Dear Reader
I am happy to learn that the Chief Vigilance Commissioner (CVC) of India finds fault with the L1 (least cost) type of bidding system, where the lowest bidder is given the contract, and which has been prevalent in government departments, ministries, and public sector undertakings (PSUs) for over 7 decades. At long last, it is being felt by the government that this may not be the most appropriate method of delivering results commensurate with the high growth trajectory of development envisioned for the country and it needs to be done away with. It is also not the method which should be used to purchase the latest technology and state-of-the-art systems.
On the other hand, the practice of selecting L1 is still relevant not only for government departments but even for private firms. If you leave the field open for the best equipment, even if they are not L1, one is treading on a dangerous path because the ‘best’ itself is then subjective. In order to eliminate the possibility of selecting the wrong L1 vendor, in many cases, the practice of pre-qualifying vendors before offers are invited from them is being pursued. This means that you pre-qualify the vendors after the notice of the tender ensuring that there is a sufficient number of vendors to ensure healthy competition. The criteria for pre-qualification for equipment suppliers could be the type of equipment, how long it has been in service, requirement of spares, estimated total cost of ownership over its lifetime and so on. You can then permit the pre-qualified vendors to purchase the tender documents and invite technical and commercial bids from these vendors, with the process of selection of the L1 vendor continuing as is. However, as we all know, even this system does not work in a foolproof manner.
Of late, there has been criticism that the government awards contracts to L1 and does not award it to a vendor with much more sophisticated equipment that may be costlier than L1. This plea, at times, is put forward by bidders from overseas who find it difficult to cut costs for their equipment that are not manufactured in India.
Its heartening that a new ‘all-inclusive’ public procurement strategy is being contemplated by the government which is in sync with a rapidly changing world, and which is conducive for procurement of complex technological solutions at the best prices for the larger public good. While the L1 system may still be good for procurement of routine products and non-consulting services, for high impact and technology complex procurements, this method may not be able to cater to today’s need for innovation, quality, speed, functionality, and efficiency.
The Government of India has been trying to encourage “Make in India’ and promote manufacturing and production of goods and services in India with a view to enhancing income and employability. In its order in 2017, the government had said that preference shall be given to local suppliers in all procurements undertaken by procuring entities, in respect of goods for which the Nodal Ministry has communicated that there is sufficient local capacity and local competition, and, where the estimated value of procurement is Rs. 50 lakhs or less, only local suppliers are eligible.
In response, we are seeing trends, where local manufacturers have begun making security products such as video surveillance equipment, boom barriers, automatic gates, intrusion alarms, biometric readers and access control systems in India. It is only hoped that the quality of these locally produced items is maintained as per BIS and international standards.
Till we meet next month, I would like to wish you a Happy Christmas and a Very Happy New Year.
Cheers, Stay Safe and Keep Others Safe.
G B Singh
Group Editor
Email: gbsingh@1stasset.org
Follow me on @EditorGB
Connect with me on Linkedin.com/in/gbsingh9
