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RATE CONTRACT

PRAKHAR AMULE (MT14IND016)

MTECH INDUSTRIAL ENGG.

DEPARTMENT OF MECHANICAL ENGG

VNIT,NAGPUR

PRAKHAR AMULE

PRAKHAR AMULE 2

RATE CONTRACT A rate contract is an agreement between the

Purchaser and Supplier to supply items at specified prices during the period covered by the contract.

The rate contract is in the nature of a standing offer from the supplier firm.

PRAKHAR AMULE 3

No quantities are mentioned in the contract.

The contractor is bound to execute any supply order which may be placed upon him during the period of the contract at the rates specified.

PRAKHAR AMULE 4

A Order can be placed upto the last date of the rate contract but should not be placed after expiry of the rate contract.

DGS&D can legally cancel the rate contract at any time during the period of the contract.

PRAKHAR AMULE 5

Types of contract Lump-sum contract

Item rate contract

Cost plus contract

 Cost plus percentage rate contract

 Cost plus fixed free contract

PRAKHAR AMULE 6

Lump-Sum Contract

Contract under which a principal (customer or owner) agrees to pay a contractor a specified amount for completing work without requiring a cost breakdown.

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Cost-Plus Contract

A cost-plus contract, also termed a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit.

PRAKHAR AMULE 8

Items for which rate contract to be Concluded

Items of standard types preferably having BIS specifications.

Items which are identified as common user items and are needed on recurring basis.

Items for which prices are likely to be stable and not subject to considerable market fluctuations.

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Items with an estimated annual drawals of Rs.25 lakhs or more.

Rate Contract may not be concluded for the scarce/critical/short supply items.

Items of low value and which are required in small quantities, rate contracts may not be convenient to operate.

PRAKHAR AMULE 10

AUTHORY TO BRING/DELETE AN ITEM ON RATECONTRACT

The decision to bring or delete an item on / from rate contract will be taken by the Standing Review Committee (SRC) under the Chairmanship of DG(S&D) except for those items which were earlier brought on rate contract or deleted from the rate contract

The Committee associates representatives from major indenting departments like Defence, Railways, Home Affairs, Health Telecommunications, State Governments and Trade organizations.

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The suggestions to bring new items on rate contract will be sent to /received by the Member-Secretary who will place them before the sub-committee for consideration.

If the item is considered worthy by the Sub-Committee, it will be allotted to the Purchase Directorate.

The Purchase Directorate will collect the data related to the suggested item with the criteria prescribed for bringing the item on rate contract.

PRAKHAR AMULE 12

Purchase Directorate would interact with Quality Assurance Wing to finalize the specification for the item suggested.

If there exists slight divergence standard, efforts should be made to secure modification and standardization, such itemss should be recommended to be purchased on the basis of rate contracts.

Sub-Committee may meet once in a month to take a view on the items already projected and submit their report to DG.

PRAKHAR AMULE 13

EVALUATION OF CURRENT RATE CONTRACT Based on the reports submitted by rate

contract holders, Purchase Directorates should analyse carefully whether performance is satisfactory or not, any difficulties faced by the firm.

In case, on such examination, it is observed that performance against Rate Contracts is not satisfactory and is primarily due to non-availability which are in short supply and are scarce/critical, the desirability of continuing the item on rate contract should be considered.

PRAKHAR AMULE 14

If the performance have been satisfactory and did not pose any problems rate contract for the item may continue.

Items in which there has been fluctuations in the price of raw-material can be taken out of the Rate contract.

Items already available on rate contract may be considered for deletion if annual drawal of the item in the past three consecutive years fall short of Rs.25 lakhs in each year.

PRAKHAR AMULE 15

PRICE

If it is decided to allow price variation relating to raw-material, it is required to indicate in the tender enquiry the base price on which the firm should offer their prices.

Where price variation is to be allowed, the approval of Department of Supply should be taken.

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EXPECTED LEVEL OF PERFORMANCE OF CURRENT RATE CONTRACT HOLDERS

The past performance of a firm will be one of the consideration in awarding fresh rate contract to the firm.

The cut off date is to be indicated in the tender enquiry allowing a minimum of 21 days prior to the tender opening date. This date should be either the 15 or the last date of the month

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PAYMENT TERMS

As per DGS&D the payment terms are 98% on proof of inspection and dispatch and balance 2% on receipt of items by consignee.

At the time of planning any change required in the standard terms of payment should be discussed for consideration and approval of the competent authority.

Any change in payment terms as decided with the approval of competent authority has to be clearly indicated in the enquiry.

PRAKHAR AMULE 18

RATE CONTRACT PERIOD Normally the period of rate contract is

limited to one year, but in special cases a shorter or longer period may be considered.

Termination period of rate contracts should be fixed in such a way as to ensure that budgetary levies would not affect the price and thereby frustrate the contracts.

PRAKHAR AMULE 19

CONSIDERATION OF LATE TENDERS IN RATE CONTRACT ENQUIRY

Late tenders received against rate contract enquiry may be considered subject to following :

an item where there is no common specification

where there is no competitive bidding

where the rate contracts are concluded on the basis of

discount given on the Net Dealer Prices

PRAKHAR AMULE 20

Rate contract with such late tendering firm would not be concluded until:

At least four months of the existing rate contract period has expired in the case of one year rate contracts.

A period of at least six months has expired in the case of two years rate contracts.

PRAKHAR AMULE 21

CONSIDERATION OF TENDERS FROM EXISTING RATE CONTRACT HOLDERS QUOTING PRICES

LOWER THAN THEIR EXISTING RATE CONTRACT RATES

If lower rates are quoted by the existing rate contract holders themselves for the fresh rate contract, they may be asked if they are prepared to reduce the rates against the existing rate contracts.

existing rate contract holders do not reduce the prices against the current rate contracts and quotations have been received at lower rates from new firms then finalization of fresh rate contracts can be done.

PRAKHAR AMULE 22

Past performance of Current RC holders

The proposal should clearly bring out the performance of previous rate contract holding firms with a load-chart and their level of achievement with respect to performance criteria indicated in the enquiry.

No new rate contract should be placed with firms having backlog which is likely to continue for major portion of the year.

If a contractor does not have the current RC, the performance criteria against the earlier two immediately preceding RC should be considered

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It is not necessary to go into the performance of the contracts earlier than three years.

The firm who hold the current and preceding two Rate Contracts should satisfy the performance criteria. Firms not satisfying the criteria mentioned above may not qualify for award of RC

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THANK YOU

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QuestionsQ 1: What is Rate Contract?

Q 2: What are the items for which Rate Contract is concluded?

Q 3: What are the Authority to bring or delete an item on rate contract?

Q 4: How to evaluate current rate Contract?

Q 5: What are the payments terms and rate contract periods?

Q 6: What are the consideration of tenders from existing rate contract holder quoting price lower than their existing rate contract?