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Presentation for Meeting of TEMA and BSNL. COMPLIMENTS TO BSNL. TEMA compliments BSNL for their continued support and encouragement to indigenous telecom equipment manufacturing sector.
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COMPLIMENTS TO BSNL • TEMA compliments BSNL for their continued support and encouragement to indigenous telecom equipment manufacturing sector. • TEMA also compliments BSNL on various initiatives taken for procurement of 3G, CDMA, ADSL, Broadband equipments, which will go in long way strengthening the market position of BSNL as a leader. • There have been healthy exchange of information between TEMA and BSNL and we thank for the same. • During last BSNL Integrity Pact meeting, CMD BSNL desired that there is need to revisit procurement policy and procedures keeping in view the present pace, where most of private operators get equipments fast as compared to Public operator. • Here is an attempt to address the issue.
Common concerns • There is general concern that private operators are able to procure equipments of high class quality almost instantly almost within no time • By and large there are delays in getting equipments by BSNL even after tender has been finalized. • BSNL generally faces issues during after sale service. Need to ensure prompt, efficient, competitive, and appropriate after sale service and maintenance support. • It is seen that whereas there are hardly any complaints, litigations relating to procurement of private telecom operators, the PSU operators are facing several such circumstances, which results in abnormal delays. • Need to ensure that payments are released promptly to the vendors and there are no • pending issues relating to release of Bank Guarantees, C Forms. • 6. Need to fix DP from the date of PO instead of APO. • 7. Uniform testing, certification procedure for imported & indigenous equipments.
PRELIMINARY • The procurement manual was prepared and released in a joint Press Conference during June, 2006 by the then MOC&IT and TEMA • Since then several amendments have been made rightly. Somehow consultations with TERMA could not be held. TEMA requests that the process of consultation be followed in letter and spirit. • Also invariably copies of amendments have not been sent to TEMA for wider circulation among members. It is reiterated that the practice of sending copies to TEMA be continued. • As per approved procedure copies of all NIT are to be informed to TEMA. We are thankful that most of the CGMs sent information to TEMA which in turn is circulated to all members. TEMA requests that there is need to re confirm the instructions, because on several occasions the information from CO and some of CGMs have been missed out. • There is approved circular that there should be at least one meeting every three months between all CGMs individually and TEMA. This may please be maintained and once again brought to the notice of all concerned. • HOD conferences organized by BSNL are excellent opportunity for interaction between telecom vendors and officers concerned with procurement. IT is requested that TEMA may be invited for this.
Updating /upgrading BSNL Procurement policy document. • Vendor Registration: Certain papers, documents like Bidders Articles of Association, ISO, Power of Attorney, compliances to DGTD, Industrial Licenses, FERA, RBI approvals, Details of Directors, Undertaking for nonworking of any employee with BSNL etc. are routinely asked for in all the tenders. It is suggested that one time registration system may be introduced, wherein manufacturer would be given an approval code. This would be quoted in all tenders. • Once a product is TSEC/TEC approved and available indigenously, then there is hardly any need to import the product. Accordingly BSNL is requested to procure indigenously the products for which TSEC/TEC approval is available. • On several occasions the field office writes CVO for clarification/confirmation with respect to certain clauses and standard replies generally is the clause is self explanatory. The fact that it has been referred to CO indicates some problem. TEMA requests that in such cases the matter can be discussed internally within BSNL in consultation with TEMA/Legal department and confirmation reply issued.
Procurement Policy …….cont. • 4. Bank Guarantee: There are instance where few BG are not being released since last 7-8 years. Hence it is requested that After expiry of BG & warrantee if no complain is received/recorded against vendor for the tendered item , BG should be released within 15 days after expiry without any further extension • 5. Of late BSNL is demanding IPR rights on software, which are proprietary with concerned software vendors. These are difficult to be passed on. TEMA requests BSNL to appreciate that no vendor can do R&D on new applications on the Software being used by BSNL because of IPR. • 6. Since taxes and duties are to be paid in full amount to Govt. by vendor, LD should be deducted/ applicable only on the Net amount after deduction of duties and taxes. The LD should be at the maximum of 12% of the Net amount after deduction of duties and taxes and only on the delayed portion of the equipment.
Procurement policy…cont. • 7. Policy and Clarity on Extension of DP: • BSNL should grant DP extension without LD where Vendor’s delivery period had impact of BSNL’s non deliverables also. For such DP extensions, BSNL not ask additional BG for DP extension. • BSNL may ask additional BG of 5% value of delayed equipment value if BSNL grants DP extension without LD and BSNL pending deliverables were not pending during Vendor delivery period. • Ultimate Consignee: The clause 6.1 of Section III of the procurement manual provides that equipments shall be delivered to ultimate consignee as per PO. Most of the circles are asking for supplies at Stores or one consignee per SSA.
Issues relating to Delivery Period….cont. • - The monthly schedules in PO are for the purpose of facilitation. The Contract is to be completed within DP and as such any LD should be applicable only after expiry of DP. Some field offices start charging LD based on monthly schedules also. This needs to be addressed by CO, BSNL. • - Delivery shall be linked to PO and not APO • - Delivery Period in BSNL may please be increased by at least 35% to 40 % as the present ones are largely unrealistic and supplies for completion in time. • As per the standard convention, the date of clearance of goods by QA is supposed to be delivery date. Thereafter 21 days are allowed for dispatch. This needs to be clarified again by CO, BSNL for the purposes of LD and applicable prices. • As per clause in APO /PO -Vendor have to supply evenly distributed quantity ,Ex - If DP is 4 Months then vendor is required to supply 25% of the qty. in each month. Clause is not clear and doesn’t mean that vendor has to supply evenly distributed qty. to all circles but some circles are deducting the amt. Clause should be clear vendor has to supply 25 % of the qty to any circle.
Procurement policy…..cont. • 8. Issues related to payment. • Several cases of pending payments have been informed to TEMA. There is need for an appropriate mechanism to get the issues sorted out. • There is need for defining a single officer in field to work as single window/person in BSNL who could be approached for payments. • Time period from BSNL’s end to be defined in the Purchase Order for the release of the payment after submission of the Bills by the vendor, if BSNL is not able to pay in the defined time period then penalty clause should be introduced. • For supplies to Andaman, BSNL reimburses the actual freight, as per prescribed rates for supplies to Government of Andaman. However, there is dual freight policy for supplies to Andaman ie. Separate rates for supplies to Andaman Government and separate for others. Hence the Government rates are not available on Telecom equipment supplies which are charged commercial tariff. BSNL is requested to approve reimbursement of actual rates as charged and paid by vendors. • Prices for supplies to BSNL is fixed at the time of award of tenders till the delivery period. Supplies are effected many times after 6-9 months. By that time, prices of inputs and hence equipments escalate. BSNL is requested to consider escalation of prices, specially with regard to foreign currency variations. • Balance payments against supplies are subject to AMC which is not part of PO. As the experience shows, balance payments are generally delayed. BSNL is requested to expedite the same. • The last 10 % payment to be paid after the 365 days of the commissioning of the project shall be paid with the second last payment as BSNL keeps a Bank Guarantee till the project is fully over or else the BG should be released once the system is being put in commercial use.
Procurement Policy….cont • 9. Arbitration • i) BSNL maintains list of Ex Departmental officers as Independent Arbitrators. The list may also include some retired judges, judicial officers. It has also been experience that the Serving Departmental Officers at times are not able to devote time as also have difficult situation to look at the case beyond departmental thinking, hence it is suggested that in case of arbitration the arbitrator be a 3rd party within the Government and not just the buyer. Also in most of the cases the dispute is more legal than technical, hence BSNL is requested to appoint Ex Judicial Officers. • ii) New LD clause forming part of all BSNL new tenders does not give any right of appeal to vendors against BSNL Circles' decision of imposing LD. The clause states that LD imposed is not under purview of any arbitration or Court. Such a provision is undue harsh to the vendors and logically and also legally there should be an appropriate redressal forum for a genuine, reasonable instances. Even decisions of highest Court in the country are subject to appeal. • TEMA requests to delete the words starting with "further the same…….." and ending with "…..not be referable to arbitration".
Procurement policy…cont. • 10. BCPC: BCPC is an internal document of the BSNL and it is impracticable for bidder to obtain the same from various sources. It also means several to and fro visits by manufacturers at various levels. Hence availability of BCPC should not be necessary for release of payments to the vendor. • 11. Form C and Road Permits: • Availability of Form C is the responsibility of the buyer and not the vendor. Form C be made available quarterly • In case of Form C not realized within a month, differential tax with interest of any shall be payable by the buyer • Road permit be made available along with PO and the effective date be reckoned accordingly • Delay in supplies due to non availability of road permit shall not be counted towards the LD calculations • Form C not released due to delay in filing of returns by the buyer, should not prevent the vendor to charge full taxes
Procurement policy…cont. 12. TSEC requirements: • Vendors are required to supply spares for maintenance of equipments whose production is discontinued due to suppression of GR by new GR. Till now orders were received from circles and BSNL QA use to inspect material and issue IC without insistence of renewal of TSEC. Of late TSEC is being asked for. The issue is GR having been superseded; there are no further expected orders. Also no testing is involved, yet full TSEC fees are asked for. The volumes of spares are also too small. Hence TEMA suggests that TSEC in such cases be not asked for. If at all some body prefers to have TSEC for some reason, then the fees required for renewal of the TESC may be disbanded. • In case of new and evolving technology, Manufacturing in India can only be initiated depending on the volumes and adaptability of the technology within BSNL network. • In continuation to above in case of new and evolving technology the condition for getting the equipment type approved or application for type approvals (Form B) should not be asked for.
Procurement policy….cont. • 13. Warranty: • Recent tenders have been asking for warranty of 24/36 months. As a normal practice this should be 12months for HW and 3 months for SW • Any modifications, attempted modifications or additions to such Software by any party other than Vendor shall void the obligations of vendor under this warranty. • Warranty shall be null and void in case of: (i) Misuse, accident, neglect, or environmental or Site conditions not conforming to the specifications for the Goods • 14. Fall Clause – • Vendor while participating in the tender, give most aggressive and best prices to BSNL and is awarded L1 position. Subsequent to this the requirement of Fall Clause is unreasonable and hence should be deleted.
.Procurement issues related to SSI units and also those registered with NSIC • SSI units ( NSIC registered ) are not getting any price preference or quantity reservation in the BSNL procurements. There are some provisions in SME Act in this behalf. BSNL is requested to consider the same and spell out the details, specially with regard to followings: • Clear regulations for incentives for purchase of items from • SSI/NSIC regd units.? • Details of price preference or any percentages fixed for exclusive purchase • from such units ? • Policy for purchase of items like Buttinski Handsets (Telephone Line Testers), • IPMs, Telecom Accessories etc • This clarification is required since these items are in the list of items being manufactured • by Telecom factories • Details of powers delegated to GM Circles or SSAs is for purchasing these • items for their respective departments ?
Proposed Recommendations by TEMA --1 • Turn Key projects • Manual for Turn Key Projects: While procurement manual relating to equipment was finalized during 2006, the processes to finalize the manual for turn key or project services. Some of the issues are being listed out here, yet it is suggested that a separate group may be formed to look after this aspect. • Separate Contracts/ APO for Supply and Services: For existing technologies like GSM (2G), BSNL should sign/ issue separate contracts/ APO for Supply through Local manufacturing, Local Trading sale, Imported items and Services
Turn Key Projects……cont. • High Sea Sales: • Actual documentation for the HSS needs to be established amongst the buyer-seller before the shipment is cleared. • Handing over of sites: • Delay in site handover not only impacts the project completion, it increases the project roll out cost of Vendor, puts additional pressure on warranty,etc • Mark-up ; • Current tenders call for vendors to provide the max mark-up, in case of third party Vendors. This is an internal confidential information to the vendor/ bidder, who is taking the responsibility of turnkey job. Hence this information on mark-up should not be asked for by BSNL. • Acceptance Testing: • AT schedule should be signed off within 1 month of issuance of PO, Any delay in the same should lead to provision for relaxation in the implementation schedule.
Proposed Recommendations by TEMA--2 • Liquidated Damages: • Sign off be one amongst the vendor and the buyer at the time of kick off for the project, so the calculation of LD at the end is more objective based. In case buyer deliverables are not met, the vendor should not be subjected to LD. • Fresh deadlines and timelines are drawn out in case of PO amendments are made. • All LD calculations be based on deliverables at the ON AIR stage/ start of commercial utilization, which ever is earlier and after taking due consideration of site handover date by BSNL. • LD to be levied at the end of the contract period and not on monthly basis. This needs a strict adherence by BSNL units. • LD in any case should be only on the delayed portion of the equipment/ services
LD…….cont. • In case of turnkey contracts, and in case of situation of “materially hampering” of network on account of certain key elements, LD should be applicable on the delayed package only. • BSNL should delete the words in to the liquidated damages clauses “without prejudice to other remedies available to BSNL”. Which we believe that only refers to circumstances where delivery/acceptance is delayed beyond the maximum liquidated damages period and BSNL exercises its right of termination. • However, if the project is delayed beyond delivery period for want of BSNL deliverables, BSNL shall make extra charges for project management on prorated basis to turnkey vendor. • Open ended clause in respect of liabilities in all tenders towards suppliers is a unmanageable trend and needs to be discouraged. TEMA requests that the liability be quantified. • TEMA requests to have a clause explicitly stating that Consequential damages, loss of revenue etc. are not part of the Contract. Also a suggestion is to cap the limitation of liability to 25 to 50% of the contract value
Proposed Recommendations by TEMA--3 • AMC: • Penalties under AMC agreement should be capped to 12%. • AMC Clause should include “ The Vendor shall enter into AMC, at the option of purchaser, for a period of 3/4 years from the date of completion of the project and on the expiry of the warranty”. • Delay in project completion: • If the delay is on account of the buyer, and it leads to increase in input cost for the vendor, the vendor should be given due benefit. • In case of turnkey projects say of GSM, once the site is put on air the clock for AMC/Warranty should start, as the buyer starts earning the revenues • Entry Tax/Octroi charges: These charges be payable in advance and be regulated on the similar lines the Custom Duty is regulated..
Proposed Recommendations by TEMA--4 • Payment Terms: • In case of turnkey projects, the site on air/ commercial utilization whichever is earlier be the deemed AT stage and all payments be triggered from that stage. Thus all delivery and AT related payments be made at this stage. • In case of supply based projects viz for the cables, the 80% payment on delivery be made in true spirit of xxxx defined days, based on the standard check list and documents attached with the supplies • Validation process to be speedy and linked payment to validation to be minimal and no linking to AT/ other milestones. • Payments in the turn key projects to be milestone based, eg. Commissioning of X No. of Sites. • Separate Contracts/ APO for Supply and Services: For existing technologies like GSM (2G) BSNL should sign/ issue separate contracts/ APO for Supply and Services.
Payment terms….cont. • Payment Terms: • Equipment • 80% of equipment price on site wise delivery. • 10% on installation and commissioning, on air or commercial utilization of equipment site wise whichever is earlier • 5% after 6 months of installation and commissioning of site equipment • 5% after validation. • BSNL may also release 5% payment as listed above (c) & (d), to vendor against BG of equivalent amount valid for 9 months.
Payment terms ….cont. • Services Payment • 90% of services price on installation and commissioning of equipment site wise. • 10% of services price after 6 months of commissioning of equipment site wise. This payment may be released along with payment at (a) provided vendor submits BG for this 10% amount valid till 9 months. • Payment process – Within 1 week of submission of invoices by vendor, BSNL shall reply back to vendor for issues related to clearance of the payment. Subsequently Vendor shall resolve all issues raised by BSNL within next 1 week. Post this BSNL shall release payment within 30 days. • BSNL shall pay interest @ 12% per annum for the delay in payment released beyond 30 days. on the outstanding amount. • Complete Custom duty should not be deducted from the first milestone payment but proportionately from all milestone payments.
Proposed Recommendations by TEMA--5 • Software upgrade clause: The context of the clause should be as below: • All corrective software whether in the form of updates and /or patches required for the maintenance of the system supplied will be implemented by the Vendor without any additional cost for 7 years, provided an AMC contract is in place at all times during such period. • Incidental damages: It is to be noted that the vendor is Vendor of equipment or turn key service provider. He is under no circumstances managing or giving responsibility for revenue earnings. • Limitation of Liability – • In no case the vendor liability should exceed the Total value of the Purchase Order issued by BSNL on the vendor. • In relation to limitation of liability under the AMC Agreement Vendor’s liability is limited to 100% of the annual support fees in any year of the AMC Agreement. • Intellectual Property Rights: • All Intellectual Property Rights in the Products supplied under the Contract will belong to and remain vested in Vendor and shall be licensed to BSNL for use specifically in the context of the Products supplied. Patent Rights – BSNL must promptly notify Vendor of a claim or threatened claim, and must provide information and assistance;
