Negotiation procedure

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

For negotiations, the tenderer is expected to give a revised offer in a sealed cover which will be opened by the tender committee members in the presence of the tenderer.

However in many cases, the rates are negotiated verbally with the contractor and the offer he submits in sealed cover is well known to the TC members even before they open his revised offer. This verbal discussion is done to avoid further rounds of negotiations which increase paper work. In some cases before finalising the TC, the contractor is called to see if he will reduce the rates further if negotiations are called (to decide if negotiations if at all conducted will be fruitful) to avoid paper work of having to prepare more TC minutes or to give explanation why negotiations have failed as per CVC's guidelines in the following letter.
http://cvc.nic.in/005crd12web.pdf

Is the above procedure correct.

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Actually, the tenderer who is being called for negotiation first holds discussion with the TC members to know its view point as contained in its deliberations which recommended negotiations and thereafter is required to give his negotiated bid in writing .This is formally put up to the the tender committee for consideration and framing their recommendations.

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

There is nothing wrong when we discuss about the point of view of each other (contractor & TC members) regarding the factors for increase in prices, but the TC is not expected to show any indication of the acceptability limits of the rates nor the contractor is expected to give his rates orally to the TC as then it will becomes a table of open bargaining which can also lead to an unholy nexus

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Negotiation is nothing but a bargaining between tender's & TC view point .More so now as negotiation is only with one tenderer only.Both discuss their views ,difficuties & urgencies of work ,how rates are arrived at & acceptability. Then only negotiation is sucessful

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

There is rationale behind CVS's instructions to conduct negotiations as an exception and not a rule because post tender correspondence is a sourse of corruption. In fact there are debate if post tender correspondence should be done at all.

The following circular of CVC may be gone through.
www.cvc.nic.in/005crd12web.pdf
The first line in para.1 states that there should not be any negotiations and the next gives an exception to the rule.

As stated earlier negotiations are a source of corruption. CVC's guidelines for negotiation only with L1 has eliminated the scenerio when the TC can call negotiations with all tenderers if L1 is not willing to pay up. By rule of negotiations only with L1, L1 will always remain L1. Even if L1 is not willing to pay up no other tenderer can get the tender.

But in negotiations bargaining the rates openly in unholy as again this can become a sourse of corruption. Only the factors for increase in prices and to what extant these affect the prices should be discussed and not the actual rates that is to be quoted by the tenderer in the negotiations.

If one round of negotiations do not give satisfactory results, we can go in for more rounds of negotiations or cancell the tender.

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It is true that negotiation should not be called but if called purpose should be told to tenderer & what result TC expect after negotiaion .Negotiaon mean sitting across the table.Purpose of negotiation is that TC still feel that tenderer can execute the work but some of his condn or rate are not acceptable & therefore need to be told to tenderer.

everbody should make effort to make negotiation sucessfull

if one round of negotiation doesnot give desire result.It is better to discharge rather than call second round from same person

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

My posting is regarding the procedure to be followed during negotiation.

Suppose the contractor has quoted a rate of 50% above NIT cost and the TC could justify an increase of 20%. The contractor is asked to reduce the rate and he says orally that he is willing to come down to 40% and gives some more factors which have increased the rates by 5%. THe TC now agrees for 25% and then he comes down to 30% which is acceptable to TC and the revised offer is obtained from him in writing. This is open bargaining.

By other way, only the factors for increase in the rates and how far they affect the rates are discussed by the TC members and the contractor. But the actual rates are not discussed and the contractor is asked to give his revised offer which is delebrated by the TC who give their recommondations accordingly for acceptance or one more round of negotiation or counter offer or cancellation or otherwise. This system will avoid any chances of corruption during negotiations.

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TC's method for deliberations and procedures is one issue which will remain subjective forever.

However I remember when I used to participate in TC at times we used to state the items which are quoted high in view of TC and as far as possible also try to establish an acceptable price band in our recommendation for negotiation.

This in my view removes any doubt that whether TC has achieved substantial price reduction after negotiation or not. But I do remember cases where negotiation did not result in expected price reduction and we still recommended with reasons which was accepted.

It is rather 'UNHOLY' not to bargain. There is no harm in open bargaining to achieve economy. Sometimes a pep talk or a tough stand that either you reduce rates or OTHERWISE ..... does work.

Don'nt you bargain for vegetable prices in market, is it 'UNHOLY'?

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Bargaining for vegetable is to save our own money and there is no chance of any corruption involved in such bargaining.

No doubt in negotiations we are bargaining for the benefit of the Railway, but when this becomes a sourse of corruption some decorum has to be observed during negotiations. Again I wish to bring out that the subject of my posting is `Procedure for negotiations' and not a debate if negotiations should be held or not

I am not speaking against holding of negotiations, but my intension is that the negotitions should be held in a manner and decorum that ot does not become a source of corruption. That is why we are calling offers in sealed envelope and opening the revised offer similar to opening of a tender.

Shared Documents Joined: May 16, 2005 No. of Replies: 4

during negotiation can contractor increase the rates of some items along with reduction in over all value of offer

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He can do any thing as you can not stop him in writing .

Question is whether you can accept it if he raise some of his rate in lieu of lowering rates of other items or otherwise? The contractor quotes on the basis of overall contract & do balance some rates from others

Therefore before negotiation starts ,a declaration is taken that in case of failure of negotiation ,old rates will prevail.

now it is upto you to be guided by overall value of contract or few individual item's rates .INstructions supporting both approaches exists

Shared Documents Joined: May 16, 2005 No. of Replies: 4

are there any instructions exists from board that in any case contractor can not increase the rate of indisual item inspite , the increased rate is with in resonable limit of railway even though he has redused over all value of offer to a justified limit

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Suppose the quantity of items in which rates were enhanced during the negotiations were increased during execution, this can raise some complications. It is possible that the overall value of the work as per the original rates are lesser than the value as per the negotiated rates and in that case negotiation has actually increased the value of contract instead of reducing it after execution of work.

Therefore never recommond for increase in rates of some item/s even though there is reduction in overall value of the offer as this can cause some complications later though the chances may be remote.

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During negotiations, the tendere is not permitted to increase rate of some individual item(s) over his original offered rates even if it may bring about an overall reduction in rates during negotiation by way of offering reduction of rates of some other item.
There is no seperate circular from Board on this specific aspect.As prescribed under Board's letter no 61/W11/CT/24 dtd 31st Oct.1965, the format of letter inviting a tenderer for negotiation prescribes a declaration to be obtained from the tenderer that in case negotiation fail,his original tender shall remain open for acceptance on original terms and conditions .The letter and spirit behind above instruction covers above situation.

Shared Documents Joined: May 02, 2005 No. of Replies: 1237

Sir, how can the tender commitee decide if the negotiation has failed or not without deciding the aspect if rates in some items can be enhanced (as they may be unworkable rates) and then suppose there is an overall reduction in the offer which comes into the acceptable range. I beg to differ that this will be covered in the spirit of the Board's letter prescribing a declaration from the tenderer to keep his original offer valid despite negotiation.

Yes, the option is with the railway to accept the original offer or the revised offer (may be enhancement in some items, reduction in some others with reasonability established on overall basis)as we have taken an undertaking from the tenderer while calling for negotiation. The tender commitee can decide this aspect as there are no circular from the Board banning enhancement of rates of few items in the tender whose original rates may be unworkable and the negotiated offer as a whole is reasonable.

Shri.Saxena sir has stated that instructions supporting both approaches exists and therefore the issue can be debated.