Infibeam and its partners have won the contract as a Managed Service Provider for “Design, Development, Implementation, Operation & Maintenance of Government e-Marketplace (GeM)”, the company has told the stock exchanges. A couple of days ago, the Economic Times had reported that the five year contract is worth around Rs 1000 crore, and Infibeam and its partner Intellect Design Arena had been the lowest bidders, but that was an unconfirmed report.

Note that a GeM is already running, developed by the Directorate General of Supplies and Disposals (DGSD) and launched on 9th August 2016, with a “limited set of functionalities of GeM Solution” according to the RFP, and “more than 7400 products in about 150 product categories and hiring of transport service” according to a press release from the government in January. Infibeam and its partners are expected to transition to a new platform, and the contract is applicable for five years after the platform goes live. It may be extended subsequently for two years by the DGSD.

The GeM will be used by government departments for procurement of commonly used products/goods as well as services. How much is this business worth? Here’s an estimate from the DGSD:

So that’s Rs 2500 crores of GMV to begin with, as an estimate. Note that as of January 23rd 2017, “Transactions for more than Rs 140 Crore have already been processed through GeM.”

Now the payout to Infibeam and its partners will depend on what they bid. The payout scheme is below, where “P” refers to the bid percentage.

Two examples from a few given in the RFP:

Scenario (a)
Estimated Value of Orders for a Year: Rs 1000 Cr
Actual Value of Orders in that Year: 800 Cr
MSP Bidding Parameter (P): 0.2%
MSP Payout in that year: 0.2% * 800 = Rs 1.6 Cr

Scenario (b)
Estimated Value of Orders for a Year: Rs 1000 Cr
Actual Value of Orders in that Year: Rs 2400 Cr
MSP Bidding Parameter (P): 0.2%
MSP Payout in that year: INR 4.16 Cr

Infibeam and partners are getting an advance of Rs 25 crores for setting up, which will be recovered over 5 years. Once the GeM goes live, payouts will be on a quarterly basis. Read the 502 page RFP here.

Why the government wants a GeM

The idea behind this is to “manual process inefficiencies, human interventions in procurement”. From the January PR, here’s why:
– Direct purchase in minutes, with the entire process online
– For transparent bidding in case of procurements of a higher value
– Standardised technical specifications already created, so the government department doesn’t need to create new specifications.
– Easy communication with all suppliers, when an RFP is ready
– Price reasonability: “Very soon, GeM will also start getting feeds from various other public procurement portals in order to ensure that the same item has not been procured at a lesser rate by any other Government agency, from the same or a different vendor.The reasonability of price would be further strengthened by way of integration with GSTN and ICEGATE that will enable the buyer to ascertain the price of an item when it exited the factory gate or when it got imported into the country.” – “Strengthen due diligence about the veracity of suppliers wanting to do business on GeM.”

What the government noticed then on the initial GeM was that “the average prices on GeM are lower by atleast 15-20%, and in some cases even upto 56%. “