TPC meetings.
(vii) Non-association of IFA with Post-Contract Stage Developments

The IFA is generally not being associated with post-contract stage
developments having financial bearing such as granting of extension
of time, levy, recovery/waiver of liquidated damages and R&E
purchases, etc. CDA Bangalore has intimated that while the cases of
waiver of liquidated damages and risk and expense are being referred
by the executives to the IFA, extension of time is not granted in
consultation with the IFA.
(viii) No Uniform Procedure for according CDA/IFA's Concurrence:

Under the FMS, two sets of financial powers have been bestowed
upon the CFA i.e. their original powers and the enhanced financial powers
to be exercised in consultation with the IFA. No uniform procedure for
according IFA's concurrence is being followed in various Controllers'
Offices. where some CsOA are not insisting on their personal concurrence
to the cases where TPC meetings have been attended by their reps, others
feel that the concurrence by IFA is mandatory, as sanction of expenditure
cannot be accorded by the CFA without IFA's concurrence, According to
them, the participation of the COA/IFA's rep in TPC meeting is for
finalization of procurement decision only and in no way tantamount to
IFA's concurrence automatically.
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There is a need to delegate powers of financial concurrence to the

IFAs at lower level in order to make the system smoother and faster. At
present two types of cases are received in the Controllers' Offices for
concurrence -cases exceeding Rs. One lakh in value where TPC meeting has
already been attended by CDA's/IFA's rep and cases below Rs. One lakh in
value where concurrence of CDA/IFA is to be accorded on file only and no
TPC meeting are to be held.
As regards cases where TPC meeting is attended by an IDAS Officer
as CDA/IFA rep and is chaired by the CFA, powers for financial
concurrence to some extent could be delegated to CDNIFA rep. For
instance, Commandant COD can procure items on single tender/PAC up Rs.
10 lakh in consultation with the IFA. The powers of financial concurrence
up to Rs.5 lakh could be delegated to CDNIFA rep and only the proposals
above this amount should be sent to the IFA for his concurrence. In other
words, participation of CONIFA rep in a TPC meeting for purchase up to
Rs. 5 lakh should itself be construed as IFA's
Concurrence. It would not only expedite procurement decisions but would
also eliminate unnecessary paperwork.
So far as cases of financial concurrence below Rs. one lakh in value
are concerned, it would be advisable to delegate powers of financial
concurrence to some extent to the officers at ACDNDCDA and JCDA level
in the Main Office of the Controller to avoid submission of each and every
case to the Pro COA/COA for his/her personal concurrence. Therefore, it is
proposed that level of IFA in the Main Office of the CDA may be defined
with respect to the level of CFA. Accordingly, financial concurrence may be
accorded at the following levels:
(ix) Non-availability of SOPS/Drills

Though the Government letter on Financial Management Strategy is
quite comprehensive; in view of its application to activities of diverse and
complex nature from purchase to hiring of transport, from conclusion of
local repair contracts to condonation of unlinked vouchers and from
technical consultancy to Local manufacture of low technology items,
absence of detailed drills/SOPs is being acutely felt by the executives as
well as IFA.
As already mentioned elsewhere, it is extremely difficult for the IFA
to play an effective role in the TPC meetings for procurement of stores
included in the Provisioning and Procurement Plans in absence of a specific
drill particularly when the IFA, is not associated with the Annual Provision
Review at any stage. Likewise, a number of proposals are being received
from Army Base Workshops for obtaining ISO -Certification. However,
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since the various stages of certification such as compilation of Quality

Manual, Pre-assessment (Trial Audit), Final audit, etc have not been
properly documented by HQrs Base Workshop Group/OGEME, .the
proposals received for concurrence in such cases are not standardized and
different units add/modify the stages as per their convenience; IF A finds it
difficult to deal with such cases in the absence of a SOP on the subject.
While a comprehensive SOP was issued by AHQrs duly vetted by
IFA (Army); CGDA in respect of Information Technology (M items
consequent upon the issue of Govt. of India Ministry of Defence letter
No.6(3)/g8.1D(OI) dated 20.10.98 arid letter No.6(3)/98/D(0-I) dated
4.2.2000, no such SOP is available in respect of procurements- related to
Ordnance and EME though Financial Management Strategy came into
existence much before the issue of Govt. orders on purchase of IT items.
While a model tender enquiry is available for IT items, no
suchstandardization has been done under the FMS. Besides, IFA is not
being associated with the procurement from the stage of acceptance of
necessity to the placement of supply order. Unlike IT Projects, supply orders
are not received for vetting by the IFA and the vendor list is not enclosed
with the statement of caser sent for IFA's concurrence. Thus in the absence
of a detailed drill /SOP on the subject, IFA,s association in the procurement
decisions remains peripheral adversely affecting the operationalisation of
FMS.
On the analogy of SOP for IT items, there is need to prepare SOP,
particularly for the following activities:
(a) Technical Consultancy Projects including ISO Certification cases
giving the various stages of certification.
(b), Purchases to be made under Provision Review.
(c) Local Repair Contracts.
(d) Civil Hired Transport.
(e) Purchases out of DGEMIE Cash Grant and A-in-U and FU Cash
Grant.
(f) Purchase of NIV and NS Items of Plant and Machinery
(g) Purchases out of Misc. Expenditure Grant.
The SOPS so prepared should outline in detail the procedure to be

followed from the stage of acceptance of necessity to post-contract stage
developments including the role of TPC. A standardized format of Tender
Enquiry and Supply Order should be appended with the SOP for the
guidance of all concerned. The mode of tendering should also be clearly
prescribed for different types of procurements. The SOPs should be got
vetted from the office of CGOA before adoption.
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(x) Non-exploration of alternative sources of supply in Single

Tender/PAC Purchases
As per DGOS Technical Instructions No 038, procurement of
ordnance stores should be made from sources or firms, which are registered
and certified for quality with the DGQA. AHQrs, MGO Branch letter
no.40011/IPC/OS/CvCoord/Policy dated 26.4.99 states that in order to
invite better competition, tender enquiries should be floated to unregistered
firms also. In case an unregistered firm happens to be L-l, 20% of the
quantity may be procured from it and the remaining 80% given to the
registered firm with the lowest quote.
However, our experience has been that adequate competition is not
generated on floating of tender enquiries, and there are a large number of
cases where purchases are made on the basis of a single tender/ Proprietary
Article Certificate. The desired efforts are not being made to explore the
alternative sources of supply by floating tenders to some unregistered firms
as well. The feedback obtained from various CsOA indicates that in a few
cases where purchases on single tender were objected to by the COA's reps
and retender ordered, greater Competition was generated which led to
purchases at a more economical rate in tune with the objectives of FMS.
However, in most of the cases, no efforts are made to generate greater
competition citing criticality and propriety nature of items, thus perpetuating
monopoly of a single firm, which cannot be termed as an ideal situation.
In order to generate greater competition, tenders should also be
floated to unregistered firms in case of PAC/Single tender. The executive
authority must explore their level best for alternative sources of supply to
get the best value for money.
(xi) Procurement of Computer, Other IT Equipment and Software

out of DGEME Cash Grant and A-in-U and FU Cash Grant
When orders for implementation of financial Management Strategy
were issued, no orders existed for purchase of Information Technology
equipment. Under Govt. of India MOD letter No. 6(3)/98/11/0-1 dated
4.2.2000, special powers for purchase of Computers and allied equipment
have been delegated to CFAs at a sufficiently senior level. Besides, the SOP
issued in January 2001 on it related items specifies a fairly comprehensive
list of items, which can be bought out of IT Grant.
However, so far as DGEME Grants (both monetary and Cash) are
concerned, no comprehensive list of items that may be purchased is
available. There is no provision for purchase of Computers out of DGEME
Workshop (Cash) Grant but numerous cases for purchase of computers and
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printers are received for IFA's concurrence. On the ordnance side also,
computers are purchased out of A-in-U and FU Cash Grant. Substantial
powers have been delegated to EME functionaries for LP of NIV/NS items
of plant and machinery. Even IT equipment such as multimedia projectors
and scanners are also being procured under this head. Since purchase of
computers etc. is now provided out of IT Grant, their purchase under other
heads or grants does not appear to be desirable.
(xii) Conclusion of Local Repair Contracts by EME Workshops on a

regular basis
It has been reported by some CsDA that a few EME Workshops
conclude local repair contracts in civil market on regular basis on the plea
that adequate facilities for repair are not available with them. The IFA finds
it difficult to verify claims of the EIRE functionaries in the absence of
inputs such as detailed repair facilities available at the Workshop and their
annual repair programme. Therefore, it is imperative to provide a copy of
the annual repair; overhaul programme of Workshops to IFA's rep. Besides,
CO of EME Workshop should invariably endorse a certificate to the effect
that due to inadequate facilities capacity of the Workshop, repairs from the
market are inescapable, every time a local's repair contract is concluded,
(xiii) Non-adherence to Procedure for Local Purchase of NIV and NS

Items
Govt. of India MOD fetter No.6 (1)/97/0(0-I) dated 8.4.97 stipulates
that for local purchase of introduced as well as Not-in-Vocab (NIV and
Non-Standard (NS) items for fabrication, manufacture of spares or Other
special commitments, Army Base Workshops (ABWs) will wait for 60 days
for obtaining NAC from normal source of supply. it further states that after
60 days, purchases may be made subject to two months' requirement at a
time. However, inputs received from the Controllers show that ABWs do
not generally wait for 60 days for obtaining NAC before purchase on
emergent basis are made. There is also a need to review the period of 60
days to make the system more pragmatic.
(xiv) Conclusion & Operation of Civil Hired Transport Contracts

Under the FMS, powers of hiring of civil transport have been
delegated to various ordnance and EME functionaries. A separate set of
instructions exists for ad-hoc hiring by station Headquarters in terms of AI
42/86 as amended by 10/92 for which Station Headquarters convene a
separate Board of Officers for fixation of rates. However it is seen that quite
often Station Headquarters fix rates for ad-hoc hiring of transport on the
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same routes for which Ordnance services also conclude contract. The rates
achieved by Ordnance are generally more economical as compared to those
notified by Station HQrs for ad-hoc hiring; obviously due to economies of
scale involved in Ordnance hiring. The fixation of different sets of rates for
same routes by Station Headquarters and Ordnance services results in
anomalous situations,
It is also noticed that requisite input such as total load factor, distance
involved in kms turnaround period allowed, etc generally do not find any
mention in tender documents. Other important provisions such as
registration with RTO, Income Tax Clearance Certificate (ITCC), earnest
money deposit (EM D) as well as commercial terms are not incorporated in
the tender enquiry. Due to lack of relevant inputs and absence of proper
approach, there is an aide variation of rates at various stations. The
desirability of having only one CHT contract for a region through a Board
of officers centrally convened by Station Headquarters needs to be
considered.
9. Suggestions for Streamlining Procurement Procedure

With a view to streamlining procurement, the following suggestions
are made: -
(i) The list of items that have been contracted under the DGS & D
rate contract could be provided to all lower level functionaries
involved in procurement so that these items are procured at the rate
contract only.
(ii) In certain cases, Central Purchase contracts and procurement
decisions are concluded/taken at the AHQrs level. Sometimes, such
items are procured at unit levels. Correlation of the two contract rates
could result in significant savings.
(iii) The executive should lay down minimum, maximum and re-
order levels of stock items so that procurement could be restricted and
funds saved from being blocked in slow moving items. A 'FSNO'
(fast slow nonmoving dormant) Analysis could be carried out in order
to help in the process.
Suggestions for IFA

(i) There seems to be hesitation on the part of executive to take
IFA's concurrence. First because, they fear that IFA would raise a number of
observations and the case returned unsanctioned.Secondaly the executives
fell that there would be delay in dealing with the cases. It is imperative to
remove these apprehensions for successful implementation of FMS.
Following suggestions need to be considered for implementation:-
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(a) While the preparation of SOP will take care of the problem of
concurrence cases being returned and action with observation, IFA
should set a time limit of 7 (seven) working days for clearing the
cases.
(b) Since IFA system is relatively a recent development, it is
important for the IFA rep/CDA staff to switch over from 'audit' mode
to the 'finance' mode. The role envisaged for IF A has to be more
positive than his role as an internal auditor. Besides providing
SOP/drills on the subject, there is a need to impart training to the
IFA/CDA staff on the nuances of finance, procurement procedures
and contract management. Apart from in-house training, IFA/his reps
may also be imparted training along with the executives in their
training schools, which will definitely help in greater understanding
of the problems/ concerns of the executive.
10. Though FMS has not been able to fully achieve the objectives
outlined in the Govt. of India, Min of Def letter No.6 (1)/97/D (O-I) dated
8.4.97 and still there are many grey areas, the executive authorities and
finance reps should be able to get over the initial hiccups which are
characteristic of any new system and succeed in implementing the system
with elan provided there is greater and mutual understanding of each other's
role and responsibilities. The areas of concern which have been brought out
above elaborately need to be addressed and the suggestions made above
considered for achieving greater efficiency and expeditious decision
making; which will go a long way in streamlining and stabilizing the system
and for achieving best economies to the state.
GUIDELINES-MGO/EME
The govt orders dated 8/4/97 introduces a system of FMS in the MGOs
Branch Army Hqrs and the related subsystems required to support the main
system it its implementation. The design and structure of the system, its
objective/aim, the important features of the system, detailed -methodology
and procedures to operate the system, provisioning and procedures to be
followed, role/functions and responsibilities of different functionaries have
all been spelt out in specific terms in the Govt orders. The extent of
delegation/enhanced delegation of powers relating to provisioning and
procurement and the conditions and parameters governing the exercise of
these Powers has also been indicated in detail. Under the system of
Financial Management of Strategy the IFAs have a very responsible an
significant role to play in the matter of the CFAs exercising their financial
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powers for sanctioning various items of expenditure. The guidelines and

check points contained herein are in this context and background.
1. Essentially the responsibility of the IFAs would be watch and

ensure at every stage that the system operates/is operate as intended vide the
various provisions of the Govt This calls for a cleat perception of the system
and the detailed procedures to be.. followed, and the detailed provisions in
the Govt. orders so that IF As role and responsibilities' are properly
understood and appreciated to proper fulfillment by the respective
functionaries.
2. Compliance with the general methodology for intimation,
processing, clearance etc. of proposals for financial concurrence laid down
in Govt, orders dated 23/9/92 referred to at Para 7 above has to
ensured( enclosed in the material)
3. While dealing with cases for financial concurrence under these
delegated powers, it has to be kept in view at all times that the most
important fact of the Financial Management Strategy is the linkage of
provisioning and procurement activities with the availability resources and
accordingly all expenditure proposals under these powers dealt with and
processed in this background. The various aspects and points mentioned at
Para 11.2 above have also to be kept in view to ensure
compliance/fulfillment thereof Provisions for making available by the
Executives of the various papers/files/documents as per Para 12 above to
enable IFAs to examine and process the cases properly has to be fully
utilised by IFAs.
4. The Financial Management Strategy has been implemented in
MGO's Branch for the first time and it is the responsibility of everyone
concerned including IF As to make it a success by making the executives
understand and appreciate our view points and overall benefits/advantages
accruing to them as a result of the operation of the IFA scheme the positive
contributions that they can make.
5. The powers delegated are in two parts, one where the delegated
powers can be exercised on their own without consultation of IF A and the
other where the CFAs car exercise their delegated powers only in
consultation with their IFAs. Due to some mental reservations or
misapprehensions or misunderstanding or lack of appreciation of the
contentions of IFA scheme and the benefits coming out of .it, cases may
arise where a lower CFA instead of according sanctions under his own
powers in consultation with the IF A may get the sanction accorded by
higher CFA under his inherent powers. Though technically such-a course is
not objectionable, this goes against the spirit of Govt. orders and the very
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basis for enhancement of powers. Such cases have to be tactfully handled

understanding the circumstances leading to such action and wherever
warranted the CFAs requested/prevailed upon to comply with the
indentations and spirit of Govt. orders also and not in letter alone.
6. In the case of procurement through TPCs it has to be ensured that
TPCs have been constituted as laid down in the Govt. orders and value of
procurement is within the constituted TPC.
7. It has to be ensured that price negotiations, if at all conducted, is
only with the lowest tendered as per directives of November `98 from the
CVC.
8. All procurements should be related to the approved Provisioning,
and Procurement Plan and no items/quantities which are not included in the
said plan should be procured. This has to be ensured.
9. In addition to the various requirements to be fulfilled and points to
be seen in all cases as mentioned in the preceding paras, the under
mentioned points relating to sanction of various types of expenditure are
also to be seen and ensured by OF As in the respective cases.
ORDNANCE
(a) Procurement of spares import

Only the MGO has been delegated with the powers up to Rs. 300
lakhs (in FFE) which are to be exercised in consultation with IFA (Army
HQrs).
 What are the items, quantities and value of items for import?
 What is the purpose of procurement and whether the projections are
authentically based and vetted by technically competent authorities
and based on scales if any?
 Assets and liabilities have been worked out correctly and is it based
on vetted and approved Provision Review and form part of the
Provisioning and Procurement Plan?
 Is the entire quantities/ items likely to be fully utilized, if so, over
what period and if the period of anticipated usage is spread over a
long period, why not prune the demand and restrict it to one or two
year's requirements; is the requirement based on wastage pattern/data.
 How has the value been arrived at, whether the tendering system
followed is as per rules, whether the related provisions of GFR been
kept in view is there adequate response and competition, are the rates
Considered reasonable with reference to last procurement rate as
updated?
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 Has the need for import been cleared by DGQA both in terms of
quantities and items?
 What are the payment terms and are they on the generally accepted
pattern, warranty and liquidated damages clause have also to be
examined to protect Govt. interests?
 Have funds been got earmarked from I & BC or FP Dte to meet the
expenditure?
 Has the price Negotiations Committee been constituted properly and
it include IFA (Army Hq) as one of the members?
(b) Local Purchase/Central Purchase /Direct Purchase:

Procurement mowers have been delegated to DGOs, Addl DsGOs
MG AQC Commands and Ordnance functionaries at Depots, Corps, Area,
Sub Area levels and BOUs and DOUs. The power at the level of DGOS;
Addl. DsGOs and MGAOC are only for sanctioning the procurements but
the actual procurements will be made at the point where the requirements
exist. The terms and conditions laid down in Govt. of India Ministry of Def
Letter No.T (I)/87/D (O-I) dated 14.7.98 will be followed.
 What is the procurement for and what is the justification, how the
requirements have come up?
 What are the items, quantities and value?
 As local purchases are to meet emergent requirements it has to be
scrupulously ensured that these are not for stock
 Has the quantity projected for local purchase been achieved at
scientifically and as per laid down norms?
 Has the proper tendering procedure been followed and is there
adequate response and competition. Whether the related provisions of
GFR kept in view?
 Are the rates achieved/obtained considered reasonable and on what
basis; are funds available?
 Whether technical specifications are met?
 Has 'NA' Certificate from normal source of supply been obtained
before considering LP, is the NAC current?
 If the value of purchase is above Rs: 1 lakh this should be through
properly constituted TPCs as per Govt orders?
 The quantities purchased, locally should be set off as assets in the
requirements arrived at in the Provision Review.
 Competence and past performance of suppliers and the various terms
and conditions of supply should be examined to safeguard Govt.
interests.
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 Does the LP proposal reveal/suggest any peculiar or abnormal

features?
 Has the tender enquiry been issued to both Regd. / non-Regd.firms to
obtain healthy competition: in the rates?
 Has LPR and year been correctly shown in the CST w. r. t the
supplies received through OEM/DGS & D rate contract/VFJ rates?
 Has escalation percentage been correctly worked out as per the order
issued from time to time?
 Has Inspection clause in the case of Central purchase/Direct Purchase
beyond one lakh through DGQA been strictly adhered to?
 Has clause for delivery schedule for supply of stores been clearly
mentioned in the supply orders?
 Has approval of acceptance of necessity been accorded by appropriate
CFA?
(c) Cash Purchase

Powers for cash purchase have been delegated to DGOS, Addl
DsGOs at Army HQrs, MGsAOC Commands and Ordnance Functionaries
at Depot level DOUs, BOUs. The powers of DGOs, Addl DsGOs and MG
AOC Commands are or only, sanctioning procurements, the-actual
procurements being made at the point where the requirement exists. The
terms and conditions laid down in Govt. of India, Min. of Def letter No.
7(1)/87/D (O-I) dated 14/7/87 will apply. Cash purchases are purchases
made across the counter by payment of cash.
The points which are to be seen in the case of Local Purchases vide
(b) above will apply. In addition
 It will be ensured that only authorised and competent officials are
deputed to make cash purchases
 Purchase is made on reasonable rates.
 Purchases are made only from reputed suppliers.
 Items purchased should be for immediate use/consumption and not
for stock
(d) Tender Purchase Committees:

The composition of TPC should be as laid down in Annexure 'F' to
Govt. orders dated 8/4/97.
Powers for procurement of items on Proprietary Articles Certificate (PAC)
Single
Tender are delegated as under:
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Level of TPC
Comdts CODs/CAFVD/CASD
Delhi Cantt. (Col/Brig) - Rs. 10 lakhs
ADCs OS/PEG AOC - Rs. 20 lakhs in consultation with
DGOS - Rs.301akhs respective IFAs
 All single tender purchases have to be examined in detail and

critically.
 Has the PAC been accorded by the authority competent to do so by
virtue of powers vested in him and the conditions, if any laid down
been fulfilled?
 Reasons for resorting to single lender, is it because there is no other
manufacturer producing the item or the products of other
manufacturers are not suitable/accept-able for technical reasons or the
users insist on a particular brand only?
 When was the item last procured and was it procured from the same
firm from whom it is proposed now; if not why it is being procured
on single tender basis now?
 Are the rate achieved reasonable and what is the basis for deciding
less?
(e) Provision Review:

The powers delegated are to MGO, DGOS, Addl. DsGOS, DDGOS
(GS&C) and Comdts CODs/CAFVD/CAD Puigaon and COG Delhi Cantt.
The annual Provision review proposals will however, continue to be
vetted by the I&BC cells in the AHQ upto the existing delegated powers in
this regard to the DGOS and his functionaries vide Govt, of India, Min. of
Defence letter No.7(1)/87/O(0-I) dated 1/5/87.
Provision review proposals for values beyond the ceilings prescribed
as above will be got vetted from IFA (Army). Procurement in all cases
beyond Rs: 1 lakh will be through TPC.
Provision Review Proposals beyond the delegated financial powers
will be referred to Min, of Def/Min, of Def (Fin).
 The provisions review has been carried out strictly as per the
instructions contained in OGOS Technical Institutions 037, 040 and
other relevant orders and also as per the directions in Govt. letter
dated 8/4/97.
 Assets and liabilities and the resultant net quantum for procurement
worked out on authentic and correct basis.
 Value of procurement has been arrived at on the norms laid down in
the Govt. orders to decide the CFA
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 How the quantities now projected do compare with those at the rime
of last review, are there wide variations and what are the contributory
factors?
 TPCs for procurement are as per Govt. orders; are the items/quantities
included in the approved provisioning and procurement plan; has
correct tendering system been followed and response and competition
adequate Whether technical specifications are met; are the rates
reasonable; do the various terms and conditions meet the
requirements and are acceptable; how is the competence and past
performance of suppliers?
(f) LP of stores for repair/manufacture of stores ex

RSSDs/MSSDs/ESDs/ EME responsibility
Exercise of these powers delegated to Comdts of
CODs/CAFVD/CADPulgaon/CVDs/ODs/ABODs, /FODs; ADs/FADs/
DOUs/BOUs etc. will be governed by the general, guidelines contained in
Govt. of India Min. of Def letter No.01810/RSSD/05-10B/III/ US/D (O-l)
dated 18/11/92.
 What are the items, quantities and value of stores for LP Whether this
requirement could be anticipated?
 What are the repair/ manufacturing jobs for which these are required?
 When did these jobs arise, what is their priority and where arc they 10
In-completed?
 Do the depots have the requisite skilled man power machinery
/equipment to undertake and complete the job?
 Was similar job undertaken earlier if so when?
 What is the relative economics of getting the job done by depot vis-à-
vis trade?
 Are the stores of normal supply from CODs/ODs/ESDs etc. if so why
LP is proposed and is the proposal, supported by current NAC?
 When was the stores purchased last, is any quantity available in stock
and whether this has been taken into account while assessing the
requirements?
 Has the proper tendering system been followed, is there enough
response and competition; are the rates reasonable? Whether technical
specifications are met?
(g) Local manufacture of stores through work order on EME

Workshops and civil firms
The general guidelines contained in Govt. of India Min. of Def letter
No, 38050105-I0A/2750/802/D (0-1) dated 27/11nl will be followed while
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exercising these powers which have been delegated to Comdts of CODs

/CAFVD/CADPulgaon/CVDs/ODs/ABODs/FODs/Ads/FADs/OOUs/BOUs
/OMC/OFP etc.
 What are the items for manufacture, quantity and value; what is the
purpose for which it is required. What are technical specifications?
 Is the proposal to place order on EME workshops or private firms?
 What is the relative cost of manufacture in EME workshops and that
by private firm?
 Does the EME Workshop have the entire infrastructure and other
facilities for manufacture and will it is able to accommodate and
execute the order in their regular programme and will it be able to
execute and complete the order as per time schedule required by
Ordnance?
 In the case of private firms what are the rates and delivery schedule
quoted and also other terms and conditions and what is their
experience and past record in executing such orders.
 If the item has been got manufactured if so when, by whom and at
what cost; the rates now quoted are reasonable compared to the
earlier occasion?
(h) Powers to order despatch of stores broad through civil hired

Tpt/Container (for move of all types of stores from one Ord.
Echelon to another in most economic manner).
Powers in this regard have been delegated to MGs AOC and Comdts
of various Depots and DTG Amn and vehicle. CFAs are to exercise these
powers once the contract on six monthly / yearly basis has been concluded
in consultation with IFA.
In respect of stations not covered by the periodic contract, the CFA is
to exercise powers in consultation with respective IFAs.
The powers delegated will be twice that delegated vide Govt. orders
dated 8/4/97 for move or arms, ammunition and explosives only.
Exercise of these powers will continue to the governed by other terms
and Conditions contained in Govt. of India. Min. of Def letter No.
55015/0510B/2545/D (0-11) dated 28/5/90 and 55015A/carlike/05-
10B6220/D (0-II) dated 3017/96.
 The powers delegated are per station per day basis.
 For move of arms ammunition and explosives the powers will be
twice that indicated in the Govt. orders,
 IFA's association will be only in cases where the stations where the
stores are to be moved are not covered by the periodic contract.
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 In such cases aspects relating to normal tendering procedure, extent

of response competition, reasonableness of rates on the basis of rates
obtained from civil authorities (RTO/STA), rates printed in financial
dailies, rates approved for similar routes in neighboring
depots/stations /units/formations, liability of transporter while
defence stores are in his possession, past performance of suppliers
have to be looked into.
 Possibility of meeting the requirement from the existing contract by
amending the same to cover the left out station (s) or by fixing a
proportional rate should be considered. The existing contract should
be fully taken advantage of
(i) Power to order move of stores and Passenger trains in case of

emergency
Powers have been delegated to Addl DsGOS/MG AOC and
Commandants of various depots, DOUs, BOUs etc. Exercise of these
powers will continue to be governed by other general terms and conditions
contained in AH Q letter. No. 03829/05-10B dated 1713/86.
 Fulfillment of the conditions laid down vide AHQ letter quoted above
should be ensured,
 What are the items to be moved by Passenger Train, its value and
stations between which they are to be .moved and what is the
expenditure involved?
 The emergent nature of the case would depend on the facts, its merits
and circumstances connected with the case. The possible result
sequences if these are not moved by passenger train has also to be
given proper weightage
 Emergent mo re of move should be got certified by appropriate
authorities.
(j) Taking over Surplus Stores on Charge

Addl. DsGOSMG AOC and Comdts. Of various Depots OC Units
have been delegated powers upto Rs. 11 lakh and Rs. 50000/- respectively
exercisable in consultation with IFAs to take over spurious stores. The
general terms and conditions laid down in Govt. of India Min. of Defence
letter No. 91193/05-10B(ii)/989/D(0-II) dated 5/9/90 will govern the
exercise of these powers. Fulfillment of these conditions has to be ensured.
 What are items of surplus stores and value?
 How did these surplus stores come about; when was this revealed and
how and if these relate over a period of rime what is the period
involved?
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 Do these correspond to deficiencies of these item revealed and

regularised earlier?
 Are the surpluses due to any lapses/omissions and if so whether these
were investigated properly and appropriate disciplinary/departmental
action taken?
 What is the condition of the surplus stores?
 As a result of the surplus, does the quantum projected for

procurement otherwise require re-adjustment by suitable reduction
and if so what is the action taken?
(k) Authorisatio of Cash Imprest to Ord, Depots/unity for payments

of bills/advance payment against Proforma Invoice in respect of
Local Cash purchase of stores made local repair/ manufacturing
to contracts entered into and other incidental expenditure
incurred as permissible under normal rules
A specified amount of Imprest to the various Depots and Ordnance
Units (Imprest Holders) has been sanctioned.
 The parameters and guidelines for making payment out of the
Imprest as contained in Govt. of India Min of Def letter Nc.66211/0S-
10B /430/US/D(O-I)d dated 30/3/8l would be followed by the
concerned authorities. Compliance this guideline has to be ensured.
 The actual amount of Imprest to be provided with in the ceiling laid
down in the Govt. orders dated 8/41/97 will be decided in
consultation with the CDA as per the provisions in FR Part 1.
(l) A-in-U and FU Cash Grant Fitting More House and office
equipment including purchase of MHE. Computer and software
including maintenance of said equipment
Powers have been delegated for this item to DGOS, Addl DsGOS,
DDGOS (Q&A) and Comdts of Regional Depts., DOUs, BOUs, etc.
 What is the proposal for and what are the items proposed?
 Are they according to scales, if any, are any of these items already
held and if so are they being utilised fully; are the items proposed to
be procured likely to be fully utilised and approved by the CFA?
 Whether the need for the items exists and proper justification given?
 Are the items of expenditure proposed normally met out of A-in-U
allotment FU cash grant etc. as per laid down rules?
 In respect of computers and software, are they already held and if so
are the proposed ones compatible with the existing ones etc. are any
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further expenditure like provision of accommodation allied facilities

etc. involved.
 Has proper tendering system followed; whether related provisions of
GFR have been kept in view is there enough response/competition,
are me rates reasonable, keeping in view catalogue price, rates
achieved and approved earlier and now in neighboring
unitslfomlarions? What are the terms and conditions of supply?
Whether these are of acceptable reputation and past performance of
the vendors may be kept in view?
 In case of purchase of computers, whether correct technical
specifications have been laid down and are met, whether item quoted
is branded/assembled.
 Is the maintenance of computer/software proposed through Annual
Maintenance Contracts; are the rates reasonable and what arc me
terms and conditions of AMC or otherwise. Reputation and past
performance of vendor may be kept in view?
(m) Miscellaneous Expenditure Grant:

Powers have been delegated for this item to DGOS, Addl DsGOS,
MGs AOC Commands & CMM Jabalpur, What is the expenditure proposed
and what is the amount involved?
 Is the need for the expenditure and justification given acceptable?
 In the case of procurement of items are they according to scales if
any; whether the items are already held and have been fully
utilised?
 Does the proposal lead to any change in scale or introduction of a
new practice?
 Whether the expenditure is an appropriate and legitimate charge on
Misc. Expenditure grant?
 The quantum of expenditure is not more than what the occasion
demands.
 In the case of purchases, compliance with the prescribed procedures,
reasonableness of rates etc. have to be ensured.
(n) Condonation of unlinked CRVs:

Only the DGOS has been given powers under this item upto Rs. 20,000/-
which could be exercised in consultation with the IFA./CDA. Such
condonation will be on the basis of the report of the CDA in each case.
These powers shall not be further re-delegated to lower authorities by
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DGOS. Govt. of India Min. of Def letter No.

01810/CRVs/OS-10B/(ii)/3661/D(O-II) dated 5.7.84 refers.
 What is the proposal for; what is the number of CRVs involved, what
are the stores and value covered by each CRV, what is the period to
which these relate?
 What are reasons for there remaining unlinked, since when and what,
specific action was taken to link the same, was it followed up
properly and what is the final outcome?
 Does the case reveal any lapses/failures resulting in the CRVs
remaining unlinked; in such a case what are the details of action
taken?
 Does the case involve any irregularities/frauds etc. and whether this
was investigated by Court of Inquiry?
 Have the stores covered by any CRVs been taken on charge and
accounted for properly and credit for the same verified by the LAO?
 Does the case and the circumstances connected therewith are such
that it may merit condemnation?
E.M.E
Powers have been delegated /enhanced in respect of the functionaries
of EME also, under the Govt. orders dated 8/4/97, to sanction expenditure
on various counts. The additional points of check over and above what has
been mentioned in the preceding pares to be exercised/ensured by IFAs
while carrying out financial scrutiny of various proposals are as under :-
(a) Local Purchase: While financial powers have been delegated to

various functionaries right from DGEEME down to OC EME units, the
enhanced powers delegated to DGEME, Comdr, Tech Group, Comdts,
Army/Adv. Base workshops and MGEME are exercisable only in
consultation with IFA/CDA For Inherent powers of CFA, IFA, need not be
consulted unless specifically asked for.
 Existing local purchase procedure has to be followed.
 In respect of Base Workshops, for procurement of introduced as well
as 'Not in Vocal (N 1 V) and 'Non Standard' (NS)-items for
fabrication, manufacture of spares (MOS) or other special
commitment, Base workshops will wait for 60 days for obtaining
'Non Availability Certificate' (NAC) from normal sources of supply.
After 60 days purchases may be made, subject to .2 months
requirements at a time. Emergent purchases can, however be dealt
with as provided for in the existing rules. Expenditure will be limited
to allocation of budget by MGO.
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 All EME CF As will sanction the local purchase of any spare parts,
maintenance stores, materials or items of equipment required to
expedite repairs of all types of MT vehicles equipment/ stores
computers engineers equipment/ medical equipment Refrigeration
equipment for the repair of which EME is responsible or the
manufacture of stores as ordered by Army HQrs to the limit stated
against each for anyone article or any number of similar articles
purchased at the same time, when such articles are not available from
the normal source of supply or if available, time does not permit of
their being obtained on urgent indent (in modification of Note 5 in
Army Schedule XII- FR Part I Vol II).
 For field force requirement, workshops can purchase items to the
maximum extent of one month's inventory level established by the
average of past twelve months consumption (in modification of Govt.
of India Min. of Def letter No. A55452/ABW/EME OPS2/4378/D(O-
11) dated 20/10/93)
 Proper fulfillment of all the above-mentioned conditions governing
sanctioning of Local purchases including acceptance of necessity and
its approval by the CF A.
 Procurement of values above Rs. 1 lakh should be proceeding by
TPCs as. Per composition
 Prescribed tendering system has to be followed; related provisions of
GFR may be kept in view; adequacy of competition and
reasonableness of rates validity of quotes, last purchase rates, rates
achieved in neighboring units may also be kept in view and
acceptability of terms and conditions of supply should be seen
 In the case of stores procured for manufacture or fabrication quantity
projected is Justified and authentically based in relation to the end
item and quantity to be fabricated/manufactured.
 In respect of equipment required to expedite repairs of various items
the basis for assessment of requirement both items and quantities and
the number already held, if any, has to be considered and looked into,
it has also to be seen whether the equipment is likely to be used
optimally/fully in the workshops.
(b) Local Purchase of Training: Aid Stores and other expenditure

out of Technical Training Grant
Financial powers have been delegated to various EME functionaries.
The enhanced financial powers delegated to DGEME, Comdr, Tech Group,
Comdts, Army/Adv. Base Workshop, MGEME and Comdt MCEME/EME
School can be exercised only in consultation with IFA/CDA.
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 The general terms and conditions contained in Govt. of India, Min. of

Def. letter No. A,/55452/ABW/EME OPS2/2l92/D(0--II) dated
8/5/90 as amended from time to time will govern the exercise of
these powers, This has to be ensured.
 Whether the proposed expenditure is covered by the objects/purposes
on which expenditure e can be incurred out of Technical Training
Grant?
 Whether the quantum of expenditure proposed is commensurate with
the training activities going on/proposed and whether the existing
infrastructural and other facilities and other resources available
already have been taken into account while projecting the present
proposal, whether the proposed requirement has been properly vetted.
Whether the necessity has been justified and accepted?
 in the case of purchases whether present tendering keeping in view
the last purchase rates and market rates procedure has been followed;
and related provisions of GFR kept in view is competition adequate;
rates are reasonable, of quotes other terms and conditions of supply
are normal and acceptable, purchases above Rs. 1 lake are through
TPCs.
 Are funds available out of the Technical Training Grant
 Proposal does not involve any change of scales or introduction of a
new practice.
(c) Local Purchase of 'Not in Vocnb' (NIV)/Non Standard (N5)

Plants & Machinery.
The powers for this item have been delegated to MGO, DGEME,
Comdr. Tech Group and Comdts. Army/Adv. Base Workshops. The
enhanced powers of these authorities are exercisable in consultation with IF
AICDA. These authorities have also been given powers under single
Tenders, which can be exercised in consultation with IFA/CDA. The powers
under single Tender are
Single Tender powers in Total Financial powers in
CFA consultation with consultation with
IFA/CDA IFA/CDA
Rs. 20 lakhs
MGO Rs.10 lakhs
Rs. 15 lakhs
Rs. 7 lakhs
DGEME
Comdr base workshop
Rs. 4 lakh Rs. 4 lakh
Gp/ Comdr tech Gp EME
Comdt Army/Adv Base
Rs 1 lakh Rs. 2 lakh
Wksp
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The general terms and conditions contained in Govt. of India Min. of Def.
letter no. A/55452JABW/EME Ops 2/2192/D (0-I I) dated 8/5/90 as
amended from time to time will govern the exercise of the above powers.
 The powers delegated for local purchase of NIV and NS items of
plant and machinery are very substantial as also the powers for single
tender. Considering the nature of the items and the powers delegated,
each case has to be examined thoroughly and in detail.
 What are the item involved, value and source of procurement?
 What is the exact purpose for which the NIV INS item is required; if
the purpose is not a new one how was the requirement met till now
and why cannot the same arrangements continue?
 If the purpose is a totally new one what is the guarantee that the
NIV/IBS item will meet the requirement particularly when the
workshop does not have the experience of the item?
 Has the item been subjected to trials if so what are the results and is
the trial evaluation report available and does it say specifically and
clearly that the intended requirements would be fully met by the
machine?
 Does it involve any further expenditure on housing, commissioning,
installation etc?
 Has the item been approved for instruction in the Army by the
empowered body as it may otherwise involve repair / maintenance /
spare parts problems?
 If the item is for a limited purpose how will this be utilized after the
limited purpose is achieved; will it be wise, and financially sound to
go in for substantial investment for the limited objective?
 What are the other alternatives to procurement of NIV/NS item and
what is the relative economics thereof?
 NS/NIV items should be restricted to those specified by Govt.
 In case of single tender purchase, the Proprietary Articles Certificate
issued by the Competent Authority and its acceptability should be
looked for. Reasons and justification for single tender purchase
should be examined critically along with aspects like reasonableness
of rates; in relation to last purchase rate; market rate etc., validity of
quotes delivery and other terms, liquidated damages for delayed
supplies, after sales service, spare parts support, repair support etc.,
Reputation and performance of the vendors may also be kept in view.
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(d) Sanction of expenditure out of DGEME Workshop Grants, both

cash and monetary on test trials, experimental works and
execution of Technical Minor Works carried out in EME units
and Establishments.
While financial powers under this head are delegated to the various
functionaries of EME, the enhanced powers delegated to DGEME, Comdr.
Tech Gp.Comdts. Army 1 Adv. Base Workshops, MGME, Comdt.
MCEME/EME Centre School and Comdt, EME centre are to be to be
exercised by them in consultation with IFA/CDA.
 All the powers are for tests, trials, and experimental work being
carried out in EME units/Estts.
 Local purchase powers under the DGEME Workshop grant are
governed by above and as laid down in AI 86/74 as amended by AI.
23/90.
 The expenditure proposed is covered by the objects/ purposes on
which expenditure can be incurred out of DGEME Workshop Grant.
 The tests, trials, experimental work and Technical minor works
carried out in EME units/estts are for bonafide Govt. purposes and are
related directly to the role and functions and charter of duties of
concerned EME unit/estt.
 Quantum of expenditure proposed is justified in relation to the size
and scope of tests, trials, experiments, etc. undertaken and whether
the total expenditure is within the overall ceilings sanctioned for the
tests, trials etc.
Whether the need for such expenditure on test, trial, experiments has
been established and approved by CFA
In the matter of local purchase, are the items available ex--depots and if so
whether the NAC has been obtained.
Whether quantities for local purchase have been assessed properly and
restricted to minimum immediate requirements of the tests, trials etc?
Whether reasonableness of rates has been ensured along with fulfillment of
other requirements of LP?
Have the technical competence, reputation, past performance of the vendors
been verified and are acceptable?
Final outcome of tests, trials, etc. should be called for and watched.
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(c) Local Purchase of Stores for development of Product

Improvement devices of Equipment
Financial powers under this head have been delegated to MOO,

DGEME, Comdr. Tech Gp, Comdts Army/Adv Base workshops and
MGEME are exercisable by them in consultation with IFA/CDA.
 What are the Product Improvement devices of the equipment for

development of which LP is proposed?
 What is the vintage and present condition of the equipment? Where
product improvement devices are to be developed and are they
capable of further development, in other words is the expenditure on
development a useful and fruitful one?
 If the items for LP are available from normal sources of supply,
current and valid NAC should be looked for while dealing with LP
cases?
 Is the quantum for LP property assessed to restrict it to the minimum
needs of the development work?
 Aspects like following correct tendering procedure, adequacy of
competition, validity of quotes, reasonableness of rates, terms and
conditions of supply, quality assurance etc. has to be examined.
 Purchases above Rs.1lakh should be processed through TPCs
(I) Maintenance and Repair of Plant Machinery and Test Eqpt of

Product Improvement Projects
 Enhanced Financial Powers under this head have been delegated to

DGEME, Comdr Tech Gp; Comdts Army/Adv. Base Workshops and
MG EME, and these are exercisable by them in consultation with
IFNCDA DO EME has been given inherent financial powers of Rs
10,000/-.
 What is the proposal for and what is the value, is it for repairs or
maintenance and how these requirements were met till now, is there
no Annual Maintenance Contract?
 Who is the agency to whom the repair/ maintenance work is proposed
to be given, is it the original equipment supplier or some body else?
 Have the technical competence, reputation, past performance of the
vendors been verified and are acceptable?
 What are the rates and terms and conditions of repair/ maintenance?
 Have competitive quotations been obtained and are the rates achieved
reasonable. What is the life/guarantee of repair work, whether the
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rates have been obtained through proper tendering as per provisions

of GFR?
 Cannot the repair work be done in the EIRE workshop and if so what
is the estimated cost and how does it compare with quotations from
trade.
 Is it not Possible to conclude AMC and cover therein the repair
obligations also?
 What is product improvement project for which the relevant
plant/machinery/test equipment were procured, when
procured/whether these are in full use and what is the current status of
the project; when it was started and when it is likely to be complete?
 Will there be use for the plant/machinery/test equipment after
completion of the project
(g) Development of Project Improvement Devices through Trade
 The enhanced financial powers under this head delegated to DG

EME, Comdr. Tech Group, Comdts Army/Adv. Base Workshops and
MG EME are exercisable in consultation with IFA/CDA
 What is the proposal and value what is the particular product
improvement device to be developed through trade and is it directly
related to the role and functions and also charter of duties by E:ME
Units/ Establishments; what are the benefits expected?
 Do not the EME units/estts have the requisite skill and expertise to
develop the same?
 Is the trade fully conversant with the line of work, its specialties and
intricacies of working and functioning of EME unit/estts and are they
in the sane line and can deliver the goods; have their competence and
capabilities been verified?
 Is the proposal part of product improvement device project and if so
what are the details and whether the sanctioning of the present
proposal will not exceed the total sanctioned value of the project?
 To whom is the development work to be given and are these private
firms engaged in the same or similar time and if so have their offers
been received through proper tendering and how do they compare
with each other; the rates and other terms and conditions of the offer
proposed to be accepted are reasonable and acceptable.
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(H) Local Repair Contract
 The enhanced financial powers under this head delegated to MGO,

DG EME, Comdr Tech Gp, Comdt. Army/Adv Base Workshops and
MG EME are exercisable in consultation with IFA, CDA
 The provisions contained in Govt. of India Min. of Def letter no.
N55452/ABW/EME Ops 2/21921D (O-II) dated 8/5/90 as amended
will continue to govern exercise of these powers and compliance
thereof has to be ensured.
 What is the proposal for and what is the value?
 What is the scope of the local repair contract proposed and what are
the items proposed for repair?
 Do not the EME Workshops have the facilities and expertise to carry
out the repairs and if so what is the estimated cost and what is the
time frame for completion and how do they compare with the offers
under consideration?
 Have competitive offers been obtained through proper tendering and
how do they compare with each other in aspects like cost, time frame
for completion, other terms and conditions like warranty, security of
Govt. stores while in their possession for repairs?
 Which is the offer proposed for acceptance and if other than the
lowest reasons therefore?
vendors been verified and are acceptable?
 Negotiations, if at all held should be with the lowest tenderer as per
CVCs directives of Nov. `98.
 The MOU/Contract Deed should be a standard, one incorporating
adequate safeguards for Govt. interests to avoid any legal
complications.
(i) Maintenance of Plant 'Machinery Equipments Automatic Test

equipment's [ATT's] Computer systems and their Peripherals
through Annual Maintenance Contract.
 The enhanced financial powers in this regard delegated to MGO, DG

EME, Comdr. Tech Gp, Comets. Army/Adv Base Workshops
Comdts. MC EME, EME School and MG EME are exercisable in
consultation with IFA/CDA
 The provisions contained in Govt. of India Min., of Def. letter no.
N5545/ABW/EME Ops 2121501DS (Cord) dated 4.10.94 will
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continue to govern the exercise of these powers and compliance with

these provisions has to be ensured.
 What are the items proposed to be covered through Macs and what is
the value of each AMC?
 What were the arrangements till now for maintenance of these items?
 Have competitive quotations been called for through proper tendering
and how do they compare with each other in regard to annual charges,
scope of maintenance services, does it include repair liability also and
if not will it not be advantageous to cover repair obligations in the
AMC to ensure quality repairs?
vendors been verified and is acceptable?
 Which is the offer proposed for acceptance, if not the lowest, reasons
therefore, are the reasons acceptable?
 The MOU/Contract deed should be standard one incorporating
adequate safeguards for Govt. interests to avoid any legal
complications.
(j) Consultancy on Technical matters from Civil sources

Manufacture of major/minor unit assemblies/stores and semi
fabrications through local contract.
 The enhanced financial powers in respect: of these delegated to

MGO, DGEME, Comdr. Tech Gp and Comdts. Army/Adv. Base
Workshops are to be exercised in consultation with. IFA/CDA
 What is the consultancy for specifically and is it on technical matters
and what is the fee, what is the duration and when the report of the
consultant be available, does it meet the requirements of EME?
 Is the technical skill, expertise and competence available in Ev1E not
able to deal with the matter themselves?
 Has the competence, expertise and experience of the civil consultancy
agency been verified and found adequate to meet EME's
requirements?
 What is the specific advantage; benefit to Army expected to flow out
of the consultancy, is its absence likely to be disadvantageous to the
Army and if so what are they and what is their impact?
 In regard to manufacture of major/minor assemblies/semi fabrication
etc. what are the items, quantities and value covered by the proposal?
 Are these items made available by normal supply sources and if so
what is the need to get them manufactured/fabricated, has NA
certificates been obtained?
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 Has competitive quotations been called for through proper tendering

as per GFR and how do they compare with each other in technical
specifications, rate, delivery schedule, quality assurance, warranty,
other terms and conditions etc. has the technical capability and past
performance of officers verified and are acceptable?
 What are the items intended for, are they for immediate use or stock?
 Which is the offer proposed for acceptance, if not the lowest reasons
therefore?
(k) Manufacture of special tools or other articles for experimental

purposes or for expediting production /repair
 The enhanced financial powers in this regard delegated to DG EME,
Comdr. Tech Gp Comdts Army/Adv. Base Workshops, MG EME and
Comd MC EME/EME schools are to be exercised in consultation
with IFA. /CDA
 What are the items to be manufactured, their specific purpose/usage
and value? Whether the need of the item has been established and
approved by the competent authority.
 How has the requirements of items and value assessed and are they
reasonable?
 Are the items proposed for manufacture for a specific purpose can be
used as general-purpose items?
(L) Hiring of Transport

 The enhanced financial powers delegated to DCG EME, Comdts,
Army/Adv Base Workshops and MG EME will be exercised it
consultation with IFA/CDA
 The general parameters, guidelines and the conditions laid down in
Govt. of India Min of Defence letter No.35015/OS-10B/25451D (o-
II) dated 28/5/9 for hiring of civil transport by Ordnance functionaries
would be followed while exercising the above financial powers by the
EME functionaries. Compliance with these requirements should be
ensured.
(m) Authorisation of Cash Imprest to EME Workshops/ Units for

product improvement payment of huts in respect of local
purchase of stores made/local repair /Manufacturing Contracts
entered into under Donna) rules.
The amount of cash Imprest permitted to be held at anyone time by
the various EME units/Estts are laid down. The guidelines laid down in
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Govt. of India Min. of Def Letter No.3563/EME/Fin/79491D (0-II) dated

19/12/86 will apply for making payments out of the Imprest.
There is no IFA role finance role involved in this.
(n) Misc. Expenditure Grant

o The enhanced financial powers delegated to DGME, Comdr. Tech
Gp., Comdts. Army/Adv base Workshops and MG EME are to be
exercised in consultation with IFA/CDA.
o Exercise of these powers will be governed by the general provisions
contained in Rule 58(A) FR Part I, Vol- I, and Schedule-1 Apps: N-
FR Part-I Vol.-II and SAO 8/S/82. The detailed guidelines laid down
relating to Govt, of India Min. of Def Letter No. PC-A,/89589/FP-I
(III)/D(GS-1) dated 1/4/98 will apply in respect of this item.
The Chief of the Army Staff
Copy to:
The Controller General of Defence Accounts
The Director of Audit, Defence Services
The Dy. Director of Audit, Defence Services, Southern Eastern, Western,
Central, Northern Command and CDA Patna.
Procurement Procedure of Authorised Line Communication Facilities

from Telephone Administration Grant
1. Reference our letter No B/46768/Gen/Sigs 7(C) dated 03 rd Aug 99

2. The guidelines on procurement procedures from Telephone
Administration Grant were issued vide our letter under reference. Based on
the experience gained in the last ore year, these are now being suitably
modified. This letter lays down the procurement procedures of authorized
line communication facilities from Tele Adm. Grant. These guidelines will
be read in conjunction with Govt. of India Olin of Def letter Pros.
B/46768/Gen/Sigs 7(a)/ 2431-A/D (GS-IV) dated 14 Sep 89,
B/46768/Gen/Sigs 7(a)/ 5394/D (QS) dated 15 Oct! 96 and
B/46768/Gen/Sigs 7(c)/ 4433/D (QS)/98 dated 21 Aug 98, So-in-C's TI
209/94 and FRI.
3. Detailed procedures and steps contained at para 16 to para of TI
209/94 will be strictly complied with and these would be applicable not only
for EPABXs, but for any static communication systems that are proposed
for procurement.
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4. The procedure prescribed can be divided into three parts: -

(a) Part I -Preparatory activities essential for procurement
(b) Part II -According of sanction by the Competent Financial
Authority (CFA)
(c) Part III -Dealing with actual procurement procedures
5. The procedural steps involved in the three stages of procurement are
as under: -
(a) Preparatory Activities Essential for Procurement
(i) Step 1:- Statement of case by the user.
(ii) Step 2: - Approval of the requirement in principal
by CSO Command/ADGT, as the case may be.
(iii) Step 3: - Preparation of QR/OR
(iv) Step 4:- Invitation for Quotes in two parts: -
(aa) Formal technical offers.
(bb) Commercial offers -Estimated price.
(v) Step 5: - Opening of Technical quotes.
(vi) Step 6:- Vetting of technical specification by a duly
Constituted. Technical Evaluation Committee
(TEC) under the orders of CSO Area/Corps/
Comd, AHQ Signals, Cdr HQ ANC or equivalent
authorities.
(vii) Stems 7:- Recommendations on the TEC report by the
intermediate from HQs,
(b) According of Technical Approval by the CSO Comd/ADGT

Processing the case for according technical approval based on TEC
report by CSO Comd/ADGT, and fixing an upper financial limit for the
project based on the estimated price.
(c) Invitation for Supplementary Commercial Quotes

only from vendors qualified by TEC on the basis of clarifications
given during the TEC. Ali prospective vendors will be given clarifications
explanations of the OR to enable them to submit final Commercial quotes,
which will be, opened at the stage of PNC.
(d) Dealing with Actual Procurement Procedure

(i) Step 1:- Constitution of PNC by CSO Comd/ADGT. For
Projects whose value exceeds Rs 2 Lakhs, the PNC will
invariably incl a CDA rep. In case of projects whose value is
less than Rs 2 Lakhs, concurrence of the respective CDA will
be obtained prior to the negotiations by the PNC. In case of all
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projects of Army HQs, CDA concurrence will be obtained

through SIGs 2 prior to the constitution of PNC by Sigs 2.
(ii) Step 2:- Opening of commercial quotes by the PNC.
(iii) Step 3:- Preparation of price performance report.
(iv) Step 4:- Negotiation with the vendor with the lowest
quotes i.e., with LI
(v) Step 5:- Approval of the PNC proceedings by CFA and
financial sanction by CF A.
(vi) Step 6:- Issue of letter of Intent /supply order by the user.
(vii) Step 7:- Contract formulation with the selected vendor by
the user.
(viii) Step 8:- Release of payment by the CFA to vendor through
CDA as per the conditions of the contract.
(ix) Step 9:- Monitoring of contractual obligations and off set
payment for non-compliance, by the user.
Part I
PREPARATORY ACTIVITIES ESSENTIAL FOR PROCUREMENT
6. Preparation and Issue of Tender Enquiries:- Action of statement

of case justifying the requirement and acceptance of requirement by the
competent authority precede the actions of invitation to tender enquiry. The
invitation to tenderand the instruction to the tenders are important
documents, as the firm's quotations tender are bases on these inputs. The
tender enquiry should therefore, be carefully scrutinized and should set out
in unambiguous terms, the requirements, of the purchaser so as to the
description of the stores, specifications, quantity, delivery period etc. A
two-bid system of obtaining technical and commercial bids should be
followed. Formats for technical and commercial responses should also be
issued in order to avoid any ambiguity or vagueness in the responses. The
tender enquiry will be issued to PSUs/SGUs and selected private vendors
of repute, who are able to offer equipment /system approved by the
Telecommunication Engineering Centre (TEC) of the DOT. A list of such
vendors will be maintained at all Headquarters,
7. Method of Purchase: - The enquiry should be as broad based as

possible. However, the security concerns would dictate limiting the number
of prospective suppliers to a reasonable number. The tender enquiries
should be issued to all registered/known suppliers. The list of approved
suppliers on the basis of experience and collected data must be available
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with all Commands. This list will be periodically updated and

communicated to this HQ.
8. Guide Lines for Preparation of TEC Report: - Evaluation of any

Common system proposed for procurement should, as far as possible, be
done or, the basis of specified QP parameters clearly weighted, against
inter-se-priorities and different makes of equipment evaluated on a common
basis. Wherever considered desirable and feasible, such evaluation should
be done on the basis of its performance and degree of satisfaction of the
identified parameters and qualities judgment should be incorporated. The
equipment can also be called for demonstration at no cost no commitment
basis. The TEC should only classify eqpt as technically acceptable or
technically not acceptable giving reasons for the later qualification,
9. Opening of Tender: - Consequent to opening of the bids,

following actions is to be completed,
(a) Tenders of different vendor's should be numbered serially,
initiated and dated on the front page.
(b) Each page of the schedule or letter attached to should also be
initiated with date.
(c) Price and delivery period should be encircled and initiated.
10. FAX or Letter Quotation: - FAX or letter quotation may be

considered if the same is followed by the formal tender within three days
provided such telegraphic/letter. If fax quotations are complete in all respect
with regard to price, specifications, delivery and other particulars essential
for taking purchases decision. If the board of officers/TEC feels that
acceptance of late tenders is necessary in the absence of adequate
competition, such quotations may be considered for acceptance with the
approval of convening authority.
11. Scrapping of Tenders: - Scrapping of tenders and issues of fresh

tender enquiry should be an exception rather than a rule, where the
quotations received do not conform to operational requirement or when
prices quoted are considered in approval of CSO Command / ADGT should
be obtained before scrapping of tenders.
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Part-II
ACCORD OF SANCTION BY THE COMPETANT FINANCIAL AUTHORITY

12. Technical Approval by the CSO Comd/ADGT: - The financial
powers delegated for expenditure are vested with SO-in-C and CSO
Commands as per Govt. of India letter quoted under, reference. Technical
approval will be accorded by CSO Commands in the first instance for units
under their jurisdiction and by DGT for all others or the basis of
recommendation of TEC. While forwarding the cases for tech sanctions,
following documents/recommendations are required: -
(a) Tender enquiries with r details of vendors to whom these have
been t addressed including OR of the system.
(b) TEC Report with quantitative vendors rating with a
comparative statement of the technical offers received.
(c) Recommendations of intermediate authorities.
(d) Proprietary Items Procurement Proprietary items procurement
may be resorted to based on the furnishing of the certificate to that
effect by the supplier an acceptance of the same to the user. In the
case of expansion or replacement of existing, in use hardware to
increase the capacity or software features of communication system,
procurement from the original supplier may be resorted to on a single
vendor basis for ensuring compatibility. The TEC report should
clearly state this aspect. Care should be taken to include this aspect in
the original contract for such items to include this aspect in the
original contract for such items of hardware /software, which may
require an up gradation on a later date.
13. Composition of Price Negotiation Committee. Composition of the

PNC is dependent on the value item, under consideration flux This would
be as follows: -
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S.NO. Value Compositions Approving Remarks

Limits Authority
(i) DCSO Corps/Chairman File to CGA
Col.Comn/ Co Units for
(ii) User rep member concurrence
Less than CSO
a. (iii) TOT (SL) Member before placing
2 lakhs Comd/ADGT
(iv) CDA rep Member a supply order
(if available) in case CDA
rep available
(i) DCSO Corps/Chairman
2 to 5 Col.Comn/ Co Units CSO
b.
lakhs (ii) User rep member Comd/ADGT
(iii)Rep of CDA Member
(i) CSO area/Chairman
Crops/DCSO
Comd/ComdtAHQ
5 to 50 Sigs/Cdr ANC/DDGT CSO
c.
lakhs (ii) Rep from Member Local unit Comd/ADGT
Major/Lt Col
(ii) User rep member
(iii) Rep of CDA Member
(i) CSO Comd
Chairman /ADGT
(ii)DCSO
Comd/Member
CSO Crops
50 to 150
d. Comdt.AHQSigs/Dr ANC/DDGT So-in-C
lakhs
(iii) Col Comndr.,/Col Member
(iv) User rep Member (v)Rep
CDA Member
(vi) Rep of local unit Member
Under
Above
e. arrangement of
150 lakhs
MOD
14. Subsequent to the accord of technical approval convening order for

PNC is issued by Army HQ/Command HQ. Specimen for technical
approval is at Apex. A. Specimen of convening order for PNC is at Apex. B.
Specimen form of expenditure is at Apex, C.
15. PNC Procedure Vendor responses will be sought in the form of sealed
price bids only. PNC may be composed at the appropriate levels depending
on importance of the store under procurement and likely financial outgo of
the proposal. The Chairman shall nominate such designation already stands
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made in the order establishing the PNC. At this stage, the PNC is expected
to obtain price data of similar comparable equipment and to also assess a
reasonable price range and on technical evaluation, to provide a bench mark
against which offers have been received. During its first meeting itself,
commercial offers of only those firms will be opened; whose technical
offers have been found acceptable by the TEC the PNC shall maintain self
speaking record of its work in chronological order. This record shall be page
numbered, stitched and signed by the Chairman PNC on the opening page
which shall indicate total number of pages in the bound volume, each page
of which shall be initiated by Secy. PNC or officer nominated by the
Chairman PNV.
16. Bids off the competing firms shall be read out to all present and
signed by the Chairman. The PNC shall undertake a detailed examination of
these bids and in its report (to be submitted to higher authorities. on file).
Furnish reasons in favour of its recommendation for acceptance of a specific
bid. Report of the PINIC shall be signed by all the members.
17. The PNC should prepare a comparative statement of the offers
received and assess the reasonableness thereof
18. Once a final view has been taken by the PNC, it shall invite
representatives) of the firm with the lowest financial quote 'L1) for
financial/contractual negotiations and finalise important issues of the
contract to be executed later.
19. Meetings of the PNC shall be attended by all members. No member

shall be authorised to nominate his subordinate officer to attend a PNC
meeting.
20. Sanction by the CFA The sanction by the CFA would then be
obtained based on PNC report. In case the CF A is the SO--in-C, all relevant
documents viz.; TEC and PNC reports duly approved by CSO Comd along
with recommendations will be forwarded to LG Signals (Sips 7). The
following documents formation will also be furnished.
(a) An assessment of reasonableness of the cost as per prevailing market
rates.
(b) Certificate that funds available are sufficient to meet existing
commitments and additional procurement liabilities.
(c) CDA office under whose jurisdiction; the procurement lies and who
would be making the payment should also be clearly stated.
PART III
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DEALING WITH ACTUAL PROCUREMENT PROCEDURE
21. Acceptance of Tender: A tender is accepted by the issue of supply

order and this concludes the contract between the purchaser and the
contractor. In view of the short time at disposal, sometimes, it may be
necessary to conclude the contract by issue of, a letter of intent (advance
acceptance letter), In Such cases, the letter of intent concludes the contract
and it is imperative that all important and relevant clauses such as
description of the stores, quantity price, deliver period etc, are included In
the letter of intent, and there is no variation between the letter of intent and
supply order which should be issued as early as possible. The letter of intent
should also specify that the contract is concluded by the letter of intent and
that a formal supply order would follow. Chaillan PNC, at his discretion
may like to take any Bank Guarantee from the vendor, if it is felt that the
vendor subsequent to acceptance may fail to performance or execute the
contract in time or delay the commencement.
22. Acknowledgement of Acceptance. The contract is brought into

existence upon communication of acceptance of the tender within the time
prescribed. Further acceptance of the contract by the firm is not necessary,
where mode of communication is by post. The letter of intent or the supply
order (as also amendments) should be sent by registered post, with
acknowledgement due, so that there would be sufficient documentary proof
of their receipt by the contract.
23. Intimation of Non-Acceptance of Tenders: -Tenderers, whose tenders

are not accepted, should be informed of the non-acceptance of their tenders,
but in no case, should information be furnished regarding the price accepted
car the price quoted by other tenderers, except at the time when the
tenderers are opened in presence of the tenderers.
24. Overseeing the effective implementation of every contract is as

important as the soundness of the negotiation procedure leading thereto.
User representative in consultation with the Comdt HQ shall undertake
regular reviews of the contract implementation. Such reviews shall be
carried out as frequently as necessary but at least once every month, to
ensure timely remedial/corrective action. Over and above such joint
progress reviews Comd,/Corps/Area HQs who have contracted shall
establish specified arrangements for constant monitoring of the contract
implementation. For any default/failure in contract concerned HQ shall
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draw up a clear timeframe for securing rectification of default/defect and

assess the financial implication thereof which may justify being set off
against payments due under the contract.
25. Submission of Returns: Quarterly returns as per Appendix '0' and

Appendix 'E' are to be submitted to DG Signals Signal 2 and Signal 7 of all
the concluded procurements from TeIe-Adm Grant for monitoring of project
implementation. The returns will be submitted so as to reach Army HQrs,
latest by 25th of succeeding month of each quarter i. e. by 25th
April/July/October/January.
26. No other documents will be forwarded to Army HQrs. Except as

mentioned in Para 20 above 26. Our letter No B/467/68/Gen/Sig/CO dated
3rd Aug 1998 is hereby supersedes.
27 Please acknowledge.
Sd/-
(B Mishra) Col
Director Signals 7
For Signal Officer in Chief
No.A/55452/ABW/EME.Ops.2/2150/DS(Coord)/94
Government of India
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Ministry of Defence
New Delhi, 4th Oct 1994
The Chief of Army Staff
Subject: Delegation of Financial Powers: Annual Maintenance Contract of

Computer.
Sir,
In exercise of the powers vested in this Ministry of Finance (Det) letter No
F 21 (2)/Coord/74 dated 10th Jul 75, it has been decided to delegate the
following financial powers to the under mentioned authorities in this Corps
of EME for entering into the Annual maintenance Contracts (AMC) for
repair/maintenance of the higher and computer system and connected
peripherals accessories purchased through Govt. funds/grants)
No Competent Financial Financial Powers in consultation with MOD

Authority (CFA) (Fin)/IFA/CDA concerned
(Rs)
(a) DG EME 1,00,000
MG EME/Cdr HQ Tech Gp
(b) 50,000
EME
(c) DD EME 25,000
CO EME Bn/Wksp(having
(d) 25,000
CRC increment)
2. Subject to approval of Govt., Computer Repair Centers (CRCs) will be

equipped to maintain/repair Personal Computers (PCs) up to 386 SX (except
surface mounted technology) to start with and gradually be equipped for
higher-end computer systems.
1. In accordance with above Para, the policy regarding repair and

maintenance through AMCs or in-house CRCs, in respect of higher
end computer systems, will be decided by the DGEME based on the
technical, expense, resources available with EME and the cost
effectiveness.
2. These financial powers will be made use for repair /maintenance of
higher end computer systems like those having 386 SX
microprocessor chip with surface mounted technology car 386 DX
microprocessor or Pentium microprocessor or RISC based
microprocessor chip etc, all types of computer systems having multi-
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user configuration, super Micro/Enhanced Super systems of all types,

Mini Computer systems all types, Main Frame computer systems all
types etc.
3. Under these powers the Annual Maintenance Contract for repair
/maintenance of higher end computers will be entered to by way of
calling for competitive bide and all other case shall be done as per
procedure in vogue.
4. These financial powers shall be restricted only to the officers who
actually form part of chain of command for repair and maintenance of
computer systems. These powers shall not be exercised for any other
purpose including that of purchase of consumables/spare etc.
5. The financial powers mentioned above are per Annual Maintenance
Contract per higher end computer system. For case of administering
an Annual Maintenance Contract, one or more similar Different
higher end computer systems may be clubbed together under a single
Annual Maintenance Contract, within the financial Powers mentioned
above.
6. The financial powers referred, to in the preceding paragraphs relate to
the expenditure to be met from the Defence Services Estimates and
are to be exercised subject to availability of funds in the budget of
financial year.
7. The issues with the concurrence of Min of Def (Fin) vide their 0.0 No
267/DFA (Fin/Sys)/94 dated 03-10-94
(P.S. Chhina)
Deputy Secretary to the Govt. of India
COPY to: -
The Controller General of Defence Accounts
No. 6(3)/98/0(0-1)
Government of India
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Ministry of Defence
New Delhi -110 011
Dated: 04/02/2000
The Chief of the Army Staff
Subject: - DELEGATION OF SPECIAL FINANCIAL POWER FOR

INFORMATION TECHNOLOGY RELATED PROJECTS-ARMY
Sir,
1. The undersigned is directed to convey the sanction of the President of India to the
delegation of financial powers to Addl G system of Army HQ and other
formation heads in Commands and lower formations for carrying out projects
related to information Technology for Indian Army.
2. Yearly allocations to Additional Directorate General system will be made by
Additional Directorate General of Financial Planning. The entire expenditure on
this account will debited to Major Head 2076, Minor Head 110 (H) Code
433/01, 433/02, 433/03 and 433/04 Estimates. The expenditure under this head
will be maintained; Addl Directorate general of Systems and monthly report on
progress of expenditure will be rendered to MOD (Finance) & FP Dte, GS
Branch, Army HQ.
3. These powers will be exercised by the various nominated functionaries only and
not re-delegated to any of their staff officers.
4. As indicated in para 2 above, exercise of these powers by Additional Director
General and other functionaries will be car Tied out in consultation with the
respective dependent IF A/CDA. This implies that IFA/CsDA will be associated
at various stages Involving acceptance of necessity of the proposal (prior to
approval of CF A), procurement action including issues of tenders, vetting CST,
price negotiations, issue of supply orders as well as post contractual monitoring.
General instructions contained in this Ministry's letter No 48503/ST-1l/4810-B/O
(QS) dated 23 Sep 92, regarding initiation, processing, clearance etc would be
followed.
(a) All procurement procedure as already prescribed in the various Govt.

orders and other instructions will be complied with strictly in respect of
procurement of stores. All equipment and stores will be properly
accounted for and issued where required under orders of Additional Director
General systems.
(b) The procurement under these delegated financial powers will normally
not be done for items with long lead period, so as to avoid carry over of liabilities
from one financial year to another.
5. This supersedes Govt of India, Ministry of Defence letter No 6(3)/98/D (0-1)

dated 20 Oct 98, and corrigendum No 6(3)/98/D (0-1) dated 12 Jan 99 and 10
July 1999
Annexure I
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(Ref tiara 2 of tiger of India, Min of Det letter No. 6(3)/98/0(0-1) dated 04 February
2000)
FINANCIAL POWERS TO BE EXERCISED BY CF A SYSTEMS AND AUTOMATION OF
SUB HEAD H (INFORMIATION TECHNOLOGY) MINOR HEAD 110 (STORES) MAJOR
HEAD 2076 (ARMY)
Financial powers Fin. Powers

Objects on which
(Rupees in lakhs) in (Rupees in lakhs)
Sl.No expenditure can be Competent Financial Authority
consultation with without consultation
sanctioned
IFA/CDA of IFA/CDA
DCOAS (P&S) 100 NIL
ADG Sys 50 NIL
Purchases of
1. GOC-in_C, Comd 80 NIL
Computer System
Comdt Cat À' Est 50 NIL
GOC Corps HQ 25 NIL
Provisions of Access
networks, media NIL
DCOAS (P&S) 100
2. connectivity including NIL
GOC-in_C, Comd 80
associated hardware and
software
3. DCOAS (P&S) 100 NIL
Purchase of system ADG Sys 50 NIL
software and application GOC-in_C, Comd 20 NIL
software Comdt Cat À' Est 10 NIL
GOC Corps HQ 10 NIL
DCOAS (P&S) NIL
100
Software development and ADG Sys NIL
50
4. technical consultancy for GOC-in_C, Comd NIL
25
IT projects & IT training Comdt Cat À' Est NIL
05
DCOAS (P&S) 100 5.0
Purchase of ADG Sys 50 2.5
5. Computers peripherals and GOC-in_C, Comd 20 1.0
ancillaries etc Comdt Cat À' Est 10 0.5
GOC Corps HQ 05 1.0
DGMO, DGMI, MS NIL 0.5
Head of Arms and Services at NIL 0.5
Army HQ
ADG Sys NIL 0.5
GOC-in C, Comd NIL 0.3
6. Computer Stationary and GOC Corps HQ NIL 0.2
consumables. GOC, Div/Area NIL 0.1
(See note below) Bde/Sub area Cdr NIL 0.3
Comdt cat À` NIL 0.1
Comdt Cat `B' NIL 0.2
DDG MISO NIL 0.2
Comdt AhCC NIL 0.2
Comdt ASDC NIL 0.2
Note: 1. Total annual expenditure is subject to the ceiling laid down in

the yearly budgetary allotment for this purpose.
Note: 2. Expenditure on computer and consumables would, henceforth
be incurred from IIT head only and from no other head.
Annexure II
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(Ref pare 2 of Govt. of India, Min of Def letter No 6(3)/98/D (O-I) dated
04 February 2000
FINANCIAL POWERS TO BE EXECUTED BY CFA REPAIRS AND

MAINTENANCE OF COMPUTER SYSTEMS OUT OF SUB HEAD H
(INFORMATION TECHNOLOGY) MINOR HEAD 110 (STORES)
MAJOR HEAD 2076 (ARMY)
Financial powers (in Rupees)

Object which In consultation with CDA/IFA
Sl. Competent Financial Authority
expenditure can Without In
No. (CFA)
be sanctioned consultation consultation
of IFA of IFA
DGEME
2 lakh 2.5 lakh
Cdr Tech Group/Cdr Base 1.5 lakhs
1 lakhs
Wksp
Comdt Army/Adv Base Wksp 40,000 80,000
MG EME
Local purchase 50,000 1 lakh
of spares and
maintenance of DD EME
40,000 -
computers,
1 peripherals and OC EME
ancillary Bn/Wksp/Unit/Est/Flight
25,000 -
equipment and (commanded by Col/Lt Col)
upgradation of
computers OC EME
Bn/Wksp/Unit/Est/Flight/AWD
(Commadant by Capt and 6, 000 -
below)
Comdt. MCEME/EME
10, 000 -
School/EME Centre
Sl. Object which Competent Financial Authority Financial powers (in Rupees) In
No. expenditure (CFA) consultation with CDA/IFA
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Without
can be In consultation of
consultation
sanctioned IFA
of IFA
DCOAS (P & S) - 2lakhs
DGEME 75, 000 1Lakh
Cdr Tech Gr./Cdr Base Wksp 30, 000 50, 000
Comdt Army/Adv Base Wksp 10, 000 20, 000

Local repairs
of computers MG EME 30, 000 50, 000
2
peripherals
and equipment DD EME 10, 000 -
OC EME Bn/ Wksp/
Unit/Est/Flight (Commended by 8, 000 -
Col/Lt. Col
OC EME Bn /
Wksp/Unit/Est/Flight/AWD 2, 000 -
(Commended by Major
DCOAS (P & S) - 8Lakh
DGEME 1.5lakh Lakh
Maintenance Cdr Tech Group/ Cdr Base

50, 000 3Lakh
of computer Wksp
system and
their Comdt Army Adv Base Wksp 10, 000 30, 000
3 peripherals
through MG EME 50, 000 3lakh
Annual
Maintenance
Contract DD EME 25, 000 1lakh
OC EMEBn/Wksp/Unit/Est/Flt
15, 000 50, 000
(Commended by Capt & Below)
Comdt MCEME/EME School
50, 000 3lakh
EME Centre
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GUIDELINES FOR SCRUTINY-INFORMATION TECHNOLOGY
Keeping in view the general financial principles aimed at achieving

effective, efficient and economical spending of public funds and taking into
account the special requirements catered for in the Govt. orders all
proposals for financial concurrence in respect of Information Technology
related projects for the Army should be scrutinised on the basis of the
following
4.1 General
(a) The positive and large scale benefits and advantages accruing
out of use of computers in various fields of activity has become an
established fact. Defence Services being no exception to this
phenomenon; the need and their endeavour to update their
information technology and the concern of the Govt. in this regard are
obvious as demonstrated by the delegation of powers in this area as
contained in the Govt. orders dated 20/10/98. In this background
therefore the proposals to expendable in this area should be
approached with an open dispassionate and positive outlook.
(b) The above notwithstanding the basic financial principles and
the need for optimum utilisation of available resources are not to be
compromised in the process of scrutiny and clearance of such
proposals.
(c) It has to be kept in mind that IF A scheme is intended to be an
aid to management to speed up decision making process and is not to
become an impediment in their legitimate activities.
(d) While under the IF A scheme, the IF A forms part of the
management and the decisions taken are joint ones care and caution is
needed to ensure that IF A. maintains. The objectively, records
his/her views clearly and explicitly, so as to avoid any doubt at a
future date.
(e) In the process of his functioning the IF A cannot always be
rigid in application of the rules and depending upon the situation IF
As may have to be a little flexible as long as he is within the overall
ambit of Govt. policies and orders and optimum utilisation of
available resources is ensured.
(f) Sanctions are not split to keep it within the financial powers of
lower CFA.
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Specifics
1. The guidelines methodology and procedure for implementation of

automation projects and purchase of Information Technology related
products have been provided in the SOP issued by Army Headquarters. The
SOP has been circulated to controllers vide Hors office letter No.
AT/IFN13381/99 dated 30/17/99. The detailed provisions of SOP may be
kept in view while scrutinizing IT related proposals.
The salient features of SOP for execution of IT projects under the delegated
financial powers from Budget read 110 (11) are as under.
(1) There are following five sub heads under which the expenditure may
be incurred or IT related projects.
a. Purchase of Computer Systems.
b. Purchase of systems software and application software.
c. Software development. Technical Consultancy for IT projects
and IT training.
d. Purchase of Computer peripherals and ancillaries.
e. Computer stationery, consumables and technical boots.
(2) It is to be seen while scrutinising the proposals that:-
(i) Whether the proposal is included in the priority procurement
plan (PPP) approved DCOAS (P&S)?
(ii) Whether technical vetting has been carried out by ADG
system?
(iii) Whether technical vetting for the telecommunication aspects of
the project as applicable has been done by DG Sigs/CSOs
Comd/Corps HQs?
(iv) Whether due care has been taken in, preparing the tender
documents and the tenders has been signed by an authorised
officer?
(v) Whether controlling authorities have maintained a list of
vendors for various type of procurements and the list have been
categorized for Stand alone PCs network, solutions integrated
projects, software development, specialised system etc.?
(vi) Whether in case of complex projects involving elaborate
network on extensive software development, activity, a system
study through competent experts have been carried out
Similarly whether a Request For Proposal (RFP) has been
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floated to select vendors arriving at a normalised solution

before initiating procurement process?
(vii) Whether closed tender to suitable venders were issued after
verifying various aspects such as nature and size of project vis-
a-vis vendors capabilities, customer service support, regional
presence of vendors depending upon locations of projects?
(viii) Whether the bids in the tenders have been called for in two
parts viz. technical bids and Commercial bids?
(ix) Whether evaluations of technical bids have been carried out by
Technical evaluation committee (TEC)?
(x) Whether supply order is placed on the vender as approved by
CFA on recommendations of TPC/PNC?
(xi) Whether supply order includes important terms such as
delivery, payment terms, acceptance testing, liquidated
damages, warranty, AMC where applicable, uptime
calculations, spares, and consumables, software
updates/upgrades etc.
(xii) In case of procurement of computer peripherals and ancillaries,
it will also be seen that proposals submitted by lower
formations to their respective controlling authorities on the
basis of standards have been prioritised and vetted by
controlling authorities on the basis of standards and
specifications laid down by HQ ADC systems for procurement
of hardware/software.
4.2.2 The following points also need to be kept in view:-
(i) The post tender price negotiations should be discouraged, as

per CVC's instructions date 18/11/98 on the subject to insure that the tenders
quote competitive rates in the initial tender itself Apart from bringing in
transparency in the procurement system this is also expected to reduce the
procurement lead time. However option is available to negotiate the prices
only with the lowest tenderer to bring down his rates. This is also in tune
with the current market trends in IT products when there is adequate
competition among the suppliers.
(ii) The problem of wide price variation between locally assembled
computer hardware and good quality branded hardware can be got over by
inviting tenders only from the reputed original equipment manufacturers
(QEMS) or their authorised dealers for branded hardware.
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(iii) In case the procedure laid down in para (i) & (ii) are followed
and the lowest tender meets the technical specifications approved by the
competent authority, there would be no problem in accepting the lowest
tender.
(iv) The technical and finance members of TECs and TPCs are
expected to take joint decisions through open discussions in the committees,
which evaluate the technical and financial bids. The technical and finance
member of TECs and TPCs should strive to supplement each other by their
respective professional inputs.
4.3. In addition to the points mentioned above which should always be

borne in mind, the under mentioned specific points of scrutiny in the context
of the Govt. orders dated 20/10/98 have to be seen while examining
proposals for financial concurrence.
(a) Compliance with the various stipulations laid down in the Govt,
orders as mentioned in Para 3 above has to be looked into and ensured in
every case.
(b) Procurement of computer systems, system software application
software, computer peripherals and ancillaries
 What is the proposal for?

 What are the existing facilities/ systems available already?
 Can the purpose of the proposal be achieved by modification or up
gradation of the existing systems?
 Has the quantum/volume projected for procurement been justified
adequately by the users and technically qualified functionaries who
are in charge of such assessment and have been certified as such by
them?
 If the proposal is for total replacement of the existing system why is it
necessary and what are the proposals for utilisation of the existing
system?
 If the proposed procurement is additional to strengthen and support
the existing ones, are they compatible with each other?
 Has the need and possibility of standardisation of the system
wherever feasible been considered with what outcome?
 Have the technical parameters and specifications been drawn up and
spelt out clearly and in detail by the concerned technical experts and
available on file; have they also certified about the adequacy of the
QR to meet the projected requirements of the users?
 Have the tenders received been scrutinized by concerned technical
authorities in regard to validity of offer, specifications, adequacy etc.
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and have the technically acceptable offers identified and certified by

them?
 How do the technically acceptable offers compare with each other, in
regard to prices item: wise and overall terms of payment, delivery
schedule, dispatch conditions, Warranty, after sales service,
maintenance support, prospects for up gradation/modifications etc.
General reputation, capacity and past performance of vendor may be
kept in view?
 Which is the tender proposed for acceptance on which the proposal is
based? If it is other than the lowest, what are the considerations in
support and are they reasonable and acceptable?
 It has to be ensured that negotiations, if at all held, is only with the
lowest tenderer in terms of Chief Vigilance Commissioners or
instructions of November 1998?
 Whether the logistic arrangements to house and operate the systems
available will be ready before the systems and delivered?
After detailed examination particularly keeping in view the above the

proposal has to be processed and dealt with further.
(c) Software development and Technical consultancy for IT projects

and IT training
 In respect of software development and technical' consultancy, aspect

of taking advantage of the skill and technical expertise in the various
computer centres and establishments of the Army been considered
before involving outside agencies in the exercise.
 Proposals to entrust software development and technical consultancy
to outside agencies have to be critically examined keeping in mind
the past experience when much exercises did not bring much positive
results the apparent reasons being that outside agencies are not
acclimatized with Army's system of working and also the intricacies
of the working nor can they appreciate Army's actual requirement and
constraints. On the contrary these exercises, if conducted in house
may produce better results.
 Have the requirements of software development been drown up in
specific terms?
 What is the area in which technical consultancy is sought and it is
clear that Army does not have the skill and expertise to undertake it
better on their own?
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 Have the competence and credibility of the outside agencies been

verified by an independent agency and established and do they have
any similar experience in the past?
 What is the mode of inviting offers and have there been enough
arenas to choose from?
 What are the comparative terms of various offers on aspects like
duration, and rime of completion, cost, implementations on ground,
training etc?
 In respect of IT training, the facilities and skills and expertise already
available in the various computer centers, schools and colleges of
instructions should be fully exploited before approaching outside
agencies?
 While procuring new computer centers, schools and colleges of
instructions should be fully exploited before approaching outside
agencies?
 While procuring new computer/ software system it may be made
obligatory for the supplier to provide training (free or on reasonable
payment to a certain number of Army personnel during a period)?
 Have competitive quotations been obtained for IT training if the
proposal is to engage an outside agency?
 How do the various offers compare on various aspects of training.
Ensure that the basic financial principles are followed.
(d) Computer stationary, consumables & technical books
 To extent and whatever possible is the procurement of stationary

proposal from co-op societies, Kendriya Bhandar etc., if the quality
requirements and reasonableness of rates based on last purchase rates,
markets conditions are achieved
 If not available with them, have competitive quotations been followed
and the rates are considered reasonable based on last purchase rate,
market conditions etc?
 In respect of consumable and technical books the extent of their
availability already should be seen as also the quantum projected for
procurement to avoid over stocking and unnecessary procurements
particularly for items with limited shelf life (consumables).
 Specifications of consumables, stationary, technical books etc, should
be clearly laid down.
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(e) Repairs and maintenances of computer, peripherals and ancillary

equipments
As evident from the trend of delegation vide para 211 above the entire
responsibility to provide repairs and maintenance cover to computers,
peripherals and ancillary equipment has become that of corps of EME In
this context all proposals in this regard for financial concurrence should be
examined keeping in view the following main points amongst others.
 In cases of purchase of spares for the contractual obligations of
equipment supplier and period of such obligations should be seen.
 What are the provisions in regard to repair of equipment, in the
annual maintenance contract, if provision exists will it not be
desirable and advantageous to entrust the repair work to the AMC
holder who can be bound?
 Do the EME have adequate skill and expertise in the requisite volume
to undertake repairs of equipment or will it involve additional
investment to create infrastructure private agency repairs versus
repairs by EME?
 Is the proposal for purchase of spares based on a current NA
certificate?
 Have the proper procedure for local purchase like tendering etc been
followed? Keeping in view the related provisions of GFR.
 In the case of repairs; is the proposal made for repairs by outside,
agency in which case tendering system, adequacy of competition,
reasonableness of rates based on past experience etc have to be
locked into.
 If adequate infrastructural and other facilities are available in El\1E
workshops, these should be exploited to t1he maximum before
considering repairs by outside agencies?
 In respect of AMC, the existing clauses relating to supply of spares
and carrying out repairs may be suggested for review and if necessary
these clauses may be enlarged in scope to cover these facilities so that
army can have some assured source of supply of spares and also
repair work.
 Is the tendering system for conclusion, of AMC adequate and there
has been competition and the rates are competitive? The feasibility of
concluding the AMC with manufacturers of the computers should be
explored.
 How does each offer compare with, others in the matters of rates,
extent of maintenances services available so that the most
advantageous and economical AMC could be selected for conclusion?
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General reputation capacity and past performance of

supplier/contractor may be kept in view
 Maintenance spares stocked or proposed for procurement by EME
workshops for field force requirements is within the laid down limit
of one months inventory level based on average of past 12 months
consumption.
 MOU for maintenance needs to be standard one to avoid
complications in future. It should include provisions for suitable
penalty clause, adequate, BG towards AMC as well as appropriate
payments terms preferably staggered.
Implementation of special financial powers delegated to GOsC-in-C,

Northern and Eastern Commands for urgent/immediate requirement of
Clops/IS duties/Siachin glacier
'A' INTRODUCTION
Delegation of special financial powers delegated to GOsC-in-C,
Northern and Eastern Commands for urgent/immediate requirement of
Clops/IS duties/Siachin glacier was conveyed initially vide Govt. of India,
Min. of Defence letter No. PC/A/89589/FP-1/743/US (0-1)/99 dated
31.05.95. At this time, the powers were limited to purchase of stores of
ordnances origin, under Major head 2076, Minor head 110 (C) and for
miscellaneous and contingent expenditure under Major head 2076, Minor
head 800.
2. Subsequently, Govt. of India, Ministry of Defiance issued fresh, order
on the subject vide its letter No.PC/A/89589/FP-I/US/D(0-1) dated 5th
August 1998 enhancing the scope of purchases by including 'sector stores'
and import of stores against payment in Free foreign Exchange (FFE). In
addition, the financial power for purchase of stores of ordnance origin was
enhanced from R5. 1 crore per transaction to Rs. 5 crones. For purchase of
sector stores and for import of stores in FFE, the prescribed financial power
was up to Rs. 2 cranes per transaction, The Govt. of India, Ministry of
Defence issued a fresh letter No. PC/A/89589/FP-1/394/US (0-1)/99 dated
12th March 1999 consolidating the powers given in the aforesaid
communications of May 1995 and August 1998. The allocation of funds
was also increased-. While in the letter of May 95, ceiling of Rs. 4 crores
per annum per command was prescribed for purchase of stores of ordnance
origin, the same was increased to Rs. 10 crones in the March 1999 letter.
This limit has been enhanced to Ps. 20 crones bar Northern Command.
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3. The purposes for which the delegation of powers is to be utilised have

been defined under para 4 of schedule attached to the Govt. letter ibid.
There has been no change in the purpose in the March 1999 letter of Govt.
of India Ministry of Defence.
4. The conditions for the exercise of delegated powers mentioned in
paras 3,4,5,6 and 7 of the govt. letter dated 31/05/95 have remained
unchanged. The association of respective CsDA to function as IFAs is an
important feature of these orders,' Para 5 therefore refers. If has teen
specified L-l at the CsDA will be associated refers from the stage of
initiation of proposals till placement of orders for procurement
5. Certain restrictions have also been imposed under the subject letter
namely
(i) Those items, except Non Standard Pattern (NSP) items mentioned
in Para 4 of the schedule to Govt. of India , Ministry of Defence
letter, will procured which have already been approved for
introduction in the Army by the GSEPC.
(ii) Items already trial evaluated and rejected would not be
purchased as NSP items.
(iii) Procurement under these delegated financial powers will be
governed by the extant orders and procedural instructions like
observance of general instructions contained in the Govt. of India,
Ministry of Defence letter No. 48503/Q/ST-11/4810-BID(OS) dated
23-09-92 regarding initiation, process, clearance etc.
(iv) Exercise of special powers will be governed by the extant
orders and procedural instructions like observance of general
instructions contained in the Govt. of India, Ministry of Defence
letter No. 48503/Q/ST – 11/4810- BID (os) , dated 23.09.92
regarding initiation process, clearance etc.
(v) The GOsC-in –C can not re-delegate these special powers to
any other officer.
(vi) all purchase under these powers exceeding Rs. one lakh are to
be made with the approval of the Tender Purchase- Committee,
which would be constituted by the GOsC-in-C and include a rep of
the CDA.
6. The letters also provide for reporting and feedback system to the
Army HQrs. and the Ministry of Defence. The Command HOrs are required
to provide details of such procurement that clearly fail within the purview of
tie Central Procurement Agency and conveying the details of expenditure
incurred in terms of items and quantity.
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2. The delegation of financial powers introduced a new dimension in the

functioning of the Defence Accounts Department. The Pr CDA Northern
Command and CDA Patna are now required to function as Internal
Financial Advisors as well. In order to facilitate CGDA issued detailed
guidelines to be followed by Controllers while functioning as IFAs vide
their letter No AT/IX/019103A/VII dated 29.06.95.
Functioning of the IFA System
3. The G-Os-C-in-C Northern Command and Eastern Command have

been exercising the delegated powers in consultation with tried concerned
since 1995.Yet it is noticed that here is considerable confusion and lack of
appreciation of the procedural requirement with the executives and the
CsDA. Some of the major drawbacks impairing the efficient functioning of
the system are described in succeeding paragraphs.
Introduction of New Items

(a) It has been prescribed under Para 6 of Govt: of India, Ministry of
Defence letter dated 12th March 99 that only items already approved for
introduction in the Army by the GSEPC will be procured except for Non
Standard Pattern (NSP) items referred to under Para 4 of the schedule of the
letter. It has, been experienced that a large number of new items such as
communication equipment, EW equipment, machinery of capital nature and
items not authorized otherwise have been procured.
(b) A related issue to (a) above is the restrictions imposed on
procurement of items, trial evaluated and rejected. Such items are not to be
procured even as NSP items. The CsDA have no means at their disposal to
know about the introduction of new items by the GSEPC or rejection of
item during trial evaluation. The measure prescribe, at best, can be
construed as a self imposed discipline, particularly since no confirmation or
comments on these are being received from Commands.
QUALITATIVE REQUIREMENTS (QR):
The existing system provides formulation of GSQR through a

rigorous method and its examination and approval by GSEPC chaired by
DCOAS (P&S). Under certain circumstances relaxation from GSQR is
obtained at the level of Raksha Mantra. In the case of procurement under
delegate powers it has been observed that OR/OR/GSOR (named differently
by different formations) has been prescribed by different functionaries.
Subsequently, at the time of TEC, the QRs have been relaxed as well.
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(Illustration 2; Appendix 4). Basically no standard operating procedure

(SOP) exists for creating such QR/OR. In our opinion, QR/OR should be
provided for NSP items only and the rest should be procured with reference
to the GSQR prescribed. A copy of GSQR should invariably be enclosed
while forwarding the procurement proposal for concurrence of the IFA.
SCALE: The purchase proposals only indicate quantity, but idea is

generally available about how the quantities were arrived at and it is not
known if there is a prescribed scale for the items/equipment. If procurement
is proposed to be made over and above the authorized scale, the
stores/equipments need to be declared and notified as sector stores. This
would insure proper accounting of stores and handing over of the same to
the successor units by the units moving out. Further the financial powers
delegated for procurement of sector stores is different.
4. Duplication of Purchase:
As per para 7 of the MOD letter dated 12.3.99, the GOsC-in-C will
also ensure that there is no duplication in terms of procurement made by the
Central Procurement Agencies in the Army HQrs/CODs. It has been
observed that there is widespread duplication in regard to procurement of
certain type of stores for example Radio Sets of various types have been
procured under delegated powers. These include HF radio Sets, Hand Held
Radio Sets, Radio Relay Sets and Telephone Exchanges of various types, to
count amongst a few. This has also led to a situation where it is not known
whether these items procured under delegated powers have been taken into
account during the course of provisioning review.
Source of procurement: The standing order on procurement of

Defence equipment and system has banned involvement of agents in such
procurements. Accordingly, procurement is carried out directly from
original equipment manufactures. It has certain advantages e.g. the quality
and after sale service is assured, it is economical to by from OEM and
maintenance support is guaranteed. It has been observed that large number
of equipment have been procured from other than OEMs (Illustration 3
Appendix A). The correct status of the firm is not available in the papers
forwarded and hence not always known to the CsDA. It is quite possible
that some of the firms might be working as agents or as trading houses 'and
therefore the advantages of purchases through equipments may not be
available.
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5. Vendor Selection:
The selection of vendor is one of the key elements of procurement.
Normally, only vendors, registered with the DGQA, are invited to quote for
items of ordnance origin. There is a rigorous process of registration of
vendor, which takes into account, the vendor's financial and technical
capabilities, including commitment to quality In the system under
discussion, this important aspect mostly gets ignored leaving a question
mark on the performance and quality control. (Illustration 4, Appendix A).
6. Ignorance of Procedure:
In general, it is seen that considerable ignorance exists about
classification of expenditure.
(a). The delegation of powers to GOsC-in-C is specifically for
expenditure under Ma)or Head 1076, Minor Head 110 (c) purchase of
ordnance origin, and Major Head 2076, Minor Head 800 miscellaneous
stores of and contingent expenditure. Therefore, by definition, expenditure
should not to be incurred if it can not be charged to the subject's heads. It
has been observed that in a large of cases, these distinctions have been
totally ignored, not only by the executive authority but by the CsDA
concerned as Nell. There is a plethora of examples where stores of ordnance
origin have been purchased under Minor Head 800 meant for Other
Expenditure' and vice--versa.
(b) A major irregularity observed is procurement of equipment classified
as capital under the delegated powers. The delegation of financial powers is
specifically related to procurement of stores of ordnance origin, which can
be changed to Minor110 (c). Often, it has been observed that the distinction
between Revenue and Capital expenditure has been completely ignored.
It seems that apart from the executive, the CsDA are to be held
responsible for not pointing out such transgressions. Apparently however
normally it may be seen that staff/officers dealing with the cases have not
been aware of differences between revenue and Capital Expenditure.
7. Association of IFA:
The GOsC-in -C are to exercise special financial powers only in
consultation with the respective CsDA that function as IFAs for this
purpose. The CsDA, as per order on the subject, are required to be
associated right from the stage of initiation of proposals for procurement till
placement of orders for procurement. It has been observed that there is a
room for better and more effective association of the CsDA at the time of
formulation of the proposals, processing of the proposals and post contract
activities. The IFA can effectively advise in regard to method of
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procurement, selection of vendors, contract operation and management.

There is however, a general feeling in certain circles that the IFA should
associated him/her only with the financial matters and nothing else.
(a) Normally the Command prepares a list of items to be procured during

the course of the year. IFA, however, is not associated at this stage.
(b) The Command HOrs. prepare a priority procurement list but at times
the priority list is ignored and new items are added without consulting the
IFA.
(c) During the oration of the contract, the contract operating authorities
have been granting extension of delivery period and even waiving liquidated
damages on their own, without consulting the IFA
8. Absence of Complete & Adequate Information:

It has been observed that often the procurement proposal are prepared
in an incomplete manner, specifications for equipment are drawn up in most
general terms and little or no information is provided about inventory level
stocks, dues, average rate of consumption and scales. If enquired it is
normally stated' that such information is, neither readily available nor
forthcoming from units.
9. Absence of Standard Practices:

The financial powers delegated to the GOsC-in-C are used for
procurement of different type of stores such as singal stores, EME Stores
and Medical Stores. Different functionaries in the command handle these
purchase proposals and it has been observed that often, the terms and
condition of the contract are not the uniform, leading to disparities in the
punitive clauses and some times even in terms of payment there is also a
tendency to float a large number of cases beyond the available limits of
budget Nith a plea that the processing of these cases in anticipation of
budgetary will save time.
C Suggestion for Improvement

There is a need to improve the system of delegation of financial,
powers, the manner in which powers are exercised and making the role of
the IFA more meaningful and supportive. Broadly, the improvements are
required in the following areas-
(i) The scope of delegation of powers:

The scope of delegation of powers is vague and open to interpretation
as has been observed from the past experience. The financial powers have
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been delegated for sector stores as well as import of stores but to the best of
our knowledge, these powers have not yet been exercised. Hence, the
relevance of these powers and rationale for delegation needs to be re-
examined. The delegation of powers was basically for procurement of items
of ordnance origin, NSP items and items specific to the requirement for CI
operation. Experience show that all types of items including those not
authorized otherwise, have been procured, such as Iridium phones worth
almost Rs.75 lakhs, machinery of capital nature. Radio Relay Sets, Radio
sets already procured centrally etc. It would be, therefore desirable to
identify items to be purchased under delegated powers specifically,
preferably by name. These items, for example, ran be Tyres, Tubes,
Batteries, Binoculars Night Vision Devices, Generators, Rucksacks,
Mountaineering equipment etc.
(ii) Need for Formulating Standard Operating Procedure (SOP):

There is an imperative need for formulating a standardized SOP at
AHQ level, which should detail adequate instructions and guidelines so as
to facilitate the removal of drawbacks in an efficient functioning of the
systems and procedures pointed out in 'B' above in order to enable the
system to function in a smooth and transparent fashion. It is necessary that
such standardised SOP be vetted by the CGOA as was done in the case of
SOP on IT which was promulgated In January 2001 after vetting by the
CGDA.
(iii) IFA as a Member of Decision Making Team:

There is a need for greater involvement of IFA in formulating the
proposals, processing of procurement proposals, contracting and
management of contracts. The IFA should not be perceived as a hindrance
to the exercise of powers delegated, but as a friend, philosopher and guide
on matters concerning finance. IFA, therefore should be part of the decision
making team. It would help the IFA in assisting the G-Os-C-in-C in proper
management of budgetary resources, quicker processing of cases, providing
valuable advice on conditions relating to purchases and bringing in overall
improvement in the procedures.
(iv) The Ned for Holding Joint Workshops and Course:

There is a pressing need to hold such workshops where
representatives of Army and COA's organization can participate and
exchange their views in a free and frank manner so as to facilitate a better
understanding of each others view points and requirements and, also
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establish a knowledge base and data base in order to equip both parties
adequately.
Implementation of enhanced financial powers delegated under Rule 58

(A) FR Part-1 (Contingent Expenditure) to Army authorized Below
AHQrs level
Introduction
The financial powers delegated to Army authorized at various levels

for purposes enumerated under Rule 58 (A) FR Part-1 Volume-l were
enhanced vide MOD letter No. PC-A/89589/FP-i (iii)/D (GS-1) dated 1/4/98
as amended vide Govt. of India letters dated 26.10.1998 and 24.5.1999. In
respect of the Ordnance functionaries, the financial powers for meeting
objectives under Rule 58(A) have been laid down in Govt. of India,
Ministry of valence letter No..6(1)/97/D(O-1) dated 8.4.197 pertaining to
the implementation of financial management strategy of MGO's branch,
Similarly, the financial powers for EME functionaries under FR Part 1, Rule
58(Q) are as indicated at Sr. No. 14 of Appendix V to the Govt. of India
letter No.6(1)/97/D(O-I) dated 8,4,1.997. For other objects indicated at (ii)
to (ix) under Rule 58 (A) FR Part-I Volume-I, the powers delegated in
schedule attached to letter dated 1.4.1998 are applicable. The financial
powers available under various aforementioned Govt. letters have been
delegated under two headings -those to be exercised without consultation of
IFA/CDA and those exercisable in consultation with IFA/CDA.
2. The various objects, as listed in Rule 58 (A) of FR Part-I, Volume-I,

on which expenditure may be sanctioned under these delegated powers are
as under:
(i) Each items of contingent expenditure on account of any
workshop, including ordnance and clothing factories, bakery, store depot,
hospital, Military Farms, or Remount unit and Army Postal Services, other
units/formations and category 'A' establishments.
(ii) Temporary establishments or labour in excess of fixed scales.
(iii) Manufacture or issue of special tools and equipment or other
articles for experimental purposes or for expediting production.
(iv) Rewards for information leading to the conviction of
incendiaries or for the recovery of stray cattle.
(v) Rewards for specially prompt and meritorious action in
connection with the extinguishing of fires and the saving of life and
property from damages ages arising therefrom.
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(vi) Rewards for information leading to the conviction of personnel

accused of bribery and corruption.
(vii) Rewards for information leading to the prevention of theft from
department of supply and EME units/establishment.
(viii) Expenditure of tests, trails and experiments within the annual
appropriations placed at the disposal of the Director of Technical
Development, or within the monetary limits prescribed in Appendix -11 to
Volume-11 of these regulations, provided that the prior concurrence of the
financial adviser obtained.
(ix) Expenditure on tests, trials and experiments by the
Commandant, Armed Forces Medical College, run from the annual
appropriation placed at the disposal of the Director General, Armed Forces
Medical Services, within the monetary limits of Rs.200/-
The item of expenditure enumerated in the said rule are essential

items of day to day needs required for smooth and effective running of an
official establishment. The funds required are placed at the disposal of the
Head of the unit formation to enable him to incur the expenditure on these
items. He is required to exercise the same vigilance as a person of ordinary
prudence would exercise in spending his own money.
3. Following is the position of expenditure incurred by Army under

Major Head 2076, Minor Head 800-8 (Miscellaneous) in the last three
financial years and proposed in the current financial year.
Actual expenditure (Rs Crores)

Years
1998-1999 287.31
1999-2000 336.65
2000-2001 401.76
2000-2002 407.93
4. As per Rule 67 of the FR Part-I the "Controllers of Defence Accounts are

invested with the duty of affording financial advice to local commanders
and the staff and subordinate officers and the fullest use shall be made by
them of the assistance of Controllers in investigating all branches of
expenditure with a view to restricting expenditure as far as possible,
consistent with efficiency This arrangement ensues that an independent
authority which is not a pari of the Service, renders financial advice
correctly and without any bias.
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5. The decentralization and delegation of financial powers has brought

about a greater awareness of the need for effective efficient and economical
spending of money and obtaining maximum rectums at minimum cost
though critical financial scrutiny. Accordingly, exercise of enhanced
delegated powers (beyond certain limits in certain cases) has been tried
subject to the CFAs consulting their CsDA/IFAs before sanctioning
expenditure. This is a, new concept of integrated Financial System
introduced in the context of Financial Management Strategy (FMS),
especially from 1997. Accordingly, the role of CsDA as financial adviser
has assumed greater significance and bestows on them a greater sense of
that the IFA is to be associated right from the stage of initiation of proposals
to the placement of supply orders/ conclusion of contract matters, and also
in post contractual matter. The IFA is also expected to be associated in
streamling of procurement procedure wherever necessary to reduce time
vetting of provisioning and procurement budget control and monitoring and
reporting over spending/under-spending at the end of the financial year.
6. The role of CsDA as IFAs requires them to have a flexible, pragmatic

end constructive approach while operating within the framework of policies
and norms laid down by the Government. Not only that they should be able
to disagree with a proposal, which may not be in conformity with
rules/regulations, but at the same time be also in a position to advise how to
meet the objectives through alternative methods. The IFA should be able to
carry the executive along, making them appreciate merits of his/her
viewpoint in a frank and forthright manner but in an atmosphere of
cordiality and spirit of accommodation. The role of CDA/IFA in other
should be perceived as that of friend, philosopher and guide.
Deficiencies observed in the operation of the IFA system
7. The following deficiencies noticed in the proposal for IFA

concurrence received in the CDA offices:
(i) The funds allotment made by the Army Hqrs percolates down to the
units and formations sometime between June and July every year and some
times even in August. As a result, first four to five months in a financial
year pass without much expenditure. Further, there is a practice of keeping
reserve funds at the higher formation levels in the Army. The revised
estimates for the financial year are also finalized in a manner, which results
in release of funds to the units/formations towards the fag end of the year
i.e., late February and March. Such a situation inevitably leads to initiation
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of procurement proposals at a fairly late stage, as units do not formulate any

advance plan of expenditure. Some of them are not even aware of the
concept of "Vote on Account". As a result, the IFA does not receive very
many expenditure proposals in the first two quarters in a financial year. It is
only in the third and fourth quarters that most of the proposals are
formulated and submitted to the IFA for concurrence. In their anxiety to
avoid surrender of funds, efforts are made to bypass laid down procedure
procedures resulting in return of cases, and quality of procurement being
compromised. This rush of cases in the last two quarters of the financial
year hampers smooth functioning, of the system besides causing avoidable
delay and pressure all round.
(ii) No specific and standardized SOP has been framed by the Army
HQrs for exercise of powers under the Govt. letters maintained in Para 1
above. The command or other units and formations do no also appear to
have evolved any SOPs for the purpose, The DAD, offices have, however,
provided check lists to units and formations for preparation of cases so as to
avoid repetitive observations, inconvenience and delays at all levels.
However, many a time these are not followed and cases are repeatedly
received with- similar deficiencies from the units and formations. Each time
the CDA is asked to concur in the proposal as a `special case' and the
observations having been noted for future compliance. The future
compliance does not happen.
(iii) It has become a standard practice to call only three quotations

irrespective of the amount of purchase. On many occasions' computer parts,
MT stores, stationery items and even temporary labour are supplied by the
same firm. Quotations are often seen to be prepared in the same
handwriting. No effort is made to generate larger number of sources for
procurement. In the absence of keen and genuine competition there is no
assurance that the rates proposed to be paid for an item are most economical
and reasonable.
(iv) The proposals initiated are not in accordance with guidelines issued
by Govt. of India MOD; letter No. 48503/Q/ST-II/4810-B/D (OS) dated
23.09.1992. The statement of case is not prepared properly. The proposals
received lack essential information, which IFA requires as a minimum to
make his recommendation. The following other deficiencies are generally
observed:
 Availability of funds is not indicated.
 Items proposed for procurement are not authorized.
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 Quotations are not enclosed.

 Items procured without even calling quotations. (Illustration 3,
Annexure B)
 Quotations not signed by the bidder. (Illustration 1, Annexure 8)
 Quotations found to be received from firms who were not invited to
quote.
 Quotations not bearing State Govt. sales tax and CST registration
numbers.
 CST is not forwarded in some cases; it has been observed that the
date of the CST is prior to the date of quotation.
 Last purchase rates are not provided in many cases.
 The specifications of the item to be procured are unclear and
unspecific.
 The concerned unit/formation has not endorsed its recommendations.
 In some cases recommendation for procurement is made in favour of
a firm other than the lowest, but the reasons therefore are not found
recorded in the proposal.
(v) In a number of cases, the CFAs have approached next higher CFA for
sanction of proposals rather than exercising their own financial powers with
the concurrence of IFA. This only shows distrust of the IFA. The spirit of
the Govt. letter dated 1.4.1998 requires that a CFA should exercise
enhanced delegated powers with the concurrence of his designated IFA and
refer only those cases to the next higher CFA, which fall beyond his
enhanced delegated powers exercisable with concurrence of IFA/CDA.
Approaching next higher CFA by the lower CFA for sanction bypassing his
own IFA defeats the very purpose of the enhanced delegation of financial
powers. There is a need to adhere to the spirit of Govt. orders.
(vi) The executives resort to splitting up of transactions to bring them

within their own powers. Quite often separate cases for concurrence/vetting
of IFA for procurement of the same item are floated by a unit/formation. As
far as possible cases for identical items should be doubled and proceeds as a
single transaction to ensure sanction by the appropriate CFA. This will not
achieve economy in the form of lower rates/quantity discount due to
economies of sale but will also save time at every level. Besides it could
lead to a wider choice of vendors due to higher value orders.
(vii) In some cases, expenditure is incurred on procurement without

consulting IFAs. This is noticed when the bills for the purchase are received
for payment by the CsDA.
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(viii) It has also been reported that at times the quantity and items are
decided arbitrarily i. e. either unauthorized items are proposed for
procurements or quantities are not justified with reference to scales or past
consumption trends. This is particularly relevant in the case of stationary
items carpets, jute matting curtain cloth etc.
(ix) Stores which are ordinarily procured from ordnance depots/are

proposed for procurements miscellaneous grant.
(x) The proposals are received for engagement of temporary

establishment/labour does not provide proper justification for engagement
of temporary establishment/labour. The statement of case does not give
essential information like the number already employed and the duration for
which addition labour is required. Even the source from which labour is
proposed to be engaged is not found indicated. In a number of cases it is
seen that the labour is sourced from a general order supplier.
(xi) Similarly the proposals received in connection with proposed

expenditure for manufacture or issue of special tools and equipment or other
articles for experimental purpose or for expediting production are found to
be deficient in essential respects. The proposals received by the CsDA do
not indicate whether the item to be procured is already held on stock and
whether it would of any use after completion of work covered by the
proposal. In the case of a manufacture, it is not confirmed that the EME
workshop has the required skill and expertise for manufacture and also
whether the item proposed to be developed would disturb the normal work
repair schedule of the workshop. The alternatives available to meet the
requirement more economically are also not clarified.
(xii) The proposals received by the CsDA for rewards do not fully bring
out
 the circumstances meriting the reward
 whether the exceptional job done falls within the jurisdiction of civil
authorities
 whether the act fall within the assigned duties of the official.
Constraints in the operation of the IFA system
8. On the basis of the input received from the Controllers' offices and
interaction with the Army units and formations, following constraints are
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experienced in an effective functioning of the IFA system pertaining to the

delegation of power under Rule 58 (A), FR Part I:
(i) The delayed allotment of funds to units and formations leads to, rush
of cases in the last two quarters. This constrains proper expenditure
planning and efficient utilization of financial resources
(ii) The powers of the executive authorities in consultation with CsDA
are not commensurate with their budget allocations. As a result,
frequent transactions are necessitated, which impede the economies
of scale in procurement. This situation also encourages splitting up of
requirements.
(iii) The financial powers available to the executive are under two
headings those to be exercised without consultation of IFA/CDA and those
exercises in consultation with IFA/COA. There is no uniform procedure in
CsDA offices for according IFA's concurrence in respect of the latter
category. In some offices, the concurrence is accorded at the levels of
Senior Accounts Officer/ACOA/DCDA and in some offices; all cases go up
to the JCOA/COA. Also, the financial concurrence is exercised only in the
main offices of the CsDA and not by officers in Area Accounts Offices etc.
Such arrangement and lack of clarity in this regard is a constrain in speedy
clearance of the proposals by the IFA.
(iv) There seems to be hesitation on the part of executive to take IFAs as

concurrence. First, because, they fear, the IFA would raise a number of
observations and return the case. Secondly, the executives feel that there
would be delay in dealing with cases.
(v) The existing scaling list of items to be purchased under various

miscellaneous grants has become obsolete. Due to changed requirement
pattern, the units/formations feel need for inclusion of new items in the list
and exclusion of some items.
Suggestion improvement
9. It is felt that following suggestions, if implemented, will lead to a

more effective functionality of the IFA system related to delegation of
powers under Rule 58 (A) FR Part I and utilization of funds for the intended
objectives:
(i) There is an imperative need for formulating a standardized

SOP at AHQ level. This should contain detailed instructions and
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guidelines so as to facilitate removal of drawbacks in an efficient

functioning of the systems and procedures. The dealing officers/staff
of various units' formations should carefully read and well versed
with rules and regulations connected with particular category of
expenditure Comprehensive check lists for preferring claims already
made available by the CsDA should be referred to while processing
cases requiting IFA's concurrence.
(ii) The officers associated with procurement should be periodically

exposed to training in nuances of finance, procurement procedures,
and contract management. It will be desirable to have joint training of
officers representing executive and finance. There is a pressing need
to hold such workshops where representatives of Army and CDA's
organization may participate and exchange their views in a free and
frank manner so as to facilitate better understanding of each other's
view point and requirements.
(iii) As already stated in this paper, the powers of executive authorities in

consultation with, CsDA are not commensurate with their budget
allocation. Though the budget allotment of some units is very large,
powers each transaction are meager. Such a situation encourages
splitting up of transactions and adversely affects efficient utilization
of public money. The delegation of powers should co-relate to the
budget handled and enable utilization of allotment in 6 to 8
transactions.
(iv) The hesitation on the part of executive to place complete trust in the
IFAs while rendering financial advice runs contrary to the
requirement of taking a positive approach for decision making. In
order to remove apprehensions of executive following suggestions
may be considered for implementation.
 IFA should set a time limit of 7 wor1king days for clearing the cases.
 The CDA staff should switch over from audit mode to the finance
mode. The role envisaged for IFA has to be more positive than his
role as an internal auditor
 There should be a continuous dialogue at all levels.
(v) In order to make the system of financial concurrence smoother and

faster, it would be advisable to delegate adequate powers of financial
concurrence to some extent to the officers at ACDA/DCDA and
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JCDA level in the Main Office of the Controllers and in field offices
to avoid submission of each and every case to the CDA. Therefore, it
is for consideration whether the level of IFAs may be defined with
respect to the level of CFA. Accordingly, financial concurrence may
be accorded at the following levels:
(vi) The existing scaling list of items that may be purchased out of various
miscellaneous grants should be revised so that this is in consonance
with the charged requirements and improvement in technology. This
revision should be done periodically.
(vii) The Office Automation system, concurrently in implementation in

some of the CDA offices, should be extended to larger number of
offices so as to enable creation of a database and also reduce lead
time in clearance of cases referred for IFA concurrence.
10. It is felt that there is a need for better rapport between the Executive
and IFA. This will promote a mature functional interaction between
the two, and improve understanding of mutual Perceptions. A climate
of trust and confidence needs to be fostered so that the IFA is not
perceived as an obstacle but a meaning facilitator for correct and
speedier decision making.
GUIDELINES FOR POWERS UNDER RULE 58 (A)

General
 As the expenditure against the various objects maintained in Rule

58(A) FR Part-I is out of miscellaneous and contingent Grant fund
availability in budget of the financial year has to be ensured
scrupulously in every case.
 The proposals initiated are on the lines laid down in govt of India Min
of Def letter No.48503/Q/ST-II/4810-B/D (QS) dt. 23.07.92.
 Whether the item of expenditure proposed is out genuinely and
normally sent out of miscellaneous head of account and is fully
covered with within the scope of the object defined in rule 58 (A) of
FR pt-I
 The delegated powers do not lead to excessive use or abuse.
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SPECIFICS
 What is the proposal for and is it an item which appropriately falls

under contingent grant?
 Is it an expenditure which is required to be incurred to run that
organization for the normally intended purposes?
 Items of expenditure though contingent in nature for which separate
allocation/provision exists are not charged to contingent expenditure.
 What is the quantum and value and how does it compare with that on
the last occasion and what are the reasons for large variations, if any?
 Is the quantum projected justified in relation to requirements and in
comparison to the last occasion?
 Is the, charge an authorized and legitimate one and is within scales
 Is there is any possibility of reducing the quantum in the light of past
usages/consumption
 In respect of new items it does not lead to introduction of new
practice
 In respect of purchase whether the tendering procedure adopted is
proper rates are reasonable with reference to past procurement and
market rates is there adequate response and competition, the tenderers
are reputed and established suppliers, their past performance is
satisfactory/established is there need for re-tendering, how is the
quality of supplies ensured?
b) Temporary establishment/labour in excess of scales.
 What is the proposal and what is a number to be employed and for

what duration?
 The necessity for engaging temporary establishment Or labour.
 What is the authorization in the PE /WE for the category in which to
be employed and be employed what is the specific item of work on
which to be employed
 Is the temporary establishment coming up for the first time or this has
been continuing, in either case how the requirements have been
worked out and it is in accordance with the norms on which PE was
authorized?
 If the proposal is coming up for the first time, since when the
deficiency exists and how the requirements were met till now and the
work managed?
 Is there any change in the composition, functions, workload
necessitating additional manpower and if so, since when, what is the
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additional workload and what is the requirement of additional man-

power based on authorized scales, how does this compare with that
proposed
 In respect of proposals for labour it has to be examined with reference
to sanctioned existing authorized number and the workload for which
sanctioned any additional workload and how long the additional load
will continue; additional requirement as per scales for the additional
workload?
 What is the pattern and extent of utilization of the presently
authorized labour by spelling out clearly and precisely the items of
work on which these are employed; similarly in respect of the number
proposed to be engaged
 If the engagement of temporary estabitshment and labour have been
going on for sometime since when and for how long this have been
continuing, are the same individual continuing?
 How is the temporary establishment and labour being engaged? Is it
through employment exchange and no irregularities have been
committed.
 Are the rates the Govt. approved rates or derrick rates?
 Is the period of engagement at a time within the maximum period laid
down by the Govt, for such engagement and their services are
terminated at the end of this period and even if the same people are
employed again they are taken afresh following laid down procedure;
in other words the service is not allowed to become continuous
beyond this period otherwise this would execute problems and
liabilities to the Govt?
 The number proposed is not excessive in relation to requirements.
Manufacture or issue of special tools and equipment or other articles

for experimental purpose or for expediting to production.
 These items will have relevance more to manufacturing units and as

Such the powers under this item will come into play in the case of
EME Workshops and Engineer units. These powers will therefore be
used by EME functionaries mainly.
 What is the proposal for and what are the items proposed to be
manufactured or issued/ what is the quantity involved and value?
 What is the purpose proposed to be achieved, when by whom?
 Whether it is a part of a project undertaken by Army or DRDO?
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 Does the proposal involve any fresh procurement and it so is the item
proposed to be procured for any use/utilization after completion of the
work covered by the proposal?
 Is the item procured already held by Army and if so is it not available
with ESDs etc?
 On what basis the quantity for manufacture/issue worked out and
what is the Justification for the number proposed?
 How the value has been arrived at?
 Has the requirement been vetted by competent technical authorities?
 In the case of manufacture is it to be got done in the EME workshops
or from civil firms; if it is to be got done in EMS workshops do they
have the required skills, expertise and infrastructural facilities for the
manufacture.
 Will this work have any effect on the execution of the normal items
of work annual repair programmer etc of EME workshops?
 In the case of purchases whether the laid down tendering procedure
followed, response is adequate, rates are competitive and responsible
 Past performance and capabilities of suppliers have been established.
 Are there any alternatives to meet the requirement more economically
d) Rewards for information leading to the conviction of incendiaries or

for recovery of stray cattle
e) Rewards for specially prompt and meritorious action in connection
with extinguishing of fires and the saving of life and property from deranges
arising there from
f) Rewards for information leading to the connection of personal
accused of bribery and corruption.
g) Rewards for information leading to prevention of theft from
departments of supply and EME units/establishment
 What is the proposal for, what is the amount involved, what are the
special circumstances/merits on which the reward has been proposed,
who are the recipients to be of the award. Are they Government
servant?
 In the case of rewards under (e) and (f) above the financial limits of
sanction under note-1 to Rule 58(A) of FR part-I are observed. This
limits
Not exceeding Rs.500/ - sanction by CFA concerned.

Above Rs.500/ up to 1000/- - sanction by G.O.C-in-C
Above Rs.1000/- - sanction by Govt. of India
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 As the cases relating to the above types of crimes/incidents normally

falls within the jurisdiction of local civil authorities/police. Occasions
where army authorities have to give away rewards by involving these
orders should be very rare. T base have therefore to be involved only
in really exceptional cases necessitating special treatment.
 If a reward is already announced by civil authorities or by the affected
parties' proposals for payment of reward under these orders out of
defence funds should be subjected to a very critical scrutiny as to its
need.
 If the recipient is a Govt. servant it should be ensured that none of the
rules applicable to him is violated.
 The meritorious action for which reward is proposed to a Govt.
servant does not fall within or performed in their official capacity or
in their normal duties/function.
h) Expenditure on tests, trials within Annual appropriations placed at the

disposal of DGOs, DGEME, and Director Technical Development.
i) Expenditure on tests, trial experiments by tie Commandant AFMC
out of Annual Appropriation placed at his disposal
j) What is the proposal for and whether the test, trials experiments etc
are in direct relation to the assigned roll and activities of ordnance services
EME corps?
 The expenditure proposed is within annual appropriations placed at
the disposal of these authorities and adequate funds are available
there under.
 Size of tests, trials and experiments proposed and the expenditure
involved have been vetted and certified by the competent technical
authorities.
 What is the duration of the tests/trials/experiments and do they
involved and addition infrastructure inputs?
 Will they affect the normal functions and activities of EME/Ordnance
unit, establishment and if so what is the impact and financial
implications?
K) Power exercisable under sl. k (ii) of Annexure enclosed
The power delegated and exercisable by the Engineer functionaries

under sl. No. k (ii) of Annexure enclosed is subject to the provisions
contained in A.I. 131 of 1953 and also in appendix 2 of FR part II. This
army instruction lays down the detailed procedure governing the
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administration and expenditure under the filed practice and Training Grant.
The main provision of this AI is.
The FPTG is a grant made to the Engineer in Chief to enable him to
exercise administrative control over training of the corps or engineers and
over its expenditure. The E-in-C will make allotment to the Chief
Engineers/Commands and to the Commandant, college of military
engineering. The Chief Engineers may sub-allot the amount to engineer
groups and engineer regiments or incur expenditure in connection with the
training of engineer units and training establishments.
Some of the illustrative examples of the purposes on which
expenditure can be incurred out of FPTG are given below. Canons of
financial propriety are not to be violated. An officer in charge FPTG can,
with the concurrence of the CDA sanction any charge not specifically
mentioned be-low which is considered necessary for the training of the
engineers and which would otherwise require the sanction of Govt. of India.
 Purchase of special items of engineer stores, tools and plant not
included in Equipment tables
 Casual labour for training requirements (e.g., handling of stores,
manufacture of special articles etc
 Purchase or manufacture of training expenditures and any T A
connection with the inspection of such equipments.
 Cost of repairing stores, tools and plants pin chased out of FPTG
(Expenditure on POL and on stores/equipment issued to engineer
units/formations will be debited to normal head of accounts and not to
FPTG. Similar is the case with expenditure on move by rail of
vehicles, engineer plants, ammunition, unit stores, escort car drivers,
supervisory and maintenance staff for the purpose of training of
engineer units.
 Officers in charge, of FPTG for purpose of sanctioning expenditure
are Chief Engineers of Commands
 Stores, tools and Plant will be wherever possible be obtained from the
normal supplying departments (e. g Ordnance, ESDs, ASC etc)
The AI also lays down in detail the accounts to be maintained method

of accounting and accounting documents, disposal of surplus stores,
accounts to be produced for audit, method of obtaining funds from the CD
A and its accounts to be submitted to the CDA and its periodicity, reports
and returns to be Submitted etc.
While dealing with expenditure proposals above the various important
provisions of AI 131/53 have to be kept prominently in view and
compliance of the various requirements and provisions there of ensured.
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The size and volume of expenditure proposed together with the justification
and propriety thereof will be examined in relations to the size of troops for
training and the nature and content of training. The other point in respect of
earlier types of expenditure referred to above are also relevant to the extent
applicable.
No.A/87085/AC/Q/MF-3/5818/D (QS)
Government of India
Ministry of Defence
New Delhi
Date: 1st November 1998.
The Chief of Army Staff
SUB: Delegation of financial powers for Military Farms.
Sir,
In partial modification of the powers laid down in schedule XI, XII,
XIV of Financial Regulations Part I and MOD letters, quoted in schedule to
this letter, the undersigned is directed to convey the sanction of the
President to the delegation of the revised financial powers in respect of the
functionaries of the Army for the items of expenditure as detailed in
schedule to this letter.
2. The financial powers referred to in the schedule relate to expenditure
met Defence Service Estimates and are to be exercised subject to the
availability of funds in the budget of the financial year.
3. The exercise of these powers will be governed by the instant orders
and procedural instructions like observations of general economy etc, issued
by the Government from time to time.
4. These financial powers will be exercised by the various functionaries
independently and in consultation with the designated officer as nominated
by the respective CDAs as indicated in schedule to this letter.
5. The monetary limit specified will apply to purchase made for any
single stern on any single day, in so far as dairy produce, fodder,
concentrators and stores are concerned.
6. The above laid down monetary limits are indicative of financial
powers of CFA's. The procedure for purchases as laid in FR or other
prescribed manner for contract, STA and local purchase will be followed
strictly.
7. The provisions of this letter will be effective from the date of the
issue of this letter,
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8. This issues with the concurrence of Min of Def (Finance) vide

U.O.No. 2104/DFA (Q)/78 dated 29.11.98.
sd/-
(T.P. MANDAL)
Secretary to the Govt. of India.
No. A/07085/AC/Q/MF-3/6815/D (QS)

MINISTRY OF DEFENCE
GOVERNMENT OF INDIA
DATED: 10 JAN 2000.
CORRIGENDUM
The following amendment is made in the schedule to this Ministry's letter

No. N87089/AC/Q/MF-3/5018/D/(QS) dated 10 Nov 98.
I. Item 2 (Local purchase of DP/Fodder/Cattle Food)

For "(-)" dasg agaubst DDGMF (Financial limits in consultation of
IFA/CDA).
Read Rs.1.0 lac against DDGMF (Financial limits in consultation of
IFA/CDA).
II. Item 5 Powers to sanction expenditure for purchase and sanction of
contracts other than dairy produces.
Against (b) by STA and under column 5 (in consultation of IFA/CDA) For
"Over Rs 20 lakh against QMG.
READ "Over Rs.20 lakhs and up to Rs.50 lakhs".
III. Item 10 (Condemnation of capital items of D & M)
For col. (a) "Tractor"
Read Col. (b) "Other items of I&R including vehicle

Read. Col. (b) "Other items of Plant and machinery".
2. This issues with the concurrence of Min of Def/Fin (QA) vide their
ID. No. 1482/QN99 dated 10.12.99.
Sd/-
(RS Choudhury)
UNDER SECRFTARY TO THE GOVT. OF INDIA
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GUDELINES FOR ASC CONTRACTS PERISHABLES
The proposals for conclusion of contract should be initiated on regular

files should contain all relevant details and data to enable their meaningful
examination further processing by the IFA. The IFA is free to call for any
additional data/information relevant to the proposal and these should be
provided to him. The financial concurrence/remarks/comments will be
recorded in writing.
"As per AHQ letter no B/52816/ST-5 date 10.04.97, the following

data will be provided one week prior to opening of tenders to CDAs
representative to enable him to make meaningful contribution in the
deliberation of panel.
a) List of station & items with period for which contract will be
concluded.
b) Last three years contract rates.
c) Scheduled quantity & quantity contracted during last three years.
d) ALMAR for last for last 3 years
e) Peculiarity of station.
f) Whole price index, All India Average Weighted rates.
In as much as the ASC Contracts are for supply of basic daily rations
to the troops it has to be kept in view that it is essential to ensure continuity
of supplies and non conclusion or delay in conclusion of contracts may, not
only lead to disruption and dislocation of supplies with the attendant
complications but also result in avoidable extra expenditure to Govt.
through local purchases. There is therefore, not only great urgency for these
cases to be examined and dealt with, with all care and caution to safeguard
the interest of troop and the financial interests of Govt. at the same time.
It is absolutely essential that all officers deputed to represent the CDA
on the Panel of Officer's are fully conversant with each one of the
provisions in the ASC Contract Procedure including those at Para 4 above
and also the relative basic provisions contained in the relevant chapter
(chapter on contracts) of FR Part I, their import, application, implications
etc. so that their functioning on the panel becomes effective and meaningful
to achieve the objective jointly with the executive/administrative authorities.
In as much as every detail of action to be taken and the procedure to
be followed in a given situation has been spelt out in clear terms in the
Contract procedure the role aid functions of rep of CDA will be essentially
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to ensure that each one of these as relevant and applicable has been fulfilled
and complied with.
The role and functions of the CDA's rep. on the Panel really
commences from the stage of fixation of 'Reasonable rate' right up to the
sanctioning of contract by the CFA In some cases it may become necessary
for him to take a decision Jointly with the other members on the panel on
the question whether or not to reckon/consider a tender not accompanied or
accompanied insufficient Earnest Money.
As the conclusion of ASC Contracts for fresh items is a continuing
process and such contracts are being concluded year after year proposals
and processing them for sanction/conclusion should not create any
insurmountable problems for CDA's rep. except to some extent in cases
where a contract is proposed for the first time in the station.
Specifics
Notwithstanding the above maintained points/position the following

guide lines/check points which are more specific are laid down:
 Whether a comprehensive plan for opening of tenders at different
formation headquarters was drawn by MG (ASC), Command well in
advance and intimated to all concerned including CDA as prescribed
in Para 53 of GOI letter dated 06.08.83.
 What is the contract for, what is the period and value, who is the
CFA? How does the quantities and the scope of the contract compare
with the immediately preceding one, are there wide variations if so
what are the reasons is it due to increase/decrease in feeding strength?
 Has the approximate requirements been estimated on the basis of
parameters mentioned
 Has the estimated value of contract been arrived at on the lines
mentioned at pare 48 above?
 In case of meat group items the option/combination of Meat dsd and
Fowl dsd has been proposed. Keeping in view the govt. orders and
while recommending the proposed option, it is to be ensured that it is
the most economical option.
 The prevailing wholesale rates may be ascertained from newspapers
and magazines while the LAO may asked to provide the market retail
rates.
 Has the average local market rate been obtained as per guidelines and
are they realistic and reflect market trends?
 The deliberation and recommendation of the Panel should be on the
lines indicated in Para 71 to 73 of Contract Procedure.
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 If there is divergence in the panel regard to recommendations specific

reasons and factors contributing thereto should be identified?
 In such cases the CFA's final decision should be seen along with the
reasons or basis for that decision.
In cases where CFA over rules the recommendations in terms of Rule 240
FR Part I reasons for the decision should be obtained and such cases should
be reported to the CDA for further action as deemed fit
 Whether re-tendering wherever ordered is with the sanction of the
appropriate higher CFA as per Para 76 to 83 of the Procedure and for valid
reasons and after a serious thinking of the risks involved in re-tendering and
after full appreciation of the same?
It is also to be ensured that re-tendering wherever ordered is strictly as per
the above quoted paras.
Whether combining items for contracts is as per Para 84 of the Procedure
and combination of items has been approved by MGASC? Whether the
duration of the proposed contract is one year- if it is for less than one year
and what are to be reasons and is they genuine and acceptable and whether
sanction of the appropriate CF A has been obtained for conclusion of
contracts for less than 1year, as per the provisions of FR Part-I
Is the norm adopted for converting AU/IR into wholesale rates by applying
depression factor (minimum 300) considered adequate and reasonable in the
circumstances?
GUIDE LINES FOR ASC CONTRACTS

(OTHER THAN PERISHABLES)
Keeping in view the fact that the powers delegated under these Govt. orders
are to maintain adequate stocks of ASC ration items for regular and
continuous supply to service personnel and to ensure uninterrupted and
continuous supplies to ASC, all proposals for local purchases tinder these
orders should be examined with promptitude and dealt with.
The following guidelines may be adopted
GENERAL:
a) The general financial principles laid down by the Govt. aimed at
achieving optimum utilization of available resources and spending public
funds in an effective, efficient and economical manner have to be observed
and this has to be ensured during scrutiny of proposals.
b) Should not be split up to keep these within the financial competence
of lower authorities.
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___________________________________________________________________________________________________________
c) The concept of IFA scheme is an aid to management and not an

impediment and as such the proposals have approached with an open,
dispassionate and positive frame of mind.
d) Sometimes it may be necessary to be a little flexible and pragmatic

rather than to be rigidly rule minded as long as the board policies and orders
of Govt. are not violated and basic financial principles are not compromised.
e) The IFA scheme being a joint effort at management level there is
need to carry the executives along.
Specifics:
In addition to the general points of security which are more specific in

relation to the set of delegation of powers under Govt. orders of 3/3/93 have
to be seen while examining proposals.
 Compliance and fulfillment of the conditions stipulated laid down in,
the Govt. orders have to be seen and ensured invariably.
 Whether the local purchase proposal is due to large scale failure of
CDP as defined in the Govt. orders and substantiated by
records/documents?
 This is particularly because under these orders purchases can be made
for fifteen days requirements to maintained the level of maintenance
stock to day basis authorised under Govt. orders dt.27/2/90 The letter
purchase are not for stock.
 The proposals for local purchase under Govt. orders at 03.03.93 have
to be examined and handed with all care and caution to see whether
the number of day's requirements projected for procurement is really
necessary and justified under the circumstances because any wrong
estimation of quantity for procurement involves extra expenditure in
the form of higher LP rates
 Assessment of quantities is with reference to level of maintenance
stocks authorised and actually held. The dues-in may also be kept in
view.
 Are there any Communications from CDP or suppliers regarding
conclusion of contract/resumption of supplies and has any action been
taken to interact with them or bring the matter to the notice of higher
authorities
 What is the financial value and how this has been arrived at?
 Has the open tender system been adopted and if not what are the
reasons for limited tendering, if adopted, should be seen; whether the
approval of competent authority for 'limited tendering' as well as list
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of vendors is available? Value of the proposed purchases may be kept

in view. While going in for open tender, the requisite notice period
vis-à-vis time frame of supply may also be considered. What is the
capability and past performance of the various tenderers?
 Has there been sufficient competition and adequate response from
suppliers?
 Whether the rates quoted are valid and terms and conditions quoted
are acceptable. How do the tendered rates compare with each other in
important aspects like rates, quantity, delivery schedule; terms of
payment, terms of delivery, replacement of rejected stocks, penalty
for not ad-hearing to delivery schedule etc.
 How to tendered tales compare with the existing central purchase
rates as well as wholesale rates of local 'Mandi' and neighoburing
areas ascertained from local newspapers, whether there is any
abnormal fluctuation.
 In the draft supply order, sanction of proposal by CFA, sufficient
clauses have been built in to safeguard Govt. interests.
 As the expenditure is debitable to LP head of account fund
availability out of the relevant year's budget has to be ensured and got
certified.
Ministry of Defence
Sub: - Common irregularities/lapse observed in Stores/purchase contracts

and guidelines for improvement for the procurement system.
Please find enclosed a copy of Central Vigilance Commission (CTE's

Organizations) letter no OFF 1 CIE 1 dated 04.02.2000 along with a copy of
the booklet received from CVC on the above subject for information and
necessary action.
Encl: As above
(R C Gupta)
Under Secretary, to Govt.
All Joint Secretaries in the DoD

JS (AP) JS (AJ) JS (PK)
JS (Coord): in respect of DP&S
CCR&D(R):in respect of DR&D
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Addl.FA (A): in respect of Defence finance

----------------------------------------------------------------------- - -------
MoD letter No.31016/2/2002/D (vig) dated 8.3.2002
Confidential
No. OFF 1 CTE 1

Government of India
Central Vigilance Commission
(CTE's Organisation)
Satarkata Bhavan
Block A, GI'O Complex
INA, New Delhi-110023
4th February 2002
To
All Chief Vigilance Officers
Sub: - Common irregularities/lapses observed in stores /purchase contract

and guidelines for improvement in the procurement system.
The Chief Technical Examiner's organization of this commission conducts an

independent technical examination of various types of works/ contracts awarded and
executed by the organizations, falling within the jurisdiction of the commission from the
vigilance angle and for the purpose of better technical and financial control.
2. Until March 1999, the CTE Organisation was undertaking examination of
civil/electrical and other allied works only. However, Keeping in view the expontial
growth in expenditure by the central Government Ministries/Department and PSUs in
purchase of materials, it was decided to enlarge the scope of these inspections and
commissions vide OM no. 98-VGL-25 dated 12.03.1999 also brought the examination of
stores/purchase contracts within the purview of the CTE Organisation in addition to the
works contracts.
3. Based on the details furnished by the CVOs in the Quarterly Progress Reports
(QPRs), the Commission started inspection of purchase contracts in August-September,
1999 during 2000-2001; the Commission also undertook investigation of defence
contracts.
4. Based on the inputs received during the inspection / examination of various
contracts in the last two years, the most common irregularities / lapses observed in the
purchase contracts have been listed in the enclosed booklet. An effort has also been made
in this booklet to list the guidelines so that such lapses do not recur in future. It is
suggested that the booklet may be circulated amongst the concerned officials of your
organization for guidance in award and execution of purchase contracts. The details are
also available on the CVC web site -www.cvc.nic.in.
Yours sincerely,
(M P JUNEJA)
Chief Technical Examiner
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COMMON IRREGULARITIES/LAPSES OBSERVED IN

STORES/PURCHASE CONTRACTS AND GUIDELINES FOR
IMPROVEMEW IN THE PROCUREMENT SYSTEM
1.0 Purchase Manual
The cardinal principle of any public buying is to procure the

materials/services of I the 'specified' quality, at the most competitive prices
and in a fail, Just and transparent manner. To achieve this end, it is essential
to have unifonn and well documented policy, guidelines in the organization
so that this vital activity is executed in a well coordinated manner with least
time and cost over-runs. In some of the Organization the purchase manual is
either not at all there or has not been updated for years together. Thus the
system of procurement is quite adhoc and arbitrary.
A codified purchase manual containing the detailed purchase
procedures, guidelines and also proper delegation of power wherever
required needs to be made by all the organizations so that there is integrated
approach is likely to put a cap on the corruption and would also ensure
smoother and faster decision making.
2.0 Filling System
The filling system adopted in most of the organization is not

satisfactory. Even the files are not being paginated. The part files are opened
as and when new action is initiated is this part files are not merged with
main file, which inter-alia results in break in continuity and arbitrariness in
decision making. The decision/deliberation of the individuals or the Tender
Committees are not properly documented or recorded which dilutes the
accountability of the officers and may result in the ìnterested' officers going
Scot free, even if serious lapses are established against them.
The procurement files are very important and sensitive documents
and thus there is a need to have a single file system with proper page
numbering. In case of urgency, if opening of the part files is unavoidable,
the same should thereafter be merged with the main file. The decisions and
deliberations of the individuals or the Tender Committees also need to be
properly recorded and well documented.
3.0. Provisioning
3.1. It has been noticed that in certain cases excessive, fraudulent and in-
fructuous purchases were made without taking into consideration the
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important aspects like available stocks, out standing dues, supplies, past
consumption pattern and average life of the equipments /items etc. This
excessive infrastructure, purchases were at time made in collusion with the
fuels. These resulted is not only the material laying unutilized for years to
gether with no residual life, but a lot of extra expenditure was incurred on
the inventory caning cost. One of the organizations took double
procurement action of purchase tires against the same liability. Even the
factors like self life of five years and the past consumption pattern were
ignored while placing the orders. As no action was taken to dispose off the
surplus tyres the department is incurring inventory carrying cost of about
20-25% per year for the last 10 years and the salvage value of the quantity
held in stock is likely to be nil due to expiry of the self life. In few cases, it
was noticed that though the demand for the stores was simultaneously
received from different wings/field units but, they were not clubbed together
and were rather processed individually against thee established principle of
bulk buying.
The provisioning of the stores needs to be done with utmost care taking in
to account into available stock, outstanding dues/supplies, the past
consumption pattern, average life of the equipment/spares. The requirement
also needs to be properly clubbed so as to get the most competitive and best
price. The required should not be intentionally bifurcated /split so as to
avoid approval from the higher authorities.
3.2 In a case of purchase of 1, 000 KVA DG sets that the tender enquiry
was originally issued by the organization for supply of DG set with four
stroke engine, however, on the request of one of the bidders the type of the
engine was later changed from four stroke to two stroke and contract was
awarded. During investigation, it was found that the engine manufacturer
had given a relieve, that the two stroke engine shall be faced out in two
years, surprisingly, the existing DG sets were with four stroke engine. In yet
another cases instead of buying DG sets for their energy needs, a shipyard
hired DG sets from a firm in an adhoc manner, without following
competitive bidding. On investigation. It was revealed that the energy cost /
unit worked, in excess of Rs.40/-,
One time purchase for projects or capital equipments / spares should
be properly justified depending on the actual requirement usage, rate of
return etc,. Further, the obsolescence factor should also be taken into
account i.e., the equipment to be purchased should conform to the latest
specifications and technology available in the market.
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4.0. Appointment of Consultants
Some of the organizations appoint consultants due to lack of in-house

expertise in technical matters. It has invariably been noticed that the
appointment of consultants is not being done in a transparent manner and
their, working is also not properly supervised.
i. The appointment of consultants is often made in an arbitrary manner

without inviting tenders and without collecting adequate data about their
performance, capability and experience. In some of the cases, the
consultants were appointed after holding direct discussions with only one
firm without establishing the reasonableness of consultation fee payable to
them,. In some eases the terms were modified to the financial advantage of
the consultant, even after award of the contract. In one of the cases, the
organization continued with a consultant for about 30 years and for all types
of contracts. In yet another cases the organization invited offers from 8
enlisted consultants but, awarded the contract to the highest bidder on the
plea that they are Padam Shree awarded , Extra amount on account of travel
expenses was also sanctioned after award of the contract.
ii. The payment terms to the consultant are allowed quite liberally. In
one of the cases, the consultant fee was paid on quarterly basis without
linking the same with the progress of the projects. Even full payments had
been before the completion of the projects.
iii. Quite a few organizations especially in the banking sector seem to

abdicate their responsibility completely and do not oversee the working of
the consultants resulting in the letter exploiting the circumstance and at
times in collusion with the supplier, give blades recommendation in favor of
a particular supplier. It has also been noticed that the consultants
recommend acceptance of inferior items I equipment and also give undue
benefit to the suppliers like non- recovery of penalties, for the delayed
supplies and corresponding reduction in the exercise duty, if announced
after award of the contract.
The consultants need to be appointed only when it is felt absolutely

essential. The appointment of consultants needs to be done in a transparent
manner and after following the competitive tendering system. The
consultant's role should be well defined. The consultant is meant to assist
the departmental officers because of lack of expertise and, it should not
mean that they takeover all the functions. The responsibilities relating to
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award of contract and execution of contract after appointment of consultant

should not be abdicated completely by the organizations. Rather appropriate
checks should be exercised at all stages of the execution of the contract.
Penal clauses for deficiency in service should invariably be stipulated in the
contracts/MOUs with the consultants.
5.0. Estimated Rates

It was observed that the estimated rates are being worked out in an
unprofessional and perfunctory manner at times by extrapolating the price
of the lowest capacity equipment or by applying a uniform yearly
compounded escalation over the prices of similar equipment purchased few
years ago. Consequently the inflated estimated rates prepared by the
organization resulted in acceptance and payment of high price to the firms.
As the estimated rate is a vital element in establishing the reasonableness of
prices, it is important that the same is worked out in a realistic and objective
manner on the basis of prevailing market rates, last purchase prices,
economic indices for the raw material/labour, other input costs, IEEMA
formula, where ever applicable and assessment based on intrinsic value etc.
6.0 Notice Inviting Tender (NIT)
6.1 Against the most preferred and transparent mode of Global tender
inquiry/Advertised tender inquiry, some of the organizations are generally
issuing limited tender inquiry to select vendors, irrespective of the value of
purchase. Further, the credentials of the firms and the criteria adopted for
selection of such tenders in most of the cases are not put on record. This not
only results in lack of competition but also favouritism to the select vendors.
It has been noticed that even in cases where advertised/Global tender
inquires were issued, the same were published in the local dailies and not in
any National Newspaper and particularly in Indian Trade Journal, Calcutta,
which is a government publication and is regarded as the standard medium
for advertising tender notice in India. The main purpose of issuing
advertised/global tender inquiry is to give wide publicity. It has been
noticed i. e. organization do not forward the copies of the tender notices to
the registered/past/likely suppliers and while in case of imported stores, the
copies of the tender notice are not being forwarded to Indian
mission/Embassies of major trading countries in order to give wide publicity
generate enough competitions and to avoid favouritism as far as possible,
issue of advertise/global tender enquiries should be resorted to and
published in Indian Trade Journal (ITJ) and selected National news papers.
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The copies of t1he tender notices should be sent to all the

registered/past/likely suppliers by UPC and also to the Indian Missions/
Embassies of major trading countries in case of imported stores.
6.2. It has also been noticed that for Advertised/Global tenders, against a
normal of four-six weeks, there are instances wherein time for tender
opening of only 12-15 days was given. Similarly, in came of limited tenders,
against a normal time of 21-30 days, there are cases where tenders were
opened in short period of only 7 days. The tender opening in such a short
duration is normally resorted to in case of recorded emergencies, where in
the purchaser sends the tender inquires by faster means like fax/speed post.
However, in most such cases, neither urgency nor the proof of having sent
the inquiries by fax/speed post could be established. In few cases, it was
also noticed that though short-term tenders were invited, expressing urgency
of the requirement. However, the cases were processed in a very routine and
casual manner without any consideration for urgency. On the other hand, in
some cases, it was noticed that with the short time available, only two three
vendors who probably new about the system about submitted their bids and,
thereby forming a cartel and circumventing the system. In some cases of
global tenders it was observed that though the organizations has given a
time of 6-8 weeks for tender opening, but the tender sale was closed 2-4
week in advance of tender opening thereby effectively giving only one
month time to bidders for purchase of tender documents. The very purpose
of floating Global tender which is to give wide publicity and sufficient time
to bidders to get the bidding documents and submit their offers, in such
cases seems to have been defeated.
With a view to have wider, fair and adequate competition, it is

important that sufficient time of say 4-6 weeks in case of tenders and 3-4
weeks in the cage of limited tenders is allowed, except, in case of recorded
emergencies where, also, a reasonable time should be permitted and tenders
should be sent by faster means like speed-post/fax. The tenders should
preferably be kept open for sale bill the date of tender opening or just one
day prior to the date of tender opening. With the widespread use of
Information Technology, the tender notice should also be put on the web-
side and e-mail address of the organization should be indicated in the tender
notice.
6.3 In cage of proprietary purchases, detailed justification purchase from

a single vendor is not being placed on record. As by issuing single tender;
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the competition is totally eliminated and possibility of paying higher prices

cannot be ruled out.
It is imperative that the purchase on single tender basis be made with
the detailed justifications in its supports and with the approval of Competent
Authority including associated finance.
7.0. Tender/Bid Documents:
7. 1 The terms and conditions being stipulated in the bid documents by

some Organizations are quite insufficient and sketchy. Sometimes, the bid
documents contain obsolete, unwanted matter and conflicting and vague
clauses resulting in wrong interpretation, disputes and time & cost overhead
Even the time/date for receipt and opening of tenders is not being
incorporated in the documents.
The important clauses relating to Earnest money, Delivery Schedule,
Payment terms, Performance guarantee Bank Guarantee, Pre-dispatch
inspection, Arbitration/ Liquidated Damages/Penalty for the delayed
supplies and Risk purchases etc, are not being incorporated in the bid
documents. All these clauses are important for safeguarding the interest of
the purchaser and also have indirect financial implications in the evaluation
of offers and execution of the contracts. All the important clauses as brought
out above need to be incorporated in the bidding documents so as to fully
safeguard the interest of the Govt. and for evaluation of bids on equitable
and fair basis and in a transparent
7.2. In some cases it was noticed that the amount of Ernest monery
Deposit Stipulated in the tender documents was grossly insufficient to
protect the Govt. interest in case of breach committed by the bidder. Some
of the organizations instead of ignoring the bids not accompanied with
earnest money deposit along with the tenders as per bids requirements,
asked the bidders to submit EMD, after tender opening. The primary
objective of submission of Earnest Money Deposit is to establish the
earnestness of the bidder so that he does not withdraw, impair or modify the
offer within the validity of the bid. It also helps in restricting if not
eliminating 'speculative' 'frivolous' and 'wait and see' bids. Since, any
relaxation regarding submission of Earnest Money Deposit has financial
implications besides giving encouragement to, the bidders to submit
frivolous bids as indicated above; the terms & conditions should clearly
stipulate the offers without Earnest Money Deposit would be considered as
unresponsive and rejected.
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7:3 In case of tenders invited in two-bid system, some of the

Organizations stipulate Earnest Money Deposit as percentage, of tender cost
instead of fixed amount. In the Two-bid system if EMD is taken on the basis
of some stated percentage of tender value and with the announcement of the
amount of EMD submitted by the bidders at the tune of tender opening, the
same will give every bidder a good indication of the prices quoted by the
competitors by making back calculations.
7.4. A bidder can use this information to the disadvantage of his
competitor, if prices are subsequently modified. The earnest money deposit
in case of 'Two-bid' system needs to be incorporated as a fixed and
reasonable amount on the basis of estimated value of purchase.
7.5 Some of the Organizations incorporate a specific delivery schedule
interalia mentioning that bids offering delivery beyond stipulated date will
be treated as non-responsive and will be summarily rejected. However, after
opening the tenders, the bid by one of the organizations with slightly longer
delivery period was not rejected as per the bid guidelines, rather that offer
was also considered and evaluation was made after loading the offer by
applying some unilateral criteria. The same resulted in inter-exchange of
ranking position.
In order to meet the project requirement, it would be prudent to incorporate
an acceptable range of delivery period with the stipulation that no credit will
be given for earlier deliveries and offers with delivery beyond tie acceptable
range of delivery period with the stipulation that no credit will be given for
earlier deliveries and offers with delivery beyond the acceptable range will
be treated as unresponsive. Within this acceptable range, for the purpose of
evaluation, an adjustment per month say @ 2% could be added to the
quoted prices of bidders offering deliveries later than the earliest delivery
period specified in the bid documents.
7.6. The Evaluation/loading criteria on account of acceptable range of

deviation in the commercial terms and condition viz. Payment terms,
Delivery period, Performance Bank Guarantee etc, is not being incorporated
in the bidding documents. The evaluation of the offer is being made simply
on the price quoted which is not in order. The comparative assessment of
offers in true sense would be complete only if it is made on equal looting
taking into account the financial implications for the deviations in terms of
conditions, in line will unequivocal evaluation criteria, specified in the
bidding documents.
In one of the cases, it was noticed that due to non stipulation of payment
terms in the tender documents, the bidders quoted prices based on varying
advance payment. The offers were evaluated by the organization simply on
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the quoted prices, even though the L-1 bidder had asked for much higher
payment in comparison to the L-2 bidder. As such, the evaluation done by
the organization was not on equitable basis as the payment of higher
advance, evidently had, financial implications. The evaluation/loading
criteria with respect to the important terms like payment terms, delivery
period, performance bank guarantee etc, having financial implication need
to be specified in unambiguous terms in the bid documents so that the
evaluation of bids after tender opening could be made in a transparent
manner without any subjectivity.
7.7. Some of the organization incorporates only broad technical details

instead of generic specifications with complete details of performance
parameters and the technical evaluation criteria. At times the technical
evaluation matrix is decided after opening g of tenders and is kept
confidential. In the absence of the detailed specifications/ technical
evaluation criteria, the evaluation of offers on equitable bats and in a
transparent manner would not be possible and would rather be prone to
subjectivity in the decision making. In one of the cases of hiring of coolers,
the requirement was bifurcated into two categories vii, 'new cooler' and 'as
good as new coolers'. Neither the quantitative requirement of each category
of coolers nor the specifications description given was quite vague and
susceptible to manipulation as it give full average to the bidders to supply
coolers of any vintage. The detailed generic technical specifications
including performance parameters and the technical evaluation criteria, if
any need to be specified in the bidding documents in unequivocal terms.
7.8 The exemptions/ reservation of a particular item, which normally

apply to SSI units, are not being specified in the tender notice/bid
documents. The applicable purchase preference to Public Sector enterprises
as per the guidelines circulated by Department of Public Enterprises is also
not being incorporated in the bid documents leading to lot of complaints
from SSVPS Units.
The Government instructions on reservation of items and price preference to
SSI units and purchase preference to PSUs need to be incorporated in bid
documents.
7.9 It has been noticed that some tenders offer conditional discount for
coverage within a shorter period, for early inspection/payment etc, and, such
discounts are being considered, at the time of evaluation of tenders by the
organizations. It needs to ensure that the evaluation of tenders should not be
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based on such conditional discounts and suitable clause should be included

to the bidding documents.
8.0. Receipt of tenders.
Some of the Organizations do not have proper arrangement for receipt

of tender. There is no tender box for receipt of tenders at scheduled date and
time fixed for tender opening. Instead the trade representatives leave the
tenders with the receptionist or the concerned Purchase, Officer(s). This
procedure is highly objectionable as the possibility of tampering and
interpolation of offers cannot be ruled out.
A proper arrangement for receipt of tender's at scheduled date and
time through tenders box needs to be adopted
9.0 Postponement of Tender opening.
Wherever extension in the tender opening is done due to reasons like change
in the specifications or on the basis of request of the vendors, it has been
noticed that firstly, sufficient time to submit the bids as per the revised
specifications and secondly, the intimation of tender opening extension is
not being sent to all the bidders who had purchased the biding documents.
Also such notice of extension is also not being published in
Newspapers/ITJ.
In order to give equal opportunity to all the bidders and to maintain sanctity
of tendering system, it is of paramount importance that any change in the
tender form & conditions, specifications and tender opening date etc, be
notified to all the bidders, sufficiently in advance of the revised tender
opening date.
10.0 Opening of Tenders
Some of the Organizations are not opening the tenders in public i.e., in the
presence of the trade representatives. The system of not opening the tenders
in public is against the sanctity of the tender system, and is a nontransparent
method of handling tenders. There could be possibility of tampering and
interpolation of offers in such cases. The rates at times are not quoted in
figures and words, cutting/over-writings are not attested by bidders. Some
of the Organizations justify opaqueness in tendering system by making a
reference to their manuals. This is not acceptable. The opening of tenders in
presence of trade representatives needs to be scrupulously followed. While,
opening the tenders by the tender opening officer/committee, each tender
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should be numbered serially, initialed dated on the first page. Each page of
the tender should also be initialed with date and particularly, the prices,
important terms and conditions etc., should be encircled and initialed in red
ink by the tender opening officer/committee. Alteration in tenders, if any,
made by the firms, should be initialed legibly to make it perfectly clear that
such alterations were present on the tenders at the time of opening. Where
ever any erasing or cutting is observed the substituted words should be
encircled and initialed and the fact that such erasing/cutting of the original
entry present on the tender at the time of opening be also recorded. The
tender opening officer/committee Should also prepare on the spot statement
giving details of the quotations received and other particulars like the prices,
taxes, duties and EMD etc., as read out during the opening of the tenders.
Further, in case of two bid system, it has been noticed that after opening of
the technical bids, the price bids, which are to be opened subsequently, are
kept as loose envelops. In such cases, the, possibility of change of bids prior
to tender opening Can not be ruled out. In order to make the system full
Proof, it needs to ensure that not only the tender opening officer/committee
should sign on the envelopes but the signatures of the trade representatives
should also be obtained on all the envelopes containing the price bids. There
after, all the envelopes should be put in, a bigger envelops/box and same
should be properly sealed duly signed by the tender opening
officer/committee and trade representatives.
11.0 Post tender negotiation
As per CVC guidelines circulated vide letter no. 8(1) (h)/98(1) dated
18.11.1998, it has been brought out that "the tenders are generally a major
source of corruption, post tender negotiations are banned with immediate
effect except in the case of negotiations with L-1 (i.e., lowest tender)". In
continuation to these instructions, following further clarifications were
issued vide letter No.98/Ord/1 dated 15.03.1999:-
(i) The Government of India has a purchase preference policy so
far as the public sector enterprises are concerned. It is clarified
that the ban on the post tender negotiations does not mean that
the policy of the GOI of India for purchase preference for
public sector should not be implemented.
(ii) Incidentally, some organizations have been using the public
sector as a shield or a conduct for petting costly inputs or for
improper purchases. This also should be avoided.
.
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Another issue that has been raised is that many a time the quantity to be
ordered is much more than L-l alone can supply. In such cases, the quantity
ordered may be distributed in such a manner that the purchase is done in a
fair, transparent and equitable manner. Despite the above instructions, it has
been noticed that still repeated negotiations with the select all the vendors
are being carried out by some of the organizations in gross violation of the
above instructions. The instructions/guidelines circulated by the CVC on
post tender negotiations only with L-1 need to be strictly followed.
12.0 Technical Evaluation of Tenders.
Apart from the deficiencies already lo-ought out in supra para 7.9, it
has been noticed that though the offers of some firms fully conform to the
specifications laid down in the bid documents, however, based on certain
additional features which were never part of the specifications, the offers
were graded as 'good', 'better' and 'best' for award of contract
once it has been established that the offers, meet the laid down
specifications the question of 'grading' as well as arty 'pick and choose'
Should not arise. The contract needs to be awarded to the lowest bidder
meeting the laid down specifications.
13.0 Purchase preference to Public Sector Enterprises :
The Department of Public Enterprises Ministry of Industry vide 0M

No.DPE/13(1)91- Fin. Dated 13.01.1992, 15.03.95, 31.10.97, 10.02.98 and
14.09.2000 have circulated the policy of granting purchase preference to
Central. Govt. Public Sector Enterprises when they complete with Private
large scale units. It has been laid down that where the quoted prices of
Public Sector Enterprises or Joint ventures with PSEs, with a minimum
value added content of over 20% by the later subject to purchase in excess
of Rs. one crore is within 10% of the lowest price, other things being equal,
purchase preferences will be granted to the Public Sector Enterprises or
Joint Venture concerned at the lowest acceptable price. It has been noticed
that the some of the organizations not following these instructions and
accordingly undue favour is being given to the Private firms.
The Instructions Guidelines circulated by Department of Public
Enterprise for granting purchase preference to the Central Government,
Public Enterprises, Joint Ventures need to be scrupulously followed as also
brought out by CVC in the instructions circulated vide letter No, 98/0rd./I
dated 15.03.1999.
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14.0 Consideration of Indian Agents:
It has been noticed that some of the organization entertained the

offers of Indian Agents and also place the contracts on them without
bothering to examine the following aspects:
(i) Foreign Principal's Performs invoice indicating the Commission
payable to the Indian agents, nature of after safes service to be rendered by
The Indian Agent.
(ii) Copy of the Agency agreement with the foreign principal and precise
relationship between then and their mutual interest in the business.
(iii) The enlistment of the Indian Agent with Director General of Supplies
& Disposals under the Compulsory Registration Scheme of Ministry of
Finance. The above aspects are important one to examine the genuineness of
prices quoted by the Indian Agent, the nature of services which would be
available from Indian Agent and compliance of Tax Laws by the Indian
Agent and, to prevent leakage of foreign exchange.
15.0 Reasonableness of Prices:
It has beep noticed that the purchases are being made by some of the
organizations in an adhoc and arbitrary manner without satisfying the prune
requirement of establishing the reasonableness of rates in relation to the
estimated rates, last purchase prices or the prevailing market rates:
Some of the instances are as under:
i. An organization placed an order for spares on a trader at an
abnormally high price of about 40 times the OEM's Price. In yet another
case, in a span of 10 days, the order was placed on the same firm for the
same item at rates almost 10 times of the previous order.
ii. In another case for procurement of an ore crusher, out of 6 offers
received by the organization, 5 offers were rejected mainly on the basis of
unspecified technical requirement, presumptions and conjectures. Therefore,
the competition was killed. The prices of single left out offer were justified
by extrapolating the prices of a lower capacity crusher (which were worked
out by taking 5% compounded annual escalation over 10 years old prices) in
proportion to the crushing force.
iii. In yet another case for hiring off coolers, orders were placed for
ambiguous categories of items like 'new and 'as good as new' coolers. An
order was placed on a firm for the category for which the firm had not
quoted in their original offer but hard subsequently quoted, after they were
invited for negotiations. Despite the financial lacking in technical and
financial capability and there being cartel formation, still the order was
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placed at exorbitant prices in comparison to earlier prices for a period of 3

years. Knowing well the cartel of firms and exorbitant prices, the
department did not consider placement of order only for one year as for next
two years, fresh tenders could have been invited to break the cartel and get
better prices. It is very important to establish the reasonableness of prices on
the basis of estimated rates, prevailing market rates, last purchase prices,
economic indices of the raw materials/labour, other inputs costs and
intrinsic value etc. before award of the contract.
16.0 Advance Payment & Bank Guarantees
(i) As per CVC guidelines circulated vide Office Memorandum No

NU/POL 19 dated 08.12.1997, it has been brought out that payment of
mobilization advance should be made only in cases of select works and that
the advance should be interest bearing so that the contractor does not draw
undue benefit. However, it has been noticed that some of the organizations
are quite liberal in allowing the advance payments even to the extent of 30-
40% and that too, totally interest free. In some organizations the payment of
advance is being stipulated in the bid document itself. The payment of
interest free advance is in contravention of the guidelines issued by CVC.
(ii) It has been observed that in some cases, despite provision in the
contracts for releasing advance payment against Bank Guarantee, the
advance payment were released with out tasking any Bank Guarantee.
Unfortunately, in some of the cases, suppliers failed to discharge their
contractual obligations and huge advances are still outstanding for the last
several years. It would be suicidal, if the advance payment is released
without the Bank Guarantee for an equivalent amount.
iii. In some cases, it has been observed that though the prospects of
supply were bleak, still timely action for revalidation/encashment of the
Bank Guarantee for the advance payment was not taken and the Bank
Guarantees were allowed to lapse, jeopardizing the Government interest. In
one of the cases, though the initial advance payment of 20% was released
against the Bank Guarantee, however, further 65% progressive payments
were also made simply against certification of Internal Auditors that the
amount claimed does not exceed the progressive expenditure. The payments
were made in a span of hardly 2 months much before the bulk production
clearance and without safeguards like Bank Guarantee etc. The Bank
Guarantee for 20% initial advance payment was also allowed to lapse.
Thereafter, the firm did not make any supplies and was declared sick and
huge Govt. claim towards the advances made without protecting the
Government interest remains un-recovered.
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(iv) The Bank Guarantees accepted were at times defective/conditional

and did not safeguard the interest of the purchaser. Normally, the BGs
permitting encashment without any demur-merely on a demand from the
purchaser are accepted.
(v) In some cases, it was noticed that the effective date of contract was
linked with the date of receipt of Bank Guarantee for advance payment.
This is detrimental to the purchaser's interest as in the absence of a specific
date for submission of Bank Guarantee; it would not be possible to establish
specific date of breach to enforce the contractual remedies. In such cases,
the supplier will get full opportunity to wriggle out of the contract, if so
desires without fulfilling contractual obligations.
The advance payments need to be generally discouraged except in specific

cases. Wherever payment of advance is considered unavoidable, the same
should be interest bearing as per CVC guidelines and be allowed after
getting an acceptable Bank Guarantee for an equivalent amount with
sufficient validity so as to fully protect the Govt. interest. Some reasonable
time should be stipulated for submission of Bank Guarantee so that
contractual remedies could be enforced, if required. The Bank Guarantee
need to be properly examined with respect to the acceptable format and any
conditions deterrent to the Govt. interest should be got withdraw before
acceptance besides verifying the, genuineness of the Bank Guarantee from
the bankers. Timely action for revalidation/encashment of the Bank
Guarantees also needs to be taken so as to protect the Govt. interest.
17.0 Performance Bank Guarantee :
Most of the organizations are not stipulating the requirement of

Performance Bank Guarantee while others are stipulating different amount
of Security Deposit/Performance Bond. In some cases, it has been noted
that the amount of PBG is too low in comparison to the contract value. The
validity of Bank Guarantees commensurate with the delivery period
extensions is not being sought resulting in loss to the govt. in the event of
non performance of the contract.
In order to safe guard the Govt. interest it would be appropriate to take
reasonable amount of Performance Bank Guarantee valid up to warranty
period for due performance of the contact. The validity of the Bank
Guarantee needs to be carefully monitored and whenever extension in the
delivery period is granted, the validity of the Bank Guarantee should also be
appropriately extended so as to protect the govt. interest The genuineness of
the BGs should be checked from the issuing Bank.
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18.0 Stipulation of delivery period in the contract.
Delivery period is the essence of any contract. It has been observed

that in some of the cases, specific delivery period with reference to the
terms of delivery, is not being incorporated as mentioned below:
i. Only the date of offering the equipment for Pre-dispatch
inspection is stipulated as the delivery period, though terms of
delivery are on CIF basis/FOR destination basis. Only the date of
completion of supply of the equipment is stipulated as the delivery
period even though the installation & commissioning of the
equipment is also to be carried out by the supplier. For installation
& commissioning, no specific date is stipulated. In absence of any
contractual binding in this regard, the suppliers claim in full
payment for supplies of equipments and then tend to behave in an
irresponsible manner and do not bother to take- up timely
installation/commissioning resulting in the equipment uninstalled
for months/years together.
The specific delivery period for supply as per the terms of delivery, such as
FOR station of dispatch/destination and for completion of installation with
the necessary provision of Liquidated Damages/Penalty clause in the even
of delay in supplies/installation needs to be incorporated in the contract.
19.0 The guarantee/warranty clause incorporated by sortie of the

organizations is quite sketchy. The modalities for enforcing the warranty
obligations are not being incorporated. Due to incorporated
guarantee/warranty terms, the suppliers take full leverage and do not bother
to honour the guarantee/warranty, obligations resulting in the equipment
remain defective and unutilized and thereby causing loss to the Govt. It has
been observed that in cases where the installation of the equipments is also
included in the scope of contract but the standard guarantee/warranty clause
of 15 months from the date of shipment/dispatch or 12 months from the date
of delivery, whichever is earlier is being incorporated. With result due to
delay in installation of the equipment, the guaranty/warranty expires even
before the installation of the equipment or sometimes above short period of
guarantee/warranty is available. Detailed guarantee/warranty clause
embodying all the safeguards be incorporated in the tender equipment) and
the resultant contract. It also needs to be ensured that in
installation/commissioning contracts, the guarantee/warranty should reckon
only from the date of installation/commissioning.
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20.0. Post-contract Management.
20.1 Modification of contract terms/specification.
After award of the contract, amendments/ modifications having

financial implications are authorized in the contract terms/specifications
giving undue benefit to the suppliers. Some of these are enumerated below:
i. The specifications are diluted though specific makes/models of an

equipment are specific in the contract as per firms tender,
however, subsequently supply of some more alternative
makes/models of the equipment are authorized without taking into
account the financial complications thereof. It has inn observed
that generally lower priced alternative makes/models are being
included subsequently in the contract giving undue benefit to the
suppliers.
ii. The payment terms are amended favourable to the supplier e.g.,
advance payments are authorized even when there was no pro-
vision in the contract for making advance Payments. At times
higher advance payments than stipulated in the contract are
authorized.
iii. The Pre-despatch inspection though was incorporated in the
contract but, the same as subsequently waived without any
reasons, thus jeopardizing the quality aspects as per contractual
requirement.
iv. The submission of Performance Bank Guarantee was waived.
Even though t1he contracts were placed on FOR, destination, the
locations of the consignee were changed nearer to the supplier's
premises without taking into account the benefit of freight charges.
After conclusion of the contract, any relaxation in the contract
terms/specifications should be severely discouraged. However,
the exceptional cases where the modifications/amendments are
considered to the absolutely essential, the same should be allowed,
after taking into account the financial implications for the same.
20.2 Post-contract Monitoring:
1. The post contract monitoring is being handled in a very casual

and lackadaisical manner. It has been noticed that due to lack of
coordination and diversified approach followed by various agencies in the
implementation of the projects the same resulted in time and cost over-runs.
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2. It has been noticed that in some cases even after expiry of delivery
schedule stipulated in the contract and without extension of time
granted by the purchaser, the consignees keep on exchanging
correspondence with the suppliers and thereby keep the contract
alive. This may result in serious legal complication it is intended
to cancel the contract. It has also been noticed that even the
materials are being accepted and payments are released as and
when the suppler makes the supplies. There is utter disregard to
the contracting norms relating to delivery period, which is the
essence of the contract
3. Generally the purchaser extends the delivery period of contracts.
However in some cases, it was recorded that the Supplier has
extended the deliver period of the contract.
4. Some of the organizations do not incorporate Liquidated
damages/Penal clause for imposing the penalty in case of failure of
the suppliers to deliver the equipment within the stipulated
schedule. The suppliers quote short delivery period and in
absence of deterrent conditions in the contract, manage repeated
extensions. In some of the cases, it has been observed that
Liquidated damages for delay in supplies are not being levied and
recovered from suppliers.
5. It has also been noticed that although there had been delay
attributable on the part of the supplier in making the timely
supplies, however, the organizations are extending the letter of
credit with the proviso that the UC extension charges shall be
borne by the organization, thereby giving undue benefit to the
suppliers.
It is essential to accord priority to the post contract follow up. The delivery
period should be extended on bonafide request and not in a routine and
casual manner. After expiry of delivery period, the consignee should be
refrained from exchanging correspondence with the supplier. In case of
delay in supplies by the supplier, the liquidated damages to the extent
possible need to be recovered. Also in case of delay attributable on the part
of the supplier, the UC extension charges should be to suppliers account. In
nutshell, there is a need to discipline the suppliers so that the non-
performers could be weeded out and the suppliers which can be relied upon
with consistent performance, in terms of quality and delivery schedule are
encouraged.
By unrighteousness men proper, men may attain what they desire but
they perish at the roots.
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Bank In the name of Bank Guarantees will be accepted The bank guarantee
Guarantee the purchasers in the prescribed format. The should be passes on
named in the Guarantee as well as revalidation to the cash section
schedule to the letters if required should be for the safe custody
contract. accepted only on non-judicial after retaining a
stamp paper. photocopy thereof
The Bank Guarantee shall be for reference and
valid upto 60 days after the date any action which
of completion of performance. may arise thereon.
Acceptance of the bank While forwarding
Guarantee shall be subject to the securities, the
verification as follows :- procedure laid
The Bank Guarantee shall be down in sub-para
subject to verification for its 101(b)(ii), 107(a)
genuineness. For this purpose, and para 108(a) and
the purchase officer shall address para 113 of chapter-
a registered Ad letter to the IX of Government
concerned branch of the bank securities manual
with a copy to the Manager of the should be followed.
Head Office of the Bank,
enclosing a photocopy of the
bank guarantee with each letter
requesting them to confirm within
10 days that the bank guarantee
has been issued to lthem. The
letter may be addressed in the
form prescribed.
For the purpose of verification of
the genuineness of the bank
guarantee, the name, designation
and code numbers of the
officer/officers signing the
guarantee are incorporated under
the signature(s) of officials
signing the bank guarantee may
be got verified by approaching
the Regional Manager/ Zonal
Manager of the concerned banks
in Delhi/New Delhi/ Chennai/
Mumbai Calcutta depending upon
the office from which the contract
has been placed, who can furnish
the necessary confirmation in
writing.
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BANK GUARANTEE PROFORMA FOR FURNISHING

PERFORMANCE SECURITY
In consideration for the President of India (hereinafter called the

Government) having agree to exempt....................................................,
hereinafter called the said Contractor(s)" from the demand, under the terms
and conditions of an Agreement dated ..........................................made
between and ………………………… of Performance Security for the due
fulfillment of the mid Contractor(s) of the terms and conditions contained in
the said Agreement, on production of Bank Guarantee for Rs …….........
(Rupees .............................) (Indicated the name of the Bank) at the
request of.................................. Contracts do hereby undertake to pay to the
Government an amount-not exceeding Rs against any loss or damage caused
to or suffered would caused to or suffered by the Government by reason of
any breach of the said contractor (s) of any of the terms or conditions
contained in the said Agreement.
2. We ………….................... do hereby undertake to pay the amount
due and payable under this Guarantee without any demur, merely on a
demand from the Government stating that the amount claimed is due by way
of loss or damage caused to or would be caused to or suffered by the
Government by reason of breach by the, said contractors of any of the terms
or conditions contained in the said Agreement or by reason of the
contractor(s) failure to perform the said Agreement. Any such demand
made on the Bank shall be conclusive as regards the amount due and
payable by the Bank under this guarantee. However, our liability under this
guarantee shall be restricted to an amount not exceeding Rs………….
3. We undertake to pay the Government any money so demanded
notwithstanding any dispute or disputes raised by the
contractor(s)/supplier(s) in any suit or proceeding pending before any Court
or Tribunal relating thereto liability under this present being absolute and
unequivocal. The payment so made by us under this Bond shall be a valid
discharge of our liability for Payment there under and the
contractor(s)/supplier(s) shall have-no claim against us for making such
payment.
4. We ..........................................................further agree that the
guarantee herein contained shall remain in full force and effect during the
period that would be taken for the performance of the said Agreement and
that it shall continue to be enforceable till all the dues of the Government
under or by virtue of the said Agreement have been fully paid and its claim
satisfied or discharged or till, that the terms and conditions of the said
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___________________________________________________________________________________________________________

___________________________________________________________________________________________________________
Agreement have been fully and property carried out by the said
Contractor(s) and accordingly discharges this Guarantee. Unless a demand
or claim under this Guarantee is made on us in writing on or before the
guarantee thereafter.
5. We, further agree with the Government that the Government shall
have the fullest liberty without our consent and without affecting in any
manner our obligations hereunder to vary any of the term and conditions of
the said Agreement or to extend time of performance by the said Contractor
(s) from time to time or to postpone for any time or from to time any of the
powers exercisable the Government against the said Contractor (s )and to
forbear or enforce any of the terms and conditions relating to the said
Agreement and we shall not be relieved from our liability by reason of any
such variation," or extension being granted to the said Contractor (s) or any
for forbearance, act or omission on the part of the Government or any
indulgence by the Government to the said Contractor(s) or by any such
matter or thing whatsoever which under the law relating to sureties would,
but for this provision, have effect of so relieving us.
6. Notwithstanding anything contained herein above our liability render
the guarantee is restricted to Rs.................................................... and shall
remain in force until……………….unless a claim or suit under this
guarantee is filed with us on or before................................... ALL OUR
RIGIHTS UNDER THE GUARANTEE SHALL BE FORFEITED
and the Bark shall be relived and discharged from all liabilities therein.
7. This Guarantee will not be discharged due to the change in the
constitution of the Bank or the Contractor(s)/supplier(s).
8. We.... ............................... lastly undertake not to revoke this
Guarantee during its currency except with the previous consent of the
Government in writing.
Dated the date of …………………………..2006 /2007
For……………………………….(indicate the name of Bank)
Signature Name of the Officer (in Block Capitals)
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___________________________________________________________________________________________________________
FORM OF LETTER TO BE ADDRESSED TO BANK FOR

VERIFICATION OF BANK GUARANTEE
To
.............................................................................i) Bank
concerned. ....................................... ....................................ii) Head Office
of the Bank
Subject: - BANK GUARANTEE VERIFICATION OF

Sir,
With reference to our Contract No ...........................................placed
ON M/s…………………………………..a Bank Guarantee No…………
Dated …………………….. for Rs………………issued from……………..
bank located at (Photostat copy of Bank Guarantee enclosed) has been
received.
2. It is requested that the genuineness of the Bank Guarantee may be
verified and intimated to the undersigned at the earliest.
Yours faithfully,
(Assistant Director)
Encl: As above.
CHECK POINTS FOR PREPAMTION OF TENDER ENQUIRY
Ensure that
1. Standard and correct forms are used for tender enquiry and all
amendments authorized to these forms from time to time are carried
out before issue.
2. Time and date for receipt and opening of tenders are indicated as per
the guidelines.
3. The prescribed time been allowed to the tenderers to submit their
quotations, depending on the type of enquiry being issued.
4. The period for which the tenders are to be kept open for acceptance
been indicated realistically keeping in view the nature of the store and
the time lag likely to be involved where consultation with the indenter
on the suitability of offers received would become necessary?
5. The amount to be furnished by unregistered firms as EMD been
calculated correctly and indicated if the enquiry is for purchase
against adhoc indent?
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6. Description of stores including specifications/drawing is correctly

indicated in the schedule,
7. The sources from where the specification drawing can be obtained are
indicated.
8. If stores are required as per BIS specification a clause for giving
purchase preference to ISI Marked stores is included.
9. If the store is required to non standard specification/drawing required
number of copies of drawings/specifications are available.
10 Where tender sample is required to be furnished authority to which it
should be sent for testing and the time within which the sample
should be submitted are indicated correctly in the enquiry.
11. If the store is reserved item for purchase from any particular sector of
industry a clear indication it given to that effect,
12 Inspecting Authority is correctly indicated.
13. The instructions to invitation to tender and conditions of contract
applicable have been correctly indicated in the enquiry.
14. Contract clauses contained in the standard forms used for issue of
tender enquiry and the General and Special conditions of contract are
not reproduced in the tender enquiry.
15. The appropriate price variation clauses in the enquiry where such a
provision is necessary has been given along with base price on which
firms should offer their prices.
16. Delivery required is correctly given. Where purchases of large
quantities of stores are involved delivery may be specified in
installment particularly in respect of cases where contracts are likely
to be concluded on variable price basis.
17. Insertion of standard pre-estimated Liquidated Damages Clause in
Tender Enquiry for claim against delay in supplies.
18. Insertion of modified clause for cancellation of contract and effecting
repurchase.
19. In case of purchase of imported stores the appropriate shipping
clauses are incorporated, other special conditions viz. payment terms
for agreement as contracts etc. should also be indicated in the
enquiry.
20. That all other special conditions as per existing orders are
incorporated in the Tender Enquiry.
21. Period of validity of performance guarantee whether to cover
warranty period also.
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Mchk020907
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Local Purchase of Ordnance Stores Placing of Repeat Orders: Defence Financial Management

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Local Purchase of Ordnance Stores Placing of Repeat Orders: Defence Financial Management

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DEFENCE FINANCIAL MANAGEMENT