The previous directives, issued on May 13, permitted disruptions caused by the pandemic and the lockdown as a reason for contractors to invoke the force majeure clause in govt contracts. The finance ministry has clarified that Central Public Sector Undertakings (CPSUs) were also covered under the term ‘government agencies’, in an earlier order regarding government contracts, it said on Friday.
The previous directives, issued on May 13, permitted disruptions caused by the pandemic and the lockdown as a reason for contractors to invoke the force majeure clause (FMC) in government contracts.
A separate order also directed all ministries, departments and government agencies to pay back the performance security to contractors on the basis of the proportion of work completed or supplies delivered.
The FMC clause may be invoked by a government contractor who is unable to fulfil contractual obligations due to supply chain disruptions caused by the pandemic or restrictions on transport or other issues resulting from the government-mandated lockdown measures.
On the issue of performance security, as part of its procurement guidelines, government agencies are required to keep 5-10% of the agreed amount in a contract as performance security for up to 60 days after the project is completed.
The ministry directed the release of this amount on a pro rata basis to work completed in order to address cash flow issues of otherwise well-functioning contractors.
Source: indiatimes.com