(See note below paragraph 307)

General principles to be observed by Government officers in entering into contracts or agreements on behalf of the Government


1. The main duty of officers entering into contracts is to see that the Government get a fair return for the money to be spent.

2. Every precaution must be taken to prevent any official from having a personal interest, direct or indirect, in a tender, contract or agreement, or from assisting a contractor in the preparation of tenders or from standing as security for him.

3. In works of great magnitude the contract deeds should be especially prepared by the Government law officers but for ordinary contracts, including all such as are based on tenders which a superintending engineer or other subordinate authority is competent to accept, such ordinary forms as may have been approved by the Government will generally suffice.

4. Even in cases where a formal written contract is not made, no order for supplies, etc. other than petty purchases up to Rs. 100, should be placed without at least a written agreement as to price.

[Vitta (Lekha) Anubhag File No. 15(6)/82]

5. If the amount of the tender is likely to be beyond an officer’s power of acceptance, or to be of an unusual character, he should, before publicly inviting tenders, submit the contract documents to the next higher authority for his approval or remarks together with a copy of the proposed advertisement for tenders and the form in which tenders are to be submitted. If the amount of the tender is likely to exceed that authority’s power of acceptance, or to be of a very special nature, that authority should in like manner submit the contract documents on to the next higher authority.

6. No contract may be entered into with or on behalf of a minor, but if a contractor dies, his legal representative, even though a minor, is bound by the terms of the contract.

7. When a contract has been made with a person for a work, a second contract in connexion with the same work while the first is still in force may not be given to the same person if the sum of the contracts exceeds the power of acceptance of the authority concerned.

8. Officers will be personally responsible for any irregular engagements entered into by them in opposition to or in contravention of the rules or orders issued by Government.


9. Whenever practicable and advantageous, contracts should be placed only after tenders have been invited. In regard to contracts for "work" or "repairs" tenders should invariably be invited for those estimated to cost Rs. 10,000 or more in the Public Works and Irrigation Departments or Rs. 2,000 or more in other departments. In the Public Works and Irrigation Department when work has to be performed within 10 kilo meters of the headquarters of a civil district where it is possible to call for tenders as laid down in paragraphs 360—364, Public Works Account Rules, the full instructions in those rules must be observed for all contracts exceeding Rs. 2,000. In cases of contracts for "supplies" reasons for not inviting tenders should be recorded if the cost of supplies exceeds Rs. 2,000.

10. Tenders should ordinarily be invited on standard forms prescribed for the purpose. (See also rule 35).

11. Sealed tenders, should be invited in the most open and public manner possible e.g., by advertisement in the Uttar Pradesh Gazette, circular communications to reputed dealers and contractors, etc. The advertisement should state the place where, the date on which, and the time when, the tenders are to be submitted and will be opened. In the case of contracts exceeding Rs. 50,000 at least one month’s time from the date of advertisement or notice should be allowed. Tenders should be opened by a responsible officer and not by subordinates, in the presence of such intending contractors as may choose to attend.

12. Before giving out a minor or petty work on contract, it should be decided whether the articles included in the estimate apart from those mentioned in rule 9 of the Store purchase Rules contained in Appendix XVIII of the Financial Handbook, Volume V, will be supplied departmentally or by the contractor.

If the articles are to be supplied departmentally they shall be purchased in accordance with the Stores Purchase Rules mentioned above, the contractor being paid only the hoisting and erecting charges if necessary. If the contractor is permitted to supply the articles, the permission should be subject to the conditions laid down in rule 5 of the Stores Purchase Rules.

13. If departmental purchase of articles for which no detailed specifications exist are to be made in conformity with the Stores Purchase Rules, the Director of Industries in the case of purchases in India and the High Commissioner for India or the supplying firm, as the case may be, in the case of purchases abroad, should be informed of the approximate quantities and expected qualities of the required articles. If it is considered desirable in any particular case, samples of the required articles may be demanded before the actual order for supply is placed and the samples should be kept carefully in sealed receptacles. In such cases the subsequent order for supply should stipulate that the full quantities of the required articles should be similar in all respects to the deposited samples.

NOTE—This rule is not applicable to purchases outside the Stores Purchases Rules.

14. Before inviting tenders, every officer should estimate his requirements for the period involved, as far as he can foresee, and regulate the time of his purchases according to the state of the market.

15. The approximate quantities of articles likely to be required should be specified in the invitation for tender.

16. Materials which are likely to depreciate or deteriorate should not be purchased long in advance of the requirements.

17. All tenders must be submitted on the prescribed form which can be obtained on application and payment where this is required. No tender should, as a rule, be considered unless it is accompanied by earnest money which should be as follows :

Amount of tender

Earnest money



(1) Up to Rs. 2,000


(2) Above Rs. 2,000 but not exceeding Rs. 5,000


(3) Above Rs. 5,000 Ditto Rs. 10,000


(4) For each additional Rs. 5,000 or part thereof, a further sum of


Contracting officers may fix the amounts of earnest money at rates lower than those prescribed above, if for any particular reason they consider it advisable to do so, but in no case should the earnest money be less than 1/2 per cent of the estimated value of the work.

NOTES—(1) An Executive Engineer of Public Works Department has the discretion to accept tenders without earnest money for road metal collection costing less then Rs. 5,000; and in the case of works costing less than Rs. 10,000 an executive engineer or other officer may, at his discretion, demand earnest money from all tenderers or only from the contractor whose tender is accepted.

(2) No earnest money is necessary in the case of tenders received by the Store Purchase Department.

(3) In the Forest Department tenders for works costing less than Rs. 5,000 may in the discretion of the officer calling for the tender, be accepted without earnest money.

(4) The Agricultural Engineer is authorized in case of tenders for the supply and erection of pumping-plants to dispense with the demand for earnest money in individual cases and to dispense with such demand from firms approved and listed by him for this purpose. (vide G.O. no. 1262/XII-A—392, dated October 30, 1934).

(5) The U. P. State Bridge Corporation and the Uttar Pradesh Rajkiya Nirman Nigam have been exempted from depositing the earnest money.

C. S. No. 86.........Dated October 17, 1988

[Vitta (Lekha) Anubhag File No. 15 (6)/84]

18. Earnest money may be furnished in one of the forms mentioned in paragraph 71 of the Financial Handbook, Volume V, Part I, as well as in Municipal debentures, Port Trust bond or bonds and/or debentures issued by the State Financial Coporations. The amount of earnest money to be furnished should be stated in the notice calling for tenders, which should also contain a direction that, instead of furnishing cash, tenderers should themselves deposit the amount in the Treasury or Sub-Treasury which is convenient to them and attach to their tender the treasury receipt in support of the payment of the earnest money. In special cases, where it would be inconvenient for tenders to deposit earnest money into a Treasury tenderers may be permitted to deposit the earnest money with the officer inviting the tender in cash or currency notes up to a limit of Rs. 500, instead of into a Treasury. Such deposits will be treated as Public Works Department deposits, or revenue deposits, as the case may be.

19. A proper receipt should be given for the amount of earnest money received and the earnest money of unsuccessful tenderers should be refunded to them as soon as possible after the disposal of tenders, a stamped receipt being obtained. A register should be maintained showing the receipt and refunds of earnest money and security deposits prescribed in rule 23.

20. Tenders should be properly filled in before acceptance or submission to superior officers for disposal, as the case may be. As the tender along with the agreement and connected papers form the documents on which a court’s decision is based in case of a disputed claim brought by a contractor, it is absolutely necessary to draw up the papers correctly in the first instance and to see carefully that there are no omissions. Special attention should, therefore, be paid to the close scrutiny of all such documents before finally accepting them or submitting them to superior authority.

21. Other conditions being equal, the lowest tender should ordinarily be accepted, but the acceptance or rejection of any or all of the tenders received is left entirely to the discretion of the officer empowered to accept the tender for the work. No tenderer can demand to know the reason for the rejection of his tender, and this should be expressly stated in the notice calling for tenders. Such an explanation may, however, be called for by a superior authority; and, therefore, the reasons for which the lowest tender has not been accepted always be recorded.

22. In selecting the tender to be accepted, the responsibility and financial status of the tendering firm, including its location and registration with the Registrar of Firms, Societies and Chits, or those of the individual must be taken into consideration in addition to other relevant factors.

(Correction Slip No. 46 dated 14-3-84.)

[Vitta (Lekha) Anubhag-l, File no. 15(4)-82]

23. Security should in all cases be taken for the due fulfilment of a contract. This security may be furnished in one of the forms mentioned in paragraph 71 of the Financial Handbook, Volume V, or in paragraph 365 of the Financial Handbook, Volume VI, as well as in Municipal debentures, Port Trust bonds and/or debentures issued by the State Financial Corporations. With the exception of contracts of less than Rs. 7,500 security deposit should not be refunded till at least six months after the completion of the work without the express sanction of the head of the department.

NOTES—(1) The limit of six months laid down in this rule does not apply to refund of security deposits in the Public works Department, in the case of kanker, brick or stone ballast collection for road work and contracts for cartage of material. In the case of a combined contract for the collection and consolidation of road metal, however, the security deposit can be refunded on the satisfactory completion of the collection work after retaining a sum equivalent to 10 per cent of the tendered amount for the unfinished portion of the contract.

(2) In the case of contracts entered into by the Stores Purchase Department security need not be taken except in cases in which the Director of Industries considers it to be necessary.

(3) The Agricultural Engineer is authorized in cases of contracts for the supply and erection of pumping plants to dispense with the demand for security in individual cases and to dispense with such a deposit from firms approved and listed by him for this purpose.

(4) The Chief Engineer, Local Self-Government Engineering Department, is authorised to grant exemption at his discretion to firms of repute dealing in pumping plants from furnishing security in contracts for the supply and erection of pumping plants. The Superintending Engineers shall dispense with the security, where necessary, in individual cases in respect of the firms exempted by the Chief Engineer. Approval of the Chief Engineer shall be obtained for exemption of a new firm when considered necessary.

Insert the following as Note (5) after the Note (4) below rule 23.

Note (5) The Uttar Pradesh State Bridge Corporation and the Uttar Pradesh Rajkiya Nirman Nigam have been exempted from depositing the security.

C. S. No. 86.........Dated October 17, 1988

[Vitta (Lekha) Anubhag File No. 15 (6)/84]

24. Long-term contracts should, as far as possible, be avoided. A fixed price should always be settled for each article to be supplied and agreements should not provide for rate fluctuating with the markets. Officers entering into contracts enduring or likely to endure for a period of more than five years on behalf of Government should, wherever feasible, include in the agreements or contracts a provision for an unconditional power of revocation or cancellation of such contracts on the expiry of six months’ notice to that effect.

24-A. The following rules should be observed when entering into agreement with firms for the direct purchase of machinery, etc.:

(i) Payments for services already rendered or supplies made should never be delayed and should be made promptly.

(ii) A provision to make payment of a part of the cost with interest after a specified interval of time counted from the time when the work is completed satisfactorily should never be made. Where it is considered advisable to delay payment till it is ascertained that the machinery is in proper working order, it should be definitely sated in the agreement that the payment of the balance is contingent on the proper working of the machinery and that no claim for interest would be entertained.

25. Provision must be made in contracts for safeguarding Government property entrusted to a contractor.

26. Ordinarily no cash advances should be made to contractors for supplies under a contract, unless specially provided for in the tender or allowed by a standing rule or order of the Government.

27. Clear and specific penalties should be attached to a breach of the contract or agreement.

28. Provision should be made for preventing the sub-letting, assignment or transfer of the whole or part of the contract except with the written permission of the Government officer giving the contract.

28-A. The terms of contract for the purchase of perishable stores should invariably include a separate warranty clause, a model form of which is given in the Annexure.

Rations and Fodder

29. In calling for tenders for articles the contractor should, whenever possible, and except in the case of perishable articles, be required along with his tender to deposit a sample, and the contract should be to the effect that the full quantity of the articles contracted for should be in accordance with the sample. The sample should be carefully preserved in a sealed receptacle.

30. A sufficient stock should be laid in at the cheapest season, and it will probably be advantageous to call for tenders just after the harvest season. It may also be advisable to enlist the assistance of the Revenue Department officers in obtaining tenders of articles of diet as those officers are likely to be in close touch with the condition of the grain market.

31. Before accepting a tender, the officer should ascertain, by a comparison of the rates offered and by inquiries in the local market, the current market rate of the articles and see that no ring has been formed against the Government.


32. Bonds or agreements should be drawn up in connexion with contracts. Standard forms should be adopted, as far as possible, and the terms should be subjected to adequate prior scrutiny. The advice of the Government law officers should be taken wherever found necessary about the forms of deeds and agreements.

33. The terms of a contract or agreement must be precise and definite and there should be no room for ambiguity or misconstruction.

34. The terms of a contract once entered into should not be varied except in accordance with the instructions in the departmental manuals or codes. Where any material variation is proposed, which is beyond the scope of the instructions, the previous consent of the Government in the Finance Department should be obtained through the ordinary channel.

35. The forms prescribed by the Public Works Department for the invitation of tenders and the execution of agreements should be used by civil officers for building works unless other forms have already been specially authorized, or unless the use of a special form is found to be necessary in any particular case. Very good reasons should exist for introducing a new form of contract and the sanction of Government in the Finance Department should be obtained before such a form is brought into use. If any doubt is entertained as to the legal phraseology or the suitability of the new form for the purposes for which it has been drawn up, it should, before submission to the Finance Department, be forwarded to the Government Conveyancer for scrutiny, and the fact that the form has been approved by him should be reported to the Finance Department. Copies of the Public Works Department forms are obtainable from the Superintendent, Printing and Stationery, Uttar Pradesh, and the forms prescribed by the Director of Industries can be obtained from that officer.

NOTE—the lump sum tender forms for the supply and erection of the pumping plant and appurtenances approved in G.O. no. 476/XII-A—317, dated May 8, 1929, for use in the Agricultural Engineering Section shall also be considered as prescribed forms.

36. Deeds or agreements should be adequately stamped except when the stamp duties chargeable on them are specifically remitted under clause (a) of section 9 of the Indian Stamps Act, 1899, and, where necessary, registered, under the rules in Chapter XLII of the Manual of Government Orders, and in Appendix C of the Uttar Pradesh Stamp Manual, part I, as amended from time to time.


37. Subject to the above general principles, Heads of Departments may, with the approval of the administrative Department of the Government, supplement these instructions and prescribe forms of documents where necessary.

38. The Comptroller and Auditor General and, under his direction other audit authorities have power to examine contracts and to bring before the Public Accounts Committee any case where competitive tenders have not been sought, or where high tenders have been accepted, or where other irregularities in procedure have come to light.


(See rule 28-A)

Model form of Warranty Clause

THE contractor/seller hereby declares that the goods/stores/articles sold to the buyer under this contract shall be of the best quality (and workmanship) and shall be strictly in accordance with the specifications and particulars contained /mentioned in clause———hereof and the contractor/seller hereby guarantees that the said goods/stores/articles would continue to conform to the description and quality aforesaid for a period of——————————days/months from the date of delivery of the said goods/stores/articles to the purchaser and that notwithstanding the fact that the purchaser (inspector) may have inspected and/or approved the said goods/stores/articles, if during the aforesaid period of————————————days/months the said goods/stores/articles be discovered not to conform to the description and quality aforesaid or have deteriorated (and the decision of the purchaser in that behalf will be final and conclusive) the purchaser will be entitled to reject the said goods/stores/articles or such portion thereof as may be discovered not to conform to the said description and quality. On such rejection the goods/stores/articles will be at the sellers risk and all the provisions herein contained relating to rejection of goods, etc. shall apply. The contract/seller shall, if so called upon to do, replace the goods, etc. or such portion thereof as is rejected by the purchaser free of cost at the ultimate destination otherwise the contractor/seller shall pay to the purchaser such damages as may arise by reason of the breach of the condition herein contained. Nothing herein contained shall prejudice any other right of the purchaser in that behalf under this contract or otherwise."