SUBJECT:- AAI DRAFT POLICY FOR PUBLIC PROCUREMENT LINKED WITH LOCAL

CONTENT.

Public procurement (preference to make in India policy 2017) (PP-LC) has been notified and
effected vide order dated 15.06.2017 of Govt. of India to encourage and promote manufacturing and
production of goods and services in India with a view to enhancing income and employment.

In order to implement ‘Make in India’ public procurement policy 2017 (PP-LC) in AAI a draft
document for inclusions in tenders of AAI is prepared and put up for your comments/suggestions.
Your suggestion/ comment may please be forwarded at gmpmqa@aai.aero upto 23.10.2018. The
comments/suggestion should be in brief and implementable and it should be in accordance with Govt.
of India ‘Make in India’ programme.

Based on input draft policy shall be improved upon before its implementation in AAI.

[A.K. Sharma]
ED(PMQA/EMC/TECH)
SUBJECT: - PUBLIC PROCUREMENT LINKED WITH LOCAL CONTENT (PP-LC)
ORDER 2017.

Public procurement (Preference to Make in India policy 2017) (PP-LC) has been notified
and effected vide order dated 15-06-2017 of Govt. of India to encourage and promote
manufacturing and production of goods and services in India with a view to enhancing
income and employment.
In order to implement ‘Make in India’ public procurement policy 2017 (PP-LC) following
shall be considered and applicable uniformly for procurement of goods and service, across
all disciplines in Airports Authority of India (AAI).
1. LOCAL SUPPLIER:-
Local Supplier’ means a supplier or service provider whose product or service offered for
procurement meets the minimum local content i.e. 50 % of total value of the product or
services.
2. LOCAL CONTENT:-
‘Local content’ means the amount of value added in India in the total value of the item
procured (excluding net domestic indirect taxes) minus the value of imported content in
the item (including all customs duties) as a proportion of the total value in percent.
FORMAT FOR CALCULATION OF LOCAL CONTENT IN GOODS:

Name of Local Calculation by Supplier/ Bidder

Supplier/ Bidder Cost per one unit of product
Cost Cost Cost Total %Domestic
Cost component (Domestic (Imported Rs./ Foreign Currency Component
component) component) (To be specified by the d = a/c
a b Supplier/ Bidder) c=a+b
1 2 3 4 5
I.Direct material cost

II.Direct labour cost

III.Factory overhead

IV.Total production
cost

3. DEFINITION OF L1:-
‘L1’ means the lowest tender or lowest bid or the lowest quotation received in a tender,
bidding process or other procurement solicitation as adjudged in the evaluation process
as per the tender or other procurement solicitation.

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4. MARGIN OF PURCHASE PREFERENCE:-
‘Margin of purchase preference’ means the maximum extent to which the price quoted by
a local supplier above the L1 for the purpose of purchase preference, shall be 20 %. Which
shall be firm during particular procurement transaction.
5. INCREASE OF LOCAL CONTENT:-
Local content can be increased through partnership, cooperation with local companies
establishing production units in India or Joint Ventures (JV) with Indian suppliers,
increasing the participation of local employees in services and training them. The following
conditions shall also be applicable.
(a) Consortium of firms should not comprise more than two firms.

(b) Joint venture firm as a single unit or each member of consortium should have
Permanent Account Number (PAN).

(c) Both the members of consortium must meet fully, jointly or as a single unit of Joint
Venture (JV) the required PQC.

(d) A detailed and valid agreement exists between the consortium members defining
clear role, responsibility and scope of work of each member along with nomination of
leader for the purpose of work under consideration commensurate with their
experiences and capabilities and a confirmation that the members of the consortium
assume joint and several responsibilities. It shall be mandatory for lead partner to
attend all progress review meetings and shall be answerable to all issues relating to
the project.

(e) In all procurements, the leader of the consortium of firm shall meet 80% of the
qualification criteria of NIT and shall accept overall responsibilities of contractual
obligations for the total scope of work during execution and up to defects liability
period. Second local partner of the consortium shall meet 40% of the PQC (Pre-
Qualification Criteria).

Note: - Percentage figures in clause no. 5(e) above are modifiable with the
prior approval of ED/ Member concerned where ever needed or
applicable. For example: -

i. Procurements with imported superior technology seldom used earlier in

India, local firm is interested to participate but does not have sufficient
experience and low competition is anticipated.
ii. Procurements with imported superior technology but never used before in
India, local firm is interested to participate but does not have sufficient
experience and low competition is anticipated.

There may be other situation also needing application of this measure.

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 (f) Both the consortium firm should jointly possess the required T & P, Machinery and
manpower and should produce self-attested documentary proof of owning and
possessing required machinery.

Note: - It can be struck off/ deleted where ever not needed or not applicable.

6. Manufacture under license/ technology collaboration agreements with phased

indigenization:-
6.1 If the product developed abroad, is being manufactured in India with the stipulated
percentage (50%) of local content, under license from foreign manufacturer who holds
intellectual property right and having technology collaboration agreement/ transfer of
technology agreement with Indigenous manufacturer, is acceptable under this policy.
Nodal Ministry may also reduce the requirement of stipulated local content subject to
clear phasing of increase of local content.
6.2 Local content being manufactured in India but supplied by overseas bidder who has
venture and bona-fide agreement with Indian manufacturer under License
/Technology Collaboration agreements with phased Indigenization, the payment can
be made in foreign currency to non local bidder also subject to adjustment of taxes as
applicable and prevailing regulation of RBI & Government of India. It can also be
given in Indian National Rupees [INR] to local manufacturer through bona-fide bidder,
subject to implementation of prevailing regulation of Government of India & RBI.

7. Verification of local content:-

a) The local supplier at the time of tender, bidding or solicitation shall be required to
provide self-certification that the item offered meets the minimum local content and
shall give details of the location(s) at which the local value addition is made.

b) In case of procurement for a value in excess of Rs. 10 crores, the local supplier
shall be required to provide a certificate from the statutory auditor or cost auditor
of the company (in the case of companies) or from a practicing cost accountant or
practicing chartered accountant (in respect of suppliers other than companies)
giving the percentage of local content.

8. A local supplier or bidder shall be considered to be from a country if (i) the entity is
incorporated in that country, or (ii) a majority of its shareholding or effective control of
the entity is exercised from that country; or (iii) more than 50% of the value of the item
being supplied has been added in that country. Local supplier/ bidder shall mean those
entities which meet any of these tests with respect to India.

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9. PURCHASE PREFERENCE (LINKED WITH LOCAL CONTENT) (PP-LC) AND ITS
IMPLEMENTATION:-

According to Make in India policy 2017, Purchase preference shall be given to local
suppliers in all the procurement, in the manner as given in following clauses, if
nothing otherwise notified by MOCA.
9.01 It is presumed that sufficient local capacity and local competition exist in
country for procurement of goods where the estimated value of procurement
is Rs.50 lacs or less but above Rs.5 lacs, & only local supplier shall be
eligible.
9.02 In-procurement of goods, up-to and less than Rs. 5 lacs, shall be exempted
from implementation of public procurement linked with local content policy
to the bidder being small purchases. However, it shall be ensured by
procuring entities that procurement is not split for purpose of avoiding the
provisions of this policy.
9.03 In-procurement of goods where the estimated value of procurement is
more than Rs. 50 lacs and which are divisible in nature, the following
procedure shall be followed.
i. Among all qualified bids, the lowest bid will be termed as L1. If L1 is
from a local supplier, the contract for full quantity will be awarded to
L1.

ii. If L1 bid is not from a local supplier, 50% of the order quantity shall
be awarded to L1. Thereafter, the lowest bidder among the local
suppliers, will be invited to match the L1 price for the remaining 50%
quantity subject to the local suppliers quoted price falling within the
margin of purchase preference, and contract for that quantity shall
be awarded to such local supplier subject to matching the L1 price.
In case such lowest eligible local supplier fails to match the L1 price
or accepts less than the offered quantity, the next higher local
supplier within the margin of purchase preference shall be invited to
match the L1 price for remaining quantity and so on, and contract
shall be awarded accordingly. In case some quantity is still left
uncovered on local supplier, then such balance quantity may also be
ordered on the L1 bidder.

iii. Local suppliers/ bidders are further classified as Make in India (MII)
bidder or MSME bidder if so, the purchase preference shall be
considered for award as per illustrations given below in table 1.

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 Table-1

Case-1 100 % order quantity will be awarded to L-1 bidder.

If bid participation trend is that -
All the bids are from MII (local
bidders) and no MSME (local
bidder).
Case-2 80% of order quantity will be awarded to L-1 bidder and
If bid participation trend is that - 20% of order quantity will be awarded to lowest MSME
(a) L-1: MII (local bidder). (local bidder), ready to match price of L-1.
(b) Lowest MSME (local bidder)
falling within price preference of
15%.
(c) No Non - local bidder
Case-3 (i) 50 % of order quantity will be awarded to L-1.
If bid participation trend is that -
(a) L-1:Non-local bidder. (ii) Remaining 50 % of order quantity to be awarded to
(b) Lowest MII (local bidder). lowest MII (local bidder) if falling within 20 % price
(c) No MSME (local bidder). preference, provided, ready to match price of L-1.
Case-4 (i) 50 % quantity will be awarded to L-1.
Where lowest MSME (local
bidder) quote is higher than the (ii) 40 % of order quantity will be awarded to lowest MII
lowest MII (local bidder). (local bidder) and 10 % of order quantity will be awarded to
And bid participation trend is that - lowest MSME (local bidder) provided, ready to match the
(a) L-1: Non-local bidder. price of L-1.
(b) Lowest MII (local bidder) falling
within price preference of 20%.
(c) Lowest MSME (local bidder)
falling within price preference of
15%.
Case-5 (i) 50 % of order quantity will be awarded to L-1.
Where lowest MII (local bidder)
quote is higher than the lowest (ii) Remaining 50 % of order quantity will be awarded to
MSME (local bidder). lowest MSME (local bidder) provided, ready to match L-1
And bid participation trend is that - price.
(a) L - 1: Non-local bidder.
(b) Lowest MSME (local bidder)
falling within price preference of
15%.
(c) Lowest MII (local bidder) falling
within price preference of 20%.

9.04 In-procurement of goods where the estimated value of procurement is

more than Rs. 50 lacs and which are not divisible in nature, the
following procedure shall be followed.
a) Among all qualified bids, the lowest bid will be termed as L1, if L1 is from a local
supplier, the contract for full quantity will be awarded to L1.
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 b) If L1 is not from a local supplier, the lowest bidder among the local suppliers, will
be invited to match the L1 price subject to local supplier’s quoted price failing within
the margin of purchase preference of 20 % of L-1 price, and the contract shall be
awarded to such local supplier subject to matching the L1 price.
c) In case such lowest eligible local supplier fails to match the L1 price, the local
supplier with the next higher bid within the margin of purchase preference shall be
invited to march the L1 price and so on and contract shall be awarded accordingly.
In case none of the local suppliers within the margin of purchase preference
matches the L1 price then the contact may be awarded to the L1 bidder.

[A.K. Sharma]
ED(PMQA/EMC/TECH)

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