Why the Finance Ministry wants to give homegrown firms a bigger role in consultancy contracts

In a move that could help homegrown firms to compete on a more even footing for government consultancy contracts, the finance ministry has issued an advisory for easing eligibility criteria for such projects.

In a memorandum regarding prescription of qualification and evaluation criteria in procurement of consultancy services, the department of expenditure has reiterated guidelines that enable firms with a lower turnover to also compete for such contracts. It has also eased manpower threshold and has said that if minimum staff strength on the payroll of the firm is prescribed as an eligibility and qualification criterion, it may be ensured that the prescribed minimum staff strength is commensurate with the manpower requirement necessary for satisfactory execution of the consultancy assignment.

The move comes after the department reviewed a sample study of consultancy procurement tenders floated by the Central government procuring entities on GeM in the last three financial years revealed issues with respect to eligibility and qualification criteria. These included comparatively high turnover requirements, higher weightage to the consulting firm’s experience than to qualifications and experience of the proposed key personnel and minimum staff strength on the payroll of the bidder far exceeding the actual manpower required for the project.

“The above findings indicate that such eligibility and qualification criteria may unduly restrict competition in procurement of consultancy firms,” the expenditure department noted.

Industry players and experts welcomed the move noting that this would enable domestic companies to also participate in such contracts, which till now were dominated by larger firms.

Kiran Kothekar, Co-Founder & Director, Vector Consulting Group said the move will help domestic firms have access to one of the largest consulting markets in the country. “After that, it is sheer delivery capability which should help firms stand out and grow on their own merit,” he said, adding that the focus of the evaluation of the firm should be first on the firm's experience in executing the project, and secondly on the capacity to execute the project, which includes the expertise of the people to be deployed and the size of the firm.

“This can be assured by insisting that the team deployed should be of employees of the firm, and not a team assembled by hiring just before the engagement starts,” he said.

Suraj Nangia, Founder and Head- Govt. & Public Sector Advisory, Nangia Global pointed out that 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.

Specialised Indian firms can qualify and compete for complex mandates on merit. “Indian firms’ ability to design robust methodologies with cultural milieu in mind, deploy highly qualified key personnel and bring sector specific insight to the table becomes central, instead of being overshadowed by sheer size or legacy brand,” he further said.