Government Procurement From MSME's The Present & The Future
The Management Accountant|December 2020
Abstract The MSMEs in India are considered to be the real engines of growth for the economy and their healthy participation in Government Procurement will have its own beneficial spin offs to the society. Government is doing a lot to encourage them but still some more things will empower these lilliputs to become economic giants and contribute in nation building.

Government in India is a very big procurement engine, this can be seen from the quantum of orders finalised in GeM1 as per their official site home page:

Note: Status as on 25.10.2020

This is just the tip of the proverbial iceberg since GeM procurement is not yet underway in a full swing. There are still daily Goods and Services that are being added in GeM and there are very many improvements being carried out in the system. Further in future all State Governments are also expected to come on board GeM increasing the transactions multifold.

Being such a big procurement agency, Government procurement is a big hope for the 6.3 crore MSMEs in the country2. This number is also prior to the reclassification of MSMEs as below3:

Being a model procurement agency which intends to procure with transparency, fairness and equity, the Government wishes to support the MSMEs in supplying to Government.

First of all we need to understand why they need this support. Our Government Procurement ecosystem works predominantly on L1 basis i.e. the lowest bidder gets the order, though the present General Financial Rules 2017 provides for Quality and Cost Based Selection, Life Cycle Costing, etc as options still majority of the cases are decided on the cost component. Considering that to win you need to quote wafer thin margins, it is imperative that to do business with Government, these minnows need support.

Secondly, unless they are supported, they will seldom be able to survive any delays in payment, unfair rejection of supplies, lack of transparency in finalising bids, etc as a result of the infamous corrupt practices of Organisations in the Government System.

The following are the support mechanisms extended by the Government:

1. Purchase Preference: Reservation of specific items (358 numbers) for procurement from micro and small enterprises (MSE)4

2. MSEs are provided tender documents free of cost and are exempted from payment of earnest money

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