My argument is that: Direct Procurement Method is only applicable on ground of urgency or emergency when life and property are threatened and other methods are not practical. Lack of “reasonable” substitutes does not hold any water.
According to Section (74), a procuring entity may use direct procurement if the following are satisfied:
- There is only one person who can supply goods, works or services
- There is no reasonable alternative or substitute
- There is urgency (life and property threatened) and other available Procurement Methods are impractical.
I want to indicate that the above section was an attempt to borrow from the discipline of economics, specifically “Monopoly”. In elementary economics you will learn that there is no such a thing as Pure Monopoly. It is simply hypothetical. However, for discussion purpose, the graphical representation of monopoly is as follows:
The above diagram shows that the demand is inelastic and a monopoly is able to charge any price and because there are no substitutes, consumers will continue to buy the item at whatever price. Such a situation never exists in the real world.
Perfect Vs Imperfect Substitute (The so called reasonable substitutes)
In the Act, 2005 the term used is “reasonable” substitutes while in economics the terms used are Perfect/imperfect substitutes. The term perfect or imperfect substitute is more objective than “reasonable’ which is highly subjective. In any case only PPOA has final say of what is reasonable substitute. There would always “exist” reasonable substitutes and therefore direct procurement will not hold on ground of absence of reasonable alternatives.
Urgency or emergency (Section 74) seems to remain the only ground for direct procurement as long as it is not “induced”. For clarity, urgency refers to situations where life and property are imminently threatened and immediate procurement action is required. This is the only tenable justification for single-sourcing.