Prior experience no criteria for startups in public procurement

In a move that would give a level playing field to startups regardless of their past experience, the department of expenditure has issued a directive to all ministries giving all startups the eligibility in public procurement. Their prior experience won’t be criteria anymore.

This benefit was enjoyed only by micro and small enterprises so far. This now enables startups to participate in such tenders with relaxed eligibility conditions.

It was in March this year after Prime Minister Narendra Modi launched the Startup India initiative that the Micro Small and Medium Enterprises (MSME) ministry issued an order to all ministries and central public sector units to relax conditions related to prior experience and turnover for startups in all public procurements.

The order, however, only mentions small and micro enterprises covered by the Public Procurement Policy for MSE order 2012.

A senior official said, “The latest order has now put to rest earlier confusion over which startups are eligible for such benefits.”

A lot of things have been cloudy under the directives. Like no definition for startups has been given in the directive. A medium enterprise as defined in the MSME Act should have an investment of not less than Rs 5 crore and not exceeding Rs 10 crore in equipment if it operates in manufacturing space.

Similarly, in the services sector, this limit ranges from Rs 2-5 crore. Under the start-up action plan, a startup is defined as one having a turnover of more than Rs 25 crore and can’t be older than 5 years from incorporation date.

Under the public procurement policy, it is said the central government department and ministries and its central public sector units (PSUs) have to procure at least 20% of their purchases from micro and small enterprises beginning 1st April 2015.

However, the MSME ministry’s order could still leave certain startups out of the race as it states that the start-ups should have the technical capability to deliver the goods and services as per prescribed technical and quality specifications to get eligible.