Finmin Eases Gem Consultancy Tender Rules Boost Indian Firms Big Four Dominance

In a measure that paves the way for domestic consultancies to be on an equal footing with multinational consulting firms, the Department of Expenditure has issued an advisory to all central government departments and ministries for easing of eligibility criteria in government consultancy tenders.

The department, which comes under the Ministry of Finance, has issued the advisory against prescribing high turnover requirements, higher weightage to consulting firm’s experience and minimum staff strength on the payroll of the bidder as criteria for consultancy tenders.

The Department of Expenditure said that a sample study of consultancy procurement tenders floated by central government procuring entities on GeM (Government e-Marketplace) — a digital platform for procurement of goods & services by central/state ministries/departments and public sector units — during the last three financial years revealed the issues with the eligibility and qualification criteria for consultancy tenders.

In an office memorandum dated July 22, the department mentioned three key issues: comparatively high turnover requirements, assignment of higher weightage to the consulting firm’s experience than to the qualifications and experience of the proposed key personnel, and minimum staff strength on the payroll of the bidder prescribed as an eligibility criterion, far exceeding the actual manpower required for execution of the project.

“The above findings indicate that such eligibility and qualification criteria may unduly restrict competition in the procurement of consultancy services,” it said.

Additionally, regarding the minimum staff requirement on the firm’s payroll as an eligibility and qualification criterion, the department said that this minimum staff strength should align with the necessary manpower needed to execute the consultancy assignment, as “disproportionately high staff strength requirements, without adequate justification, may unnecessarily restrict competition”.

The multinational consulting firms, most prominently the Big Four, have played a major role in consulting government departments. The Indian Express had reported in January 2024 that 44 central departments had hired 1,499 consultants from external agencies, including the Big Four i.e., Ernst & Young, PwC, Deloitte and KPMG, incurring an annual expenditure of Rs 302 crore.

This office memorandum is a pivotal, pro-competition reform in the way the Government of India engages with advisors, said Suraj Nangia, Founder and Head, Government & Public Sector Advisory, Nangia Global. “For years, government tenders had conditions such as high turnover multiples, rigid staff strength requirements and an excessive focus on firm level credentials, tilting the field towards only the largest players, regardless of whether those filters were relevant to the work at hand. This advisory explicitly calls that out and nudges procuring entities to frame eligibility criteria in a way that truly reflects project needs,” he said.

The department reiterated the eligibility and qualification criteria for consultancy procurements, asking ministries to adhere to certain paras of the Manual for Procurement of Consultancy Services related to criteria, sub-criteria along with evaluation and qualification. As per the manual, a procuring entity has to determine whether the consultants are qualified and capable in all respects to be shortlisted to provide the services. The procuring entity will evaluate the consultants for shortlisting, inter-alia, based on their past experience of handling general and similar consultancy assignments, and financial capability of the firm. The procuring entity also reserves the right to waive minor deviations in the qualification criteria if they do not materially affect the capability of a consultant to perform the contract.

Similarly, in the sub-criteria and criteria, quality of the technical proposal has to be evaluated by awarding marks so as to make the total maximum technical score of 100 for the criteria and sub-criteria for quality/technical proposals — (a) the consultant’s relevant experience for the assignment; (b) the quality of the methodology proposed; (c) the qualifications of the key staff proposed; and (d) capability for transfer of knowledge.