8.0 Brief Introduction:

There are purchase orders / contracts where the part delivery is made / accepted but the payment to the suppliers is not made due to either the Purchase Order (PO) terms do not have provision for Part Payment against Part Supply of materials or there is ambiguity in PO terms w.r.t. Part Supply Part Payment. Sometimes payment to the vendors including MSME is delayed due to non-clarity on such issues.

8.1 Background:

The cases of pending invoices where the delivery was not completed i.e. part delivery was made by the supplier were scrutinised w.r.t. PO terms. In some of the POs it was clearly mentioned that 100% payment will be made after supply and acceptance of complete set of ordered items. However, the suppliers could not make complete delivery within contractual delivery period and to minimise LD part delivery was made. In certain cases, complete delivery was made but some items were rejected during receipt inspection. In some POs part delivery was acceptable but part payment was not specified. In some cases, delivery was made in more no. of lots than that specified in PO. Sometimes, the items like documentation having zero value as per PO are delayed by the vendors.Thus, due to one or other reason the part payment was not made against part supply though in some of the cases the partly supplied/accepted items were used for production.Amending the PO to include part payment required approval from competent authority as it was change in payment terms.

8.2 Implementation:

In order to avoid such occurrences in future the following Systemic Improvements were suggested and implemented.

(i) Acceptability of Part Supply has to be spelt out in Tender document, so that the bidders can quote accordingly.

(ii) The no. of lots (including Documentation) and Part Supply Part Payment must be discussed and recorded during TNC/CNC meetings, irrespective of whether it is mentioned in the offer or not. If such meetings are not conducted, then clear written confirmation on the same is to be obtained from the bidder prior to issuing technical clearance to the bidder.

(iii) The part supply part payment clause is to be separately defined in the PO indicating its applicability along with the acceptable no. of lots and items in each lot, as mutually agreed between MDL and supplier.

(iv) In case, the value of Documentation is found to be quoted as zero in the price bid, then the Documentation should not be indicated as a separate line item but it should be merged with the line item of main equipment. Alternatively, payment terms can be finalized such that 5-10 % (mutually agreed) of PO Value can be retained till its delivery & acceptance.

(v) In case the quantity of material is large or the items are divisible/ separable (e.g. valves, cables, fittings etc.) part delivery part payment may be accepted subject to condition that it will not affect production schedule. Delivery and payment terms may be framed accordingly.

8.3 Impact and Benefits:

With the above systemic improvement, the PO terms are more clear, delay in clearing invoices and payment to the suppliers is minimized.

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