Indian Railways Institute of Mechanical & Electrical

Engineering (IRIMEE), Jamalpur

TENDERS & CONTRACTS

A Booklet & Compendium for Study & Reference

Faculty Incharge: Shri A K Dwivedi (IRSME), Dean

Shri Suman Raaj (IRSME), SP(TS)
Course Director: Shashwat Gupta (IRSME), P(WMT)
─

January 2022
1
 2

Table of Contents
Introduction 5

To Start With… Back to the Basics 5

Getting Work Done 6

What is a Contract? 7

Government Contracts & Public Spending: Canons of Financial Propriety 8

General Financial Rules (GFR), 2017 9

Schedule of Powers (SOP) 10

Types of Contracts in Railways 11

Works Contract 11
Schedule contract; 12
Piece work contracts (Zonal contracts); 12
Lumpsum contract 13
Engineering, Procurement, Construction (EPC) Contract 14
Consultancy Contract 14
Works Contracts in Mechanical Department 15
Stores/Supply Contracts 16
Stock items 16
Non-Stock items 16
Service Contracts 17

Contract Management in the Railways 17

Pre-Tender Planning 19
Estimate Preparation & Sanction 19

Tenders 20

Types of Tenders 20
Open Tender 21
Rules for following 2-packet system 21
Limited Tender 22
Special Limited Tender 24
Single Tender 25
Dispensing with Calling of Tenders (Quotation) 25
Do’s and Don’ts of quotation contracts 27

Tendering & Tender Documents 28

Powers for Calling of Tenders 28
 3

Stages in Tenders 29
Notice Inviting Tender (NIT) 30
Components of a Tender Document 30
Tender Notice Publication & Opening Date 30
Tender Offer Validity 31
Tender Document Cost 31
Earnest Money Deposit (EMD) 31
EMD Waiver 32
Pre-Bid Meeting 33
Tenderer’s Credentials 33
Completed Works 34
Eligibility Criteria 35
Technical Eligibility 36
Financial Eligibility 36
Bid Capacity 36
Price Variation Clause (PVC) 37
PVC Formula – Labour 37
PVC Formula – Material 38
PVC Formula – Fuel 38
PVC Adjustments 38
PVC in Supply Contract 39

Tender Committee (TC) and Acceptance Stage 39

Constitution of Tender Committee (TC) 39
Consideration of Tenders: Anomalous Cases 40
If L-1 Withdraws? 40
Multiple L-1 ? 40
Only/Lone Tender offer 40
Role of Tender Committee (TC) 41
Role of Convener 41
Role of Finance Member 41
Role of Third Member 42
Role of Tender Accepting Authority (TAA) 42
Part Acceptance Of Tender:– 42

Contract Finalization 43
Letter of Acceptance (LoA) Per E- 1256, 43
Contract Agreement 44
Important Tender Documents include: 44
Contract Agreement Signing Powers 44
Security Deposit (SD) & Performance Guarantee (PG) 45
 4

Security Deposit (SD) 45

Performance Guarantee (PG) 46

Contract Execution Stage 47

 5

Introduction
With increasing importance of outsourcing in every Department, there is a
constant feeling among officers and supervisors alike that Tenders,
Contracts and their execution is something quite new and adds a hitherto
unanticipated level of complexity to daily functioning. To eliminate
uncertainty and enable field executives to carry out their tasks properly, it
falls to CTIs to conduct training programmes for the same. IRIMEE is no
different.
We regularly organize online training courses as part of our Training
Calendar, and officers and supervisors can be nominated and join from
anywhere. In 2021-22 so far, 3 training courses with a total of 730
trainee-days have been completed, with another course starting in Feb.
This booklet is another attempt to broaden our base and provide a ready
reference to one and all for Tender & Contract rules.

To Start With… Back to the Basics

Many times one is faced with the question, “What is my role in the
Railways (or in the Govt. in general)?” In other words, what is the nature of
my job in the field? An Officer? Bureaucrat? Technocrat? A Leader? Babu?
Middle Manager? Facilitator? Rule Maker? Breaker? Follower? Enforcer?
System representative? Figurehead? Something else altogether?
The answer is both “All of the above” and “None of these”. Our role is not so
much to “do the job” oneself so much as to “know it and how to get it
done”. In other words, one is a Techno-Manager.
 6

Role as a Techno-Manager in the Railways

Now with this as a given, let’s move on to how to get work done!

Getting Work Done

Departmental work is done when one has the work, and all resources for
accomplishing it including the Design and Technical Knowhow, along with
the requisite Manpower, Machines and Material, within one’s own control.
When this fails, we seek outside help through outsourcing. Getting work
done Departmentally or by Outsourcing is governed by completely
different norms and regulations.
 7

Departmental staff are governed by a variety of Conduct Rules and Duty

Lists, the enforcement of which is governed by DAR rules and procedures
nested within the organizational and Service hierarchy.
The players on either side of an outsourcing activity, however, are governed
by nothing other than their Contract Agreement, enforceable within the
bounds of the law of the land. This leads us on to the next question:

What is a Contract?
❖Agreement: When two or more persons have a common intention
communicated to each other to create some obligations between
them, there is said to be an Agreement.
❖An “agreement” which is enforceable by law is a "Contract".
❖As per section 10 of Indian Contract Act 1872, only those agreements
are enforceable by law which are made by the free consent of the
parties, competent to contract, for a lawful consideration and with a
lawful object, and are not expressly declared to be void.
❖Please see Para 1201 IR Code for Engineering Dept for more
information
So a contract is basically a fiduciary relationship involving the allocation
of work to a third party in exchange for payment.
The responsibility for the work, along with all associated risk, is taken up
by a third party in exchange for payment or, more accurately, profit.
Hence, a contract is also the transfer of risk and reward by an agreed
arrangement that is mutually beneficial to both parties.
 8

In the context of the Railways and outsourcing, however, "Contract" shall

mean and include the Agreement of Work Order, the accepted Schedule of
Rates or the Schedule or Rates of Railway modified by the tender
percentage for items of works quantified, or not quantified, the Standard
General Conditions of Contract, the Special Conditions of Contracts, if any;
the Drawing, the Specifications, the Special Specifications, if any and
Tender Forms, if any.

Government Contracts & Public Spending: Canons of Financial Propriety

When a government organization spends public (taxpayer) money, it must
abide by a basic public responsibility. In the Railways, these are defined
and summed up by the Canons of Financial Propriety, as under:
❖The expenditure should not prima facie be more than the occasion
demands, and every Railway servant should exercise the same
vigilance in respect of expenditure incurred from public money, as a
person of ordinary prudence would exercise in respect of the
expenditure of his own.
❖No authority should exercise its powers of sanctioning expenditures,
to pass an order, which will be directly or indirectly to its own
advantage.
❖Public money should not be utilized for the benefit of a particular
person or a section of the community unless (i) the amount of the
expenditure involved is insignificant OR (ii) The claim for the amount
 9

could be enforced in a court of law OR (iii)The expenditure is in

pursuance of a recognised policy/custom.
❖The amount of allowances such as traveling allowance, granted to
meet expenditure of a particular type, should be so regulated that
the allowances are not on the whole a source of profit to the
recipients.

General Financial Rules (GFR), 2017

❖Every authority delegated with the financial powers of procuring
goods in public interest shall have the responsibility and
accountability to bring efficiency, economy, and transparency in
matters relating to public procurement and for fair and equitable
treatment of suppliers and promotion of competition in public
procurement.
❖The procedure to be followed in making public procurement must
conform to the following yardsticks:
➢The description of the subject matter of procurement to the
extent practicable should:
○ Be objective, functional, generic and measurable and
specify technical, qualitative and performance
characteristics,
○ Not indicate a requirement for a particular trademark,
trade name or brand
 10

➢The specifications in terms of quality, type etc., as also quantity

of goods to be procured, should be clearly spelt out keeping in
view the specific needs of the procuring organizations.
➢Care should also be taken to avoid purchasing quantities in
excess of requirement to avoid inventory carrying costs.
➢Offers should be invited by following a fair, transparent and
reasonable procedure.
➢The procuring authority should be satisfied that the selected
offer adequately meets the requirement in all respects.
➢The procuring authority should satisfy itself that the price of
the selected offer is reasonable and consistent with the quality
required.

Schedule of Powers (SOP)

➢SOP specifies the scope of officers’ financial powers in the Railways,
operated as a Delegation of Authority from the top down.
➢The SOP defines and lays down which officer or level of officer can
sanction different types of expenditure and the restrictions thereon,
such as a budgetary ceiling, Finance Concurrence, GM’s or Board’s
approval etc.
➢For Tenders, SOP specifies level and conditions of Tender Committee
(TC) and Tender Accepting Authority (TAA)
➢In general, power of RB > HQ > Field officers’, and powers of the
senior officers > JS/SS level.
 11

➢Unless otherwise specified, each step/power needs to obtain Finance

Concurrence at the appropriate level
➢Thus, SOP becomes a document to decide route of file for obtaining
permissions/sanction for proposed works
➢For most cases, the Indian Railways Model Schedule of Powers 2018,
issued by the Railway Board, is used absent any superseding
instructions.

Types of Contracts in Railways

Let’s discuss each of these in more detail.

Works Contract
Governed by Para 1203 of the Engineering Code, a Works contract consists
of all works and supplies relating to the Engineering Department executed
through the agency of contractors, including:
❖Zone Works: lumpsum contracts for routine repair work charged and
billed using repair Work Orders
 12

❖Special Works: Such as the construction of bridge, the formation of

an embankment etc. other than zone works;
❖Supplies of building materials: Such as bricks, tiles, lime, doors,
windows, ballast, moorum, fire bricks, pitching stone etc. which are
not usually stocked or purchased by the Stores Department .
Forms of Works contracts:
The following forms of contract are primarily intended for application to
Works Contracts:--
❖ Schedule contract;
It is the simplest and most common form of Contract, in which rates
and quantity of various activities are fixed. The contractor agrees to
carry out work as specified, within a given period, at the fixed or
accepted unit rates for each item comprising such work. The sum to
be paid will depend on actual quantities of the work done against
each item of work (measured).
❖ Piece work contracts (Zonal contracts);
Under E1208, this means a contract under which only unit rates or
prices for various kinds of work or materials are agreed upon, without
reference either to the total quantity of work to be done or materials
supplied; or to the quantity of work to be done or material supplied
within a given period.
Zonal Contract on the Railways (refer para E1209) fall under this
category (c.f. para 406S), wherein:
➢The Railway indicates the approximate total cost of work. It is
often advantageous to allot all minor works and repair and
maintenance work to one contractor, who is also made
responsible for conveyance and supply of engineering materials
 13

➢Zonal contracts include:

● New Works, additions and alterations to existing
structures, special repair works and supply of building
materials subject to the contract value of each such work
not exceeding Rs. 5 lakh.
● (Authority Railway Board letter No.
2001/CE-1/CT/17/pt.III dt. 27.09.2017)
● All ordinary repairs and maintenance works; and
● Conveyance of materials e.g. bricks, lime, sand etc. which
are likely to be required in a zone during the year.
➢After the contract is executed/signed, specific work orders or
supply orders are placed based on the Schedule of Rates (SoR).
➢The rate of progress of work may not be specified but if it is
unsatisfactory the contract can be terminated.
➢To avoid the vitiation or undue benefit, the approximate cost in
each group of the works of master schedule is specified.
➢Time period of such contracts is normally 1st July to 30th June
(1 year), and maximum value of one work order is Rs 5.0 lakhs
➢It should be ensured that as far as practicable, no work orders
are approved against the old contract after the opening of the
new tenders and all works of the old contract are completed by
the end of June.
➢Exceptional cases may, however, be dealt on their merits with
the approval of the competent authority, taking into account all
relevant facts including such information as is available
regarding the trend in rates.
❖ Lumpsum contract
Under E1205 & E1206, the lumpsum contract is one under which the
contractor engages to carry out a work or effect supply as specified
and within a given period for a fixed total sum; his receipt of this sum
 14

being dependent on his completing the work or supply to

specification and time, irrespective of the actual quantities and kinds
of work done of materials supplied in achieving his results (c.f. para
403S).
In the case of such contracts, a scale of rates or prices may be agreed
upon by which enhancement of or reduction from the lumpsum may
be regulated in the event of any departures from the work or supply
as specified being made subsequently under the order of competent
authority; or by which reductions may be made, at the discretion of
competent authority for failure on the contractor's part to conform to
specification. (c.f. paras 1328 and 404S).
❖ Engineering, Procurement, Construction (EPC) Contract
In EPC, the engineering and construction contractor will carry out the
detailed engineering design of the project, procure all the equipment
and materials necessary, and then construct to deliver a functioning
facility or asset to their clients. EPC features the following major
advantages:
➢Effective project management, with fewer contracts to manage,
➢Engagement of professionally managed agencies,
➢Well defined system of obligation associated with damages
both for Railway & Contractor,
➢Assigning risk to the party who is in a better position to
mitigate it e.g. land, statutory clearances assigned to Railway
whereas design, site uncertainty, sub contracting are assigned
to contractor,
➢Milestone based payments
❖ Consultancy Contract
These are required to hire professional experts to render advisory
services to the Railways, for works requiring highly specialized
technical assistance, including for pre-investment studies, specialized
 15

design and analysis using computers, architecture, landscaping, etc.

Consultancy contracts can be undertaken via Item No. 5 of Works
Matters of Model SOP 2018, as below:
Powers for deciding Consultancy Contract
GM Rs. 10 Crore per case with concurrence of PFA
Further delegate as under
CAO Rs 50 lakh each case, with annual ceiling of Rs.5 cr.
PCE/ Rs 20 lakh each case, with annual ceiling of Rs 1.5 cr
CHOD
DRM Rs 10 lakh each case with annual ceiling of Rs. 1.5 cr.

➢Minimum level of tender acceptance: SAG level

➢Means minimum level of TC: JAG/SG
(vide letter no. 2017/Trans/01/Policy dt. 8/11/2017)
➢For single tender: TC shall be of SAG level
➢If a contract is to be fixed only on a single tender basis due to
special circumstances, GM’s personal approval is required,
irrespective of the value of the contract.
❖ Works Contracts in Mechanical Department
Responsibility for works and supplies related to a particular work
handed over to the contractor for a fee. Thus, in Mechanical
Department, Works Contracts are generally departmental functions
outsourced to an external agency, such as:
➢Annual Maintenance Contract (AMC) or Repair Contract (RC) of
key machines and important equipment – by single tender on
OEM or otherwise,
 16

➢Outsourced Works: For labour saving, such as stripping, bogie

shot blasting, etc.;
➢Non-core Activities: Such as loading/unloading, Shop floor
cleaning, Transportation (Inter-shop or outside), etc.
Stores/Supply Contracts
Undertaken for public procurement of items, material, goods and spares for
the Railways’ use. Generally done through the Stores Department, at
Railway Board or Zonal or Divisional/Depot levels.
They are generally done in one of two ways:
❖ Stock items
These are those items which need to be stocked in a Store depot as
they are frequently required by the user department for maintenance
of their assets. They are:
➢Supposed to be available in the Stores depot.
➢Generally procured by the PCMM office. Only in an emergency
situation or when advised by the PCMM office are these items
procured at Stores Depot level by generating ERM or NRM in
iMMIS.
❖ Non-Stock items
They are those items which need not be stocked since they are not
required frequently. They are only procured to meet the emergent
demands of the user department, as and when required.
For procurement of these items , a non-stock demand is prepared and
submitted to the Stores department through iMMS.
They are charged to respective revenue heads (PU-28) or planned
works under RSP, M&P and Works Programmes.
All Stores Tenders follow the same rules and procedures of public
procurement as any other form of Tender done in the Railways.
 17

Service Contracts
A “service” is defined as any subject matter of procurement other than
goods or works, except those incidental or consequential to the service,
and includes physical maintenance, housekeeping, professional,
intellectual, training, consultancy and advisory services or any other service
classified or declared as such by a procuring entity but does not include
appointment of an individual made under any law, rules, regulations or
order issued in this behalf.
In other words, it is the procurement of a public good for its intangible
material benefit. It is the newest class of contract in the Railways.
In recent years, Railways has seen a rise in the number of service contracts
in non-operational areas such as cleaning, facilities management,
consultancy etc. Given their diverse nature, a need was felt to reclassify
these and deal with them using a simplified mechanism focussed on
outcomes and delivery operated separately from a Works Contract.
Service contracts have thus got their own SOP and GCC.
Contract Management in the Railways
Major steps in contract management in the Railways are as under:
➢Pre-tender planning
➢Tender invitation and finalization
➢Execution stage
➢Contract finalization stage
As discussed above, all contracts carry a certain amount of risk and have a
financial ramification. Thus, they place a large responsibility on the
shoulders of the executive, who must balance several pressures at once.
 18

To balance these pressures and to ensure error-free tender finalization and

contract execution, one must remain abreast of the contents of, and all
updates on, the following:
➢Indian Contract Act, 1872
➢General Conditions of Contract (GCC) & Corrections
○ GCC for Works (latest in 2020)
○ GCC for Services (issued in 2018)
➢Schedule of Powers (SOP) – IR Model SOP, 2018
➢Indian Railway Vigilance Manual (IRVM)
➢Works Code
➢Stores Code
➢Railway Board Circulars
➢Previous Tender Cases (LAR & TCM)
 19

Pre-Tender Planning
Before undertaking the work of calling proposed offers for a work (tenders),
the following points must be taken care of:
Survey
Scope of work (details)
Design and drawing
Estimate Preparation and Sanction
Likely time of completion
Type of tender
Preparation of Tender Schedule
➢Notice Period
➢Tender Offer Validity
➢GCC
➢Special Conditions and Special Specifications
➢Eligibility criteria
The most important steps are given in bold in the checklist above.
Estimate Preparation & Sanction

Of these, the most technical step is the Estimate that must be prepared
based on the Scope of Work, and then sanctioned by the Competent
Authority after Finance concurrence. For large works, estimates are
prepared in two parts, as abstract estimates and detailed estimates. While
the former gives an overview of the work cost outlay under major headings,
the latter is a far more detailed document that requires some care.
 20

Estimates should be:

➢True to life (Realistic), including contractor’s profit margin.
➢Based on latest rates for each component
➢Latest Minimum Wages (EPF, ESI etc)
➢Based on one or more LAR/ LPR/ Budgetary Quotes 🡪 Maintain
Caution
➢Include cost of Machinery/ Chemical / Electricity/ Water Charges etc
➢Abstract Estimate: Para 702
➢Detailed Estimate: Para 703 & 704
➢Model SOP Item No. 2 (C)
Tenders
Refers to identifying and calling interested and prospective contractors or
firms to give their offers (tenders) for the proposed work. It is done:
➢To obtain the best possible value for money
➢For judicious use of Public money
➢To get Competitive rates
➢To ensure Transparency
Types of Tenders
Major tender types include:
➢Open Tender ➢Special Limited Tender
○ One Packet System ➢Single Tender
○ Two Packet System ➢Dispensing With Tender
➢Limited Tender (Quotation)
 21

Choosing among these is based on:

➢Ensuring a reasonable level of competition
➢Importance and urgency of the proposed work
➢Availability of skilled/qualified contractors or any Approved firms
➢Specialised nature of the Work, if any
➢Value of work (Estimate amount)
Open Tender
➢Publicly floated so anyone can bid. It is the least restrictive mode of
tendering and involves the most competition.
➢General mode for govt. to give equal opportunity to all bidders.
➢Eligibility Criteria as per rules. Manipulative tendering restricts
competition and therefore has a Vigilance angle.
➢Model SOP 2018 Item – 5 (A) (i)
➢Two Packet System of Tendering: Technical Bid and Financial Bid
➢Stage 1: Technical Packet opened First, TC Deliberates on Technical
criteria. Only technically successful tenderers considered for Stage 2
➢Stage 2: Financial Packet opened and rates of only the successful
tenderers are evaluated ⇒ Technically suitable L1
Rules for following 2-packet system
➢RB Letter No. 94/CE.I/CT/4 Pt.17 dated 13.08.2012
➢RB Letter No. 2017/Trans/01/Policy dt 26.12.2017
➢For all tenders requiring techno-economic evaluation, the “Two
Packet System” shall be the norm as far as possible.
➢For tenders > Rs 10 Crore, “Two packet system” shall
mandatorily be followed, except where it is decided not to do
 22

so by the Tender Accepting Authority (not below SAG), with

finance concurrence.
➢For tenders < Rs 10 crore, decision lies with tender inviting
authority, with Finance concurrence.
Limited Tender
Where for reasons in the public interest, it is considered not practicable or
advantageous to call for open tenders, limited tenders may be invited with
the concurrence of the Financial Adviser and Chief Accounts Officer and
approval of the competent authority.
➢This system of inviting tenders is for works costing up to Rs. 7.5
Crores (Rupees Seven Crore Fifty lakhs) each,
➢Only from amongst the contractors on the Approved List, provided
the number of contractors on the Approved List for that particular
type of work is not less than 10.
➢For formulating approved list of contractors and invitation of Limited
Tenders, the norms specified in the Board’s letter No.94/CE- I/CT/4
dt.17.10-02, 12/16-5-06 and No. 2007/CE/ I/CT/18 dt. 28-9-2007
and subsequent revisions on the subject shall be followed.
➢Reasons for inviting limited tenders from firms/contractors should be
kept on record while approaching finance for concurrence.
➢Notice Inviting Tender (NIT) sent to all contractors on the Approved
List by Registered Post
➢Tender notice period is not to be less than 14 days. Notice to be
published in newspapers, displayed on notice boards and also put on
the Internet wherever possible.
➢Model SOP 2018 Item – 5 (A) (ii)
 23

➢Regular updating of the Approved list after careful screening of

applications by the standing committee and approval by higher
authority is a must.
Category Eligibility Criteria
Engg Work Contractual
Organization Experience Payment
Diploma holder 2 works costing not Rs 25 lakh in last 3
C of less than Rs. 10 lakh Financial years
3 yr experience each
Graduate 2 works costing not Rs 1 cr in last 3
B engineer of 5 less than Rs. 25 lakh Financial years
yr experience each
Graduate 2 works costing not Rs 5 cr in last 3
engineer of 10 less than Rs. 1 cr Financial years
yr experience each
A
and Diploma
holder of 5 yr
experience
➢Contractors in higher slab cannot tender for works of lower slab
unless separately registered.
➢Open Tenders may be invited in the following cases:
○ Insufficient response
○ Due to specialized nature of work, experienced contractors are
not available
○ Ring formation suspected.
 24

➢Sometimes Open Tenders can be periodically invited to gauge

prevalent market rates
Special Limited Tender
➢For important or urgent works special limited tenders can be invited.
➢In this system few contractors are picked up who are considered to be
capable of doing that work. Their credentials are verified.
➢These can be other than those on the approved list. But care should
be taken to include the contractors in the approved list, in that area
capable of doing that work.
➢The calling of the Special Limited Tender and selection of the limited
contractors needs finance concurrence and approval of CAO/GM
➢SLT in following cases in consultation with FA&CAO:
○ Works of Specialized nature (Personal Approval of PHOD- full
power, DRM- upto Rs. 10 lakh)
○ Works of Urgent Nature (Personal Approval of CAO/GM- full
power, DRM- upto Rs. 10 lakh)
○ Consultancy Work (Personal Approval of CAO/GM)
➢As per Rly. Bd’s. Lr. No. 2007/CE/I/CT/18 dt. 28-9-2007 CAO/C with
the concurrence of FA&CAO/C may invite special limited tenders not
only for specialized nature of work but all types of works depending
upon the merit of the case.
➢To be invited from specialized and reputed contractors/
organizations/ agencies not necessarily on the Approved List.
➢Preferably more than six but not less than four (Rly. Bd’s letter No.
94/CEI/CT/4 dated 17.10.2002)
➢Tender notice period must not be less than 14 days.
 25

Single Tender

When under special circumstances/urgency, the offer is taken from only a

single agency, it is called single tender.
➢Model SOP 5 (C) for Single Tender
➢Not to be called for routine work. Tight targets cannot be accepted as
reasons for calling of single tenders. Only in rare or emergent
situations, with Finance Concurrence; accidents, breaches involving
dislocation to traffic (powers to GM, PHOD, DRM)
➢Work of specialized nature-(i) CAO/C (ii) PHOD: 20 Lakhs with annual
ceiling 1 crores (with finance concurrence) or Any other situation if
GM personally approves
➢AMC for equipment can be placed on Single Tender basis on
authorized dealer on approval of AGM
➢TC and TAA should be one step higher than that in the case of
open/limited tenders, except in the cases where GM is the
accepting authority
➢CAO/C can call and finalize Single Tender of value upto Rs.5cr for
early completion of the last milestone of throughput enhancement
works under ‘New lines’, ‘Doubling’, ‘Gauge conversion’, and ‘Traffic
Facility’ plan heads and CAO/RE in ‘Railway Electrification’ plan head
in respect of projects targeted for completion in 2017-18, with the
personal concurrence of FA&CAO/C.
➢In this case, tender Committee would be of SAG level and acceptance
by CAO/C
Dispensing with Calling of Tenders (Quotation)
 26

For small value urgent works (Letter no. 2007/CE-I./Ct/18/Pt.13 dt.

11/09/2017).
(A) Works directly related to safe running of trains: without finance
concurrence, on a certificate by accepting authority that the work is of
urgent nature,
Rank/Grade Cost(per case) Annual Ceiling
S.S.(ind. ch.) Rs.2 lacs Rs.10 lacs
JAG/SG

(B) All other works, including Works directly related to safe running of
trains: With finance concurrence
Rank/Grade Cost(per case) Annual Ceiling
S.S.(ind. ch.) Rs.5 lacs Rs.60 lacs*
JAG/SG Rs.5 lacs Rs.60 lacs*
SAG Rs.10 lacs Rs.1.2 Cr.
 27

Do’s and Don’ts of quotation contracts

➢Powers will be exercised by the officers with their own administrative

approval and no separate administrative approval is necessary.
➢Powers should be exercised sparingly.
➢The circumstances under which quotations have to be called should
be spelt out.
➢The work should not be split up for the purpose of bringing it within
the ambit of this dispensation
➢The reasonableness of rates should be gone into objectively and in
detail by the accepting authority.
➢Quotations should not be for fancy (expensive & low utility) items.
➢Quotations should only be for works which are urgent in nature.
➢Quotations should be invited from at least three well experienced
contractors/agencies, not necessarily on the Approved list.
➢Accepting Authority must take precautions to see that the quotations
are from genuine firms (and not from fictitious firms).
➢A Register showing the full particulars of works authorized through
quotations will be maintained by the officer having powers to
dispense with calling of tenders. The register shall be sent to
associate finance while seeking their concurrence.
 28

Tendering & Tender Documents

After pre-tender planning is complete, tender is floated with the requisite
tender documents:
➢Include schedules, special conditions, drawings etc.
➢Conditions should be precise but exhaustive
➢Should be ready before calling of tenders
➢Contractor should be able to visualize the exact nature of work ,
scope and difficulties etc.
➢Pre-tender planning and approvals should have been completed
Powers for Calling of Tenders
Type and Value Authority
Upto Rs. 4 Crore Selection Grade/JA Grade
Above Rs. 4 Crore and upto Rs. 20 crore SAG/ADRM
Above Rs. 20 Crore and upto Rs. 50 crore DRM/CWM
O Above Rs. 20 Crore and upto Rs. 75 crore CHOD in SA Grade
T Above Rs. 20 Crore and upto Rs. 300 crore AGM/PHOD in HAG
Above Rs. 20 Crore and upto Rs. 300 crore CAO/RE in HAG
Above Rs. 20 Crore and upto Rs. 500 crore CAO/Construction in HAG
Full Powers General Manager

Upto Rs. 37.5 lakh Selection Grade/JA Grade

L Above Rs. 37.5 lakh and upto Rs. 1.5 DRM/ADRM/HOD
crore
T Above Rs. 1.5 Crore and upto Rs. 8 PHOD/CHOD
crore

S Works of Specialized Nature- Upto Rs DRM/ADRM/SAG

L 10 L
 29

T Up to Powers of acceptance PHOD/CHOD/CAO/C

Works of urgent Nature- Upto Rs 10 DRM/ADRM/HOD
L
Up to Powers of acceptance CAO/C

(i) In case of accidents, breaches DRM/ADRM/SAG

involving dislocation to traffic
Up to Rs. 20 lakhs per case subject to
annual limit of Rs.1 Cr
Up to Rs.10 Lakhs per case subject to DRM
annual limit of Rs. 50 L
S
(ii) Works of specialized nature -Full CAO/Con
T Powers
(iii) In each case to tackle emergency CAO/C- (in charge of USBRL
situation arising out of geological project) of NR only
condition - Upto Rs. 2 Crores
Last Mile works (DL, TF, NL, GC CAO/C and CAO/RE
and RE)- Upto Rs 5 Crore
Stages in Tenders
 30

Notice Inviting Tender (NIT)

Brief specification/description of work
Estimated cost of work
Place and time for obtaining tender papers/downloading
Cost of tender paper and mode of deposit
Place and time submission of offers and time of opening
Amount and form of earnest money if not exempted
Eligibility Criteria
Uploaded on web site of the outsourcing organization
Address of website to be printed in NIT
Components of a Tender Document
➢General Instructions – TD Cost, EMD, SD, Date of publication, date of
closing, Date of tender Opening, General details
➢Notice Inviting Tender (NIT)
➢General Conditions of Contract (GCC)
➢Special Conditions of Contract (SCC)
➢Scope of work and Schedule
➢Rate Schedule
Tender Notice Publication & Opening Date
➢21 days between NIT in paper and Opening Date (Model SOP Page
A17, see also Engg Code Para 1238)
➢Can be reduced, but with prior approval
➢Publication of NIT in Newspapers (Rly Bd Letter dt 07.01.2019)
➢Paper Clippings should be available
➢CPRO must be contacted in each Tender Publication
 31

Tender Offer Validity

Rly Bd Letter No 2017/ Trans/01/ Policy dt 08.02.2018 Para 3.2 (c) and Para
4.0

Tender Document Cost

Payable on IREPS website depending on the NIT value (Para 1240 of
Engineering Code) but e-forms are downloadable free of cost:
(i) For works costing upto Rs. 5 Lakhs Rs. 1000/-
(ii) For works costing above Rs. 5 Lakhs Rs. 2000/-
and upto 20 Lakhs
(iii) For works costing above Rs. 20 Lakhs Rs. 3000/-
and upto 50 Lakhs
(iv) For works costing above Rs. 50 Lakhs Rs. 5000/-
and upto Rs. 2 crores
(v) For works costing above Rs. 2 crores Rs. 10000/-
and upto Rs. 50 crores
(vi) For works costing above Rs. 50 crores Rs. 25000/-

Earnest Money Deposit (EMD)

To screen non serious firms, the firm has to keep the offer open during the
validity period: Pre-mature withdrawal of offer leads to forfeiture of EMD.
 32

To be submitted by the tenderer alongwith their offer and forfeited, if:

➢The tenderer withdraws or amends their offer;
➢If the successful tenderer fails to sign contract or furnish the required
performance
EMD Waiver
Recently (since 2020), bidders are exempt from paying EMD in light of the
financial pressure on firms due to the Covid-19 pandemic.
➢Any firm recognized by the Department of Industrial Policy and
Promotion (DIPP) as ‘Startups’ shall be exempted from payment of
earnest money deposit detailed above.
➢100% Govt. owned PSUs shall be exempt from payment of earnest
money deposit
➢Labour Cooperative Societies shall deposit only 50% of above earnest
money deposit
➢Service/ Goods Tender for STARTUP Firm and MSE Firm
 33

Pre-Bid Meeting
➢Useful in High value contracts / complex work to explain the
intricacies of project/work to prospective bidders
➢Attended by executives and finance officers
➢Held well in advance of date of opening
➢Clarification to Discrepancies / Omissions notified by any Tenderer
shall be available to all prospective Bidders
➢Clarifications given during the Pre-Bid Meeting be made part of
Tender Documents
Tenderer’s Credentials

Vide Letter No. 2017/Trans/01/Policy dt 08.02.2018 & GCC-2020, tenderer

submits documents testifying tenderer previous experience and financial
status should be produced along with the tender. All requisite documents
in support of qualifying Eligibility Criteria, Bid Capacity etc as per Tender
Conditions are to be self attested before submission.
➢Certificate based system of credential consideration
➢Certificate in Standard format – Annexure-V of GCC
➢Non submission of Certificate shall result in Summarily Rejection
➢Practice of verification of tenderers documents dispensed with
➢Railway reserves Right to verify all statements, information and
documents and seek any information or document from tenderer
➢Verification or lack of such verification shall not relieve bidder of its
obligations or liabilities
➢In case of false, forged or incorrect information submitted by the
tenderer:
 34

○ Agency shall be banned from doing business for upto five years
○ During the evaluation of tenders – Forfeiture of EMD
○ After the award of contract – Contract terminated. EMD,
Performance Guarantee and Security Deposit & other dues
available with the Railway shall be forfeited
Completed Works

➢Work even though it might have commenced before the qualifying

period, but completed in the last 7 yrs. ending the last day of the
month previous to the one in which a tender is invited.
➢Work is physically completed and completion certificate is issued by
the concerned organization though final bill is pending,
➢If a part or a component of work is completed but the overall scope
of contract is not completed, this work shall not be considered for
fulfillment of technical credentials even if the cost of part completed
work/component is more than required.
➢The value of final bill including PVC amount, if paid, or in case final
bill is pending, Minimum of –
○ the contract cost in last approved variation statement plus PVC
amount paid, or
○ cumulative amount paid upto last on-account bill including PVC
amount and statutory deductions
➢Credentials in foreign currency shall be converted into US Dollar and
then into Indian Rupee by the rate of US Dollars (in INR) published by
the RBI for the last day of month previous to the one in which tender
is invited.
➢Consideration of Work experience certificate issued by
 35

○ Any Private individual – shall not be considered

○ Any Govt. Organisation – shall be considered
○ Any Public listed company – shall be considered, if issued by a
person authorized by the Public listed company to issue such
certificates, provided such Company.
■ Have average annual turnover of Rs. 500 crore & above in
last 3 financial years excluding the current financial year,
■ Is listed on NSE or BSE and incorporated / registered at
least 5 years prior to the date of opening of tender,
➢In case certificate issued by public listed company, the tenderer shall
also submit alongwith work experience certificate, Relevant copy of
work order, Bill of quantities, Bill wise details of payment received
duly certified by CA, TDS certificates for all payments received and
final/last bill paid by company in support of above work experience
certificate
The tenderers shall submit an attested Certificate from the concerned
department / client and/or Audited Balance Sheet duly certified by the
Chartered Accountant/Certificate from Chartered Accountant duly
supported by Audited Balance Sheet.
Client Certificate from other than Govt. Organization should be duly
supported by Form 16A/26AS generated through TRACES of India’s Income
Tax Department.
Eligibility Criteria

For Open Tenders costing above Rs. 50 lakhs (GCC: Part-1, Clause-10)
 36

The criteria may be modified on a case to case basis in respect of urgent

project/works and specialized nature of work with concurrence of FA &
CAO (Associate Finance) and personal approval of GM, and additional
conditions if required may be incorporated.
Technical Eligibility
Must have successfully completed any of the following during last 7 years,
ending last day of the month previous to the one in which tender is
invited:
➢Three similar works each costing ≥ 30% of ATV(Advertise Tender
Value) or
➢Two similar works each costing ≥ 40% of ATV or
➢One similar work costing ≥ 60% of ATV
Total value of similar nature of works (defined by PHOD/CAO) completed
during the qualifying period, and not the payments received within the
qualifying period, to be considered.
Financial Eligibility

Total contractual payments received during the last three years and in the
current financial year (up to date of inviting of tender) should be a
minimum of 150% of ATV of Work.

Bid Capacity
Available Bid capacity shall be calculated as = [A x N x 2] – B, where
A = Maximum value of payment received for executed construction
works in any one financial year during the current & last 3 financial years,
up to date of Inviting of tender
 37

N = Number of years for completion of tendered work

B = Value of existing commitments and balance of ongoing works
with the tenderer to be completed in next ‘N’ years
For Tenders costing > Rs 20 Cr wherein eligibility criteria includes bid
capacity also, the tenderers who meet the minimum eligibility criteria will
be qualified only if their available bid capacity is equal to or more than the
total bid value of the present tender.
The Tenderer shall furnish the details of existing commitments and balance
amount of ongoing works duly verified by CA. Non-submission of above
statement along with offer shall be considered as incomplete offer and will
be rejected summarily. In case of no works in hand, a ‘NIL’ statement is to
be submitted.

Price Variation Clause (PVC)

Desirable in
➢Large value Contracts having value more than 5 Crore
➢Cases of large fluctuation in price of raw materials, labour, fuel etc.
Advantages
➢Protects interests of both the parties: Government when prices fall
and Contractor when prices rise
➢Advantage to govt. when taxes and duties are reduced
PVC Formula – Labour

L = R x ( L–Lo)/Lo x P/100, where

L = Amount of price variation in labour,
 38

R = Gross work done by contractor as per on account bill excluding

cost of materials supplied to him at fixed price and payment made to
consultants engaged by the contractor
Lo= All India consumer price index Number for industrial workers
published by RBI for the base period
L= All India consumer price index Number for industrial workers
published by RBI average for the 3 months of the current quarters
P = % of labour components
PVC Formula – Material

M = R x (W-Wo)/Wo x Q/100, where

M = Amount of price variation in materials
Wo = index number of wholesale price – by group and sub-group for fuel,
power, light and lubricants as published by RBI for the base period.
W = Above for average for 3 months of the quarter
Q = % of materials component
PVC Formula – Fuel

U= R x (F-Fo)/Fo x Z/100, where

U= Amount of price variation in Fuel
Fo= index number of wholesale price – by group and sub-group for fuel,
power, light and lubricants as published by RBI for the base period.
F= Above for average for 3 months of the quarter
Z= % of Fuel component
PVC Adjustments

➢Adjustment done once every quarter in on account payments

➢If more than one account payment each quarter, adjustment in each
 39

➢No adjustment if variation is less than 5%

➢Upward adjustment in the extend period only if it is on govt’s account
➢Downward adjustment in the extended period even if it is granted on
contractors account
➢In case of imported items adjustment in respect of exchange rate and
custom duty done subject to production of documentary evidence
➢Wage escalation clause to be avoided and top be done in exceptional
circumstances on the insistence of the suppliers with financial
concurrence
PVC in Supply Contract

➢Base month and date to be indicated by the contractor along with

wage structure at that time per month of the permanent workers only
➢Wage will consist of basic wage, dearness allowance, employer’s
contribution to PF, employers' contribution to state insurance scheme
or any other scheme instituted by the Government
➢Increment in time scale not to be included
➢Number of direct workers in the base year will only be considered.
Tender Committee (TC) and Acceptance Stage
Constitution of Tender Committee (TC)
Per E-1255,
➢Accepting Authority nominates TC as per delegation of power
➢Normally Standing TCs are there at different levels as per SOP
➢If General Manager is Accepting Authority, H.O.D. to constitute the TC
➢Generally consists of three members: One each from the concerned
Executive Department, Accounts Department and a sister Department
 40

➢Level of TC is based on value of Lowest bid (for a 2+ Bid tender)

➢TC member can be of higher grade in case of non-availability
➢If an officer is competent to be the accepting authority is a TC
member, Accepting authority will be next higher grade
Per Board’s Letter No. 2015/CE-I/CT/O/20/1, dated 14/09/17 & 08/01/20,
➢Two Member TC – With one member essentially from Finance deptt.
and other from the concerned Executive deptt., for OT (invited
through e-tendering) above Rs. 50 Lakh and upto Rs 5 cr
➢Three Member TC for all Other Cases
Consideration of Tenders: Anomalous Cases
➢ If L-1 Withdraws?
○ CVC Circular No. 98/ORD/1, dated 24.8.2001
○ If L1 withdraws before work order is placed or supply/execution
takes place, there should be re-tendering.
○ Exception vide RB letter no. 2017/Trans/01/Policy dated
17.11.2017 for Stores & Non-Consultancy Services
➢ Multiple L-1 ?
○ Letter No. 2017/Trans/01/Policy, dated 08.02.2018
○ Tender may be awarded as per higher BID Capacity
○ If Bid capacity is also same, tenderer having done more value of
similar work in last 3 previous financial year and current
financial year
➢ Only/Lone Tender offer
○ Single offer in response to open tender can be considered by TC
○ Single offer in response to LT should be considered with great
caution
 41

Role of Tender Committee (TC)

The responsibility of TC is generally Joint and Collective. But every member
has some additional tasks to bring the required information on table for
consideration by TC at the time of drawing TC minutes and TAA later. But
all the facts/information have to be considered by the TC collectively.
Role of Convener
➢He has full knowledge of the work to be executed, all special
features, site conditions, specifications, credential of the tenderer,
time frame, urgency etc.
➢Acts as Member Secretary of TC, Briefs other members of the TC
➢Market survey for rate analysis and implication of special conditions,
if any, are also to be evaluated by him. All special conditions
mentioned in the tenders and those having financial implications
should be evaluated
➢Proper examination of reasonableness of rates
➢Credentials of the Tenderers and verification of documents submitted
by tenderers in support of stipulated Eligibility Criteria, if considered
necessary
➢Clarification on technical aspects of the case, if any.
➢Any other information related to work, as he/she represents the
department which has generated the tender under consideration
Role of Finance Member
➢Earnest money is as per demand and existing rules/guidelines
➢Arithmetical accuracy of the offer
➢Fund position, and if work is properly sanctioned
➢Partnership deed, power of attorney, any legal issues that may arise
 42

➢Being a common member, he must ensure a uniform and consistent

approach to dealing with all tenders in his office
Role of Third Member
➢Rules are followed in general
➢Reasonableness of rates has been properly examined
➢A uniform and consistent approach has been adopted
➢In cases of difference of opinion between members of TC, he gives his
definite opinion
Role of Tender Accepting Authority (TAA)
➢TAA is finally and ultimately responsible for acceptance.
➢TAA must ensure that:
○ Work is essentially required and funds & sanction are available
○ Full opportunity has been given to all tenderers in case of OT
○ Other special features have been recorded.
➢Accepting Authority has full authority to accept, modify or reject the
recommendation of TC
➢AA to record reasons, if TC recommendation not accepted
➢Normally case not to be sent back to TC for reconsideration
Part Acceptance Of Tender:–
➢Legally & procedurally permissible as per Tender documents and GCC
➢However, the basic nature of tender should not change, i.e. only
minor changes can be made at this stage.
➢To be finalized within Offer Validity Period
Once accepted, a tender is now a contract, binding on both the Railways
and the winning party. No change is now allowed in TC, conditions, etc.
 43

Contract Finalization
As stated above, once tender is finalized and accepted, it is now a contract.
No change in TC Minutes, Contract conditions, etc. is now permitted on
either side – Railway or the contractor.
Contract finalization proceeds as:
❖Letter of Acceptance (LoA) and its Acceptance
❖Execution of Contract Agreement
❖EMD/ SD/ PG
❖Formalities preparatory to starting the Work

Letter of Acceptance (LoA) Per E- 1256,

➢Prepared Based on TC recommendations, as modified by Accepting

Authority with a copy to concerned Executive Officer
➢In Case of Direct Acceptance of Tender, LOA requires vetting by
Associate Finance prior to Issue
➢Brief letter (Standard Format) issued to successful tenderer that their
offer has been accepted;
○ Relevant details such as Contract Amount, Quantity, Itemized
rates, Authority to Commence & Date of Completion, PG etc.
○ Binding contract until a formal agreement is constituted
○ Prior to the expiry of the Validity period
○ Verifiable or reportable method of delivery
➢Communication of acceptance is considered complete once it is
submitted to Postal authorities
 44

Contract Agreement

➢Consists of a notarized agreement on Rs 100/- stamp paper for

executing the work under the given contractual agreement,
obligations, laws, rules etc. and payment of designated Security
Deposit (SD)/ Performance Guarantee (PG) amount by Contractor to
Railways, before starting the work.
➢It includes a signed acceptance of the LoA and handing over of
contract documents.
➢Form for Contract Agreement for Works in GCC Annexure
Important Tender Documents include:

➢Conditions of Contract (Standard or Special)

➢Specifications (Standard or Special)
➢Plans/Drawings, as necessary
➢Schedule of Items (BoQ)
➢Contract Agreement
➢Instructions to Tenderers
➢Tender Forms
➢Letter of Acceptance (LoA)
Contract Agreement Signing Powers

➢Model SOP 2019 Para 6

➢Finance vetting is necessary.
➢The powers under this item are to be exercised only after the
contract, purchase, lease etc. are approved by competent authority.
 45

➢Contract/Lease agreement to be vetted by the Law Officer where no

standard agreement exists.
➢Rider agreements to the main agreement may likewise be signed by
the authorities who signed the original agreement provided the
approval of the competent authority is obtained.
Security Deposit (SD) & Performance Guarantee (PG)
Security Deposit (SD)

➢Security Deposit is 5% of contract value, paid in advance for faithful

execution of the contract by the Contractor.
➢Paid in standard SD Forms (ref. GCC) and is forfeited if the work is not
completed, unduly delayed etc.
➢EMD of successful tenderer is retained as part of SD, for due and
faithful fulfillment of the contract.
➢Balance SD to be deposited before “first on-account bill” or to be
recovered from "on account" bills @6% of each bill value.
➢SD deducted can be released on submission of Bank Guarantee of
equal amount, with validity 60 days beyond date of completion of
work if there is no maintenance period, and 60 days beyond
maintenance period in other cases.
➢SD to be returned after expiry of the maintenance period and after
passing the final bill based on No Claim Certificate.
➢To be certified that no dues from Contractor to Railway against the
contract.
➢Unconditional and unequivocal no claim certificate from contractor to
be obtained before release of SD.
 46

➢Approval of competent authority. . . .. . . competent to sign the

contract. But not lower than JAG.
➢After physical completion of the work, amount recovered can be
returned in lieu of FDR/ BG
➢No interest shall be payable upon the EM or SD or amount payable to
the contractor.
Performance Guarantee (PG)

➢Successful bidder must submit PG @5% of contract value within 21

days from date of issue of LOA, with validity upto stipulated
completion date + 60 days.
➢Extension up to 60 days can be given, with penal interest @12% per
annum for delay beyond 21 days.
➢Immediate verification of its genuineness and monitoring of the date
of expiry must be done to prevent fraudulent award of work to a
non-serious contractor causing unnecessary delay
➢Encashment or extension of validity well in time to protect financial
interests of government
➢In case the contractor fails to submit PG even after this, the contract
is liable to be terminated duly forfeiting EMD and other dues
➢The failed contractor will be debarred from participating in re-tender
for that work.
➢The PG is released after completion of work based on “Completion
Certificate” issued by the competent authority.
 47

Contract Execution
Once the contract is finalized and work starts, we enter the contract
execution stage. Notable aspects at this stage are as follows:
➢Site order book
➢Use of machine numbered M.B and level books
➢Quality control registers
➢Field laboratory
➢Detailed programme
➢Variations – Quantity Variation and Price Variation
➢Time extension
➢Non-schedule (NS) items
➢Prompt correspondence and proper record keeping