Selection of Source, Rate Contract / DGS & D Contract.....Purchase procedure (contd..)


What is Rate Contract ?


In certain situations , mostly in case of manufacturing units but otherwise also, there are items of regular use for which it is  advantageous on commercial as well as technical grounds to have one long term order / contract with one or more than one vendors to meet the recurring requirement.

The rate contract is entered into when the total annual requirement of certain items is large but not fixed.

Rate contracts may also be entered into for items which are identified as of regular and

repetitive consumption.

What is normally done is that a rate is fixed ,through tendering and selection process of a vendor and then repeated orders are placed depending on as and when the requirement arise. 

How it is done ?

For entering into rate contracts / long term contracts, the mode of tendering to be followed may be decided as per the nature of the item, the available sources, etc.  Thus, rate contract enquiries may be either Open Tender/ Limited Tender/ Single Tender , depending upon the nature of the item.

All other conditions applicable to issuing tenders are same, such as while issuing LTE for rate contract, it should be ensured that only reliable and reputed manufacturers/ suppliers/ contractors are contacted or else if the source is not known clearly Open tendering may be resorted to.
Items such as Chemical & Reagents, Oil & Lubricants can be procured on Rate contracts basis



DGS & D is a Central Purchasing & Quality Assurance Organisation of Govt. of India, Department of Supply, Ministry of Commerce.

In the year 1860, the British Govt. evolved a concept of Central buying & set up India Stores Department in London for meeting procurement needs of Govt. of India.
Established in 1951 in its present form for rendering procurement services to Central & State Govt. by placing Rate Contracts for common user items & contracts against their ad-hoc demands.
Adhoc procurement decentralized in December, 1991. Main function now is to conclude RATE CONTRACTS.
  • Quality assurance functions continue to remain centralized as before
  • Continues to be the NODAL Agency of Govt. of India for purchase policy & procedure.
  • Govt. Departments/Organisations, who have not built-up their own infrastructure for purchase, can raise their demands on DGS&D for ad-hoc procurement.


  • Handling procurement against several World  Bank & Asian Development Bank aided projects for modernisation of Polytechnics & Vocational Training Centres, National Aids Control. National / State Highways, Hydrology Project
  • Services continue to be available to Public Sector Undertaking & Autonomous bodies.


It  enters into Rate contracts for a number of items of wide demand by the different ministries and Public Sector Undertakings ( ). Such demanding agencies are known as Direct Demanding Office under the DGS&D contracts.

DGS & D fixes rates and terms and contracts with many firms and for many items yearly and thus the interested buyers, mostly the direct demanding agencies and PSUs can place orders on such firms for meeting their requirements.

The advantage is in economy of time s the buyer doesn't have to go through the tendering process which certainly is time consuming ,at times. The DGS & D finalises the rate contracts in the start of a financial year and the rate, terms and conditions usually hold for the entire financial year. Sometimes, the rates do undergo changes with the consents of the sellers.


Items on DGS&D Rate Contract Month wise

Rate Contract for May,2011

Different modes of Tendering :


Purchase Procedure (Steps)

Purchase Flow Chart
Recognition and description of need
Transmission of need (Indenting)
Selection of Source to satisfy the need
Contracting with the accepted source
Following up with the source / supplier
Receiving and inspecting material
Payment and closure of the case