At the apex of the Indian legal framework governing public procurement is Article 299 of the Constitution of India. Article 299 stipulates that all contracts made in the exercise of the executive power of the Union of India or a State Government must be in the name of the President of India or the Governor of the State, as the case may be, and be executed on behalf of the President or the Governor or by such person as he or she may direct.

At the federal level, there is no dedicated legislation governing public procurement in India. However, at the state level, certain state legislatures (like Tamil Nadu and Karnataka) have enacted such laws.

Nevertheless, comprehensive rules and directives for public procurement have been put in place at the federal level in terms of:

• The General Financial Rules, 2017 ("GFR");
• The Delegation of Financial Powers Rules, 1978;
• The Manual on Policies and Procedures for Purchase of Goods issued by the Ministry of Finance;
• The Manual of Policies and Procedure for Employment of Consultants issued by the Ministry of Finance;
• The Director General of Supplies and Disposals Manual;
• Manuals governing procedures for purchase of goods/ services issued by individual ministries/ departments like defence, and public sector undertakings like BSNL;
• Government orders regarding price or purchase preference or other facilities to sellers in the handloom Sector, cottage and small scale industries and to central public sector undertakings, etc.; and
• The guidelines issued by the Central Vigilance Commission to increase transparency and objectivity in public procurement.

These rules and directives form the regulatory framework for public procurement by governmental instrumentalities. In addition, for works contracts, model bidding documents have been issued by various public authorities (such as the National Highways Authority of India, Planning Commission, etc.) which establish the standard contractual framework between the public authorities and private parties.

There also exist certain sectoral laws and underlying sectoral policies which guide public procurement. Within this framework, various governmental instrumentalities and agencies, including ministries and departments (such as the Public Works Department, the National Highways Authority of India), have evolved their own public procurement system. This chapter does not address these systems.

India is not currently party to the WTO Government Procurement Agreement. However, the GFR have been periodically revised to incorporate developments such as a rapid growth of alternative service delivery systems, developments in information technology, outsourcing of services and liberalisation of the system of procurement, accounting and disposal of goods in line with the international practices.

Rule 144 of the GFR lays down the fundamental principles underlying the public procurement regime. It provides that every authority delegated with the financial powers to procure goods in the public interest shall be responsible and accountable for bringing efficiency, economy and transparency in matters relating to public procurement and for fair and equitable treatment of suppliers and promotion of fair competition in public procurement. Rule 144 of the GFR provides that the procedure for public procurement must conform to, inter alia, the following yardsticks:

• The specifications in terms of quality, type, etc., as well as quantity of goods to be procured, should be clearly spelt out keeping in mind the specific needs of the procuring organisations. The specifications should meet the basic needs of the organisation without including superfluous and non-essential features, which may result in unwarranted expenditure. Care should also be taken to avoid purchasing quantities in excess of requirements to avoid inventory carrying costs;
• Offers should be invited following a fair, transparent and reasonable procedure;
• The procuring authority should be satisfied that the selected offer adequately meets the requirement in all respects;
• The procuring authority should satisfy itself that the price of the selected offer is reasonable and consistent with the quality required; and
• At each stage of procurement the procuring authority must place on record, in precise terms, the factors it considered in making the procurement decision.

Rule 173 of the GFR requires that all government purchases should be made in a transparent, competitive and fair manner to secure best value for money whereby prospective bidders will be enabled to prepare and submit their competitive bids with confidence. Some of the measures for ensuring the above are as follows:

• The text of the bidding document should be self-contained and comprehensive without any ambiguities. All essential information which a bidder needs for submitting a compliant bid should be clearly spelt out in the bidding document in simple language. The bidding document should contain, amongst other things:

1. The criteria for eligibility and qualifications to be met by the bidders such as minimum level of experience, past performance, technical capability, manufacturing facilities and financial position, etc.;
2. Eligibility criteria for goods indicating any legal restrictions or conditions about the origin of goods, etc., which may be required to be met by the successful bidder;
3. The procedure as well as date, time and place for sending the bids;
4. Date, time and place of opening of the bid;
5. Essential terms of the procurement contract;
6. Special terms affecting performance, if any;
7. The criteria for evaluation of bids.

• Provision should be made in the bidding document to enable a bidder to question the bidding conditions, bidding process and/or rejection of its bid;
• Suitable provision should be kept in the bidding document for the settlement of disputes, if any, emanating from the resultant contract;
• The bidding document should indicate clearly that the resultant contract will be interpreted under Indian Laws;
• The bidders should be given reasonable time to submit their bids;
• The bids should be opened in public and authorised representatives of the bidders should be permitted to attend the bid opening;
• The specifications for the required goods should be clearly stated without any ambiguity so that the prospective bidders can submit meaningful bids. In order to attract a sufficient number of bidders, the specifications should be as broadly drafted as possible. Efforts should also be made to use standard specifications which are widely known in the industry;
• In the case of turn-key contract(s) or contract(s) for the procurement of sophisticated and costly equipment or wherever felt necessary, suitable provision is to be made in the bidding documents for one or more rounds of pre-bid conference for clarifying issues and clearing doubts, if any, about the specifications and other technical details of the plant, equipment and machinery, etc., projected in the bidding document. The date, time and place of the pre-bid conference should be indicated in the bidding document. This date should be sufficiently in advance of the bid opening date;
• Bids received should be evaluated in terms of the conditions already incorporated in the bidding documents. No new condition which was not incorporated in the bidding documents should be brought in for evaluation of the bids. Determination of a bid's compliance should be based on the contents of the bid itself without recourse to extrinsic evidence;
• Bidders should not be permitted to alter or modify their bids after expiry of the deadline for receipt of bids;
• Negotiation with bidders after bid opening must be severely discouraged. However, in exceptional circumstances where price negotiation against an ad-hoc procurement is necessary due to some unavoidable circumstances, negotiations may be entered into but only with the lowest evaluated compliant bidder;
• Where a number of firms are placed on a rate contract for the same item, negotiation as well as counter offering of rates is permitted with the bidders and for this purpose special permission has been given to the Directorate General of Supplies and Disposals;
• The contract should ordinarily be awarded to the lowest evaluated bidder whose bid has been found to be compliant and who is eligible and qualified to perform the contract satisfactorily as per the terms and conditions incorporated in the corresponding bidding document. However, where the lowest acceptable bidder is not in a position to supply the full quantity required, the remaining quantity, as far as possible, should be ordered from the next highest compliant bidder at the rates offered by the lowest compliant bidder; and
• The name of the successful bidder should be published in the relevant Ministries' or Departments' notice board or bulletin or website.

While aerospace procurement is not treated differently from other types of procurement, all procurement by the Ministry of Defence is governed by the Defence Procurement Procedures, 2016. In decreasing order of priority, the procurement of defence equipment under this procedure are:

• Buy (Indian – IDDM): procurement of products from an Indian vendor meeting one of two conditions – (i) products that have been indigenously designed, developed and manufactured with a minimum of 40% (forty percent) 'indigenous content' on cost basis of the total contract value, or (ii) products having 60% (sixty percent) 'indigenous content' on cost basis of the total contract value, which may not have been designed and developed indigenously.
• Buy (Indian): procurement of products from an Indian vendor having a minimum of 40% (forty percent) 'indigenous content' on cost basis of the total contract value.
• Buy and Make (Indian): Initial procurement of equipment in fully formed state in quantities as considered necessary, from an Indian vendor engaged in a tie-up with a foreign original equipment manufacturer, followed by indigenous production in a phased manner involving transfer of critical technologies as per specified range, depth and scope from the foreign original equipment manufacturer.
• Buy and Make: An initial procurement of equipment in fully formed state from a foreign vendor, in quantities as considered necessary, followed by indigenous production through an Indian production agency in a phased manner involving transfer of critical technologies as per specified range, depth and scope, to the production agency.
• Buy (Global): Outright purchase of equipment from foreign or Indian vendors. In case of procurement through foreign vendors, Government to Government route may be adopted, for equipment meeting strategic/ long term requirements.

In addition to the above listed categorisation, the 'Make' categorisation, aims at developing long-term indigenous defence capabilities. Acquisitions covered under the 'Make' category refer to equipment/ system/ sub-system/ assembly/ sub-assembly, major components, or upgrades thereof, to be designed, developed and manufactured by an Indian vendor.

The Defence Production Policy, 2011 stresses the preference for procurement from indigenous sources wherever possible, subject to ensuring that the defence forces have an edge over potential adversaries at all times – in immediate terms as well as in sustainability.