of 38
8/9/2019 Introduction Contracts Management
1/38
1
CONTRACTS AND CONSTITUTION-LAW
OF CONTRACTS
8/9/2019 Introduction Contracts Management
2/38
2
CONTRACT MANAGEMENT
CONTRACTS;
AND ITS MANAGEMENT
8/9/2019 Introduction Contracts Management
3/38
3
CONTRACTS
THE WORD CONTRACT IS DERIVED
FROM LATIN WORD CONTRACTUM
WHICH MEANS DRAWN TOGETHER;
EVERY PROMISE OR EVERY SET OF
PROMISES FORMIMG THE
CONSIDERATION FOR EACH OTHERSIS AN AGREEMENT;
8/9/2019 Introduction Contracts Management
4/38
4
CONTRACTS (CONTD)
CONTRACT IS AN AGREEMENT BETWEEN
TWO OR MORE PARTIES, WHICH IS
ENFORCEABLE BY LAW;
TO FORM AN AGREEMENT THERE MUST
BE A PROPOSAL OR OFFER BY ONE PARTY
AND ITS ACCEPTANCE BY ANOTHER;
AGREEMENT= OFFER + ACCEPTANCE;
8/9/2019 Introduction Contracts Management
5/38
8/9/2019 Introduction Contracts Management
6/38
6
ESSENTIALS OF A VALID CONTRACT
(CONTD)
OBJECT OF AGREEMENT MUST BE LAWFUL;
AGREEMENT MUST NOT HAVE BEEN
EXPRESSELY DECLARED VOID BY ANY LAW INFORCE IN THE INDIA;
AGREEMENT MUST BE CERTAIN AND NOTVAGUE OR INDEFINITE;
LEGAL FORMALITIES (STATUTORY
REQUIREMENTS OF MAKING IN WRITING, INPRESENCE OF WITNESSES OR REGISTERED ORSIGNED BY AUTHORIZED PERSONS) MUST BECOMPLIED WITH;
8/9/2019 Introduction Contracts Management
7/38
7
REQUIREMENTS OF A VALID
CONTRACT
MUST BE UNCONDITIONAL;
MUST BE MADE AT THE PROPER PLACE;
MUST CONFORM TO THE TERMS OF OBLIGATIONS;
MUST BE MADE AT THE PROPER TIME;
MUST BE MADE IN PROPER FORM;
PARTIES MUST BE ABLE AND WILLING TOPERFORM ITS OBLIGATION;
THERE MUST BE REASONABLE OPPORTUNITY FOR
INSPECTION; MUST BE MADE TO THE PROPER PERSON;
MUST BE FOR FULL AMOUNT;
8/9/2019 Introduction Contracts Management
8/38
8
OVERVIEW OF CONTRACT LAW
LAW OF CONTRACTS MAY BE DESCRIBED AS THEENDEAVOUR OF PUBLIC AUTHORITIES TOESTABLISH A POSITIVE SANCTION FOR THE
EXPECTATION OF GOOD FAITH WHICH HASGROWN UP IN THE MUTUAL DEALINGS OF MEN;
IN CIVIL LAW OR THE LAW OF THE STATE ORTHE LAND, LAW SIGNIFIES A COMMAND FROM ASUPERIOR AUTHORITY PRESCRIBING A COURSEOF ACTION, DISOBEDIENCE WHICH WOULD
ENTITLE PUNISHMENT; THE OBJECT OF THE LAW OF CONTRACTS IS TO
REGULATE THE DEALINGS BETWEENINDIVIDUALS/ PARTIES;
8/9/2019 Introduction Contracts Management
9/38
9
OVER VIEW OF CONTRACT LAW
(CONTD)
LAW OF CONTRACTS IS NOT THE
WHOLE LAW OF AGREEMENTS NOR
IS IT THE WHOLE LAW OF
OBLIGATIONS; IT IS THE LAW OF
THOSE AGREEMENTS, WHICH
CREATE OBLIGATION AND THOSEOBLIGATIONS WHICH HAVE THEIR
SOURCE IN AGREEMENT;
8/9/2019 Introduction Contracts Management
10/38
10
OVER VIEW OF CONTRACT LAW
(CONTD)
BROAD CLASSIFICATION OF LAW- PUBLICAND PRIVATE;
PUBLIC LAW DEALS WITH THEADMINISTRATIVE POWERS OF STATE ANDALSO CERTAIN RELATIONS BETWEEN THESTATE AND THE INDIVIDUAL;
PRIVATE LAW DEALS WITH THE RIGHTSOF SUBJECTS INTERSE;
INDIAN CONTRACT ACT 1872;
8/9/2019 Introduction Contracts Management
11/38
11
GOVERNMENT AND PRIVATE
CONTRACTS
MOST OF THE MAJOR INFRASTRUCTUREPROJECTS IN OUR COUNTRY FOR THE
PRESENT ARE BEING EXECUTED BYGOVERNMENT AND HENCE MOST OF THECONTRACTS ARE PUBLIC CONTRACTSGOVERNED BY PUBLIC LAW;
MAJOR PART OF THE GOVERNMENTEXPENDITURE IS THROUGH THEPROCUREMENT OF GOODS, SERVICES ANDCONSTRUCTION ACTIVITY;
8/9/2019 Introduction Contracts Management
12/38
12
PUBLIC PROCUREMENT
PUBLIC PROCUREMENT IS
ACQUISITION OF GOODS, SERVICES
AND PUBLIC WORKS IN A TIMELY
MANNER THAT RESULTS IN BEST
VALUE TO THE GOVERNMENT AND
PEOPLE
8/9/2019 Introduction Contracts Management
13/38
13
CONSTITUTION AND CONTRACTS
ARTICLES 298, 299, 14 AND 19
8/9/2019 Introduction Contracts Management
14/38
14
ARTICLE 298, POWER TO CARRY ON
TRADE ETC.
Under this article, Executive power of the Unionand States extends to carrying on of any trade,
disposal of property and making of contracts forthe same I.e. Public Procurement;
For such PP, the Government does not require anyadditional powers, it can have by entering tocontracts;
The power to enter into contracts for PP istherefore expressly vested in the Governmentunder this Article.
8/9/2019 Introduction Contracts Management
15/38
8/9/2019 Introduction Contracts Management
16/38
16
ARTICLE 299: CONSTITUTIONAL
REQUIREMENTS OF A GOVERNMENTCONTRACT (CONTD)
NEITHER PRESIDENT NOR GOVERNOR SHALL BEPERSONALLY LIABLE IN RESPECT OF ANY CONTRACTOR ASSURANCE MADE OR EXECUTED FOR PURPOSEOF CONSTITUTION OR ANY ENACTMENT RELATINGTO GOI IN FORCE NOR SHALL ANY PERSON MAKINGOR EXECUTING ANY SUCH CONTRACT ORASSURANCE ON BEHALF OF ANY OF THEM BEPERSONALLY LIABLE IN RESPECT THEREOF;
IN ORDER THAT PUBLIC FUNDS MAY NOT BEDEPLETED BY CLANDESTINE CONTRACTS MADE BY
ANY AND EVERY PUBLIC SERVANT THERE SHOULDBE DEFINITE PROCEDURE ACCORDING TO WHICHCONTRACTS MUST BE MADE.
8/9/2019 Introduction Contracts Management
17/38
17
EQUALITY OF OPPORTUNITY IN THE
MATTER OF GOVERNMENT CONTRACTS
ARTICLE 19(1)(G) CONFERS ON ALL CITIZENS AFUNDAMENTAL RIGHT TO PRACTICE ANYPROFESSION (INCLUDES TAKING AND EXECUTINGGOVT CONTRACTS) CARRY ON ANY OCCUPATION,TRADE OR BUSINESS;
FAIRPLAY IN ACTION MUST BE THE BASIS OF THEPOLICY OF THE STATE- ART 14 APPLIES ALSOMATTERS OF GOVERNMENT POLICY AND IF THEPOLICY OR ANY ACTION OF GOVERNMENT EVEN INCONTRACTUAL MATTERS FAILS TO SATISFY THE
TEST OF REASONABLENESS IT WOULD BEUNCONSTITUTIONAL; BASIC REQUIREMENTS OF ART14 IS FAIRNESS IN ACTION BY STATE;
8/9/2019 Introduction Contracts Management
18/38
18
SUMMARY OF GENERAL PRINCIPLES
EMBODIED IN CONSTITUTION
PROFESSION OF DOING GOVT CONTRACTS IS AFUNDAMENTAL RIGHT UNDER CONSTITUTION;
PERSONS PRACTICING GOVT CONTRACTSCANNOT BE TREATED ARBITRARILY ORCAPRICIOUSLY;
GOVT CANNOT LIGHTLY BRUSH ASIDE ACONTRACTOR WHOSE TENDER IS THE LOWEST;REASONS FOR REJECTIONS SHOULD BE
REASONABLE, COGENT AND ACCEPTABLEWITHOUT ARBITRARINESS OR DISCRIMINATION;
8/9/2019 Introduction Contracts Management
19/38
19
PRINCIPLES OF PUBLIC PROCUREMENT
PUBLIC PROCUREMENT SYSTEM CAN
BE SAID TO BE WELL FUNCTIONING
IF IT ACHIEVES THE OBJECTIVES OF
TRANSPARENCY, COMPETITION,
ECONOMY AND EFFICIENCY
FAIRNESS AND ACCOUNTABILITY;
8/9/2019 Introduction Contracts Management
20/38
20
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
PP INCLUDES PROCUREMENT BY GOVERNMENTAND BY STATUTORY BOARDS AND NON-MINISTERIAL BODIES;
PP MUST FOLLOW PRESCRIBED COMPETITIVEPROCEDURES AND THE RULES GIVE A MAJORWEIGHT TO FAIRNESS AND EQUITY;
PP IS ALSO SUBJECT TO OVERSIGHT BYLEGISLATURE AND AUDIT (IN ADDITION TOINTERNAL ACCOUNTABILITY MECHANISMS);
MISTAKES IN PP CAN HAVE VAST POLITICALREPERCUSSIONS OWING TO THE FOCUS THATTHE MEDIA AND THE PUBLIC PLACE ON THESUBJECT;
8/9/2019 Introduction Contracts Management
21/38
21
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
A KEY PRINCIPLE OF GOOD GOVERNANCEPRESUPPOSES CONSISTENT PRINCIPLES
AND REGULATIONS FOR PROCUREMENT; INFORMATION AND DOCUMENTATION ON
THESE RULES SHOULD BE WIDELYAVAILABLE AND THE RULES SHOULD BEENFORCED FAIRLY AND CONSISTENTLY;
THERE SHOULD BE A WELL UNDERSTOODSYSTEM FOR REGISTERING ANDRESOLVING COMPLAINTS SPEEDILY;
8/9/2019 Introduction Contracts Management
22/38
22
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
THERE SHOULD BE A WELLFUNCTIONING SYSTEM FOR DISPUTE
RESOLUTION AND CHECKS ON THEARBITRARY BEHAVIOUR OFPROCUREMENT ENTITIES AND ONTHE INCONSISTENT EXERCISE OF
DISCRETIONARY POWERS INCONTRACT AWARD, ENFORCEMENTAND MANAGEMENT;
8/9/2019 Introduction Contracts Management
23/38
23
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
ACCOUNTABILITY AND TRANSPARENCYARE VITAL TO PROCUREMENTMANAGEMENT;
LACK OF OVERSIGHT MECHANISM TOENSURE ACCOUNTABILITY UNDERMINESTHE CAPACITY OF GOVERNMENTS TOSECURE THE CONFIDENCE OFCONTRACTORS AND SUPPLIERS IN THEPUBLIC PROCUREMENT PROCESS ANDTHE TRUST OF CITIZENS IN THE PROPERUSE OF PUBLIC FUNDS;
8/9/2019 Introduction Contracts Management
24/38
24
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
TRUST AND CONFIDENCE CAN BE ESPECIALLYERODED BY SECRECY IN PROCUREMENTTRANSACTIONS AT THE LOCAL LEVELS
(ALTHOUGH A DEGREE OF CONFIDENTIALITY ISESSENTIAL TO PROTECT BUSINESS PRIVACY ANDTHE LEGITIMATE INTERESTS OF INDIVIDUALBIDDERS)
TRANSPARENCY REDUCES UNCERTAINTY ANDINHIBITS CORRUPTION IN PROCUREMENT BY
ASSURING EQUALITY OF ACCESS TO INFORMATIONFOR ALL BIDDERS BEFORE, DURING AND AFTERTHE BIDDING PROCESS;
THE SYSTEM SHOULD ALSO PROTECT THEINTERESTS OF THE CITIZENS;
8/9/2019 Introduction Contracts Management
25/38
25
PRINCIPLES OF PUBLIC PROCUREMENT
(CONTD)
SOUND PP POLICIES AND PRACTICES ARE
THUS AMONG THE ESSENTIAL ELEMENTS
OF GOOD GOVERNANCE; GOOD PRACTICES REDUCE COSTS AND
PRODUCE TIMELY RESULTS;
POOR PRACTICES LEAD TO WASTE AND
DELAYS AND ARE OFTEN THE CAUSE FORALLEGATIONS OF CORRUPTION AND
GOVERNMENT INEFFCIENCY;
8/9/2019 Introduction Contracts Management
26/38
26
KET ELEMENTS OF PUBLIC
PROCUREMENT
CLEAR, COMPREHENSIVE ANDTRANSPARENT LEGAL FRAMEWORK;
CLEAR CUT FUNCTIONALRESPONSIBILITIES ANDACCOUNTABILITIES FOR PROCUREMENTFUNCTION;
EFFICIENT INSTITUTIONAL FRAMEWORK;
ROBUST MECHANISM FOR ENFORCEMENTOF POLICY, RULES AND REGULATIONS;
WELL TRAINED PROCUREMENT STAFF
8/9/2019 Introduction Contracts Management
27/38
27
ESSENTIALS OF GOOD PUBLIC
PROCUREMENT
ECONOMY: BY OPEN COMPETITION;
EFFICIENCY: BY EFFECTIVE
PROCESSES;
FAIRNESS: BY NON-DISCRIMINATION;
TRANSPARENCY:
BY OPENNESS; ACCOUNTABILITY: BY ADHERENCE
TO PROCUREMENT LAW OR ACT;
8/9/2019 Introduction Contracts Management
28/38
28
EQUALITY OF OPPORTUNITY IN
PUBLIC PROCUREMENT
MERE COMPLIANCE TO THE INDIAN CONTRACT ACTIS NOT ENOUGH IN CASE OF GOVERNMENTCONTRACTS, BUT THEY MUST ALSO SATISFYARTICLE 14 AND 19
ARTICLE 14: EQUALITY BEFORE LAW- THE STATESHALL NOT DENY TO ANY PERSON EQUALITYBEFORE THE LAW OR THE EQUAL PROTECTION OFTHE LAWS WITHIN THE TERRITORY OF INDIA;
HENCE TO SATISFY ARTICLES 14 &19 INGOVERNMENT CONTRACTS THE PROCESS OFPROCUREMENT SHOULD BE FAIR &REASONABLE,FAIRNESS IN ACTION BEING THE BASICREQUIREMENT;
8/9/2019 Introduction Contracts Management
29/38
29
EQUALITY OF OPPORTUNITY IN
PUBLIC PROCUREMENT (CONTD)
TAKING GOVT CONTRACTS IS A PROFESSIONALOCCUPATION TO WHICH EVERY ONE HAS AFUNDAMENTAL RIGHT;
PP HAS TO BE OPEN FOR ALL WHO ARE ELIGIBLE; SC HAS HELD TODAY THE GOVERNMENT IN A
WELFARE STATE IS THE REGULATOR ANDDISPENSOR OF SPECIAL SERVICES ANDPROVIDER OF A LARGE NUMBER OFBENEFITS,JOBS,CONTRACTS,LICENSES,QUOTAS,
MINERAL RIGHTS ETC. THE GOVT POURS FORTHWEALTH, MONEY,BENEFITS, SERVICES,CONTRACTS, QUOTAS AND LICENSES..
8/9/2019 Introduction Contracts Management
30/38
30
PROCUREMENT LAW
TO REGULATE PUBLIC PROCUREMENT OFGOODS, CONSTRUCTION AND SERVICES SO AS TOPROMOTE THE OBJECTIVES OF:
MAXIMIZING ECONOMY AND EFFICIENCY INPROCUREMENT;
FOSTERING AND ENCOURAGING PARTICIPATIONIN PROCUREMENT PROCEEDINGS BY SUPPLIERSAND CONTRACTORS, ESPECIALLY WHERE
APPROPRIATE, PARTICIPATION BY SUPPLIERS ANDCONTRACTORS REGARDLESS OF NATIONALITYAND THEREBY PROMOTING INTERNATIONALTRADE;
8/9/2019 Introduction Contracts Management
31/38
31
PROCUREMENT LAW (CONTD)
PROMOTING COMPETITION AMONG SUPPLIERSAND CONTRACTORS FOR THE SUPPLY OF THEGOODS,CONSTRUCTION OR SERVICES TO BE
PROCURED; PROVIDING FOR THE FAIR AND EQUITABLE
TREATMENT OF ALL SUPPLIERS ANDCONTRACTORS;
PROMOTING THE INTEGRITY OF, ANDFAIRNESS AND PUBLIC CONFIDENCE IN THE
PROCUREMENT PROCESS; AND ACHIEVING TRANSPARENCY IN THE
PROCEDURES RELATING TO PROCUREMENT;
8/9/2019 Introduction Contracts Management
32/38
32
VOLUME OF PROCUREMENT
VOLUME OF PROCUREMENT IS VERYHIGH; SO ARE THE STAKES;
GOK ANNUAL PROCUREMENT WASASSESSED AS ABOUT RS.13,000/- CRORESIN 2001;
IRREGULARITIES IN PROCUREMENT,MALPRACTICES/ CORRUPTIVE PRACTICESIN PROCUREMENT ARE A COMMON AUDITOBJECTION; VIGILANCE CASES; SOMEEVEN LEAD TO FALL OF GOVERNMENT;
8/9/2019 Introduction Contracts Management
33/38
33
THE UNCITRAL MODEL
PROCUREMENT LAW
THE UNCITRAL MODEL LAW ONPROCUREMENT OF GOODS, CONSTRUCTIONAND SERVICES WAS ADOPTED BY THEUNITED NATIONS COMMISSION ONINTERNATIONAL TRADE LAW (UNCITRAL) ATITS TWENTY-SEVENTH SESSION; THECOMMISSION HAS ALSO ISSUED A GUIDE TOENACTMENT OF THE UNCITRAL MODEL LAWON PROCUREMENT OF GOODS.CONSTRUCTION AND SERVICES (A/CN.9/403)
8/9/2019 Introduction Contracts Management
34/38
34
PROCUREMENT LAW (CONTD)
MANY COUNTRIES HAVE A PROCUREMENT LAW;
SOME COUNTRIES INCLUDING INDIA HAVECODES AND MANUALS;
HOWEVER THESE ARE ISSUED BYADMINISTATIVE MINISTRIES /DEPARTMENTSAND COULD BE CHANGED/REVISED RATHEREASILY; MAY LEAAD TO INCONSISTENCIES;
THE REVISION/MODIFICATION OF THE LAW/ACTREQUIRES THE APPROVAL OFPARLIAMENT/ASSEMBLY WHICH IS RATHERTOUGH/DIFFICULT; IT WILL ENSURECONSISTENCY;
8/9/2019 Introduction Contracts Management
35/38
35
PROCUREMENT LAW (CONTD)
IN INDIA PROCUREMENT PROCEDURES ARECONTAINED IN THE GENERAL FINANCIAL RULES(GFR) WHICH HAS BEEN REVISED IN 2005;
TAMIL NADU IS THE FIRST STATE IN INDIAWHICH HAS ENACTED A PROCUREMENT LAW; ITIS NAMED THE TAMIL NADU TRANSPARENCY INTENDERS ACT, 1998 AND RULES 2000;
KARNATAKA IS THE SECOND STATE IN INDIAWHICH HAS ENACTED A PROCUREMENT LAW; IT
IS NAMED THE KARNATAKA TRANSPARENCY INPUBLIC PROCURMEENT ACT 1999 AND RULES2000; KARNATKA HAS ALSO MANDATEDSTANDARD TENDER DOCUMENTS;
8/9/2019 Introduction Contracts Management
36/38
36
PROCUREMENT LAW (CONTD)
OTHER STATES SUCH AS ANDHRA
PRADESH, ORISSA, PUNJAB ARE
PROPOSING TO ENACT SIMILARPROCUREMENT LAWS;
8/9/2019 Introduction Contracts Management
37/38
37
OTHER LEGISLATIONS THAT AFFECT
CONTRACTS
THE INDIAN CONTRACT ACT, 1872;
WORKMEN COMPENSATION ACT,1923;
THE INDUSTRIAL DISPUTES ACT,1947;
EPF AND MISCELLANEOUS PROVISIONS ACT,1932;
THE INDIAN PARTNERSHIP ACT, 1923;
THE SALE OF GOODS ACT,1930;
PAYMENT OF WAGES ACT, 1936;
MINIMUM WAGES ACT,1936; EMPLOYEESS STATE INSURANCE ACT, 1948;
FACTORIES ACT, 1948;
8/9/2019 Introduction Contracts Management
38/38
38
OTHER LEGISLATIONS THAT AFFECT
CONTRACTS (CONTD)
KARNATAKA SALES ACT, 1957;
CONTRACT LABOUR (REGULATION ANDABOLITION) ACT, 1976;
MATERNITY BENEEFIT ACT, 1961; CHILD LABOUR (PROHIBITION AND REGULATION
ACT, 1986;
PAYMENT OF GRATUITY ACT,1972;
THE PUBLIC LIABILITY INSURANCE ACT, 1991;
ENVIRONMENTAL (PROTECTION) ACT, 1986; THE ARBITRATION AND CONCILLIATION ACT,
1996; ETC.