The Ministry of Defence has changed the structure of the period allowed to vendors to begin delivery of contracted materiel or services.
The Defence Acquisition Council (DAC) decided at the end of last month that:
“With an aim to facilitate production and achieving delivery timelines, the DAC approved aligning the date of delivery with the date of advance payment instead of the date of contract. This entails that the Seller has adequate mobilisation funds available to him to commence production and ensure delivery as per laid down schedule. The vendors would also be saved from penalties in case advances are delayed for reasons beyond their control. This step would provide immense impetus especially to indigenous manufacturers alleviating them from initial financial stress as also ensuring timely delivery of equipment to the Armed Forces.”
What this means is that, while earlier the period allowed to vendors for delivery began from the date of contract, it will now begin from the date of advance payment.
The delivery schedule and invocation of any late delivery penalty clause will be governed by the date of advance payment.
In the past, the first payment of a contracted item or service is often delayed, with contractors being required to begin work on the order on their own expense for fear of being subjected to penalties for late delivery. This is especially problematic for small contractors or in the case of high-value orders.
This change will allow vendors to bid for contracts without concerns about penalties for late deliveries caused by delays in advance payment.
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