Option Clause in Stores Contracts

Option Clause in Stores Contracts

Source: Railway Board letter dated 04.03.2022  Click here for download

 

• Para 3800 of IRS Conditions of Contract Click for download

• Applicable for all tenders wherever specifically mentioned in the tender as Special condition.

• For Fixed Quantity Contracts only

• The purchaser (i.e., Railways) reserves the right to increase the order quantity by a quantity not exceeding 30 % of the ordered quantity. 

• Provision of Minus 30 % Option Clause shall not be inserted in the Tenders.   

• Minimum Purchase value is Rs. 1.5 Crores  

• There is no bar to include this clause for below value of Rs. 1.5 Crores, if accrues the benefits to the Railways. 

• Example: As per contract, the quantity ordered is 100 Nos.  Under this clause, Purchaser has the right to increase up to 130 Nos depending on the requirements.

•  Same price, same terms & conditions are applicable.

•  During the currency of the contract including extension period, if any.

• Before resorting to such an increase, reasonable notice and time should be given to the contractor/supplier.

• Railways can resort to increasing the quantity, though the contractor/supplier who delivered the ordered quantity has been supplied in full before the last date of delivery.  

• Approval of Option Clause:  While deciding the acceptability of Tenders/Contracts, the value of +30% quantity will be excluded from the value of Tenders for determining the level of Competency of sanction.   

• Performance of the firm on whom option is proposed to be exercised should be satisfactory.  

• Operated only where there is clear demand for additional quantities and benefits accrue to Railways in terms of existing contractual rates being reasonable  or lower than newly opened tendered rates, if available. 

• Operation of Option Clause: 

 

• TC cases - Finance Concurrence is not required. By Competent authority within his powers of Tender acceptance (original quantity plus 30 % under option clause. Operation of plus 30% clause, Finance vetting of modification advice is required. 

 

• Non TC cases - Finance concurrence is required -If the value of contract (including plus 30%) is within vetting limit of PO - Purchase Order.

 

 Key Takeaways:

1. Plus 30 % only 

2. Minimum purchase value : Rs. 1.5 Crores

3. There is no bar to include this clause for below value of Rs. 1.5 Crores, if accrues the benefits to the Railways. 

 

4. Same Price and Same conditions 

5. Applicable to extended date of delivery 

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