cag's cwg audit report - chapter - 22 (2011)

8/6/2019 CAG's CWG Audit Report - Chapter - 22 (2011)

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c : : :wl-e ..::I:uUpgradation of Street Lightingof Roads in Delhi

The project for modernisation of Delhi Street Lighting System was conceived by GNCTDinJune 20061 with plans to implement it across Delhi within 2 years. Detailed lightingstandards were prepared in November 2006 to be followed by all the departmentsconcerned viz - PWDI NDMCI and MCD. The project was executed on around 800 km ofDelhi roads at a tendered cost of Rs.286 crore.The lighting standards provided only the technical parameters of performance of lampsand luminaries'. PWDIwhile adopting the same specification stipulated the use of a mix ofimported and indigenous luminaries for different categories of roads. The decision on useof imported luminaries was taken with the approval of the CM. Sample luminaries of someof the leading manufacturers were displayed before the CM in September 2007.Subsequently I as per the directions of the CMI luminaries consisting of both indigenousand imported makes were installed on a sample stretch, which was inspected by the CM inOctober 2007. Based on the inspection and approval of CMIPWD decided to use importedluminaries for certain roads. No technical note regarding reasons for use of importedluminaries along with cost benefit analysis was found on record. The decision taken byPWD regarding use of imported luminaries was also adopted by MCD and NDMe. Thetechnical specifications did not distinguish at all between indigenous and importedluminaries. The imported luminaries were procured at a far higher cost that theindigenous luminaries, leading to avoidable extra expenditure of Rs. 31.07 crore acrossthe three agencies.The technical specifications for both imported and indigenous luminaries were identical.Department selected as approved, the models demonstrated by the bidders on the basis ofinspection by CM. Record of any techno-economic evaluation of the options offered by thebidders in support of such selection was not documented. Consequently Imodels of variouscompanies of vastly different repute and of different price range were selected at thesame level. We found that the procurement price of imported luminaries, which variedfrom Rs.251704 to Rs.32IO O O per unit, was far higher than the fair price computed on thebasis of actual invoice price.The awarding of work in NDMC after calling of design based tenders resulted in an extraexpenditure of Rs.6.77crore, as work was awarded to the bidder with higher unit rates forvarious items. NDMC also awarded additional work of 18.445 km to Philipsl incorrectlyterming it as deviations to the original contract, but this time without the constraint ofefficient design. While the final measurements and payment on this account have not yetbeen finalised, we believe that this may lead to an additional loss of Rs.6.13 crore.Light fixture/fitting

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Chapter 22 - Upgradation of Street Lighting of Roads in Delhi

lighting systems and maintenance of thesesystems.The work was implemented by PWD, MCDand NDMe. The details of length of roadand tendered cost for the works under thethree agencies are tabulated below:

Table22.1 - Summary ojStreet Lighting Works

(In Rs. Crare)RoadLength(km) 34.401 444.39 154.95WO3 NOMC 86

We acknowledge the improvement inillumination levels of Delhi roads,brought in by the implementation of awell prepared lighting standardsdocument, which has contributed to anoverall consistency in implementationand marked improvement in urbanlandscape and city infrastructure.

22.2 Use of imported luminaries22.2.1 Decision on use of imported

luminariesThe initial proposal for street lighting inPWD was sent for government approval inNovember 2006 but was not sanctioned onaccount of change in scope of work. Arevised estimate involving use ofindigenously manufactured luminaries wassent in May 2007 and was accordedapproval in June 2007, but the approval waswithdrawn.Meanwhile, the CM desired (July 2007) thatwhile PWD was implementing acomprehensive plan for street lighting, suchlighting may be demonstrated on at leastone or two roads in time for Diwali 2007.PWD invited spot quotations to install streetlighting on a sample stretch of roads. Thesequence of events is as detailed below:

Table22.2 - Chronology oj Events[or Streetlighting on Sample RoadEventseriod

July 2007 Spot quotation from three firms using indigenous luminaries for asample stretch of roads was invited.

August 2007 Second call for spot quotation was invited from the same three firmson the same conditions. The bidders now quoted for imported andindigenous luminaries. While Philips quoted only for indigenousluminaries, Trilux quoted for imported luminaries and Keselec-Schreder quoted for both indigenous and imported luminaries.

September 2007 Third call for spot quotation from three firms invited in two separatesections, one each for imported and indigenours luminaries. The workwas however not executed.

Sample luminaries of some of the leading manufacturers weredisplayed before the CM in September 2007.

October 2007 Indigenous and imported luminaries installed on a sample stretch'were inspected by the CM, and also by the PWD minister.

2 Ring Road from ITO to Rajghat

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Based on the inspection and approval ofCM, PWD decided to use importedluminaries on 'A' category roads, a mix ofimported and indigenous luminaries on'B' category roads, and only indigenousluminaries on 'e' category roads.

It may be noted that this 'A', 'B' and 'C'categorisation of roads was not specified inthe lighting standard. Thereafter, PWOrevised the preliminary estimate byincorporating use of imported along withindigenous luminariesThe decision of PWO on use of importedluminaries on 'A' category roads was alsoadopted by MCO and NOMe. NOMCspecified all of its roads as 'A' category, andcalled tenders for imported luminaries only.A total of Rs.45.80 crore was spent onprocurement of imported luminaries, withRs. 28.95 crore by PWO, Rs.6.51 crore byMCO and Rs. 10.34 crore by NOMe.The imported luminaries were procured at acost much higher than the cost at whichindigenous luminaries were procured,leading to avoidable extra expenditure ofRs. 31.07 crore across the three agencies(PWO, NOMC, MCO) as tabulated below:Table22.3 - Avoidable Expenditure

on Imported Luminaries(In Rs. Crare)

Number ofImportedLuminaries

AdditionalExpenditureIncurred*

31.07

PWO 10,631 19.81MCO 2,337 4.50NOMC 4,166 6.76Total 17,205

* Aga inst average procurement cost o f ind igenous luminary(400 Wand 250W) of Rs. 8600 in MCD

Meaningless differentiation betweenindigenous and imported luminaries isstarkly exemplified in the case of aluminary of Keselec-Schreder make(Ambar-3), procured by PWD as anindigenous luminary at Rs. 15,160 but byMCD as an imported luminary at overtwice the cost at Rs.32,OOO.

Ambar-3, Imported (MCD), Price: Rs.32,OOO

Ambar-3, Indigenous (PWD), Price: 15,160

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22.2.2 Manner of enrolment of importedluminaries

The technical specifications for bothimported and indigenous luminaries wereidentical, and technical test reports of theimported and indigenous luminariessupplied by the various firms were equallycompliant with specifications for luminariesgiven in the lighting standards.

PWD selected and enrolled as approved,the models demonstrated by thebidders, except SpaceAge who wasdeclared qualified later, on the basis ofinspection by the CM. We could not findany techno-economic evaluation of theoptions offered by the bidders insupport of such selection. Consequently,models of various companies of vastlydifferent repute and of different priceranges were selected at the same level.

In the case of selection of luminaries of GE(General Electric) and AI-Babtain brandsoffered by SpaceAge, no evidence of anyon-site demonstration was found on record.Further, at the time of award of work toSpaceAge, the Works Advisory Board(September 2008) had desired thatluminaries of GE make should be used bySpaceAge. PWD was unable to enforce thesame, and could not prevent SpaceAgefrom installing luminaries of AI-Babtainmake in place of GE.In reply to our observations on use ofimported luminaries leading to avoidableexpenditure, PWD stated that these werespecified for use on selected roads onaccount of the imported luminaries havingthe following advantages over theindigenous ones:

10 to 15 per cent more efficiency asmeasured by the higher light outputratio

Better aesthetic appearance and finish Lower maintenance costWe are of the view that the department'sreasoning regarding superiority of importedluminaries on account of higher light outputratio is essentially an afterthought to justifytheir decision. If light output ratio wasconsidered such a critical performanceparameter, it should have been included inthe lighting standard issued by GNCTD, andalso specified by PWD as a requirement forimported luminaries, which was not done.Further, product brochures of none of theluminaries used in PWD (indigenous orimported) speak about the light outputratio, let alone state its value. Of theluminary test reports supplied by thedepartment, we found that the light outputratio of imported luminaries varied from78.4 to 88.9, while for indigenousluminaries, it varied from 75.3 to 89.5. Thisis at variance with the department'sassertion the imported luminaries havingefficiency greater than the indigenousluminaries by 10 to 15 per cent.No documentary evidence has beenprovided regarding lower maintenancecosts for imported luminaries. In any case,all luminaries are under a six yearcomprehensive maintenance contract, andnone of the bidders were asked to quoteseparately for maintenance of indigenousand imported luminaries, as should havebeen the case if the maintenance costswere known to be substantially different.



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22.3 High Cost of procurementof luminaries

We found that the procurement process didnot ensure procurement at competitiverates, as explained below:

22.3.1 High cost procurement of importedluminaries

Audit scrutiny of the actual price of theimported luminaries that had been installedby the successful bidders, as ascertainedfrom the invoices, revealed a wide gapbetween the imported price, and the pricepaid by the department for the fittings, asgiven in the table below:

Table22.4 - Wide gap between import price andprice actually paid [or imported luminaries (In Rs.)

Name of Executing Make & Brand Cost including Contracted gency mark up Procurement(fair Price) Price .PWD, Zone Ml Trilux: Lumega 900 26,222 28,242 2,020PWD, Zone M2 Schreder: Maya-Maxi / 16,325 26,371 10,046Sapphire 3PWD, Zone M3 AI-Babtain- 9,318 25,704 16,386smart /05MCD Schreder: Ambar 3 11,082 31,328* 20,246MCD Philips: Modena 22,660 26,421 * 3,761NDMC Philips: Modena 22,386 24,819* 2,433

* Weighted Average Cost of procurement

The cost of procurement by all agencies wassubstantially higher than the fair priceincluding mark Up3,being higher by 8percent to 183 percent. The selection ofimported luminary makes and fixing of theirbase price at high levels, particularly in caseof SpaceAge and Keselec Schreder, was inviolation of financial propriety. A pricepremium was being paid simply onaccount of the luminaries being imported.Consequently, contractors managed toearn extra profit of Rs. 10.33 crore.Including cartage, SITC, cost of bulb, contractor profit of10 per cent for PWD and 15per cent for MCD and NDMCand cost of maintenance during the Defect LiabilityPeriod {DLP}.

22.3.2 High cost procurement ofIndigenous luminaries in PWD

We noticed that both PWD and MCD hadused a combination of indigenous andimported luminaries for their street lightingprojects. The analysed rate for providingand fitting of indigenous luminary by PWDwas Rs. 15,522 per unit (Philips Velocity400W) based on a single quotation,whereas these (Model MC3 by Keselec-Schreder and Model Velocity by Philips)were supplied in MCD by two leadingmanufacturers at Rs. 9100 per unit.



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Thus, the execution of items of the samemake at higher rate by PWD resulted in anextra expenditure of Rs.5.59 crore.

22.4 Restrictive and anti-competitive conditions intendering

22.4.1 Conditions in EOIThe lighting standards prescribed pre-qualification criteria for the prospectivebidders. Both PWD and MCD prescribedmore restrictive eligibility criteria forfinancial and technical capability, whileNDMC used the list of vendors declaredeligible by PWD. We found that PWD kept the required

annual turnover at Rs.40 crore in placeof Rs.20 crore indicated in the lightingstandards, thereby restrictingparticipation. The limit also exceeded 30per cent of estimated cost criteria ofcve . MCD made the prequalificationcriteria for both the phases stricter byfixing the condition of average annualturnover at 30 percent of estimated costduring the last seven years instead ofthree years.

The lighting standards stipulated that"the main contractor shall procure itemsfrom respective manufacturers."However, both PWD and MCD in theirEOI specifically stated that the biddershould be a manufacturer of luminariesof international repute. This severelyrestricted the competition, and gavedisproportionate leverage to theluminary manufacturers in controllingthe bidding process.

The parameter of being a luminarymanufacturer of "international repute" did

not specify how the clause would beassessed and was very selectively applied.While initially, Spaceage Switchgear IndiaLtd. was found as ineligible, and later foundeligible during reassessment done when thefirm represented to the CM, its compliancewith requirement of being a manufacturerof luminaries of international repute wasnever assessed. The vendor installedluminaries from a Saudi Arabian firm, AIBabtain, with whom the vendor had nodeclared standing relationship, putting toquestion the eligibility of the vendor as amanufacturer of luminaries of internationalrepute.The restrictive clause was used to reject twofirms, Street Scape, Australia and UtkalGalvanizers Ltd on the grounds that they didnot have luminaries' manufacturers as leadpartners.PWD, in its reply, stated that the competentauthority, Chief engineer, had taken thedecision that luminary manufacturersshould be made lead partner for executionof work for the following reasons: proper maintenance of the luminaries

during the 6 year maintenance period. genuineness of the supplies

their perception that only a few reputedluminary manufacturers are equippedfor providing design work forillumination.

In our view, the benefits of increasedcompetition could have been brought in bycomplying with the GNCTD preparedlighting standards requirement of the maincontractor procuring the luminaries fromthe manufacturers. Such benefits wouldhave been far in excess of the perceivedbenefits stated by PWD.



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Chapter 22 - Upgradation of Street Lighting of Roadsin Delhi

22.4.2 Division of work in PWDThe street lighting work in PWD was dividedinto three parts (August 2007) on thegrounds of administrative convenience andearly completion, but with the apparentintention of giving one work each to each ofthe three shortlisted (initially) firms.Further, NIT stipulated that only one workalone would be given to one contractor.This condition contributed to lessercompetition among the pre-qualifiedvendors as only one among the four prequalified bidders ran the risk of not winningany bid.

22.4.3 Irregularities in assessingqualification of a firm in PWD

SpaceAge Switch Gears Ltd. submitted (July2007) EOI as a manufacturer of luminariesof international repute, and of poles inIndia. The bid by the firm was neither as aJV nor as a consortium, but was in the nameof Spaceage Switch Gears Ltd.The Board of assessors (BoA) disqualified(November 2007) the firm on the followinggrounds: Non supply of imported aswell as

indigenous fittings.

Non clarification of works done by theirforeign concern. The firm could not obtain the required

qualifying marks of 75 out of 100,scoring only 48 marks out of 85.

On being disqualified by the BoA, the firmappealed (November 2007) to the CM forinclusion as a tenderer for the work. Thevendor's plea to the CM was forwarded tothe E-in-C. Subsequently, a re-assessment ofthe eligibility of the firm was done by the

BoA, who, this time, found the firm to bequalified.We found that the following aspects of there-evaluation, leading to an increase in thescore from 48 to 67 (out of 85), asunreasonable: The score for experience in similar class

of work increased from 10 to 15 (out of15), though the relevant work was doneby another firm, related by having acommon majority shareholder, butwhich was in fact, a separate legalentity, and not a part of the biddingentity as a JV or consortium member.

The firm did not submit any newfinancial statements in support of therequired average annual turnover, yet itsscore increased from 10 to 19 (out of19).

The firm did not submit any newdocuments relating to personnel,establishment, and plant andequipment, yet its score in this regardincreased from 10 to 12.

The score on presentation before theBoA was also increased from 13 to 16.

The financial bid of SpaceAge was thelowest for M3 zone but the Works AdvisoryBoard (WAB) did not approve the award ofwork in March 2008 on the grounds thatthe firm had already been rejected by theBoA, and the reassessment and subsequentinclusion was improper",

Incidentally, two of the members forming the BoAs werealso members of the WAB, but both the diametricallyopposite decisions regarding the firm's eligibility hadbeen taken unanimously.



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The firm approached (May 2008) theHon'ble Delhi High Court which quashedthe decision of WAB of rejection of tender(July 2008). Consequently, and in view ofurgency of work, the Government decided(September 2008) to award the work to thefirm.

The firm, SpaceAge, went on to supplylow cost imported luminaries of Saudimake, costing Rs.5,040, and chargingRs.25,704 for the same and in the processearning super profits of Rs.2.68 crore.

22.5 Deficiencies in Tenderingand award of workAll the agencies followed differentapproaches for calling of tenders. PWDcalled tenders based on percentage rate,MCD adopted item rate tender, whileNDMC called for design based tenders.22.5.1 Deficiency in tendering in PWD22.5.1.1 Incorrect use of percentage

rate tender by PWDThe estimates for the street lighting workprepared by PWD was based on marketrate, but PWD resorted to percentage ratetendering instead of item rate, incontravention to the provisions of theCPWD manual.The costs of the following items were over-estimated by PWD with direct implicationon the final cost of procurement: Imported luminaries: The estimated

rate for imported luminaries was kept atRs. 27,000 per unit against the average

cost' of imported luminaries actuallyused being Rs. 17,288, while theminimum cost was just Rs.9,318.

Indigenous luminaries: The estimatedcost taken by the department forindigenous luminaries was Rs. 15,522,but the same fittings were supplied inMCD at rates of Rs.8000 to Rs.9200 perunit.

Pole (12 m): The base rate of Rs.26,750taken for estimation of cost of 12 metrepole was inclusive of all charges forfabrication, supply and erection etc. butthe same was again loaded, therebyinflating the cost of a pole to Rs.31,502.

22.5.1.2 Selling of advertisement rights inPWD without competitive biddingprocess

PWD included the item of rebate in thetender on account of advertisement to bequoted by each bidder for a period of fiveyears. However, this item was included in aseparate section, Subhead-C of the tender,which was not to be considered for bidevaluation. Hence, the contractors wereunder no compulsion to give competitiverates.As a result, the successful bidder of zoneM2 did not quote at all for advertisementrights, while in M1 and M3, the ratesquoted were Rs. 1250 and Rs. 300 per poleper month. The department had no optionbut to cajole the bidder in zone M2 toquote a price of Rs.750 while the winningbidder of M3 increased his offered price toRs.750 per pole per month. Thus, the ratesfor advertisement rights were notdetermined competitively, but were given

Including cost of bulb, cartage, one year maintenanceand contractor profit of ten percent.



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away as a reward for winning the bid at anyprice that the winner deemed appropriate.The selling of advertisement rights withoutcompetitive bidding is highly irregular andhas potentially led to loss in revenue.

In the present scenario, wherein noncompetitive bidding preventeddetermination of true value for theadvertisement rights and this componentof the agreement is yet to be executed,the department should explore theoption of explicitly scrapping this part ofthe agreement.

22.5.2 Deficiency in award of work inMCD

22.5.2.1 Avoidable expenditure of Rs. 2.54crore due to non-compliance withdesign specifications

We found that the lighting standards werenot complied with on many dualcarriageway roads, where 10 metre poleshad been used in place of the prescribed 12metre poles.This led to an estimated avoidable extraexpenditure of approximately Rs. 2.54 croredue to use of larger number of poles andluminaries. It was also seen that in Phase-Iof execution, the offered price of a 10metre pole (Rs. 28974) was more than theprice of a 12 metre pole (Rs. 28358) due tosuspected post bid tampering. Installationof a 10 metre pole was more lucrative tothe contractor than the 12 metre pole.MCD, in reply to our observation, statedthat the designing was done based on siteconditions, and that approval of thecompetent authority, E-in-C, was taken for

installing 10 m poles on 80 feet (24 m) wideroad.We are of the view that such approval,taken without a techno-commercialevaluation of the impact, and in violation ofthe already issued lighting standard wasincorrect.22.5.2.2 Extra cost of Rs.O.48 crore due to

specifying decorative luminariesusing lamps of a particular brandin MCD

The lighting standards provided for use of150 watt HPIT (Metal Halide) lamps forpedestrian crossing, slip roads and bus bays.However, MCD specified decorativeluminaries using 140 watt lamp of aparticular brand, Cosmopolis in theagreement. As per records, a total of 670such Cosmopolis lamp fittings at a cost ofRs.15,OOOper unit were used, whereascomparable 150 watt HPSVfittings wereavailable at Rs. 7800. In these fittings, theHPSVlamps could have been replaced with150 watt metal halide lamps for providingwhite colour light, as done by PWD. Thus,specifying decorative luminaries withCosmopolis lamps in place of standardluminaries with metal halide lamps resultedin extra cost of Rs.0.48 crore.22.5.2.3 Suspected post-tender alteration

in price bids in MCDAs per the CPWD manual, the officeropening the tenders should encircle allcorrections, cuttings, conditions and over-writings, number them and attest them inred ink on each page of the price bid itself,indicating that the cuttings, over-writingsand corrections were made beforesubmitting the bid.

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These conditions were violated in thetendering for both phases of the work inMCD. The winning bid of Sweka Powertechfor Phase-I and Phase-II had large numberof over writings/ corrections/ alterations. Inneither of the bids did the contractor fill upthe column for 'Amount' in the schedule ofquantity, and the total for the bid wasstruck and recorded only in one case{Phase-II}.The matter is under investigation by CBI.Photocopies of the records were obtainedfrom CBI for the purpose of audit.A scrutiny of price bid of Sweka Power TechEngineers Pvt. Ltd. {L-1} for Phase-I revealedmany cuttings and over writings in the ratesof items quoted in the schedule ofquantities. The certificates recorded by theaccountant either did not tally with thenumber of corrections made in the page orthe certificates themselves had cuttings/overwriting. In all the cases where suchoverwriting and corrections in rates werenoticed, the final effect was to enhance thequoted price and not vice versa. Thecorrections in figures have been done in amanner as to minimize the physicalalteration in the number by restricting thechanges to a single digit, leading to anincrease in the amount. Further, thecorrections had not been assigned separatenumbers as required.Another correction noted was in thediscount offered by the firm in the form of anote at the end of the quoted rates whichread-"payment will be released within 10days after submission of the RA bill, thenwe are ready to give discount of Nil per centon the total amount". In this case also,there was apparent tampering, by changing1 per cent to Nil per cent by prefixing 'Ni' to1 per cent.

The possibility of these alterations at posttender stage cannot be ruled out. The totalresult of enhancement of quoted amountby such alterations was Rs. 3.63 crore.A similar pattern of alteration of bids wasseen in Phase-II also in the case of bids ofthe same bidder, Sweka Power TechEngineers Pvt. Ltd. Scrutiny of price bid ofSweka Power Tech Engineers Pvt. Ltd. {L-I}revealed that there were cuttings/overwritings/corrections in the quoted rates ofseveral items. The corrections made in thequoted rates against the above said itemswere not encircled individually.It is suspected that the corrections in twoitems have been made after opening oftenders. The net effect of the suspectedtampering was enhancement of tenderedamount by Rs. 3.34 crore, while still keepingit below the next higher bidder {L-2} by Rs.4.69 crore i.e. without changing the overallstatus of L-1 bidder.The details of the alteration are shown inAnnexe-22.122.5.3 Deficiency in tendering/award of

work in NOMe22.5.3.1 Calling of design based tender by

NDMC and consequent lossNDMC opted for a "design based approach",wherein each bidder was asked to submitroad wise design and compute the quantityfor each item required to meet the targetillumination level and to quote the rates foritems required. The lighting standard didnot provide for calling tenders on designbasis.

We are of the view that design based tenderdoes not ensure procurement of items atthe lowest cost. "Design based tender" has



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also actually placed Philips at anadvantageous position with respect toother bidders, as despite quoting higher(item wise) for each of the key items,Philips managed to be lowest(L-1} bidderdue to proposing use of lower quantities ofvarious items.Philips was the lowest with tenderedamount of Rs. 34.40 crore against Rs. 37.32crore quoted by SpaceAge (second lowest).The scrutiny of rates of 10 major itemsforming 88.44 per cent of gross tenderedcost (of Philips) of Rs. 35.46 crore revealedthat in none of these items was Philips thelowest bidder. The overall bid amount ofPhilips was lowest only due to theirproposed design involving lowerconsumption of various items. For instance,the design proposed by Philips involveduse of 3815 poles and 4166 luminariesagainst the estimated quantity of 6364 and9329 respectively, while the quantitiesquoted by second lowest bidder were 6492poles and 7126 luminaries.Even the Technical Evaluation Committee(TEe) was unable to assess the differentdesigns due to wide variation in number ofpoles and other infrastructure offered to beinstalled by the bidders. It finallyrecommended that the price bids may beopened after obtaining an undertaking fromall the four bidding firms that they wouldnot charge for any extra work/infrastructure required to be provided incase the required levels of illumination asper NIT specification were not met withtheir design.We observed that the second lowest bidderi.e. SpaceAge at the quoted quantity ofPhilips could have executed the work at Rs.

28.69 crore, which is less than the amountquoted by Philips by Rs. 6.77 crore.In reply to our observation, NOMC statedthat design based tenders rather thanconventional mode were invited keeping inview the special needs of the NOMC areawith its dense tree cover.In our opinion, the "design" could havebeen either done in-house or could havebeen executed as a separate consultancyassignment, thereby providing a levelplaying field to obtain competitive rates foreach item of work. This could have savedthis huge premium of Rs. 6.77 crore, whichwas otherwise earned by Philips on thebasis of their design.22.5.3.2 Irregular award of work in NOMC

under deviation clause leading toloss

Chairman, NOMC gave approval foradditional work of 18.445 km for 14 roadsand service/ slip roads which were not partof the original agreement. The works wereawarded on the same rates as the existingcontract for street lighting with Philips(awarded in August 2009) under thedeviation clause stating that the increase inquantity was under the deviation limit of 25percent. In this case, the additional workvaluing Rs.7.38 crore was for new roads notcovered by the original agreement, andhence could not be construed as deviationin quantity alone. This was not evenapproved by the Council-the competentauthority. NOMC intimated that the Councilin its meeting held subsequently on 23rdFebruary 2011, ratified the expenditure. Wefound that the agenda note put up forapproval of the Council in this regard madeno mention of the audit objectioncommunicated to NOMe.

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Chapter 22 - Upgradation of Street Lighting of Roadsin Delhi

Loss to NDMC on account of award ofadditional work under deviation clause The existing agreement with Philips was

design based, where the work wasawarded on account of the bid being oflowest total cost, and not necessarilythe lowest in unit cost of the items.Thus, award of additional work toPhilips at its quoted (higher) item ratesled to an additional loss of Rs. 1.45crore, when compared with the rates ofsecond lowest bidder.

As per the tentative execution dataprovided by NDMC, the additional workon 14 roads led to an excessexpenditure of Rs. 1.30 crore beyondwhat would have entailed if the roadshad originally been included in thecontract, and optimally designed.Against the pro-rata cost of Rs.7.37crore, Philips has submitted a bill of Rs.11.05 crore".

The full execution/consideration of proposalof Philips as per the claim submitted wouldfinally entail a total cost of Rs.12.06 crorefor additional work, leading to an increasein the currently computed loss figure ofRs.1.30 crore to Rs.4.68 crore, in additionto the loss of Rs.1.45 crore incurred onaccount of higher rates of Philips duringaward of additional work. The total loss onaccount of award of work is, therefore,estimated at Rs. 6.13 crore.NDMC, in its reply, stated that payment foradditional work would be restricted on pro-rata basis or on the actual quantityexecuted, whichever was less.

Bill for 2.5 KM of road length awarded in October 2010,with pro-rata cost estimate of 1crore has not yet beensubmitted

22.6 Delay in project initiationand completion

None of the agencies could complete theproject within two years as planned.22.6.1 Delays in PWDPWD planned in June 2007 to complete theproject by February 2009. The project wasexecuted as 3 separate packages in threePWD zones, but the work was finallycompleted by September 2010 after a delayof about 19 months. There was delay atevery stage, with delay in awarding of workitself of about 11 month. There were delaysin execution too, as the work stipulated tobe completed by January 2010 was alsodelayed by about eight months.Further, PWD has not decided the penaltyto be imposed on account of delay, as noneof the three contractors had submitted theirfinal bills (though they have been issuedphysical completion certificate in August/September 2010).22.6.2 Delays in MCDThe stipulated date of completion forphase-I was 9 July 2009. However, acertificate was issued (January 2011)indicating provisional completion on 2August 2010. MCD neither sanctioned EDT,nor recovered liquidated damages of Rs.3.45 crore for a delay of 55 weeks.After lapse of the stipulated date ofcompletion of 7 July 2010 for Phase II, thecontract value was enhanced from Rs.60.74crore to Rs.73.36 crore by awardingadditional work on 24 July 2010 withstipulated date of completion extended toDecember 2010. The total work wassubsequently restricted to Rs.61.99 crore

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for a total road length of 160.5 km on 05August 2010, but the stipulated date ofcompletion was not changed. Though thecertificate for provisional completion ofwork was issued on 24 September 2010, notime extension was sanctioned.We have computed the delay in completionby 50 days, with a corresponding LD ofRs.4.25 crore, which has not been levied byMCD.22.6.3 Delays in NOMeAfter approval of estimate (December2007), NDMC delayed the tendering

process. Tenders were invited in March2009 after a delay of 14 months, and it tookanother five months to award the work. Thecontractor was given additional work for18.45 km between December 2009 andOctober 2010, which would imply aproportionate increase in the time periodup to November 2010. The execution ofwork was delayed by more than twomonths, and NDMC had neither issuedcompletion certificate nor recorded thefinal measurement. Further, compensationfor delay valuing Rs. 1.25 crore was also notlevied.

cag's cwg audit report - chapter - 22 (2011)

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