Mastering GFR 2017 (Part 4A): Procurement 101 - The Goods
⚠️ Educational Disclaimer
This content is for educational purposes only. While we've prepared this series based on the General Financial Rules (GFR) 2017 (Updated 31st July 2025), please note that:
- This is a simplified interpretation of GFR 2017 for examination preparation
- Errors or omissions may occur despite our efforts to ensure accuracy
- For official, authoritative information, always refer to the official GFR document
- Neither the author nor the website assumes responsibility for any damages, losses, or consequences arising from reliance on this content
- Always verify critical information with your department's official channels before implementation
Introduction
Welcome back to our GFR exam success series! If there is one chapter you absolutely must know inside and out, it's Chapter 6: Procurement. This is the rulebook that governs every single purchase you make, from a box of paper clips to a new fleet of vehicles.
This chapter is so important that we're splitting it into two parts:
- Part 4A (This Post): Procurement of Goods (Rules 142-176)
- Part 4B (Next Post): Procurement of Services (Rules 177-206)
Getting this right saves you from audit objections and vigilance queries. Let's begin.
The 5 Fundamental Principles of Public Buying
Before we learn the how, we must understand the why. Rule 144 lays down the fundamental principles for all public procurement. Every purchase must be:
1. Transparent
The process must be fair, public, and reasonable.
2. Economical & Efficient
You must get the best value for money. This means getting the right quality at a reasonable price.
3. Competitive
The process should promote competition among suppliers.
4. Equitable
All suppliers must be treated fairly.
5. Specific
Your requirements (specifications) must be generic and functional. You should not name a specific brand (e.g., "HP laptop") but rather the function (e.g., "Laptop with 16GB RAM, i5 processor...").
The First Question: Is it on GeM? (Rule 149)
This is the most important rule in modern procurement. The Government eMarketplace (GeM) is the mandatory first stop for all purchases.
Procurement of common use Goods and Services available on GeM is mandatory.
You must follow the GeM purchase process, which is based on value:
| Value of Purchase | GeM Method to be Used |
|---|---|
| Up to ₹50,000 | Direct Purchase: Buy from any available supplier on GeM who meets the required quality, specification, and delivery period. |
| Above ₹50,000 and up to ₹10,00,000 | L-1 Buying: You must compare at least three different manufacturers on GeM and select the seller with the lowest price (L-1). |
| Above ₹10,00,000 | Bidding/Reverse Auction: You must obtain bids using the online bidding or reverse auction (RA) tool provided on GeM. |
You cannot split a large demand into smaller purchases to avoid the L-1 or bidding process. This is called "avoidance of piecemeal purchases" and is a serious audit objection.
What If It's NOT on GeM? The Procurement Methods
If the item is not on GeM, you follow the standard procurement process. The method depends on the estimated value of the goods.
- Level 1 (Small): No Quotation (Rule 154)
- Level 2 (Medium): Purchase Committee (Rule 155)
- Level 3 (Large): Tendering (Rule 158)
Level 1: Purchase of Goods Without Quotation (Rule 154)
Value: Up to ₹50,000
How: You can buy from any reliable supplier without inviting formal quotations or bids.
Mandatory Requirement: The competent authority must record a certificate: "I am personally satisfied that these goods purchased are of the requisite quality and specification and have been purchased from a reliable supplier at a reasonable price."
Level 2: Purchase of Goods by a Purchase Committee (Rule 155)
Value: Above ₹50,000 and up to ₹5,00,000
How: A Local Purchase Committee must be constituted.
- It must have three members of an appropriate level.
- The committee will survey the market to ascertain reasonableness of rate, quality, and the supplier.
Mandatory Requirement: The committee members must jointly record a certificate: "Certified that we... are jointly and individually satisfied that the goods recommended for purchase are of the requisite specification and quality, priced at the prevailing market rate and the supplier... is reliable and competent...".
Level 3: Purchase of Goods by Obtaining Bids (Rule 158)
This is what most people call "Tendering." For any purchase above ₹5,00,000 (or as defined by your department's specific powers), you must invite bids.
The Three Main Tender Types:
1. Advertised Tender Enquiry (ATE) (Rule 161)
This is the default method for high-value procurement.
When: For purchases with an estimated value of ₹50 Lakhs and above.
How: Tenders are invited through wide advertisement on the GeM-Central Public Procurement Portal (GeM-CPPP) and the department's website.
Time Limit: A minimum of 3 weeks must be given for bidders to submit bids. If bids are also sought from abroad, this minimum time is 4 weeks.
2. Limited Tender Enquiry (LTE) (Rule 162)
This is a more restricted method.
When: For purchases with an estimated value up to ₹50 Lakhs.
How: Bidding documents are sent directly to firms on the list of registered suppliers (must be more than three firms). The tender must also be published on the CPPP/GeM.
Exception: LTE can be used for purchases above ₹50 Lakhs only in special cases, like if the demand is urgent or sources of supply are definitely known and limited.
3. Single Tender Enquiry (STE) (Rule 166)
This is the most exceptional method and requires strong justification, as it has no competition.
When: Only under three circumstances:
- It is known that only one particular firm is the manufacturer of the required goods (e.g., a proprietary item).
- In a case of emergency, and the reason is recorded in writing.
- For standardization (e.g., you need spare parts that are only compatible with your existing equipment).
Mandatory Requirement: For cases 1 and 3, a Proprietary Article Certificate (PAC) in the prescribed format must be provided by the user department.
Special Powers for Scientific Departments
A 2024 update in the GFR gives special powers to Scientific Ministries/Departments (like Dept. of Space, Atomic Energy, DRDO, etc.). These powers are different from normal rules and are often asked in exams.
| Purchase Method | Normal GFR Limit | Limit for Scientific Depts. |
|---|---|---|
| Without Quotation (Rule 154) | Up to ₹50,000 | Up to ₹2,00,000 |
| Purchase Committee (Rule 155) | ₹50k - ₹5,00,000 | ₹2,00,000 - ₹25,00,000 |
| Limited Tender (Rule 162) | Up to ₹50 Lakhs | Up to ₹1 Crore |
| Advertised Tender (Rule 161) | Above ₹50 Lakhs | Above ₹1 Crore |
The "Insurance Policies" of Procurement
To protect the government's interest, we take "security" from bidders. This is a V.V.I.P topic.
1. Bid Security (or Earnest Money Deposit - EMD) (Rule 170)
What it is: An "insurance" to prevent a bidder from withdrawing or altering their bid after they've submitted it.
Who gives it: All bidders, except for Micro and Small Enterprises (MSEs) and registered Startups.
How much: Usually 2% to 5% of the estimated value of the goods.
Alternative: You can ask bidders to sign a "Bid Securing Declaration" instead. This is a declaration that if they back out, they will be suspended from bidding for a period of time.
When is it returned? To unsuccessful bidders, as soon as the contract is awarded to the L-1 bidder. To the successful bidder, after they furnish the Performance Security.
2. Performance Security (Rule 171)
What it is: An "insurance" to ensure the successful bidder actually performs the contract (i.e., delivers the goods on time and as per specification).
Who gives it: Only the successful (L-1) bidder.
How much: 3% to 5% of the contract value.
When is it returned? This is the key question. It is returned 60 days after the date of completion of all contractual obligations, including warranty obligations. So, if an item has a 3-year warranty, the security is held for 3 years + 60 days.
A Final Word: Advance Payments (Rule 172)
The Rule: Normally, no advance payment is made. Payment is released after supplies are made.
The Exception: Advance payment can be made in cases like Maintenance Contracts (e.g., AMCs) or fabrication contracts.
The Limits:
- 30% of the contract value to a private firm.
- 40% of the contract value to a PSU or government agency.
The Safeguard: Any advance payment must be secured by an equivalent Bank Guarantee from the supplier.
Summary of Part 4A
You've just learned the entire process of buying goods!
- Start with GeM (Rule 149): Know the 3 value-based buying methods.
- If not on GeM: Use the 3-level hierarchy (No Quote < ₹50k, Committee < ₹5L, Tendering > ₹5L).
- Tenders: Know the difference between Advertised (big value), Limited (small value), and Single (no competition, needs PAC).
- Securities: Understand Bid Security (to secure the bid) vs. Performance Security (to secure the contract).
Series Navigation:
← Part 3: The Record Keeping | Part 4A: Procurement (Goods) | Part 4B: Procurement (Services) →
Coming Up Next...
In Part 4B, we'll cover Procurement of Services—one of the most confusing topics for employees. We'll learn the critical difference between "Consulting Services" (the "Thinkers") and "Non-Consulting Services" (the "Doers").
About This Series: This is Part 4A of a comprehensive 7-part series on GFR 2017 for government employees preparing for departmental exams. Each part covers specific chapters with exam-focused concepts, case studies, and memory tricks.
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