WORKSHOP ON
ENFORCEMENT OF
CONTRACT CLAUSES
B.PRADHAN,CVO,AAI
GUWAHATI
08.09.2011
STRUCTURE OF PRESENTATION
2

PUBLIC PROCUREMENT

CVC GUIDELINES

AREAS OF CONCERN

SUGGESTIONS
PUBLIC PROCUREMENT
3

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.
PUBLIC PROCUREMENT…
4

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.
PUBLIC PROCUREMENT
5


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
CVC GUIDELINES
6
Circular/Order No. &
Date
CVC circular No.
31/11/08
dated
06.11.2008.
CVC circular No.
17/7/09
dated
14.07.2009.
Subject
Time bound processing
of procurement.
Posting of details on
award
of
tenders/contracts
on
website.
Investment in Airport Infrastructure
7
10th Plan
(In Rs. Crore)
11th Plan
(In Rs. Crore)
Whole Airport
1.
Sector
6404
36,371
2.
3534
12,964
S.
No.
Sector
AAI
CONTRACT CLAUSES
8


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.
Contd..
9

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.
AREAS OF CONCERN
10
Change in scope of work after award of
contract.
Delay in completion and commissioning
of various projects: Cost overrun / Time
overrun.
Accepting revision in
award of work.
conditions after
Contd…
11

Allowing extra items at inflated
rates.

Permitting
alternative
makes
without adequate cost adjustments.

Accepting substandard work .
Observations by CTEO
12


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.
Observations by CTEO….
13

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.
Observations by CTEO…
14

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)
Observations-CTE Type
15

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)
Observations-CTE Type…
16

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)
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 !
18

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.
SOME SUGGESTIONS…
19

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.
Contd..
20
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 .

Contd..
21
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.

GENERAL GUIDANCE
check points during
execution stage
22
 Conditions
regarding Insurance Policies, P.G.,
Labour licence etc. complied with.
 Bank
Guarantees are duly verified
 Recoveries
 Major
are made as per Contract.
Deviations should not be done.
 Mandatory
 Proper
Tests are carried out.
record of hindrances maintained.
AREAS TO BE COVERED IN THE
WORKSHOP
23
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.

CONCLUSION
24

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.
25
THANK YOU!
cvoaai@aai.aero
or
b.pradhan@nic.in