Compliance Requirements under the Order

1. Restriction to Class-I Local Suppliers in Case of Sufficient Local Capacity (Para 3 (a))

In procurement of all goods, services or works in respect of which the Nodal Ministry / Department has communicated that there is sufficient local capacity and local competition, only ‘Class-l local supplier’, shall be eligible to bid irrespective of purchase value.

2. Eligibility of Bidders and Conditions for Issuance of Global Tender Enquiries (Para 3 (b))

Only Class-I and Class-II local suppliers are eligible to bid, except in Global Tender Enquiries (GTE), where non-local suppliers may also participate. For procurements not under Para 3(a) and valued below ₹200 Cr, GTE is not permitted without approval from the competent authority per GFR 161(iv).

(a) ‘Class-l local supplier’ means a supplier or service provider, whose goods, services or works offered for procurement, meets the minimum local content.

(b) ‘Class-Il local supplier’ means a supplier or service provider, whose goods, services or works offered for procurement, meets the minimum local content as prescribed for ‘Class-ll local supplier’ but less than that prescribed for ‘Class-l local supplier’ under this Order.

(c) ‘Non – Local supplier’ means a supplier or service provider, whose goods, services or works offered for procurement, has local content less than that prescribed for ‘Class-II local supplier’ under this Order.

(d) For the purpose of this Order, works includes Engineering, Procurement and Construction (EPC) contracts and services include System Integrator (SI) contracts.

3. Mandatory Sourcing from Class-I Local Suppliers and Exceptions (Para 3.1)

(a) Items, notified as having sufficient local capacity and competition, shall mandatory be sourced from Class-l local suppliers in SI/EPC/Turnkey Contracts/ Services tenders. This provision will be applicable only for those items which have been notified by the Nodal Ministry as Class-I i.e. having sufficient local capacity and competition, with specific HSN codes.
(b) Notwithstanding above, if in any project, it is considered that it is not practically feasible to source such items from Class-I local suppliers, it may take relaxation from such stipulation with the approval of Secretary of the administrative Ministry/ Department concerned or with the approval of the Competent Authority specified by the Administrative Ministry/Department, on case-specific basis.

4. Purchase Preference for Class-I Local Suppliers in Divisible Contracts (Para 3A(a),(b))

Purchase preference shall be given to ‘Class-I local supplier’ in procurement undertaken by procuring entities of goods/works which are divisible in nature & covered under para 3(b), subject to the Order /instructions issued by Nodal Ministry

Procedure-
Among all qualified bids, lowest bid will be termed L1. If L1 is ‘Class-l local supplier’, contract for full quantity will be awarded to L1. If L1 bid is not a ‘Class-I local supplier’, 50% of order quantity shall be awarded to L1. Then, lowest bidder among ‘Class-l local supplier’ will be invited to match L1 price for remaining 50% quantity subject to Class-I local supplier’s quoted price falling within margin of purchase preference & contract for that quantity shall be awarded to such ‘Class-l local supplier’ subject to matching L1 price. In case such lowest eligible ‘Class-I local supplier’ fails to match L1 price or accepts less than offered quantity, next higher ‘Class-I local supplier’ within margin of purchase preference shall be invited to match L1 price for remaining quantity and so on, and contract shall be awarded accordingly. In case some quantity is still left uncovered on Class-I local suppliers, then such balance quantity may also be ordered on the L1 bidder

      5. Purchase Preference for Class-I Local Suppliers in Non-Divisible Contracts (Para 3A (c))

In procurement of goods or works, which are covered by para 3(b) and which are not divisible in nature, and in procurement of services where the bid is evaluated on price alone, the ‘Class-l local supplier’ shall get purchase preference over ‘Class-Il local supplier’ as well as ‘Non-local supplier’

Procedure for making such purchase preference is-

1. 1. Among all qualified bids, the lowest bid will be termed as L1. If L1 is Class -I local supplier’, the contract will be awarded to L1.
   2. If L1 is not ‘Class-l local supplier’, the lowest bidder among the ‘Class-I local supplier’, will be invited to match the L1 price subject to Class-I local supplier’s quoted price falling within the margin of purchase preference, and the contract shall be awarded to such ‘Class-l local supplier’ subject to matching the L1 price.
   3. In case such lowest eligible ‘Class-I local supplier’ fails to match the L1 price, the ‘Class-l local supplier’ with the next higher bid within the margin of purchase preference shall be invited to match the L1 price and so on and contract shall be awarded accordingly. In case none of the ‘Class-I local supplier’ within the margin of purchase preference matches the L1 price, the contract may be awarded to the L1 bidder.

6. Purchase preference in tenders where contract is awarded to multiple bidders (Para 3B)

In tenders where contract is awarded to multiple bidders subject to matching of L1 rates or otherwise, the ‘Class-I local supplier’ shall get purchase preference over ‘Class-Il local supplier’ as well as ‘Non-local supplier’

In such tenders following applies:

a)Where sufficient local capacity, competition exist (as notified by nodal Ministry), only Class-I local suppliers shall be eligible to bid & contracts shall be awarded exclusively to them

b)In other cases, Class-II & Non-local suppliers may all participate along with ‘Class I Local suppliers as per Order

c)If Class-I local suppliers qualify for at least 50% of tendered quantity, contracts may be awarded to all eligible bidders as per bid terms. If not, preference must be given to Class-I suppliers within 20% of highest awarded bid, to ensure they receive at least 50% of quantity

d)Preference is first extended to lowest quoting Class-I supplier within 20% margin, subject to eligibility & quantity limits. If they decline or are ineligible, next higher eligible Class-I supplier is considered

e)Procuring entities may define tender-specific criteria for applying purchase preference, in line with these guidelines

7. Threshold Exemption and Prevention of Procurement Splitting under Para 3 & Exemption from Order (Para 4)

Notwithstanding the provisions of paragraph 3, procurements with an estimated value below ₹5 lakhs shall be exempt from this Order. However, procuring entities must ensure that procurement is not artificially divided to circumvent the requirements of this Order.

Para 4A:

Procurement of spare parts, consumables for closed systems and Maintenance/Service contracts with Original Equipment Manufacturer/Original Equipment Supplier/Original Part Manufacturer shall be exempted from this Order.

8. Minimum Local Content Requirement for Supplier Classification (Para 5)

Local content’ requirement to categorize a supplier as ‘Class-l local supplier’ is minimum 50%. For ‘Class-II local supplier’, the ‘local content’ requirement is minimum 20%. Nodal Ministry/ Department may prescribe only a higher percentage of minimum local content requirement to categorize a supplier as ‘Class-l local supplier’/ ‘Class- II local supplier. For the items, for which Nodal Ministry/ Department has not prescribed higher minimum local content notification under the Order, it shall be 50% and 20% for ‘Class-l local supplier’/ ‘Class-II local supplier’ respectively.

9. Margin of purchase preference (Para 6)

Margin of purchase preference shall be 20%

10. Specification of Local Content and Purchase Preference in Procurement Documents (Para 7)

Minimum local content, the margin of purchase preference and the procedure for preference to Make in India shall be specified in the notice inviting tenders or other form of procurement solicitation and shall not be varied during a particular procurement transaction.

11. Implementation of Purchase Preference on Government e-Marketplace (GeM) (Para 8)

For procurement through GeM, items meeting the minimum local content should be clearly marked during registration. Where feasible, GeM should enable automated comparison of bids with and without purchase preference, and obtain consent from local suppliers when preference is to be applied.

12. Details to be disclosed at the time of tender/bidding/solicitation by Class-I/II Local Supplier (Para 9(a-c))

Class-I/II local suppliers must indicate local content % and self-certify compliance with Class-I/II norms during tender/bid. They must also disclose location(s) of local value addition.

a) For procurements over ₹10 Cr, Class-I/II local suppliers must provide a certificate from a statutory/cost auditor (for companies) or practicing CA/cost accountant (for others) indicating the % of local content.

b) Bidders must self-certify local content at the time of tendering. For contracts above ₹10 Cr, a CA/cost accountant-certified local content certificate is required at project execution. If not feasible, it may be submitted post-completion within a time acceptable to the procuring entity. If the supplier fails to meet the required local content and is reclassified (e.g., Class-I to Class-II or Non-local), a penalty up to 10% of the contract value may be imposed. However, the contract will not be terminated on this basis.

    13. Ensuring Non-Discriminatory Eligibility Criteria for Local Suppliers (Para 10)

1. 1. Every procuring entity shall ensure that the eligibility conditions in respect of previous experience fixed in any tender or solicitation do not require proof of supply in other countries or proof of exports.
   2. Procuring entities shall endeavour to see that eligibility conditions, including on matters like turnover, production capability and financial strength do not result in unreasonable exclusion of ‘Class-l local supplier/ ‘Class-II local supplier’ who would otherwise be eligible, beyond what is essential for ensuring quality or creditworthiness of the supplier.