[Updated : 09/01/2017] Guidelines for the Purchase of Goods and Services in Grama Panchayats

goods and services

09/01/2016: Malayalam version of new procurement manual has been prepared by Santhosh C S, Audit Officer, KSA Palakkad. The digital copy of this is available for private circulation and you can download it from this link,

   Malaylam Version of Procurement Manual 2016 – By Santhosh C S

   New Procurement Manual in a nut shell [Malayalam] : Prpared by Sanjay Prabhu D

Manual Vetting Committee constituted for vetting and quality assurance of various manuals prepared by KLGSDP decided to approve the Manual of Procurement of Goods and Services in Local self Government Institutions. After examining the matter in detail the Government  approved the same as per order G.O(Rt)No.2487/2016/LSGD dated 20-08-2016. [ Download Order ]

Government had transferred the functions and institutions of Government to the Local Governments in accordance with the provisions of section 174(i) of the Kerala Panchayat Raj Act, 1994 and section 30 of the Kerala Municipality Act, 1994.

In pursuance of orders 1) G.O (MA) No. 189/95/LSGD dated 18.9.1995, 2) G.O (P) No. 188/00/LSGD dated 4.7.2000, a sizeable chunk of the state’s funds is also being transferred to the Local Governments for implementing various schemes and projects as per the guidelines formulated by Government from time to time and which involves purchase of goods and services and execution of the works by the Local Governments.

The Stores Purchase Rules are meant for a more centralized system and hence there is a growing realization that these Rules may not always fully suit the needs of the Local Governments while implementing various schemes and projects as envisaged by them.

In the above circumstances, Government has considered the need for separate guidelines for the procurement of goods and services in Local Governments and accordingly the Guidelines for Procurement of Goods and Services in Local Governments. And all Local Self Government Institutions in the State will follow these guidelines in letter and spirit for procurement of goods and services by them in respect of items covered by these guidelines.

Procurement Methods for Goods

Various procurement methods need to be applied based on the complexity of the items, its value and availability of suitable market to source the same. Different methods as appropriate with value as described in the table will be applicable for procurement of goods, works and services by LSGs.

Goods and Works


Value (threshold) per contract: Contracts estimated to cost less than INR 5,000

Procurement Method: Petty Purchase

Applicable Conditions and Steps in Procurement Process: For Stationery, Commodities and similar routine items under goods and for repair, refurbishment works. To be used in the absence of Rate or Rolling Contracts No need for following a competitive process should have a maximum ceiling of the annual budget that can be spent using this method Should have approval of the Implementing.


Value (threshold) per contract:Contracts estimated to cost more than INR 5000 and less than INR 25000

Procurement Method: Local Shopping

Applicable Conditions and Steps in Procurement Process: A minimum of 3 Quotations may be obtained / received, from known sources of supply. Request for quotations may be posted in the notice board of the local government and its website and issued to all suppliers who are enlisted for supply or from database published by Manufacturers Associations, Yellow Pages, Industry Journals, other departments, etc. (There will be no sale of Tender Documents, as suppliers/contractors are identified and approach by the LSG) 7 Days’ time shall be given for submission of quotations. Quotations shall be received in writing as per format. Quotations shall be opened publicly in the presence of bidders’ representatives and a member of the LSG Social Audit Committee. A purchase order shall be issued with details of items to be supplied, price, delivery, warranty and other essential terms and conditions and where advance payment is insisted on, the purchasing officer shall obtain beforehand a written undertaking from the selected firm/contractor to the effect that they shall supply in a timely manner and satisfactory condition. Contract award information shall be displayed in the notice board for 7 days.


Value (threshold) per contract: Contracts estimated to cost more than 25,000 and less than 100000

Procurement Method: Limited Tendering

Applicable Conditions and Steps in Procurement Process: Limited Tender is a procurement method used for goods and works where a large supplier/contractor base exists and an open tender is not expected to vary the pricing conditions. Limited tender can also be used in case of urgency, with prior approval from the next higher authority of the Implementing officer. In this method, selection is made based on comparing price offers obtained from several suppliers, usually 4-6 to ensure competitive prices. As far as possible, Limited Tender enquiries will be issued to those firms, which are borne on the list of approved contractors/suppliers.

Steps involved are:

  • Identifying items for purchase,
  • Laying down specifications for the items identified,
  • Estimating total numbers and costs of items identified based on approximate unit costs,
  • Identifying likely agencies from whom quotations can be invited (minimum 5 but 8-10 agencies would ensure better response and more competitive rates)
  • Issuing letters of invitation based on approvals, 14 Days’ time shall be given for submission of offers (There will be no sale of Tender Documents, as suppliers/contractors are identified and approach by the LSG)
  • Letter should include post qualification criteria including turn over for past 2 years of at least 5 times the estimated price of contract, a minimum of 80% of the estimated price as value of a single order executed in last 2 years.
  • Public opening of offers on the designated date and time in the presence of bidders representatives and a member of the LSG Social Audit Committee
  • Processing offers received, obtaining orders of competent authority for placing of orders for supply,
  • A purchase order shall be issued with details of items to be supplied, price, delivery, liquidated damages, pre/post-delivery inspection provisions, warranty and other essential terms and conditions and where advance payment is insisted on, the purchasing officer shall obtain beforehand a written undertaking from the selected firm/contractor to the effect that they shall supply in a timely manner and satisfactory condition.

Value (threshold) per contract: Contracts estimated to cost more than 100,000

Procurement Method: Open Tendering

Applicable Conditions and Steps in Procurement Process: Open Tender is the competitive bidding procedure and the most efficient and economical way of procuring goods and works. The procedures shall provide for adequate competition in order to ensure reasonable prices,  and methods used in the evaluation of tenders and the award of contracts shall be made known to all bidders.

The steps involved are:

  • Notification / Advertising in widely circulated newspaper, one national English and one Malayalam
  • Sale of tender documents for a period of 21 days from the date of advertisement (Cost of bid document will be INR 200 for contracts estimated cost upto INR 1,000,000; INR 500 for contracts estimated cost upto INR 2,000,000 and INR 1,000 for contracts valued above INR 2,000,000)
  • Submission of tender documents within 21 days of advertisement, Public opening of tender and verification of tender security in the presence of bidders representatives and a member of the LSG Social Audit Committee
  • Evaluation and Selection of lowest evaluated responsive tender based on post qualification, Contract award, and Contract performance (Detailed procedures are explained subsequently)

Other Methods of Procurement of Goods and Services


Value (threshold) per contract: Works contracts valued up to INR 500,000

Procurement Method: Community/Beneficiary Based Direct Implementation

Applicable Conditions and Steps in Procurement Process: Under a direct implementation by Community Beneficiary Groups, the community develops a sub project and implement the same using its own resources (skilled and unskilled labor, materials, equipment), and may subcontract part of the subproject. This approach offers several advantages. It is community driven and cost effective (inputs can be provided by the community at below-market costs), and it injects funds into the community (e.g., through the payment of wages and materials). Two important criteria that differentiates this method are that level of participation of the beneficiary shall be higher and the need and subproject identification be directed by the beneficiary itself.

Steps involved are:

  • Need assessment through a participatory process
  • Establishing an Implementation committee comprising of community members who are direct beneficiaries
  • Drawing up implementation schedules, and schedule for purchase of construction materials and inputs
  • Publication of the plans and schedules in the Notice Board for Beneficiary Group, for 7 days inviting comments
  • Implementation (using shopping method for construction materials) and monthly update of progress and expenditure details through Notice Board
  • Review of sub project, quality, use and O&M; and expenditure details by LSG Social Audit Committee

Value (threshold) per contract: Irrespective of Value

Procurement Method: Single Tender

Applicable Conditions and Steps in Procurement Process: Single Tender is contracting without competition (single source) and are applicable only under the following circumstances:

  • An existing contract for goods/works, awarded in accordance with competitive procedures, may be extended for additional goods of a similar nature. It may be justified that no advantage could be obtained by further competition and that the prices on the extended contract are same. Provisions for such an extension, if considered likely in advance, shall be included in the original contract.
  • Standardization of equipment or spare parts, to be compatible with existing equipment, may justify additional purchases from the original Supplier.
  • The required equipment is proprietary and obtainable only from one source.
  • The Contractor responsible for a process design requires the purchase of critical items from a particular Supplier as a condition of a performance guarantee.
  • In exceptional cases, such as in response to natural disasters.
  • Those items for reasons of

All single tender cases should have a justification note prepared and signed by Implementing Officer and have prior approval from the LSG Governing Body. The justification note should explicitly discuss how the proposed procurement has mitigated the risks on account fraudulent practices like collusion and coercion and reputational risks.


Procurement Method: Rate Contracts

Applicable Conditions and Steps in Procurement Process: A Rate Contract is a contract for the supply of goods, works and services at specified rates during the period covered by the contract. No quantities are usually mentioned in the contract, and the contractor is bound to accept any order which may be placed upon them at the rates specified within the contract period. As a reciprocal consideration, the Government undertakes to order from the contractor all goods, works and services under the contract which are required to be purchased, subject to certain reservations for submitting prices to competition and for dividing the contract between one or more contractors.

Rate Contracts established following open tendering methods by specialized agencies at national, state or district that are mandated only will be applicable for procurement by LSGs. Such agencies will include DGS&D, GoI; corporations and agencies notified by GoK. List of admissible Rate Contracts will be maintained by the LSGD. Considering the annual budgets expended by LSGs under various components, no single contract award should value more than INR 500,000.


Procurement Methods for Services from Individual and Institutional Consultants and Contractors including but not limited to Research and evaluation contracts, professional services, training, workshops


 Value (threshold) per contract: Institutional Services valued more than INR 500,000

Procurement Method: QCBS

Applicable Conditions and Steps in Procurement Process: QCBS uses a competitive process among short-listed firms that takes into account the quality of the proposal and the cost of the services in the selection of the successful firm. Cost as a factor of selection shall be used judiciously. The relative weight to be given to the quality and cost shall be determined for each case depending on the nature of the assignment.

The selection process shall include the following steps:

  • Preparation of the TOR;
  • Preparation of cost estimate and the budget;
  • Advertising;
  • Preparation of the short list of consultants;
  • Preparation and issuance of the RFP [which should include: the Letter of Invitation (LOI); Instructions to Consultants (ITC); the TOR and the proposed draft contract];
  • Receipt of proposals;
  • Evaluation of technical proposals: consideration of quality;
  • Public opening of financial proposals;
  • Evaluation of financial proposal;
  • Final evaluation of quality and cost; and
  • Negotiations and award of the contract to the selected firm.

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