By Adv. Gaurav Kumar, Founder, Bid Nexa · Advocate, High Court of Jharkhand · General information, not legal advice for a specific case.
Under the Public Procurement Policy for MSEs, when the lowest bid (L1) is not from an MSE, MSEs quoting within L1 + 15% may be allowed to supply a portion by matching the L1 price. They can supply at least 25% of the tendered value. Central ministries and CPSUs must procure at least 25% of their annual purchases from MSEs.
The policy in brief
- At least 25% of annual procurement by central ministries, departments and CPSUs must come from MSEs. This became mandatory through Gazette Notification S.O. 5670(E) of 8 November 2018.
- Within that 25%, there are sub-targets of 4% for MSEs owned by SC/ST entrepreneurs and 3% for MSEs owned by women entrepreneurs.
- MSEs within the L1 + 15% band may be asked to match L1 for part of the order, when L1 is not an MSE.
Source: the MSME Ministry's FAQ on the policy, January 2022.
How the matching works
- The buyer opens price bids and finds L1.
- If L1 is not an MSE, the buyer looks for MSEs within 15% of L1.
- The lowest such MSE is offered the chance to match L1 for its share.
- If it declines, the next-lowest MSE in the band gets the offer.
- For non-divisible items, an MSE within the band may be awarded the full supply.
What it means for your pricing
Purchase preference is a safety net, not a strategy. Price to win on merit, but know that a close second can still win part of the order. Before you accept a match, check that the L1 price still covers your costs, freight and warranty.
Make sure you qualify
- Hold a valid Udyam registration covering the item
- Declare MSE status correctly in the bid
- Read whether the tender applies purchase preference at all; some do not
Confirm in the tender document / NIT.
Where it applies
The policy applies to central ministries, departments and CPSUs. Many states have their own preference policies, which can differ. Check the tender and the state's rules before you rely on any preference.
Frequently asked questions
Does L1 + 15% apply to every tender?
No. It applies where the tender follows the MSE procurement policy and the lowest bidder is not an MSE. Some tenders state that it does not apply. Confirm in the tender document / NIT.
Do state governments follow the same rule?
Not always. States can have their own procurement preference policies with different terms. Read the tender and the applicable state policy.
Can a trader MSE get purchase preference?
Conditions for traders have varied. The safest course is to read the tender's eligibility clause and your Udyam registration's coverage before claiming preference.
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