In the last decade, startups have emerged by providing new solutions and services in domains such as health, transport, security, education, payments to name a few. Public procurement from startups is an area that has grown a lot of importance over the last five years. Governments can benefit from startup procurement friendly policies by having a wider range of tailor-made products and services to choose from.

The Government of Karnataka recognized the importance of promoting public procurement from startups. Aside from creating and providing a marketplace with healthy competition, the agenda is also, to promote the growth of startups and enhance the ecosystem.

Government of Karnataka amended Karnataka Transparency in Public Procurements Rules, 2000 vide G. O. No. FD 218 Exp -12/2021 dated 1/09/2021 to encourage procurement from startups.

The aim of the Karnataka PMA framework is to promote the growth of startups in Karnataka, while encouraging procurement of startup products/ services by State Government Departments/ State Public Sector Units.

The framework covers general relaxations for startups in public procurement, value-based preferential procurement from startups and the adoption of startup inclusion plan in a full tender.

1. Eliminating the requirement of earnest money deposit (EMD) from startups during the tendering process.
2. Value based procurement: The following measures shall be adopted by the Government of Karnataka under value-based procurement model.

• Limited Tender up to a value of rupees fifty (50) lakhs for empanelled startups – Limited tender procurement model for technology products/ solutions (IT, Bt, electronics) up to a value of rupees (50) fifty lakhs shall be followed for empanelled startups. The number of contracts issued to a particular startup by a procurement entity shall be limited to two (2) contracts and by multiple procurement entities shall be limited to five (5) contracts for a startup in each financial year.

• The empanelment process of startups shall put together a list of pre-qualified startups for the purpose of procurement. Startups that are empanelled during the empanelment process, may apply for a limited tender.

•       Prequalification for empanelment shall be done in a fair and transparent manner:
  • The credentials, eligibility, capability, performance, quality control systems,  internal financial controls, financial background, and other eligibility  requirements shall be carefully verified before registration and empanelment of the startup. 
  • Prequalification for empanelment will be done every year by an expert committee as, constituted by the Government of Karnataka 
  • Empanelment shall be valid for three (3) years from the date of empanelment 
  • The list of empanelled startups shall be published on the Karnataka Public Procurement Portal and the website of the Department of Electronics, IT, Bt and S&T.

3. Startup inclusion plan: Startups can participate in tenders through a startup inclusion plan, where bidders sub-contract a part of the services to startups.  All public tenders in Karnataka relating to the procurement of technology products/ solutions going forward, shall include a startup inclusion plan. The evaluation criteria should include at least six (6) percent weightage given to the bidders for the inclusion of a startup in project delivery. With the startup inclusion plan, bidders shall allot at least ten (10) percent of the contract value to the startup involved in the project delivery.

For a startup to qualify for a startup inclusion plan in a public procurement tender, the startup should be registered with Karnataka Innovation and Technology Society (KITS) and empanelled by Department of Electronics, IT, Bt and S&T.