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De-mystifying Government IT & Procurement Policy
NASSCOM
September, 2017
2
Contents
Technical evaluationIV
Scope of work developmentV
BackgroundI
II Procurement Modes
Pre-QualificationIII
Key Legal and Contract termsVI
GFR 2017 – Key ChangesVII
Objective of todays session :
1) Make you understand the Government procurement rules
2) How to work with buyer to improve the quality of the tender documents so that it is a win-win proposition
3) Key changes made in GFR 2017
3
Why IT procurement is different from other procurements?
Highly affected by changing business
objectives
Technical content which is diverse &
hard to define
Success is dependent on
institutional capacity
!
Rapid technological change over
project lifecycle
Combination of professional engineering
services and supply of diverse HW & SW
Specialized bidding documents are necessary to facilitate IT procurement.
This exercise aimed to facilitate successful installation, integration, and operation of a range of information
technology procurements — from straightforward supply and maintenance of technology products, to
complex development, integration and operation of mission-critical information systems.
Complexity of Project phases: Pre go-live,
Go-live & Post go-live
4
Model RFP exercise by MeitY
Break-up of Industry issues
Reviewed with government perspective
covering key risks:
1. High cost of procurement
2. E-Gov projects not taking off
3. IAs abandoning projects midway
4. Non-compliance to notified e-Gov
standards
Best practices from:
1. World Bank RFP for Information
Systems
2. PPP In India, Ministry of Finance,
Government of India
3. Model Request for Proposals and
Quotations for PPP Projects,
Department of Expenditure, Ministry of
Finance, Government of India
4. General Financial Rules (2017),
Government of India
5. Manual for Procurement of Goods and
Services, Department of Expenditure,
Ministry of Finance
Acceptance3%
Arbitration2%
Blacklisting2%
Change requests4%
Enforcement5%
Escrow2%
Evaluation2%
Exchange Rate Variation
2%
Generic16%
Integrity Pact2%
IPR2%
Liability5%
Liquidated damages
5%
Payment11%
Scope5%
SLA6%
Subcontracting2%
Termination3%
Others 21%
5
Industry Feedback : Key Issues
1
2
3
4
5
6
7
8
International Bidders
Taxes and Out-of-Pocket Expenses
, Exit Management
6
Key Rules & Procedures governing Government Procurement
Central Government
1. General Financial Rules (2017)
2. CVC : Guidelines on Tenders
3. Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012
4. Defence Procurement Procedures (updated)
Central PSUs
1. PSU : Purchase Procedure / Manuals
State Government
1. State Government procurement policies
State PSUs
1. Largely follow State Government procurement policies
Principles of Public Procurement
1. Transparency
2. Openness
3. Integrity of Process
4. Integrity of Procurement Officers
5. Accountability
6. Competition
7. Fairness
8. Economy
7
High Level conformance required
1. 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 trade mark, trade name or brand.
2. 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 organisations. The specifications so worked out should meet the basic needs of the
organisation without including superfluous and non-essential features, which may result in unwarranted expenditure.
3. Where applicable, the technical specifications shall, to the extent practicable, be based on the national technical regulations
or recognized national standards or building codes, wherever such standards exist, and in their absence, be based on the
relevant international standards. In case of Government of India funded projects abroad, the technical specifications may be
framed based on requirements and standards of the host beneficiary Government, where such standards exist. Provided that
a procuring entity may, for reasons to be recorded in writing, adopt any other technical specification.
4. Care should also be taken to avoid purchasing quantities in excess of requirement to avoid inventory carrying costs.
5. offers should be invited following a fair, transparent and reasonable procedure.
6. the procuring authority should be satisfied that the selected offer adequately meets the requirement in all respects.
7. the procuring authority should satisfy itself that the price of the selected offer is reasonable and consistent with the quality
required.
8. at each stage of procurement the concerned procuring authority must place on record, in precise terms, the considerations
which weighed with it while taking the procurement decision.
9. a complete schedule of procurement date of issuing the contract should be published when the tender is issued.
10. All Ministries/Departments shall prepare Annual Procurement Plan before the commencement of the year and the same
should also be placed on their website.
8
Procurement Procedure
How it has been covered in Model RFP
1. Suggested standard guidelines / checklist for the Department to help in deciding the right procurement mode. This
should cover the following :
• Define threshold values /conditions for various modes of procurement (3 Stages 0.5L, 0.05-30 L and above 30 L)
• Conditions where all the scope of work should be clubbed in a single bid vs. multiple bid
New Developments
2. A single window (a website/portal) for all Governance procurements - Government e-Marketplace (Rule 149)
3. Registration of suppliers (Rule 150) DGS&D (or concerned departments for specialized goods) to empanel the
Consultants and Solution Category for various types of work and categories. Post this empanelment, the empanelled
companies should be not be evaluated on the a) Eligibility a) Financials b) Number of projects carried out BUT they
should be evaluated on the quality of solution proposed by the bidders (or quality of Consultants provided). These
empaneled suppliers will be considered for Limited tenders and also exempted from EMD (Rule 150 (i)).
Key Observations/Challenges
• EOI & RFQ and RFP (limited & open) : When to use what
• No single official window for accessing e-Governance tenders
Alternative Actions / Standardization Methodology
• The Ministries or Departments are delegated powers to
do procurement of goods. In case, it does not have the
required expertise, it may may do so through DGS&D
• Apart from use of Rate Contract / GeM (Rule 148-150), a
clear cut guideline on how & when to use the EOI, RFE,
RFP (Limited & open) and Nomination
• A guideline provided to cover entire scope of work in one
bid process or it should be broken in several bids as per
the goods/service categories
• Guidance to use rate contract in empanelments
1
Single Source : Rule 166 ,
194 & 205
Rule 183 : Consulting and Rule 164 : Two stage bidding
9
Key Observations/Challenges
• Unfavorable pre-Qualification and Technical qualification
criterion – Manpower, Turnover, PoA, Net worth
• Disproportionate project worth to turnover requirements
• Lack of conditions to promote competitive bidding
• Client certified Proof of experience certificates tough due
to NDA
• CV commitments and related penalties
• Blacklisting clause application restricting competition
Alternative Actions / Standardization Methodology
• Guidelines on providing the pre-qualification criterion
and evaluation criterion. Best practices to be taken
from International Funding Organizations
• Reasons for Debarment and centralising the
debarment process
How it has been covered in Model RFP
4. Standard Guidelines for drafting the eligibility criterions.
• Wherever possible, linked it with the requirement of the project (for e.g. turnover should be 5/10 times the
estimated value of the project)
• Usage of certifications, only when relevant
5. Revisit stringent clauses/provide Guidelines :
• Allowing of consortium , where it helps bring value to the Department Or generates healthy competition
• The OEMs should not be asked to provide the work orders, as generally the work order is not shared by the SI
vendor to the OEM
• Organization should not be allowed to participate only where Service Provider has committed fraud or was
involved in corrupt activities or code of integrity (max 3 years by DGS&D and max 2 years by concerned
Ministry/Department)
Evaluation Methodology (PreQual/Eligibility)2a
10
Key Observations/Challenges
• High weightage given to Company profile & past project
experience / Even post empanelment, Corporate profile is
given undue weightage in evaluation
• Issues on using QCBS for SI RFPs
• Lack of transparency : final technical scores not published
/announced before opening of financial bids
Alternative Actions / Standardization Methodology
• Guidelines ensuring transparency
• Sharing of information to potential bidders to the
extent possible to provide equal platform for
competitive bidding. This is quite prevalent in the
tenders released by the International donor agencies
in India
How it has been covered in Model RFP
6. Standardization of conditions pertaining to turnover, work related turnover , Certifications, manpower requirements,
credentials
7. Categorised the RFPs on the basis of outcome or input
8. Templatization of the details required for the scope of work
Guidelines
• The technical evaluation should be done on a maximum marks of 1000 marks so that comparative evaluation can be
done for areas having small weightage in evaluation
Evaluation Methodology (Technical Evaluation)2b
11
Key Observations/Challenges
• Sketchy & only high level requirements
• Segregation of requirements basis the
nature of procurement
• Performance requirements not furnished
• Funds for the project not enough for
DPRs
• In the PPP tenders information provided
by the Department mostly limited and all
the risk is to be borne by the bidder
Alternative Actions / Standardization Methodology
• Checklist template on SoW to be provided to ensure
• Appropriate level of details with clarity on In-scope/ Out-scope
definition, Scalability needs, Interoperability needs
• The above needs to be provided with respect to:
• Networking, Data Digitization, State Data Centre, Application
requirements (Functional and Non Functional)
• Site Preparation (if at all), Capacity Building & Training
• Hardware, Operations & maintenance support for the above activities
• Either doing detailed DPR or formal review while budgeting for
requirements
How it has been covered in Model RFP
9. Standards to be defined for provisioning information in the RFP (any type of SI bid)
• Level of details to be provided for software / Details to be provided for Non-Functional and Performance Levels in
RFP involving software implementation
• Hardware, Network, Data Centre, Data Digitization, Site preparation – Specific requirements to be provided
10.Develop Model RFPs on whether it is an “outcome based RFP” or “input based RFP” In case this is “outcome
based RFP”, the payment terms, risks, penalties etc. to be different from an “input based RFP”
Suggestions
• A Revised Estimates budget to be calculated / approved, post tendering process
• Lowest bid is not always helpful… process to be defined for analysing the reasons for deviations and a suitable
incentive / disincentive may be introduced
Clarity in Scope of Work3a
12
Key Observations/Challenges
Pertaining to SLAs
• While it is good to have aggressive SLA’s, it also
can be a tricky situation when abnormal
penalties may have to be levied for no fault of
the vendor.
• SLA’s not consistent with the technical and
functional specifications provided for solution
development
How it has been covered in Model RFP
11. Introducing both Options (depending on suitability) in defining the SLAs.
12. Introducing counter SLAs on other stakeholders to delivery may have to be included to avoid SLAs becoming one
sided
Guidelines
• SLA should be realistic (Consultant to study the requirement and certify the attainability of the SLAs). A suitable
incentive / disincentive structure to be evolved which encourages a) attainment of SLAs b) improvement in case of
non-attainment of the SLAs.
• The RFP should also provide for the measures / control in place to measure the SLAs. In case of dependencies from
the other stakeholders, the same also should be measured. In the absence of infrastructure / process for
measurement, the SLA should not be put as a penal SLA.
• The timelines set for any project should be based on similar project implemented in India. The SLA for meeting the
SLA should be for all the stakeholders and mutual commitment should be provided for timely completion of the project.
Alternative Actions / Standardization Methodology
Option 1:
• SLA & Penalties should be based on practicability of attaining them
(based on historic performance). As per international best
practices, there is an opportunity given to vendor to earn back the
penalty amount through better performance / improvement in the
SLAs.
Option 2:
• Minimum SLAs should be prescribed and for performance above
the minimum SLAs, a premium should be paid to the System
Integrator. This would reward the bidder to propose & deploy a
robust solution
SLAs defined for Scope of Work3b
13
Key Observations/Challenges
• The bidder has minimal information to prepare a solution
and more often this results in huge variation in the financial
quotes
• The decision whether to retain the current solution or to go
for a new solution should be done before the SI bid and
should not be left to the bidder. The decision taken by bidder
can be counter productive
• The bill of material should be a firm one and should not be
left as indicative (for input based RFPs).
• Timelines /Deadlines set in the RFP are unrealistic and
quite aggressive.
How it has been covered in Model RFP
13.Define predictability in outcomes /Deliverables : Only those specifications (even if indicative) should be mentioned
which do not translate towards a preference to a particular brand/OEM.
• In case such specifications are mentioned (even indicative) in the RFP, then the Buyer/Consultant should be
responsible for the performance.
• In case specifications are not mentioned then the stacks (and other areas of high risks) should be identified before
publishing RFP.
• For other (low risk areas), bidders can propose specifications (at their own risk)
Guidelines
• The Deliverables should be linked to the controllable factors. All stakeholders should commit deliverables from their
side. The commitment purely from SI/Consultants for attaining a deliverable is liable to miss the timelines.
Alternative Actions / Standardization Methodology
• The bill of material should be a firm one
• The RFP document (for input based RFPs) should
have last level of clarity on:
• Solution Architecture, Leveraging SDC, Network /
SWAN
• Licenses, Support, Proprietary vs. Open
• Security Architecture, Deployment Model
• All models and brands comprising of 80% of the
market share should be evaluated and should result
in a firm Bill of Material even for PPP /Turnkey
Solution provider model
Scope of Work (Deliverables)3c
14
Key Observations/Challenges
• CV committed are not deployed by bidder
• Confidentiality clause restriction to share international
projects details / Non-acceptance of bidder Authorized
client certificates
• Duplication of administrative requirements - Request for
Organizational details redundant are paper intensive &
lead to delays
• Different RFPs need different forms of of Power of
Attorney
• Encouragement to MSMEs
How it has been covered in Model RFP
14.Review the Technical evaluation criterions to rationalise the weigtages given to CVs
15.Registration of suppliers basis their organizational details, abilities etc. to avoid administrative delays linked to bid
participation terms. Subsequent evaluation to be focused on solution proposed / CVs deployed
16.MSMEs encouraged and in each bid, there should be a condition for the bidders to use a certain percentage of work
(in value terms) should be earmarked for the MSMEs.
17.For Bids which require innovative solutions / solutions yet to be deployed successfully in India, international
experience is allowed with authorized confirmation
Guidelines:
• International firms should not only be evaluated for participation on the proof of their experiences but also on the
strength of their proposed solutions
• Acceptance of Power of Attorney (PoA) in its variant forms to be agreed to by Government buyers
Alternative Actions / Standardization Methodology
• Either the weightage given for CV evaluation is
reduced OR the client department commits the start
time of the project, which if delayed, the bidder should
have the flexibility to change resources of similar or
higher experience
• Either encourage MSME through dilution in pre-qual
/Technical evaluation OR mandate a specific % of
work to be outsourced to MSMEs
• Requirements of documentation for bidder experience
details/credentials/ certificates to be reviewed
Bid Participation Terms4
15
Key Observations/Challenges
• PPP models have not succeeded in ICT projects in
india / Business model put in the RFP need many pre-
approvals
• The System Integrator is at negative cash flow, as the
deliverable based payments are low in value as
compared to the costs incurred by SI
• Bidders in eagerness may quote a financially unviable
price
How it has been covered in Model RFP
18.Provided situations where PPP projects should be used. It would provides for institutional processes to deal with the
changes required.
19.Guidelines on selection of the kinds of PPP project applicable to E-Gov and the model to apply, as many types of
PPPs exist.
20.Provide clarity in terms of payment mode decisions: Based on resource input (people, products, time based service)
or outcome/deliverable
21.Need for rationalization in payment terms in line with the cash outflow AND increase the PBG amount
22. Introduce incentives in payment terms for High risk or high value projects as success fee for encouraging continuous
improvements
Alternative Actions / Standardization Methodology
• Clarity on usage of PPP RFPs OR include the costing /
business model of the bidding agency, as a part of the
evaluation process / delink from L1
• Increase PBG to secure the commitment of the SIs (as
per rule 172 can seek advance from client against BG)
Payment Models and Payment Terms5
16
Key Observations/Challenges
• Commercial bids contain items with no certainty on
procurement at a later stage.
• The business model / PPP model decided during the
bidding process is carried out with inadequate due
diligence and buy-in from concerned stakeholders
• Having multiple quotes for various transactions in a
PPP bid may result in a drain in the exchequer (for
e.g. Income Tax)
• The bidder bears the risk on any changes in the
taxes and OPEs
How it has been covered in Model RFP
23.A template for commercial bids (for various types of RFPs) to be provided
24.Any changes in the taxations structure should be compensated by the buyers, as per the private industry practice
25.Out of Pocket Expenses should be at actuals (may be estimated by the buyers and budgeted as percentage of the
total value of the bid)
Guidelines
• “Most favored purchaser” clause is not relevant for an IT project as the cost of the IT product / services are dependent
on various events / terms and conditions. Hence this clause should be avoided for IT projects
Alternative Actions / Standardization Methodology
• A clear guideline on the “dos” and “don’ts” for commercial
bid
• Any change in the procurement plan should not result
in the change in L1 or H1
• Commercial bid for a PPP bid should ideally be only
one single quote for a transaction.
• OPEs should be extra OR exact requirements may be
provided to compute OPEs
Commercial Bid & Evaluation6
17
Key Observations/Challenges
• Risk exposure to the Bidding Organization
from Non-Controllable events
• Higher delivery costs for bidder
• Prone to litigations
• Unviable delivery conditions
Alternative Actions / Standardization Methodology
• Review the following terms and conditions in consultations with all
the key stakeholders, studying the best international practices from
other leading e-Governance countries and alignment with the
current guidelines already published by Department of Expenditure,
Ministry of Finance (GoI), Central Vigilance Commission, General
Financial Rules (Ministry of Finance) etc.:
How it has been covered in Model RFP
26.Align the Legal Terms and conditions based on the international practices in mature market and contextualise it to
Indian situations in the areas of :
• Ownership of the deliverables, Intellectual property rights, Sharing of Source Code,
• Arbitration clauses, Warranties, Limitation of liability, Damages
• Governance, Audit, Access & reporting
• Terms of payment, Penalties, Performance Bank Guarantee
• Breach, Rectification & Termination , Exit Management Schedule
• Transfer of Assets, Confidentiality & Security of data
• Post Termination responsibilities, Invoicing & Settlement
• Sub-contracting, Service Level Agreements, Change Requests
• Key Personnel, Environmental, Health and Safety
• Indemnification, Disputes
Legal & Contract Terms7
18
18
1. Mandatory use of Government e-Market place (GeM) and introduction of clause on ‘Electronic
Reverse Auction’
2. Revision of financial limits for different various purchasing methods :• Up to Rs.50,000/- through any of the available suppliers on the GeM, meeting the requisite quality,
specification and delivery period.
• Above Rs.50,000/- and up to Rs.30,00,000/- through the GeM : Seller having lowest price amongst the
available sellers, of at least three different manufacturers, on GeM, meeting the requisite quality,
specification and delivery period. The tools for online bidding and online reverse auction available on
GeM can be used by the Buyer if decided by the competent authority.
• Above Rs.30,00,000/- through the supplier having lowest price meeting the requisite quality,
specification and delivery period after mandatorily obtaining bids, using online bidding or reverse
auction tool provided on GeM.
2. Introduction of clause on ‘Debarment from bidding’
3. Code of Integrity Guidelines
4. Special provision for start-ups & MSME
5. Submission of declaration by supplier in place of EMD
6. Submission of EMD & performance Guarantee by on-line methods
7. Separate section for consulting & non Consulting services
8. Changes in Quality and Cost Based Selection (QCBS) for Consulting services
Key Changes in GFR… Model RFP updated
© 2017 KPMG Al Fozan & Partners Certified Public Accountants, a registered company in the Kingdom of Saudi Arabia, and a non-partner member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Printed in Saudi Arabia
Thank YouRamendra Verma
Public Service Delivery Transformation Leader & Partner, IGH
KPMG Advisory Services Private Limited
Address: 6th Floor, Tower A, Advant Navis Business Park, Plot 7,
Sector-142 , Noida Expressway , Noida (Delhi NCR), India
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Tel: +91 120 386 8703│ Mobile: +91 9871901269
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