workshop on enforcement of contract clauses
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WORKSHOP ON ENFORCEMENT OF
CONTRACT CLAUSES
B.PRADHAN,CVO,AAI
GUWAHATI
08.09.2011
STRUCTURE OF PRESENTATION2
PUBLIC PROCUREMENT CVC GUIDELINES AREAS OF CONCERN SUGGESTIONS
PUBLIC PROCUREMENT
Public procurement plays a big role, as appxmly.
30% of India’s GDP gets converted to public
procurement contracts. Departments like Railways,
Defence and Telecom use 50% of their funds for
procurement of good and services
As procurement is prone to corrupt practices, it
has a three-fold effects:
it distorts the market mechanism,
represents a high cost to the procurer and
results in poor quality of goods and services.
3
PUBLIC PROCUREMENT…
According to World Bank estimate,
the average bribe to obtain a public
contract is estimated at 15% of the
contract value.
The CVC, therefore, maintains a high
focus in this area.
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PUBLIC PROCUREMENT
The cannon of Public Procurement is to procure work, material, services of the specified quality within the specified time at the most competitive prices in a fair, just and transparent manner.
In brief, the watchwords in this context are Quality Time Value for money Fairness Transparency
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CVC GUIDELINES6
Circular/Order No. & Date
Subject
CVC circular No. 31/11/08 dated 06.11.2008.
Time bound processing of procurement.
CVC circular No. 17/7/09 dated 14.07.2009.
Posting of details on award of tenders/contracts on website.
Investment in Airport Infrastructure
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S. No.
Sector10th Plan (In Rs. Crore)
11th Plan (In Rs. Crore)
1.Whole Airport Sector
6404 36,371
2. AAI 3534 12,964
CONTRACT CLAUSES
The procurements/projects undertaken by PSUs are governed by Manuals /Guidelines, resulting in signing of Contract Agreement with the executing agency / supplier.
The Contract Clauses stipulated in the Agreement are essence of the Contract.
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Contd..
Adherence to the Contract clauses in terms
of specifications and making payments as
per agreement is essential for the
performance of the Contract.
Non adherence to the Contract Clauses
gives rise to undue benefits to the
executing agency causing losses to the
organization and defeats the very purpose
of stipulations.
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AREAS OF CONCERN
Change in scope of work after
award of contract.
Delay in completion and
commissioning of various projects:
Cost overrun / Time overrun.
Accepting revision in conditions
after award of work.
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Contd…
Allowing extra items at
inflated rates. Permitting alternative makes
without adequate cost
adjustments. Accepting substandard work .
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Observations by CTEO
In Kolkata Project, following was observed by CTEO:
As per the Board’s approval, Architect Fee was
fixed at 5% of the estimated cost or the awarded
cost, whichever is lower. However, at the time of
framing the agreement, the fee was changed to
5% of the actual cost of the work or the awarded
cost, whichever is lower. This revision caused
increase in consultancy fee by approximately
Rs.24 crores, giving undue benefit to the
architectural consultant.
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Observations by CTEO….
A large area of land was allotted at a
nominal cost to the contractor for
establishing stockyard in the airport
premises, which was against the
clarification issued at pre-tender stage.
Undue benefit accrued to contractor on
this account was of the order of Rs.10
crore.
13
Observations by CTEO…
Completion Certificates recorded without
ensuring the completion of all the packages of
composite tenders. (Jaipur)
Higher rates paid to the Contractor compared to
the rates admissible as per contract provisions
for substituted items.(Trivandrum-Testing of
Piles)
Measurement for steel was made in excess of
actually used and there is no provision in the
contract for the ownership of scrap.(Trivandrum)
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Observations-CTE Type
Scope of work and design of the structures
changed during execution.(Amritsar)
Site engineers are releasing escalation
payments as per agreement clauses
timely, but when it comes to recovery
against de-escalation, action is being
taken only after vigilance observation or
at the time of final payment.(Aurangabad)
15
Observations-CTE Type…
Escalation payment made in
contravention to agreement clause.
(Ranchi Project)
The lead partner of the JV Consortium is
absent in the site activities and the other
in- experienced partner is executing the
work, thereby, causing delay.(Raipur
Project)
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QUESTIONS ???17
What should be the appropriate
safeguard against the failure of the
consultant/contractor?
How to deal with the ambiguous
provisions in the tender ?
How to ensure timely completion of the
projects ?
What should be the effective monitoring
tool for project management?
SOME SUGGESTIONS !
Specific clause may be incorporated in
the Consultancy Agreement to
penalize for poor planning and lack of
supervision on the part of Consultant.
The ambiguous clauses, if any, need to
be referred to NIT approving Authority
for necessary clarification / decision.
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SOME SUGGESTIONS…
Realistic time frame for execution of the
project based on site specific factors be
determined prior to accord of AA & ES.
The AA &ES Authority need to freeze maximum
permissible time frame for the Project.
A separate penalty clause for delay in
execution of the Project need to be specified in
the Agreement to arrest time and cost
overrun.
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Contd..
There should be no major deviation in scope of work after award of work.
The E & M equipments shall be brought to site in proper synchronization with the Civil works to avoid possible damages/lapse of warranty .
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Contd..
Hindrances need to be recorded meticulously to enable proper scrutiny during sanction of EOT.
OPMS need to be operationalized for effective monitoring of the projects.
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GENERAL GUIDANCEcheck points during
execution stage
Conditions regarding Insurance Policies,
P.G., Labour licence etc. complied with.
Bank Guarantees are duly verified
Recoveries are made as per Contract.
Major Deviations should not be done.
Mandatory Tests are carried out.
Proper record of hindrances maintained.
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AREAS TO BE COVERED IN THE WORKSHOP
Commonly Observed Lapses in implementation of Projects.
Finance issues in Project Implementation : Internal Audit’s perspective (Monitoring of BG/PG/EMD/SD etc.).
Time & Cost Overrun in Infrastructure Projects : Issues
Discussions & Suggestions.
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CONCLUSION
We must adopt vigilance as an
attitude and do not view it as
restrictive and punitive.
We must learn to integrate
vigilance in our day to day
working.
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THANK YOU!cvoaai@aai.aero
orb.pradhan@ni
c.in
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