The process of outsourcing

Last updated: May 20, 2019

Having worked in two Maharatna PSUs of India, I have a decent understanding of the process of outsourcing in the government sector. As per my observation, these are the rough steps in that process:

  1. A survey of the necessity of implementing a certain system/project, doing a certain work, or procuring certain item(s) is done.
  2. Based on the survey, the requirements are assessed.
  3. Then an Estimate is prepared where the list of items, their quantities, rates and total amount for the project is estimated.
  4. If the requirements can be technically catered to by the company manpower and the size of the work is not too large, then it is done so.
  5. Otherwise, based on the Estimate and any supporting documents from higher authorities, a Notesheet is initiated seeking Administrative Approval from Competent Authority for floating a Tender.
  6. After receiving approval and allocation of fund from the Finance Dept. of the PSU, a Notice Inviting Tender (NIT) is prepared which is a comprehensive document containing all important dates, guidelines for the bidder, terms and conditions of the work and technical details of the work to be implemented.
  7. After floating the tender for a specified period of time, the bids are opened and examined by a Tender Committee(TC) of the PSU.
  8. The Tender Committee comes with its recommendations regarding the successful bidder based on certain guidelines and bid assessment.
  9. The bidder so chosen now becomes the contractor for this job.
  10. He is now asked to provide a complete expenditure sheet which is used to allocate the exact amount of budget for the contract work for a given time period as mentioned in the NIT, which also includes AMC (Annual Maintenance Contract) charge.
  11. To enable the contractor party to start the work without delay, a Letter of Indent (LOI) is issued by the PSU to the party.
  12. Meanwhile an official Work-Order is prepared similar to the LOI, which contains the complete table of cost involvements.
  13. Thereafter an Agreement is signed between the PSU and the contractor firm.
  14. The One-time Payment is then processed to be paid to the party, and rental/periodic payments are also paid as specified in the NIT.

- Raman Butta