Proprietary Article Certificate (PAC) in Tender Procurement: The Definitive GFR 166 Guide for MSMEs & Government Buyers

Last Updated: July 17, 2026 | Reading Time: 18 minutes | Author: TenderFlow Pro Procurement Intelligence Team

Quick Answer: A Proprietary Article Certificate (PAC) is a mandatory approval document under GFR 2017 Rule 166 that allows Indian government departments to procure goods from a single source when no substitute exists. It requires technical justification, finance concurrence, and competent authority approval. On GeM, PAC buying mandates bidding above ₹25,000 and demands extra due diligence on price reasonableness under Rule 149.

Table of Contents

  1. What Is a Proprietary Article Certificate (PAC)?
  2. GFR 2017 Rule 166: The Legal Foundation
  3. The 3 Legal Grounds for PAC Procurement
  4. Standard PAC Format & Mandatory Fields
  5. GeM PAC Buying Process: Step-by-Step (2024–2025)
  6. How MSMEs Can Win PAC-Based Tenders
  7. PAC vs. Open Tender vs. LTE: Comparison
  8. Common PAC Mistakes That Lead to Audit Objections
  9. The Proprietary Item Committee: Role & Composition
  10. Price Reasonableness & Rule 149 Compliance
  11. Case Study: How a Jaipur MSME Won a ₹1.2 Cr PAC Tender
  12. Free Download: PAC Template & Checklist
  13. Frequently Asked Questions (FAQ)
  14. Conclusion & Action Plan

What Is a Proprietary Article Certificate (PAC)? {#what-is-pac}

A Proprietary Article Certificate (PAC) is a statutory declaration issued by a competent authority within a government department or ministry, certifying that a specific product or equipment is manufactured by only one firm (the Original Equipment Manufacturer, or OEM) and that no other make or model is acceptable for technical, compatibility, or standardization reasons.

Under India's public procurement framework — governed by the General Financial Rules (GFR) 2017 — competitive bidding is the default. PAC is the exception. It permits Single Tender Enquiry (STE) under Rule 166, bypassing open or limited competition. Because it removes the price-discovery mechanism of competitive markets, PAC is one of the most audited and scrutinized procurement methods in India.

Why PAC Matters in 2026

Definition Box: Proprietary Article Certificate (PAC) — A written certificate under GFR 2017 Rule 166(i) and 166(iii), signed by the indenting officer and approved by the competent authority, declaring that goods are available from only one manufacturer and no substitute exists.

GFR 2017 Rule 166: The Legal Foundation {#gfr-166-legal}

Rule 166 of GFR 2017 governs Single Tender Enquiry — the procurement method that relies on PAC. The rule states:

"Procurement from a single source may be resorted to in the following circumstances: (i) It is in the knowledge of the user department that only a particular firm is the manufacturer of the required goods; (ii) In a case of emergency, the required goods are necessarily to be purchased from a particular source and the reason for such decision is to be recorded and approval of competent authority obtained; (iii) For standardisation of machinery or spare parts to be compatible to the existing sets of equipment (on the advice of a competent technical expert and approved by the competent authority), the required item is to be purchased only from a selected firm."

Key Legal Nuances

Aspect Requirement Consequence of Non-Compliance
Rule 166(i) — Proprietary PAC mandatory; must prove sole manufacturer status Tender void; CAG objection; recovery
Rule 166(ii) — Emergency Written emergency justification + competent authority approval Audit objection; potential blacklisting
Rule 166(iii) — Standardization Technical expert advice + compatibility proof Bid challenge; contract cancellation
Finance Concurrence Mandatory under all three sub-rules Financial irregularity
Competent Authority Must be higher than normal purchasing authority Ultra vires decision

Source: General Financial Rules 2017, Ministry of Finance, Department of Expenditure.

The 3 Legal Grounds for PAC Procurement {#3-legal-grounds}

1. Sole Manufacturer (Rule 166(i))

This is the most common PAC ground. The user department must demonstrate that:

Example: A DRDO lab requires a specific spectrometer manufactured only by Thermo Fisher Scientific. No Indian or alternative OEM produces a device with the same wavelength accuracy.

2. Genuine Emergency (Rule 166(ii))

Emergency PAC does not require a Proprietary Article Certificate in the strict sense, but it requires:

Red Flag: CAG audits frequently reject "self-created emergencies" where poor planning led to last-minute procurement.

3. Standardization & Compatibility (Rule 166(iii))

Used for spare parts, upgrades, or expansions of existing systems. Requirements:

Example: Indian Railways procuring brake pads compatible only with existing LHB coach specifications.

Standard PAC Format & Mandatory Fields {#pac-format}

A valid PAC must contain the following fields. Missing any field renders the certificate defective:

Proprietary Article Certificate Template

PROPRIETARY ARTICLE CERTIFICATE
(Under GFR 2017 Rule 166)

(i) Name of Equipment / Item: _________________________________
    (Equipment Name) through Single Tender Enquiry (GFR-166)

(ii) The indented goods are only Manufactured by M/s.: _______________________

(iii) No other make or model is acceptable for the following reasons:
      a) ___________________________________________________________
      b) ___________________________________________________________
      c) ___________________________________________________________

(iv) Concurrence of finance wing to the proposal: Yes / No
     (Vide Office Order / U.O. No.: _____________ Dated: _____________)

(v) Approval of the Competent Authority: Yes / No
     (Vide Office Order / U.O. No.: _____________ Dated: _____________)

(Signature with date & Designation of the Indenting Officer)

RECOMMENDATION OF PROPRIETARY ITEM COMMITTEE

The Committee after scrutiny found that ________________________________
(Equipment Name) is a *Proprietary / is not a proprietary item of M/s. ___________
and hence, *recommends / does not recommend the Purchase of ______________
through single tender inquiry (GFR-166).

(Member)              (Member)              (Member)
(Member)              (Chairman)

Approved / Not Approved

DIRECTOR / HEAD OF DEPARTMENT
(Strike out whichever is not applicable)

Mandatory Attachments to PAC

  1. Technical Justification Note — Why no substitute exists.
  2. Market Survey Report — Evidence of non-availability from other sources.
  3. Finance Concurrence — Signed by FA/CAO.
  4. Competent Authority Approval — One level above normal purchasing authority.
  5. OEM Authorization Letter (if buying through dealer/distributor).
  6. Manufacturer's Certificate — Confirming proprietary status.

GeM PAC Buying Process: Step-by-Step (2024–2025) {#gem-pac-process}

The Government e-Marketplace (GeM) has specific rules for PAC buying under its General Terms and Conditions (Version 1.21, 2025). Here's the updated workflow:

Step 1: Buyer Identifies Proprietary Need

The buyer department determines that the required item is proprietary and not available through competitive GeM listing.

Step 2: Internal PAC Generation

Step 3: PAC Upload on GeM

The buyer uploads the PAC to GeM with:

Step 4: GeM Review & Approval

GeM authorities review the PAC for:

Step 5: Bid Creation

Once approved, the buyer creates:

Step 6: Bidding & Price Discovery

Value Threshold Mandatory Process
Up to ₹25,000 Direct purchase possible (with price reasonableness check)
Above ₹25,000 Bidding is mandatory; Reverse Auction (RA) may follow
Above ₹10 lakh RA typically mandatory for PAC items with multiple authorized sellers

Step 7: Order Placement

The lowest valid bid (L1) wins. If multiple authorized sellers exist, RA drives the price down further.

Critical GeM PAC Rule (2025 Update)

"In case of all PAC procurements, the Buyers will have to carry out extra due diligence in establishing the reasonableness of prices before placement of contract as per Para (vii) of Rule 149 of GFR-2017."

Source: GeM General Terms and Conditions Version 1.21

How MSMEs Can Win PAC-Based Tenders {#msme-win-pac}

For MSMEs, PAC tenders are a strategic goldmine — competition is naturally restricted to OEMs and their authorized resellers. Here's how to dominate:

1. Secure OEM Authorizations Early

2. Optimize Your GeM Catalogue

3. Monitor PAC-Specific Tenders

Use TenderFlow Pro's AI-powered tender scanner to:

4. Price Strategically for Reverse Auctions

5. Challenge Invalid PACs

If you believe a PAC was issued without proper justification:

MSME Benefits on PAC Bids:

PAC vs. Open Tender vs. LTE: Comparison {#pac-comparison}

Parameter Open Tender (Rule 161) Limited Tender (Rule 162) PAC / Single Tender (Rule 166)
Competition High — all eligible bidders Medium — 3+ invited suppliers None — single source
Value Threshold ₹50 lakh & above (post-July 2024) Up to ₹50 lakh (post-July 2024) No value limit
Advertisement CPPP + GeM + newspapers CPPP + GeM + direct invite No public advertisement
PAC Required No No Yes — mandatory
Approval Level Standard competent authority Standard + approval if <3 bids Higher than normal authority
Audit Risk Low Medium High
Timeline 4–6 weeks 2–3 weeks 1–2 weeks
Best For Infrastructure, bulk supply Specialized services, recurring OEM equipment, spares, emergency
MSME Opportunity High volume, high competition Moderate, relationship-driven Low volume, very high margin

Source: GFR 2017 (as amended July 2024), Ministry of Finance OM dated 10.07.2024.

Common PAC Mistakes That Lead to Audit Objections {#pac-mistakes}

Based on CAG audit findings and CVC guidelines, these are the top PAC errors:

❌ Mistake 1: Generic Items Disguised as Proprietary

The Error: Declaring standard items (printers, toner, office furniture) as proprietary to favor a vendor.

The Consequence: CAG objection, recovery of excess payment, disciplinary action under CCS (CCA) Rules.

The Fix: Conduct a genuine market survey. If 3+ suppliers exist, PAC is invalid.

❌ Mistake 2: Retrospective Approval

The Error: Procuring first and obtaining PAC approval later.

The Consequence: Expenditure is treated as "unauthorized" and recoverable from the officer.

The Fix: PAC must be approved before issuing the tender or purchase order.

❌ Mistake 3: Missing Finance Concurrence

The Error: Technical officer signs PAC without FA/CAO concurrence.

The Consequence: Financial irregularity; payment may be withheld.

The Fix: Always obtain finance wing concurrence before competent authority approval.

❌ Mistake 4: Stale Supplier Lists

The Error: Using a 5-year-old registered supplier list for LTE/PAC hybrid procurements.

The Consequence: CAG treats this as restrictive practice favoring known vendors.

The Fix: Update registered supplier lists annually with due publicity.

❌ Mistake 5: Inadequate Price Justification

The Error: Accepting OEM's quoted price without benchmarking.

The Consequence: Rule 149(vii) violation; excess payment recovery.

The Fix: Use GeM price trends, past purchase data, and third-party quotes to establish reasonableness.

The Proprietary Item Committee: Role & Composition {#proprietary-committee}

Many ministries and PSUs mandate a Proprietary Item Committee to review PAC requests. While GFR 2017 does not explicitly mandate this committee, organizations like NIAMT, IISc, and DRDO have institutionalized it as a safeguard.

Typical Committee Composition

Role Responsibility
Chairman Head of Department / Director — Final approver
Technical Member Subject matter expert — Validates technical justification
Finance Member FA/CAO representative — Certifies fund availability
Procurement Member Purchase officer — Checks procedural compliance
Independent Member External expert (in some organizations) — Unbiased review

Committee Checklist

Price Reasonableness & Rule 149 Compliance {#price-reasonableness}

Rule 149(vii) of GFR 2017 mandates that buyers must certify the reasonableness of rates in all procurements. For PAC — where there is no competition — this becomes critical.

Methods to Establish Price Reasonableness

  1. GeM Price Benchmarking: Compare against similar products on GeM.
  2. Last Purchase Price (LPP): Check if the price is within 10% of the last identical purchase.
  3. Third-Party Quotations: Obtain informal quotes from 2–3 other suppliers (even if they can't supply the exact item) to benchmark.
  4. OEM Price List: Use the manufacturer's published price list as a ceiling.
  5. Reverse Auction: If multiple authorized sellers exist, RA establishes market price.

Price Reasonableness Certificate Template

PRICE REASONABLENESS CERTIFICATE

I certify that the rate of Rs. _________ per unit for ____________________
is reasonable based on:

[ ] GeM benchmark price
[ ] Last Purchase Price (Ref: __________ Dated: _________)
[ ] Third-party quotations (attached)
[ ] OEM published price list (attached)
[ ] Reverse Auction result

The price is within acceptable variance and represents fair value
for the exchequer.

Signature: _________________
Designation: _________________
Date: _______________________

Case Study: How a Jaipur MSME Won a ₹1.2 Cr PAC Tender {#case-study}

Company: Rajshree Scientific Solutions Pvt. Ltd., Jaipur (Udyam-registered MSME) Sector: Laboratory Equipment Tender: PAC-based procurement of HPLC system for Rajasthan State Pollution Control Board Value: ₹1.2 Crore

The Challenge

The Pollution Control Board issued a PAC tender for an Agilent HPLC system, citing proprietary detection technology. Rajshree Scientific was an authorized reseller for Agilent but faced competition from another authorized dealer in Delhi.

The Strategy

  1. Catalogue Precision: Ensured their GeM listing matched the exact Agilent model number (1260 Infinity II) with all golden parameters.
  2. Documentation: Uploaded a current OEM authorization letter valid through 2027.
  3. Technical Engagement: Submitted a pre-bid clarification request highlighting their local service center in Jaipur — a value-add not offered by the Delhi competitor.
  4. RA Discipline: Entered the Reverse Auction with a floor price of ₹1.18 Cr. Stopped bidding at ₹1.195 Cr when the competitor dropped to ₹1.192 Cr.
  5. MSME Preference: Invoked 15% price preference. Since their bid was within 15% of L1, they matched the L1 price and won 100% of the contract under MSME reservation.

The Result

Key Takeaway: PAC tenders aren't just about price. Local service capability, documentation discipline, and MSME preference rules can turn a #2 bid into a winning contract.

Free Download: PAC Template & Checklist {#free-template}

📥 Download Proprietary Article Certificate Template + 20-Point Compliance Checklist

Includes:

Frequently Asked Questions (FAQ) {#faq}

Q1. Is PAC mandatory for all single-source procurements?

A: Yes. For procurements under Rule 166(i) and 166(iii), a PAC is mandatory. For emergency procurements under Rule 166(ii), a written emergency justification replaces the PAC, but the approval threshold is equally strict.

Q2. Can a department issue a PAC for services?

A: PAC is primarily for goods. For proprietary services (e.g., patented software licenses), a similar justification note is required, though the term "PAC" is technically specific to physical goods under GFR 166.

Q3. What happens if a PAC is challenged on GeM?

A: GeM has a grievance redressal mechanism. A seller can challenge a PAC if they believe their product is technically equivalent. GeM may suspend the bid pending review. If the challenge is upheld, the buyer must either justify the PAC or convert to an open tender.

Q4. Does PAC procurement require bidding on GeM?

A: For values up to ₹25,000, direct purchase is permitted with a price reasonableness check. Above ₹25,000, bidding is mandatory. If multiple authorized sellers exist, a Reverse Auction is typically conducted.

Q5. Who is the "competent authority" for PAC approval?

A: The competent authority for accepting a single tender offer is one level higher than the authority normally competent to accept tenders for that value. For example, if a Director normally approves tenders up to ₹50 lakh, the PAC for any value requires approval at the Secretary/Additional Secretary level.

Q6. Can an MSME challenge a PAC favoring a large OEM?

A: Yes. If the MSME can demonstrate that its product meets the technical specifications and is functionally equivalent, it can file a challenge. However, the MSME must provide technical documentation — not just a claim.

Q7. How long is a PAC valid?

A: A PAC is valid for the specific procurement for which it is issued. It cannot be reused for subsequent procurements. Each tender requires a fresh PAC unless the department has a blanket approval for recurring proprietary items (rare and audit-sensitive).

Q8. What is the role of the Proprietary Item Committee?

A: While not mandated by GFR 2017, many organizations (especially PSUs, IITs, and research institutions) require a Proprietary Item Committee to scrutinize PAC requests. The committee reviews technical justification, verifies OEM claims, and recommends approval or rejection.

Q9. Is price preference for MSMEs applicable in PAC tenders?

A: Yes. MSME price preference (15% margin to match L1) applies to PAC bids on GeM, provided the MSME is Udyam-registered and the buyer has enabled MSE purchase preference in the tender.

Q10. What documents should an MSME upload for a PAC bid on GeM?

A:

Conclusion & Action Plan {#conclusion}

The Proprietary Article Certificate is one of the most powerful — and most dangerous — tools in Indian public procurement. Used correctly, it ensures mission-critical equipment reaches government departments without compromise. Used incorrectly, it invites CAG objections, recoveries, and disciplinary action.

For buyers, the mantra is: Document everything. Justify every line. Benchmark every price.

For MSMEs, the opportunity is clear: PAC tenders have restricted competition, higher margins, and predictable demand. The key is OEM authorization, catalogue precision, and understanding the MSME preference framework.

Your 7-Day Action Plan

Day Action
Day 1 Audit your current product portfolio. Identify which items are OEM-authorized.
Day 2 Contact 3 manufacturers in your domain. Request GeM-compliant authorization letters.
Day 3 Update your GeM catalogue with exact make/model numbers and golden parameters.
Day 4 Set up TenderFlow Pro alerts for PAC tenders in your product category.
Day 5 Review past CAG audit reports on PAC misuse. Learn from others' mistakes.
Day 6 Prepare a "PAC Challenge Kit" — technical docs proving equivalence for your top 5 products.
Day 7 Bid on one live PAC tender. Treat it as a learning exercise, not just a revenue play.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Procurement officers should consult their departmental finance wing and legal cell before issuing PACs. MSMEs should verify current GeM and GFR rules at the time of bidding.

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