Mastering GFR 2017 (Part 5): Managing Govt Property (Works, Inventory & Contracts)

Mastering GFR 2017 (Part 5): Managing Government Property (Works, Inventory & Contracts)

⚠️ 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 Parts 1-4, we learned how to plan budgets, spend money, and procure goods and services. Now comes the next phase: Managing all of that stuff after it's been purchased.

This post combines three important chapters:

Chapter 5: Works (How we build and repair our assets)
Chapter 7: Inventory Management (How we track our assets)
Chapter 8: Contract Management (How we legally manage our contracts)

Part 1: Chapter 5 - The "Works" Rules

This chapter deals with all "Works" contracts—from building a new office to fixing a leaking roof. It's a critical chapter for employees in construction-related departments.

Key Definitions (Rules 130-131)

1. Original Works

All new construction projects, including site preparation and additions/alterations to existing works. In simple terms: You're building something new.

2. Minor Works

Works that add capital value to existing assets but do not create new assets. Example: Adding an extra room to an existing building (it adds value but doesn't create a brand-new asset).

3. Repair Works

Works to maintain existing buildings and fixtures. Example: Fixing a broken window, repainting a wall, or replacing a faulty water line.

The "Who Does What" Rule (Rule 133)

Can a department fix its own building? This is a very practical and commonly tested rule.

🎯 The Rule:

For Minor Repairs (Rule 133(1)):

A Ministry can directly execute repair works up to ₹60 Lakhs itself. You don't need to go through a Public Works Organisation.

For Repairs Above ₹60 Lakhs (Rule 133(1)):

You must assign the job to a Public Works Organisation (PWO).

For ANY Original or Minor Works (Rule 133(1)):

You MUST assign to a Public Works Organisation (PWO), regardless of cost.

What are PWOs?

These are default organizations designated for this purpose, such as:

Central Public Works Department (CPWD) - The most common
Military Engineering Service (MES) - For defense establishments
Border Roads Organisation (BRO) - For border areas

Can We Use a PSU Instead? (Rule 133(1))

Yes, but as an alternative. A Ministry can award the work to a Central or State PSU, but it must ensure competition among them based on their lump-sum service charges.

The 7-Step Mandatory Checklist Before Starting ANY Work (Rule 136)

This is a V.V.I.P exam topic. You cannot start any work or incur any liability until ALL of these are complete:

Administrative Approval: Has been obtained from the competent authority.
Expenditure Sanction: Has been obtained.
Detailed Design: Has been sanctioned (the architectural/engineering plan).
Estimates: Based on the Schedule of Rates (SOR) have been prepared and sanctioned.
Funds: For the year have been provided/allocated.
Tenders: Have been invited and processed.
Work Order: Has been issued to the contractor.

⚠️ Critical Rule (Rule 137):

You cannot split a single, large project into smaller parts to avoid approval from a higher authority. A group of works that forms one project is treated as ONE work. Violating this is a serious audit objection.

Part 2: Chapter 7 - Inventory Management (The "Store-Keeper's Guide")

This chapter is about how we account for and track every single item the government owns, from stationery to machinery. It's dry but absolutely critical for exams.

The Two Main Jobs of Inventory Management

1. Accounting (Rule 211)

Maintaining proper lists and accounts for all goods owned by the government. The key registers include:

Form GFR-22: For Fixed Assets (machinery, furniture, equipment)
Form GFR-23: For Consumables (stationery, chemicals, spares)
Form GFR-18: For Library Books

2. Verification (Rule 213)

Physically checking that the items in the register actually exist and are in good condition. This is called "Physical Verification" or "Stock Verification."

Physical Verification Rules (Rule 213 & 215) - A Guaranteed Exam Topic!

This is one of the most commonly tested topics. Know these frequencies by heart:

Type of Asset	Verification Frequency	GFR Rule
Fixed Assets (Furniture, Computers, Machinery)	At least once a year	Rule 213(1)
Consumables (Stationery, Spares, Chemicals)	At least once a year	Rule 213(2)
Library Books (< 20,000 volumes)	Every year	Rule 215(i)
Library Books (20,000 - 50,000 volumes)	At least once in three years	Rule 215(i)
Library Books (> 50,000 volumes)	Sample verification at least once in three years	Rule 215(i)

The Special Library Rule (Rule 215(ii))

What if library books are lost or damaged?

A loss of five (5) volumes per one thousand (1,000) volumes issued/consulted in a year is considered "reasonable" and need not be investigated.

BUT, if a lost book is valued at over ₹1,000 or is a "rare book," the loss must be investigated regardless of the "reasonable" loss limit.

The "Scrap" Rules: Disposal of Goods (Rules 217-218)

What happens when an item is old, broken, or useless? Follow these steps:

Step 1: Declare

An authority competent to purchase the item can declare it as surplus, obsolete, or unserviceable.

Step 2: Report

A "Report of Stores for Disposal" is prepared in Form GFR-10.

Step 3: Sell

The method of sale depends on the assessed residual value:

Value > ₹4 Lakh: Must be sold by advertised tender or public auction
Value ≤ ₹4 Lakh: The competent authority can decide the mode (e.g., sell to other departments, public auction, negotiated sale)

Part 3: Chapter 8 - Contract Management (The "Legal" Rules)

We procured items in Chapter 6. Now, we have to manage the legal contract we signed. This chapter ensures that contracts protect the government's interests.

The Foundational Rule (Rule 224)

All contracts must be executed by an authority with the power to do so, and they must be made "for and on behalf of the President of India."

A Checklist for a Bulletproof Contract (Rule 225)

This rule lists the "General Principles" for contracts. Every good contract must include these clauses:

🎯 Key Contract Clauses:

1. Precise Terms

The terms must be definite and without any ambiguity. Vague terms lead to disputes.

2. Price Variation Clause

This clause allows for price changes in case of inflation/deflation. It can only be provided in long-term contracts where the delivery period is beyond 18 months.

3. Liquidated Damages (NOT a Penalty)

A provision for recovery of damages for defaults by the contractor (e.g., late delivery). This should always be included. The amount is pre-agreed and is NOT a "penalty" (which courts don't like).

4. Warranty Clause

The contract must require the supplier to repair, rectify, or replace defective goods without charge. The warranty period must be clearly specified.

5. Contractor's Claim Time-bar

No claim for payment from a contractor shall be entertained after the lapse of three years from the date the claim arises. This protects the government from old claims.

The Arbitration Rule (Rule 227A) - A NEWER and VERY IMPORTANT Rule

This rule often appears in recent exams. It's about what happens when there's a dispute.

⚠️ The Scenario:

An "Arbitral Tribunal" (set up to resolve a contract dispute) orders the government to pay the contractor, but the Ministry wants to appeal in court.

The Rule (Rule 227A):

If the Ministry/Department challenges the arbitral award in court, it must still pay 75% of the award amount to the contractor immediately.

The Safeguard:

This 75% payment is made after the contractor provides an equivalent Bank Guarantee (BG).

Why This Rule?

It ensures the contractor isn't starved of funds during a long legal appeal, while also protecting the government's money with a BG.

Summary of Part 5

You've just learned how to build, track, and legally manage all of the government's property!

Chapter 5 (Works): Remember the 7-step checklist before starting any work and know that big jobs go to a PWO like CPWD.
Chapter 7 (Inventory): Remember annual verification for assets/consumables and the special 3-year/sample rules for libraries. Know the "5 books per 1,000" loss rule.
Chapter 8 (Contracts): Remember the key clauses (Liquidated Damages, Warranty, Time-bar). Most importantly, remember the 75% payout rule for challenged arbitral awards with a Bank Guarantee.

Series Navigation:

← Part 4B: Procurement (Services) | Part 5: Managing Govt Property | Part 6: Giving Money →

Coming Up Next...

In Part 6, we'll cover Chapter 9: Giving Money—the rules for:

Grants-in-Aid (GIA): Money given to organizations for public purposes
Loans: Money lent to organizations which must be repaid with interest

About This Series: This is Part 5 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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