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Mastering GFR 2017 (Part 4B): Procurement of Services - Consulting vs Non-Consulting

Mastering GFR 2017 (Part 4B): Procurement of Services - Consulting vs Non-Consulting

Mastering GFR 2017 (Part 4B): Procurement of Services - Consulting vs Non-Consulting

⚠️ 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
📥 Download Official GFR 2017 PDF

Introduction

Welcome back to our GFR exam success series! In Part 4A, we mastered the complete process of buying Goods. Now, we tackle the other half of Chapter 6: Procurement of Services.

This is one of the most confusing and exam-heavy topics. Why? Because the GFR splits "Services" into two completely different categories with entirely different procurement rules. Get this distinction right, and you're ahead of most candidates.

The Most Critical Question: "Thinker" or "Doer"?

Before you procure any service, you must know what kind it is. All the rules depend on this single definition.

🧠 The Core Difference

Consulting Services (Rule 177): The "Thinkers"

  • What you're buying: Expertise, advice, intellect, or judgment
  • Output: A report, study, recommendation, or solution
  • Key characteristic: Quality varies with the person's expertise and skill
  • Keywords: Intellectual, Advisory, Non-physical, Project-specific
  • Examples: Management Consultants, Policy Consultants, Feasibility Studies, Engineering Design, Training Development
  • Outcome: You're buying "How to do it"

Non-Consulting Services (Rule 197): The "Doers"

  • What you're buying: Physical execution of a task
  • Output: A completed action or service
  • Key characteristic: Performance is measurable against set standards
  • Keywords: Physical, Measurable, Deliverables, Performance Standards
  • Examples: Maintenance Contracts (AMCs), Hiring Vehicles, Security Guards, Cleaning/Janitorial, Photocopying, Office Support Services
  • Outcome: You're buying "Getting it done"

Quick Comparison: Consulting vs Non-Consulting

Basis of Comparison Consulting Services (Rule 177) Non-Consulting Services (Rule 197)
Nature of Work Intellectual & Advisory Physical & Measurable
Main Output Report, study, or advice Completed task or action
Key Variable Quality of Expertise (Subjective) Performance Standards (Objective)
Procurement Focus Quality is more important than cost Cost is often the deciding factor
Example Hiring a firm to create a "Report on Upgrading IT Infrastructure" Hiring a firm to "Maintain IT Infrastructure (AMC)"

Part A: How to Hire a "Consultant" (Rules 177-196)

Hiring a consultant is a complex process that prioritizes quality over price.

Step 1: Identify Sources (Rule 183)

For Services Up to ₹50 Lakhs:

You can prepare a "Long List" of potential consultants through:

  • Formal inquiries (references from other departments)
  • Informal inquiries (from professional associations, industry bodies)
  • Previous engagements with firms known to do good work

For Services Above ₹50 Lakhs:

You must publish an Expression of Interest (EOI) on:

  • The Government eMarketplace (GeM)
  • The Central Public Procurement Portal (CPPP)

The EOI invites firms to express their interest and show their qualifications.

Step 2: Shortlisting (Rule 184)

Process: From the responses to your EOI or Long List, you will now shortlist the most suitable consultants.

Golden Rule: You must shortlist a minimum of three (3) consultants.

Selection Criteria: Consultants are shortlisted based on their:

  • Relevant experience on similar projects
  • Qualification and expertise of the proposed team
  • Understanding of the scope of work

Step 3: Issue the Request for Proposal (RFP) (Rule 186)

Important: You only send the detailed RFP document to the shortlisted consultants. The full RFP is not posted publicly.

RFP Contents: The RFP must contain:

  • The Terms of Reference (TOR): The exact scope of work
  • Bid evaluation criteria and selection procedure
  • Standard formats and proposed contract terms

Step 4: The Two-Envelope Bid System (Rule 187)

🎯 This is the most distinctive feature of Consulting Procurement!

Consultants submit their proposals in TWO separate, sealed envelopes:

Envelope 1: TECHNICAL BID

  • The consultant's qualifications and experience
  • Their proposed approach/methodology for solving the problem
  • The composition and qualifications of the proposed team

Envelope 2: FINANCIAL BID

  • Contains only the item-wise price/cost
  • This envelope remains sealed until later

The Process:

  1. Both envelopes are opened on the specified date.
  2. The Technical Bids (Envelope 1) are evaluated first by a Consultancy Evaluation Committee (CEC).
  3. Only the Financial Bids (Envelope 2) of technically qualified consultants are opened.
  4. The Financial Bids of technically unqualified consultants are returned unopened.

Step 5: How to Select the Winner (Rules 191-193)

This is the critical decision point. You have TWO main selection methods:

Method 1: Quality and Cost Based Selection (QCBS) (Rule 192)

This is the default and most common method. It balances quality with cost.

How QCBS Works:

  1. Technical Score (T): Each qualified technical bid is evaluated and given a score out of a maximum.
  2. Financial Score (F): The financial bids are evaluated. The lowest priced bid gets the highest score.
  3. Combined Score: A final score is calculated by weighting T and F (e.g., 70% for Technical, 30% for Financial).
  4. Winner: The consultant with the highest combined score wins the contract.

Key Exam Point: The weight for technical (non-financial) parameters shall in no case exceed 80%.

Method 2: Least Cost System (LCS) (Rule 193)

When is this used? Only for standard, routine assignments where the methodology is well-established (e.g., simple audits, basic engineering designs).

How LCS Works:

  1. All submitted technical bids are first evaluated for qualification.
  2. All technically qualified consultants remain in consideration.
  3. The contract is awarded to the bidder with the lowest evaluated cost.

Key Difference from QCBS: Quality doesn't play a role here. It's purely cost-based selection.

Exception: Single Source Selection (Rule 194)

Just like Single Tender for Goods, you can hire a consultant by nomination only in exceptional cases:

  • In an emergency, and the reason is recorded in writing
  • Natural continuation of previous work by the same consultant
  • Only one firm has the proprietary expertise required

Requirement: Full justification and approval from the competent authority is mandatory.

Part B: How to Hire "Outsourced" (Non-Consulting) Services (Rules 197-206)

This process is much simpler and faster than Consulting Services and is almost identical to buying Goods.

Step 1: Identify Contractors (Rule 199)

Prepare a list of potential contractors by:

  • Scrutinizing Yellow Pages, trade journals, websites
  • Inquiring from other departments
  • Checking previously used suppliers

Step 2: Invite Bids (Rule 201)

The tendering process is based on value:

Value of Service Tendering Method
Up to ₹50 Lakhs Limited Tender Enquiry (LTE): Send the tender directly to more than 3 contractors from your list
Above ₹50 Lakhs Advertised Tender Enquiry (ATE): Publish on GeM and CPPP for all to see

Step 3: Evaluation and Selection (Rule 203)

The Process: Evaluate responsive bids and award the contract to the L-1 (lowest) bidder.

Key Difference from Consulting: It's straightforward cost comparison. Quality/experience is not a major factor in selection (though the contractor must meet minimum technical requirements).

The Golden Rule for All Non-Consulting Services (Rule 206)

⚠️ This is a critical exam question!

Rule 206 states: For any situation not covered in Rules 198-205 of the Non-Consulting Services section, you MUST follow the rules for PROCUREMENT OF GOODS (i.e., Rules 142-176 from Part 4A).

You MUST NOT follow the rules for CONSULTING SERVICES.

What this means in practice: All the rules we learned for Goods apply to Non-Consulting Services:

  • Bid Security (EMD): Required
  • Performance Security: Required
  • Advance Payments: Allowed with restrictions and BGs
  • The 3-Level Purchase Hierarchy: Applies

Quick Reference Table: Services Procurement Comparison

Aspect Consulting Services Non-Consulting Services
Procurement Focus Quality-focused Cost-focused (L-1)
Up to ₹50L Long-list & Shortlist (min 3) Limited Tender (min 3 contractors)
Above ₹50L Expression of Interest (EOI) published Advertised Tender published
Bid Submission Two envelopes (Technical + Financial) Single envelope (Combined bid)
Selection Method QCBS (default) or LCS L-1 (Lowest)
Bid Security Usually NOT required Required (except MSEs, Startups)
Performance Security Usually NOT required Required

Summary of Part 4B

You've now mastered the complex process of procuring Services!

  • Know the Difference: Consulting (Rule 177) = "Thinkers" (advisory services). Non-Consulting (Rule 197) = "Doers" (physical services).
  • Consulting Procurement Path: EOI (if >₹50L) → Shortlist (min 3) → RFP → Two-Bid System (Technical + Financial) → QCBS (default) or LCS.
  • Non-Consulting Procurement Path: Identify Contractors → LTE (if <₹50L) or ATE (if >₹50L) → Single Bid → L-1 (lowest bidder).
  • The Golden Rule (Rule 206): For non-consulting services, apply the Goods rules (Bid Security, Performance Security, etc.) when needed.

Series Navigation:

← Part 4A: Procurement (Goods) | Part 4B: Procurement (Services) | Part 5: Managing Govt Property →

Coming Up Next...

In Part 5, we'll cover Managing Government Property through three chapters:

  • Chapter 5: How to build and manage "Works" (construction projects)
  • Chapter 7: Inventory Management (tracking all government assets)
  • Chapter 8: Contract Management (legal rules for contracts)

About This Series: This is Part 4B 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.

Blog: Government Employees Hub

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