The Department of Expenditure has advised central government ministries and departments against setting overly high turnover thresholds, giving excessive weight to a consultancy firm's past experience or prescribing unrealistic minimum payroll requirements in consultancy tenders, saying such conditions could restrict competition.
The advice follows a study of consultancy tenders floated by central government procuring entities on the Government e-Marketplace over the past three financial years. The study found instances of all three practices.
In an office memorandum issued on July 22, the department's Procurement Policy Division said some tenders prescribed comparatively high turnover requirements, gave greater weight to the consulting firm's experience than to the qualifications and experience of proposed key personnel, and required bidders to have minimum staff strength "far exceeding the actual manpower required for execution of the project."
The department said such eligibility and qualification criteria may "unduly restrict competition" and reiterated provisions of the Manual for Procurement of Consultancy Services, Second Edition, 2025, on evaluation of qualifications and technical criteria.
It also specifically directed procuring entities to ensure that any minimum payroll requirement is proportionate to the manpower actually needed to execute the assignment. Disproportionately high staff requirements without adequate justification could unnecessarily restrict competition, it said.
Consultants said the advisory could open more government assignments to smaller and specialised domestic firms.
Suraj Nangia, founder and head of government and public sector advisory at Nangia Global, called it "a pivotal, pro competition reform" in government consultancy procurement. He said high turnover multiples, rigid staff requirements and excessive emphasis on firm-level credentials had often favoured the largest players, even when such filters were not relevant to the assignment.
The manual recommends a minimum average annual turnover of 200% of the assignment value, with at least 50% coming from consultancy contracts over the previous seven years. It assigns 70% weight to general and similar experience and 30% to financial capability.
It also cautions against setting turnover requirements at five to 10 times the estimated cost of consultancy work, saying this "prima facie, appears high". For higher-value assignments, it says turnover should not be blindly linked to the assignment value and an upper cap may be considered to avoid restricting competition to the largest four or five consultancy firms.
"Specialised Indian firms can qualify and compete for complex mandates on merit" when turnover thresholds are reasonable, staff requirements reflect actual project needs and shortlisting focuses on relevant experience and genuine financial capability, Nangia said. He added that better-calibrated criteria could deepen the domestic consultancy pool and improve the quality and diversity of advice available to policymakers.
The memorandum is advisory in nature. It says the relevant provisions of the procurement manual are being reiterated and "may be adhered to", rather than amending the manual or the General Financial Rules, 2017. Rule 184 of the GFR requires a competitive shortlist of at least three firms.
