Development Order

Development Order

                   (2006 without books - General expenditure - short notes)

Ø   Object: To develop new sources  or indigenous (native) sources for development of Imported Items or for Major items  to avoid monopoly / cartel .

Ø   Placement of development orders should not be considered as routine but considered only in the following situations:-

i) Where the approved sources are not adequate and it is desirable to develop more sources for bringing in more competition or improvement in quality.

ii) Where the rates received from the new sources are lower than those applicable to approved sources and where new sources are having potential for supply of quality material and are having infrastructure of plant and machinery and testing equipment as per the quality assurance programme.

Indigenous Development of Imported Items.

Ø  Central/Regional Railway equipment advisory committees has initiated the action duly inviting prospective manufacturers to enter the field and produce prototypes( samples).

Ø  Requirements:   If annual requirements are not enough for an new entrepreneur (industrialist) to develop and absorb the expenses and there being reluctance on the part of the firm to develop unless the quantity ordered is worthwhile, Railways / Production Units may give an advance commitment to the firm giving an assurance to the effect that orders for the following two/three years will be placed on the new firms. But the order will be placed like as follow.

Ø  First Year: 100 % of requirements placed on new firm.

Ø  Second year: 80 % of requirements placed on new firm.  The remaining 20 % will be obtained through open Tender.

Ø  Third year: 60 % of requirements placed on new firm.  The remaining 40 % will be obtained through open Tender.

Ø  Fourth Year and onwards :  Through Open Tenders only.

           Special features of Development orders

ü  No clause for Liquidated Damages.  ( Because delays may be happened due to manufacture of items first time by the firms)

ü  Extension of Delivery period should be granted on a more liberal basis, at the discretion / prudence of the Purchase Officer.

ü   In cases of the late supplies and complete failures, the case should be decided on merits.  Resort to 'Risk Purchases' should occur only in rare cases and generally if the Administrative Officer concerned is satisfied that the party has made sincere efforts and yet failed, the question of risk purchase should not arise.

ü   Price Escalation may be incorporated to allow for variations in cost on account of Governmental action, i.e. Customs Duty, Sales Tax-, as also basic raw materials such as 'Steel'.

ü   But no wage escalation clause should be permitted.

ü   To establish the indigenous manufacture of some items, import of some raw materials may be required.  If the entrepreneur is not able to offer from his own open general licenses, the purchaser may provide foreign exchange and recommend actual user import licence for the requisite quantity of raw material.

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