Disclaimer: Please note, the General Financial Rules 2017 apply only to the Central Government Ministries, Departments, and associated CPSEs. State Governments may have different procurement norms. For details on State procuring rules, kindly refer to the State-level Startup Policies.
Governments, just like private companies, have to buy goods and services for their operational needs.
Public procurement refers to the process by which governments and state-owned enterprises purchase goods and services from the private sector. As public procurement utilises a substantial portion of taxpayers' money, governments are expected to follow strict procedures to ensure that the process is fair, efficient, transparent and minimises wastage of public resources.
In India, public procurement (government tenders) can also present useful pilot opportunities for startups that have not yet been able to gain traction in the private sector.
Conversely, opening government tenders up to startups improves the choices available to government bodies since startups are often more agile than corporate vendors and can provide cheaper, more innovative products and services.
Government e Marketplace (GeM) is an online procurement platform for government ministries and departments, and the most widely used channel for public procurement in India. MSMEs, DPIIT recognised startups and other private companies can register on GeM as sellers and sell their products and services directly to government entities.
GeM Startup Runway is a new initiative launched by GeM to allow startups to reach out to the universe of government buyers by offering innovative products that are unique in design, process and functionality.
Startups are exempted from otherwise stringent selection criteria such as Prior Experience, Prior Turnover and Earnest Money Deposits
DPIIT recognised startups are distinguished from other sellers because they are provided the Startup India badge
Buyers can rate your product or service on GeM. Given the large scope of public procurement, this can help you to finetune and adapt your product for scale.
No more restrictive categories on GeM, meaning that new & innovative products to be published on the platform.
DPIIT recognised startups have facetime opportunity with 50,000+ Government buyers
The Central Public Procurement Portal (CPPP) is the Government of India’s portal that facilitates all the Central Government Departments, Organisations, Autonomous Bodies, and CPSEs to publish their NIT, tender enquiries, contract award details, and their corrigenda.
The primary objective of this portal is to provide single-point access to the information on procurements made across various Ministries and Departments and all the organisations under them. Startups can now register on CPPP and become Preferred Bidders in Public Orders and get exemptions on prior experience, prior turnover, and earnest money deposit requirements on https://eprocure.gov.in. A free and fair environment provides startups with a level playing field amongst other competitors.
In order to facilitate easier bidder registration for startups on CPPP, the detailed guidelines for the same are attached here.
Rule 170 (i) – Relaxation from payment of EMD for DPIIT recognised startups
Link the existing document
Rule 173 (i) – Relaxation from Prior Experience and Turnover
Link the existing document 1 and document 2
Rule 1.9 (ix) clarifies conditions for relaxation of Prior Experience and Turnover for DPIIT recognised Startups in Consulting and other services procured by any department/organisation under the Government of India.
Rule 4.5.2 clarifies conditions for relaxation of Prior Experience and Turnover for DPIIT recognised Startups in procurement of works by any department/organisation under the Government of India.
MoD has launched the procurement procedure ‘Make-II’ with the objective of impetus for Startups and timely induction of equipment into the Indian Armed Forces. In this subcategory, no Government funding is envisaged for prototype development purposes but has assurance of orders on successful development and trials of the prototype. A number of industry friendly provisions such as relaxation of eligibility criteria, minimal documentation, provision for considering proposals suggested Suo-moto by industry etc., have been introduced in the Make-II Procedure. The financial capping of projects for explicit participation Startups have been reserved separately defined by each Defence-PSU. See More
Technology Development Fund (TDF) has been established to promote self-reliance in Defence Technology as a part of the 'Make in India' initiative. It is a programme of MoD (Ministry of Defence) executed by DRDO, meeting the requirements of Tri-Services, Defence Production, and DRDO. The scheme will cover funding through provision of grants to industry that may work in collaboration with academia or research institutions to carry out innovation, research, and development. After the development of the prototype, the product shall be commercialised by DRDO for procurement.
MoD is identifying innovation in defence space through iDEX through investments made under the SPARK II. As per the guidelines, the applicant startup has at least an equivalent amount of financial or in-kind contribution for developing the product. The matching contribution can come from the founders of the company, venture investors, banks, or other funding partners who are acceptable to DIO-iDEX. The investments under the iDEX program are proposed in the following stages:
Link to the recent Defence Acquisition Procedure released by the Ministry of Defence.
The National Security Guard, Ministry of Home Affairs has established a swiss model of procurement to purchase innovative products and services. Startups can create a proposal and submit it in a standard format to the department via email for consideration. The proposal shall be examined by both HQ NSG and user units and the startup shall be invited for presentations/demonstrations during monthly presentation of proposals which will be scheduled once in a month. The same will be witnessed by various user/stakeholders of NSG, if deemed necessary.
For more information please visit here
Smart Cities Mission, Ministry of Housing and Urban Affairs, envisions to bridge an interaction between the administrators across 4000+ cities in India and innovators to identify new solutions to improve the citizen services. The portal invites proposals and pilot implementation opportunity to some key problem statements issued by the city administration. Startups may register here.
Ministry of Petroleum and Natural Gas has reserved a corpus of ₹320 Crores to collaborate with Startups in India through their CPSEs. The CPSEs have launched the initiative through their websites in the form of innovation challenges. See More
The Ministry of Railways has drafted a Policy on Unsolicited Non-Fare Revenue Proposals. The policy enables the department to award Earnings Contract to a bidder when an unsolicited proposal is received by a proponent. A special incentive of a Right of First Refusal is granted to the proponent to match the highest bid. This policy has been drafted and published with an aim to generate revenues for the Government by considering unsolicited offers proposed by outside agencies.
For more information please visit here.
The Government of Kerala has established various Procurement Models via the Kerala Startup Mission (KSUM). KSUM facilitates procurement of innovative products and services from startups through the following ways:
The detailed information and documents on these models can be accessed here.
The Government of Andhra Pradesh has created a Suo Moto model of procurement where they invite innovative startup applicants to create and submit a proposal to Government Departments. These proposals are evaluated by Andhra Pradesh Innovation Society and are then presented to various Government Departments for procurement.
The companies outside Andhra Pradesh can also apply under this scheme and are evaluated by the evaluation committee. If their product/solution is selected and they do not have a presence in A.P, they shall open a development centre in Andhra Pradesh. Assistance under this scheme will be provided only on opening of such development centre in A.P.
Products and solutions, valued upto INR 50 Cr collectively, will be selected annually, by the Competent Authority, for implementation within GoAP. The selected proposals get a work order from GoAP of upto INR 5 Cr. For more information please visit here.
The Government of Rajasthan has created an online platform, Challenge for Change, to provide work orders to startups for upto INR 1 Cr. Various Government Departments of Rajasthan have provided problems statements in the domains of Safe Drinking Water, Wool Industry, Crop Cultivation, Detection of Quarry and Mine blasts etc. that can be solved by the innovative offerings of startups.
The startups can apply online to participate in the challenge and apply for the stated problem statements. For more information please visit here.
Odisha State Government notified a Government order dated 13.3.2018 which has included following provisions for Startups in public procurement:
Further, State Government’s Finance Department has exempted all eligible Startups and local MSEs from submission of Earnest Money Deposit (EMD) while participating in tenders of Government Department and agencies. The performance security (if any) has been reduced to 25% of the prescribed amount for Startups. Related Government orders have also been uploaded on Startup Odisha Portal.
The above provisions are followed in-principle as State Government Departments have also included above clauses in their procurement tenders.
Government of Gujarat, vide Industries and Mines Department Resolution on 11.4.2018 removed the criteria of "prior experience", “turnover”, “tender fee” and “submission of EMD” for encouraging Startups to participate in public procurement. The instructions to all the State Department is as below:
The State Government has further directed all the offices to scrupulously follow the above mentioned provisions. The State departments have also included above clauses in their respective tenders. Further details on notification is provide on Startup Portal of Gujarat.
Government of Haryana has done away with key qualification criteria of ‘turnover’ and ‘experience’ for Startups participating in public procurement process. The notification ‘Concessions/ Benefits in Public Procurement to Startups/ First Generation Entrepreneurs in the State’ was released by the State Department of Industries & Commerce on 3rd January 2019. According to the notification, startups will be treated at par with the MSEs in public procurement process subject to meeting other technical specifications as part of qualifying requirements for the procurement.
Startups based in the state, having turnover of less than INR 25 crore, would be eligible to participate along with big companies. As per estimates, around 750 startups are likely to benefit with the relaxation in norms. As per estimates, around 750 startups are likely to benefit with the relaxation in norms.
Additionally, if their quoted prices are within band of L1 (lowest bidder) plus 15% or in plain terms if Startup quoted prices are higher by 15% as compared to the lowest bidder and Startup is ready to match with the lowest bidder, they will be eligible to bag the contract subject to fulfillment of other terms and conditions.
Besides this, the government has exempted the startups from payment of tendering fee and Earnest Money Deposit (EMD) subject to conditions as per eligibility.
The Maharashtra State Innovation Society in collaboration (MSInS) with Government of Maharashtra, organises a Startup Week in every calendar year. Startups from selected sectors are invited through an EoI for a “proof of concept opportunity”, where they pitch to a panel comprising of Government officials, renowned industry players, and investors. Three startups from each sector are selected and awarded a work order of amount of ₹10-15 lakhs to prove their concept. It is expected that MSInS may provide proof of concept opportunity to about 15 to 20 startups every year.
HPCL has launched Udgam. Udgam is a program to enable innovators and entrepreneurs pursue a promising idea, establish and validate proof of concept (POC) and support commercialization/implementation. Learn More
EIL is offering ease of vendor enlistment process to enable and promote procurement from India Startups. Learn More
MRPL is supporting the startups with funds and incubation support to create innovative solutions with a potential of commercialisation and implementation. Learn More
Under the Make-II initiative, projects with estimated cost (Design & development phase and Procurement phase) not exceeding Rs 250 Lakhs, will be earmarked for Startups. No separate technical or financial criteria are defined for startups. Learn More
NTPC has issued vendor assessment guidelines for startups along with a list of non-critical activities open for startups. Learn More
BEL has extended procurement relaxations in special categories earmarked for startups such as AI, ML, Cyber Security, etc. Also, Under the Make-II initiative, for projects with estimated cost of prototype development phase not exceeding INR 10 lakhs and Procurement cost not exceeding INR 5 Crore, no separate technical or financial criteria are defined for startups. Learn more
The Airport Authority of India has established a Startup Grand Challenge Model offering certain incentives to shortlisted ideas post a series of evaluations. The shortlisted ideas are then further invited to submit a proposal for procurement which is challenged and evaluated by a counterbidding mechanism.
A system of counter bidding may be deployed for procurement from startups for innovative products shortlisted through the challenge. The startups would need to submit an online proposal detailing out the uniqueness of their product, the value add for airport etc. Based on the RFP, AAI will call for bids from other parties for the procurement within a fixed timeline. Those bidders who will be able to match the technical part with lower financial bids will be called along with the startup (with original proposal) to go for second round of bidding. The bidder with the lowest bid, after the second round of bidding, will be selected. This process will be time bound and will be closed within a month of receiving the initial proposal.
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