Annexure 2

Manual for Procurement
of
Goods
(Updated June, 2022)
Government of India
Ministry of Finance
Department of Expenditure
FOREWORD
1. Government organizations procure a wide variety of goods and services and undertake
execution of works in pursuance of their duties and responsibilities. With a view to
improving transparency in decision making in public procurement and reducing the
scope for subjectivity, Department of Expenditure in 2006 had prepared a set of three
Manuals on Policies and Procedures for Procurement of Goods, Works and hiring of
Consultants, in conformity with the General Financial Rules (GFR), 2005. Over the years,
these Manuals have served as a guide book for procurement.
2. In the last few years, the Government of India has issued new instructions in the domain
of public procurement. Some of these important changes include introduction of Central
Public Procurement Portal (CPPP), Government e-Marketplace (GeM), preferential market
access for micro and small enterprises, preference for domestic manufacturers of electronic
goods, inclusion of integrity pact, etc. The GFR has been revised comprehensively in
March 2017 covering inter-alia these set of new instructions. Consequently the Manual
of Procurement too has been revised after a decade and within a month of the release
of GFR 2017.
3. The new Manual on Procurement of Goods has been extensively revised in keeping with
GFR 2017 and in consonance with the fundamental principles of transparency, fairness,
competition, economy, efficiency and accountability. Efforts have been made to cover
all major aspects of procurement in this Manual in a user-friendly manner. The manual is
the outcome of extensive consultations in two stages with Ministries/Departments/PSUs
and other organizations over a period of six months.
4. Manuals issued by this Department are to be taken as generic guidelines, which have
to be necessarily broad in nature. Ministries/Departments are advised to supplement
this manual to suit their local/specialized needs, by issuing their own detailed
manuals (including customized formats); Standard Bidding Documents and Schedule of
Procurement Powers to serve as detailed instructions for their own procuring officers.
5. I would like to acknowledge the lead taken by Dr. Vivek Joshi, Joint Secretary, DoE and
dedicated efforts of Shri Sanjay Aggarwal, Director (PPD), Shri Vinayak T. Likhar, Under
Secretary(PPD) and Shri Girish Bhatnagar, Consultant (Public Procurement) in revision of
this Manual. I would also like to thank Ministries, Departments, other organisations and
individuals who reviewed the drafts of the Manual and provided their valuable inputs.
6. I hope that this Manual would be useful to procuring officials working in various Ministries/
Departments as operating instructions and will bring about greater transparency and
predictability in government procedures and help in improving the ease of doing Business
with Government.
(Ashok Lavasa)
Date : 05.04.2017 Finance Secretary
v
Disclaimer
While every care has been taken to ensure that the contents of this manual are accurate and
up to date till June 2022, the procuring entities are advised to check the precise current
provisions of law and other applicable instructions from the original sources. In case of any
conflict between the provisions stipulated in this manual and in the original source such as
GFR or the prevailing laws, the provisions contained in the extant law and the original
instructions shall prevail.
vii
A bidder’s bid security will be forfeited if the bidder withdraws or amends its/his tender or
impairs or derogates from the tender in any respect within the period of validity of the tender
or if the successful bidder fails to furnish the required performance security within the
specified period.
Bid securities of the unsuccessful bidders should be returned to them at the earliest after
expiry of the final bid validity period and latest by the 30th day after the award of the contract.
Bid security should be refunded to the successful bidder on receipt of a performance
security. However, in case of two packet or two stage bidding, Bid securities of unsuccessful
bidders during first stage i.e. technical evaluation etc. should be returned within 30 days of
declaration of result of first stage i.e. technical evaluation etc.69
6.1.2 Performance Security (Rule 171 of GFR 2017)

i) To ensure due performance of the contract, performance security [or Performance
Bank Guarantee (PBG) or Security Deposit (SD)] is to be obtained from the
successful bidder awarded the contract. Unlike contracts of Works and Plants, in
case of contracts for goods, the need for the Performance Security depends on the
market conditions and commercial practice for the particular kind of goods.
Performance security should be for an amount of five (5) to ten (10) per cent of the
value of the contract as specified in the bid documents [The value has been reduced
to three (3) percent till 31.03.2023. Refer to para 6.1.2 (iv) below]. Performance
security may be furnished in the form of Insurance Surety Bond70, account payee
demand draft, fixed deposit receipt from a commercial bank, bank guarantee
issued/confirmed from any of the commercial bank in India, or online payment in an
acceptable form, safeguarding the purchaser's interest in all respects. In case of GTE
tenders, the performance security should be in the same currency as the contract
and must conform to Uniform Rules for Demand Guarantees (URDG 758) – an
international convention regulating international securities71.Unlike, procurement of
Works, in procurement of Goods, the concept of taking part of Performance
Guarantee as money retained from first or progressive bills of the supplier is not
acceptable. Submission of Performance Security is not necessary for a contract
value uptoRupees1 (one)lakh.
ii) Performance Security is to be furnished by a specified date (generally 14(fourteen)
days after notification of the award) and it should remain valid for a period of 60
(sixty) days beyond the date of completion of all contractual obligations of the
supplier, including warranty obligations.
iii) The performance security will be forfeited and credited to the procuring entity’s
account in the event of a breach of contract by the contractor. It should be refunded
to the contractor without interest, after he duly performs and completes the contract
in all respects but not later than 60(sixty) days of completion of all such obligations
69
Notified vide OM No. F.1/2/2022-PPD issued by Department of Expenditure dated 01.04.2022
70
Notified vide OM No. F.1/1/2022-PPD issued by Department of Expenditure dated 02.02.2022
71
A set of rules developed by the International Chamber of Commerce first adopted in 1992. The latest version
URDG 758 provides a framework for harmonising international trading practices and establishes agreed-upon
rules for independent guarantees and counter-guarantees among trading partners for securing payment and
performance in worldwide commercial contracts.
106
c) Release of payment and settlement of the final bill should be processed through
the Associated/ integrated Finance as per the terms and conditions of the
contract;
d) No payments to contractors by way of compensation or otherwise outside the
strict terms of the contract or in excess of the contract rates should be allowed;
iv) Before the payment is made, the invoice should be cross-checked with the actual
receipt of material/assets/services to ensure that the payment matches the actual
performance;
v) While claiming the payment, the contractor must certify on the bill that the payment
being claimed is strictly within terms of the contract and all the obligations on his part
for claiming this payment have been fulfilled as required under the contract. There
should also be a suitable provision for verification of the authenticity of the person
signing the invoice, and so on, to claim the payment;
6.3 Terms of Payment for Domestic Goods

Where the terms of delivery are FOR Dispatching Station, the payment terms, depending on
the value and nature of the goods, mode of transportation, and so on, maybe60 to 90 (sixty
to ninety) per cent on proof of dispatch and other related documents and balance on receipt
at site and acceptance by the consignee.
Where the terms of delivery is FOR destination/delivery at site, the usual payment term is
100 (hundred) per cent on receipt and acceptance of goods by the consignee and on
production of all required documents by the supplier.
Where goods to be supplied also need installation and commissioning by the supplier, the
payment terms are generally:
i) For a contract with terms of delivery as FOR dispatching station -- 60 (sixty) per cent
on proof of dispatch along with other specified documents, 30 (thirty) per cent on
receipt of the goods at site by the consignee and balance 10 (ten) per cent on
successful installation and commissioning and acceptance by the consignee; and
ii) For a contract with terms of delivery as FOR destination/delivery at site -- 90 (ninety)
per cent on receipt and acceptance of goods by the consignee at destination and on
production of all required documents by the supplier and balance 10 (ten) per cent on
successful installation and commissioning and acceptance by the consignee.
Note: Generally (especially for goods requiring installation and commissioning at site by the
supplier), the desirable terms of delivery are FOR destination/delivery at site, so that the
supplier remains responsible for safe arrival of the ordered goods at the site. Therefore,
unless otherwise decided ex-works or FOR dispatching station terms should be avoided.
6.3.1 Modes of Payment for Domestic Goods

Payments to domestic suppliers are usually made by cheque/demand draft drawn on a
Government treasury or branch of RBI or any Scheduled Commercial Bank authorised by
RBI for transacting Government business. Such payment can also be made to the supplier's
bank, if the bills are endorsed in favour of the bank with a pre-receipt embossed on the bills
with the words, "received payment" and both the endorsement and pre-receipt are
authenticated by the supplier. In addition, an irrevocable power of attorney is to be granted
110

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Manual for Procurement

6.1.2 Performance Security (Rule 171 of GFR 2017)

6.3 Terms of Payment for Domestic Goods

6.3.1 Modes of Payment for Domestic Goods

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