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.

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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.

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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)

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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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