workshop on enforcement of contract clauses and timely recovery by g. asok kumar, ias cvo,aai ethics...
TRANSCRIPT
WORKSHOP ON ENFORCEMENT OF CONTRACT CLAUSES AND TIMELY
RECOVERY
By G. ASOK KUMAR, IAS
CVO,AAI
ETHICS IN PUBLIC PROCUREMENT
JAIPUR 23.02.2012
ETHICS
Is doing the RIGHT THING
Is the imbibed value system – may vary from
culture to culture, place to place, but there
are certain universally accepted values
Is what money cannot buy. Best when
internalised and comes from within.
Can be forced- but true ethics is doing the
right thing, even when not watched.
2
GOOD ETHICS
Gets the trust of people
Is very important in public life
Carries the burden of the hopes of millions
of people, who expects the public servants
to perform their duties as a trustee
Makes everyones’ life pleasant
3
PUBLIC PROCUREMENT ?
Any procurement made for public / by spending
public money is public procurement.
Procuring works, material, services etc., of the
SPECIFIED QUALITY within the SPECIFIED TIME and
at the MOST COMPETITIVE PRICES in a FAIR, JUST
and TRANSPARENT MANNER is essential in public
procurement.
CVC, therefore, maintains a high focus in this area.
4
PUBLIC PROCUREMENT
Public procurement plays vital role in economy / growth
Appxmly. 30% of India’s GDP gets converted into public
procurement contracts.
Departments like Railways, Defence and Telecom use
50% of their funds for procurement of good and
services.
According to World Bank’s estimate, the average bribe
to obtain a public contract is 15% of contract value.
Budget expenditure of AAI during 2011-12 is Rs. 2100/-
Crores and for the year 2012-13 is Rs. 2450/- Crores.
5
PILLARS OF VALUE OF PUBLIC PROCUREMENT
1. Public Trust: Is the faith the public has in governments that are
created to protect their basic freedoms.
Each citizen has an expectation that government, and each member of
the government, will discharge their duties in a competent manner and
not abuse authority granted to them. Not only does the citizen pay for
these services, but they have relinquished some of their individual rights
and freedoms to ensure that the government has the ability to look after
their well-being. An abuse of authority always is a betrayal of the public
trust and is not tolerated in a democratic society. Thus, public
procurement operations are subject to intense public scrutiny.
6
PILLARS OF VALUE OF PUBLIC PROCUREMENT
2. Public Service: Government organizations offer varied
services and serve a number of people, a common concern is the
need to make the best use of available financial and human
resources. To do this, public employees serve a unique role in
society.
Employees must use their authority without bias.
As stewards of the public trust, and as servants to the public
welfare, procurement practitioners must consistently pursue
their professional standards even at the expense of their
personal beliefs.
7
PILLARS OF VALUE OF PUBLIC PROCUREMENT
3. Justice: Justice is the quality of being just,
impartial and fair in how public procurement
professionals discharge their responsibilities.
Justice is best served when professionals exercise
judgment within established legal frameworks to
balance competing interests among all stakeholders
with the explicit intent to ensure that decisions and
actions are proper, fair & appropriate.
8
PUBLIC PROCUREMENT……
As procurement is prone to corrupt
practices, it has a many effects:
it distorts the market mechanism,
represents a high cost to the procurer
and
results in poor quality of goods and
services
Erodes public faith.
9
ESSENTIALS FOR PUBLIC PROCUREMENT
Any sound procurement procedure should be based on principles of ethics, fairness, equity and transparency.
In brief, the canons of public procurement are:
Right Place – Need / scope Right material - Quality Right Time - Time Right Price - Value for money Right Vendor – Fairness & Transparency
10
PREREQUISITES FOR PUBLIC PROCUREMENT
- Well documented Works / Purchase Manual with clear DoP (Delegation Of Powers)
- Regular updating of Manual for systematic and uniform approach
- Formulation of project proposal and establishing need and justification – Techno Economical Feasibility Studies (TEFS), Comprehensive Bid Analysis (CBA), Techno-Commercial Studies in terms of payback period, IRR, Discounted Cash flow (NPV) etc.
11
PREREQUISITES FOR PUBLIC PROCUREMENT…
- VALUE ENGINEERING – Evaluation of all available alternatives.
- STRs (Specifications and Technical Requirements) – Broad based enough to encourage competition and at the same time specific to meet the actual intended use / purpose. Not customized and tailor made to suite select group of vendors that restricts competition.
- Designs to be optimized - avoid over provisioning.
- Realistic Estimates based on proper market survey.
12
PREREQUISITES FOR PUBLIC PROCUREMENT…
- TIME IS THE ESSENCE - Timely Decision making.- Timely commissioning of cost
intensive equipment/facility- Timely rescission of contract on
account of delays / non performance
- Systemic Performance Appraisal of vendors/ contractor / consultants
- Accountability
13
Investment in Airport Infrastructure
14
S. No.
Sector10th Plan (In Rs. Crore)
11th Plan (In Rs. Crore)
12th Plan (In Rs. Crore)
1.Whole Airport Sector
6404 36,37150,000 Appx.
2. AAI 3534 12,964 17,500
CONTRACT CLAUSES?
Procurements/Projects undertaken by PSUs are governed by Manuals /Guidelines thus, resulting in signing of Contract Agreement with the executing agency / supplier.
Various Clauses stipulated in the Agreement are essence of the Contract.
The elements of the contract are mutual assent and consideration.
15
Contd..
Adherence to the Contract clauses in terms
of specifications / making payments etc. as
per agreement are essential for effective
Contract Management.
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.
16
AREAS OF CONCERN /VIGILANCE ISSUES
Change in scope of work after
award of contract.
Accepting revision in specification /
payment conditions after award of
work.
Allowing extra items at inflated
rates.
17
Contd…
Permitting alternative makes without
adequate cost adjustments.
Acceptance of substandard work .
Delay in completion and commissioning
of various projects (Cost overrun / Time
overrun). Sometimes doubting the
need / purpose of procurement.
18
CVC / CTEO GUIDELINES19
All public procurements are subject to the compliance of CVC’s / CTEO’s circulars / instructions.
Circulars / instructions issued by AAI are also to be followed meticulously for effective Contract Management: CVC circulars/orders – (http://cvc.gov.in/cvc_instruct.htm)
CTEO’s circulars/orders– (http://cvc.nic.in/CompcirculCTE.pdf)
AAI Circulars – (
http://infosaarthee/Board Member/Planning/ TechInst/Pages/default.a
spx
). So far 86 TI’s issued. It is better to update the Works
Manual.
CTEO’S OBSERVATIONS
In one work the Board’s approval for
Architect Fee was to be 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.
20
CTEO’S OBSERVATIONS ….
A large area of land in the airport
premises was allotted at a nominal cost
to the contractor for establishing
stockyard, which was against the
clarification issued at pre-tender stage
of the work. Undue benefit accrued to
contractor on this account was of the
order of Rs.10 crore.
21
CTEO’S OBSERVATIONS ….
Completion Certificates recorded without
ensuring the completion of all the packages of
composite tenders.
Higher rates paid to the Contractor compared
to the rates admissible as per contract
provisions for substituted items.
Measurement for steel was made in excess of
actually used and no provision made in the
contract for the ownership of scrap.
22
Observations-CTE Type
Scope of work and design of the
structures changed during execution.
Escalation payments are released by Site
engineers 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.
23
Observations-CTE Type…
Escalation payment made in contravention
to agreement clause.
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.
EOT cases not processed in time. Penalties
not levied as per agreement provisions.
24
POINTS TO PONDER25
What should be the appropriate safeguard against the
failure of the consultant/contractor?
How to make tender document unambiguous?
How to bring uniformity in dealing with the ambiguous
provisions in the tender ?
How to ensure timely completion and commissioning of
the projects and procurement ?
What should be the effective monitoring tool for project
management?
How to enhance co-ordination amongst various
Departments of AAI / Airports for effective management
of contracts.
SOME SUGGESTIONS !
Specific penalty clause may be
incorporated in the Consultancy
Agreement to avoid poor planning / lack
of supervision and to increase
accountability of Consultant.
The ambiguous clauses, if any, need to be
referred to NIT approving Authority only
for necessary clarification / decision.
26
SOME SUGGESTIONS…
Realistic time frame for execution of the
project to be considered based on specific site /
soil factors 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 avoid time and cost overrun.
27
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 synchronization with the Civil / Electrical works to avoid possible damages/lapse of warranty / Guarantee etc..
28
Contd..
All records / files to be preserved meticulously.
Hindrances need to be recorded properly to enable scrutiny during sanction of EOT.
OPMS need to be operationalized for effective monitoring of the projects.
29
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.
30
AREAS TO BE COVERED IN THE WORKSHOP
Time & Cost Overrun in Projects – Causes and solutions by ED(Engg.)
Irregularities in Engineering works by GM(Vigilance)
Finance control in Project management by ED(Fin.)
Implementation of Contract clauses by RED(NR))
Panel discussion.
31
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.
32
THANK [email protected]
33