Irregularities in
Engineering Works
Sanjay Jain, GM(Vig)
DATE: 8th September’ 2011
PUBLIC PROCUREMENT...
 The process of Public Procurement can be categorized
in three distinct Stages Pre-tender
Stage
(Project
formulation,
Appointment
of
Consultants, Preparation of Detailed Project Report/ Detailed
Estimate)
 Tender Stage (Preparation of tender documents, inviting &
opening of tenders, prequalification, tender evaluation & award of
work, Integrity Pact)
 Execution Stage (Compliance of agreement conditions, making
payments, ensuring quality & timely completion)
2
PRE-TENDER STAGE...Shortcomings
Appointment of Consultants:
 Consultant be appointed in a transparent
and competitive manner for need based
and specialized jobs.
 Consultant’s fee be based on some fixed
value of the contract.
3
Pre – Tender Stage: Shortcomings
 DPR & estimates not prepared based
on soil condition and survey at site
resulting into large scale deviations.
 Tenders invited without acquisition
of land, site approvals and statutory
clearances from local authorities
resulting in delays and disputes.
Pre – Tender Stage: Shortcomings
 Consultancy fee given on % basis
on packages wherein there is no
input required. No ceiling limit
stipulated.
 Consultant appointed without well
defined responsibilities.
Payment
not linked to the work progress and
final completion.
 Penal clause for deficiency in
services by the consultant not
stipulated
in
the
contract
agreement.
Pre – Tender Stage: Shortcomings
 Tender specifications tailor made to
suit particular firm/select firms
inviting allegations of favour and
bias from the competing firms.
 Restrictive
eligibility
criteria
included in the NIT resulting into
inadequate response.
 Gross over–provision in capacity of
new DG sets procured for power
house affecting system efficiency.
Tender Stage: Shortcomings
 Firm pre-qualified on the basis of
their
experience
in
on-going
work/work in progress as against
the requirement of completed work.
 Tender evaluated in deviation to the
Ambiguity Clause.
 Interest free ‘Mobilization Advance’
stipulated in one of the tenders in
violation of CVC guidelines.
Tender Stage: Shortcomings
 Two firms who had produced
completion certificate for the same
work
were
qualified
without
verification.
 Post
bid
relaxation
of
the
qualification criteria.
(Had the
relaxation been included in the NIT
more firms would have participated
with a competitive response).
 Price variation clause – Fixation of
star price.
Contd…
Tender Stage: Shortcomings…..
 Condition for vetting of structural
designs
by
IIT/
Engineering
College.
 Design Based tender called for
HVAC,
PA
system
without
stipulating design experience.
 Adequate Safeguard not taken for
supply of spares & technological
support for the design life of the
system.
Contd…
Tender Stage: Shortcomings
 Repeat order was placed on a firm
without ensuring fulfillment of the
conditions stipulated in the DOP.
 Abnormally long time taken to
decide and award the work.
(Directions issued by the Chairman
for time bound processing i.e.
award of contract within 30- days
of opening of tenders vide letter
dt. 30.08.07).
Contd…
Tender Stage: Shortcomings
 Time period increased and tender
condition(s)
changed
during
negotiations, thereby denying level
playing field to the other bidders.
 Evaluation criteria/exclusion criteria
followed to decide L-1 bidder not
made part of the tender.
 Contract
awarded
without
establishing reasonability of the
offer received.
Contd…
Tender Stage: Shortcomings
 Budgetary
offers
received
for
procurement
of
insecticides
and
weedicide chemicals were considered
as commercial offers leading to
procurement at high rates.
 Tenders splited so as to bring them
within the approval limit of local
authorities.
 Improper provisioning
of store
purchases
without
taking
into
consideration the available stock,
past consumption pattern and shelf
life of the item.
Contd…
Tender Stage: Shortcomings
 Inflated
justification
statement
prepared by including unjustified
components and loading factors.
 Technical
evaluation
not
done
objectively
on
equitable
basis.
(Without considering the extent of
deviations, when the offers suffer
from deficiencies, equal opportunity
should be given to all).
 Splitting of award in a supply
contract after techno-commercial
evaluation, although multi sourcing
not stipulated in NIT
Execution Stage : Shortcomings
 BGs
accepted
with
conditional
stipulation and not verified from the
Issuing Bank.
 Use of departmental machinery was
allowed to be used in cargo without
recovery of charges as per contract
provisions.
 Payment of substituted item without
making financial adjustments
Execution Stage : Shortcomings
 Acceptance of tack welding in place
specified continuous welding in steel
fabrication work.
 Filing system adopted in project was
not in order. Part files are opened as
and when new action are initiated, but
subsequently not merged with the
main file. No pagination.
 Payment of secured advance against
certain
items
without
obtaining
requisite insurance cover.
Execution Stage : Shortcomings
 Non/part implementation of contract
clauses related to Insurance policy
(CAR), Workmen Compensation, ESI,
labour licenses.
 Defective contract management: Not
maintaining
mandatory
site
records/registers.
 Large scale sub contracting by the
main agency without approvals of
the competent authority.
Execution Stage : Shortcomings
 Liquidated
damages
not
levied
despite time over-run attributed to
the contractor.
 Shortfall in mandatory tests on items
reflecting slackness in supervision
and possibility of acceptance of substandard material/work.
 Mobilization
advance/secured
advance
not
recovered
as
per
provisions of the contract.
Execution Stage : Shortcomings
 Wide cracks, low density values, settlement
in portions of flexible runway noticed
within 3-months of execution.
 Non submission of documents like excise
duties pass, custom duty receipts for
imported items – Bill cleared.
 Order for supply of equipment was placed
on FOR destination, locations of consignees
changed without freight adjustments.
 Exchange of correspondence with the
Contract Agency after expiry of time period
and without extension of time to keep
contract alive.
Execution Stage : Shortcomings
 Over payment in running bills and recovery
in final bill.
 Interest on over payment not deducted
properly.
 Over payment on A/c of party payment of
extra items / secured advance considering
extra material.
FINALLY……..
We may have to add one
more stage
i.e. COMMISSIONING
(to put into operation)
General Shortcomings
 Not posting summary details of
contracts awarded during the
month on web site.
 Tender document not available on
web site in down loadable format.
 E-payment through ECS or RTGS
not fully implemented.
Inference……….
 Negligence in project management,
contract
administration
and
supervision.
 Willful
acts
of
omission
and
commission with possible malafide
 Undue benefit to the contractor
 Contractual disputes
Result……….
 Additional
time
and
cost
rectifications
and
remedy
Maintenance Stage
 Audit observation
 CTE paras
 Vigilance Cases
 Departmental enquiries
for
at
Actions taken in AAI……….
Vigilance Initiatives:
 Leveraging Technology (e-payment,
e-billing, e-receipt, e-procurement)
 Time
bounded
processing
of
procurement / tenders
 Introduction of ‘Integrity Pact’
 Project management and clean
procurement workshops
 Introduction of ‘Integrity Pledge’ in
all tenders.
 E-tendering
 CTE - Type Inspection
Conclusion……….
 Excellence is a moving target
 Vigilance in project management
brings Quality Assurance and cost
savings – deterrent against corrupt
and inappropriate practices
Need for rejuvenated approached to achieve
excellence in project management and
implementation……….
Common Points to be discussed
 If application received and tender not
issued the application fee to be refunded or
not.
 Similar Experience – Work of DG/HVAC set
installation to be accepted for O&M.
 In a tender – three makes are given
 Agency is free to choose any make.
or
 First priority on the product mentioned first.
Common Points to be discussed….
 If contractor writes/ specifies one of the
approved makes out of those than is it a
conditional tender or not.
 If tender is conditional whether EMD to be
forfeited or not.
 Consideration of experience certificate with
levy of Penalty.
EMD….
 In EMD, DD is valid for 90 days and BG is
valid for 180 days. If BG is valid for 179
days whether we should accept it as tender
is valid only for 90 days.
Yes or No
-
Why?
 How to verify the BG for EMD before tender
opening.
FINANCE
A CHECK MECHANISM
 BUILT IN CHECK SYSTEM
 INCONSISTENCY IN FINANCIAL
SCRUTINY
 NEED FOR FINANCE MANUAL
 DUTIES AND
RESPONSIBILITIES
Role of Finance Officer
 Financial Concurrence (AA&ES Stage)
 Budget Allocation;
 Monitoring of utilized budget to check the
balance available;
 Assessment of need/ viability of project;
 Phasing of proposed expenditure in-line
with progress of work.
Role of Finance Officer…
 Tender Opening
 Check justification of cost available;
 Ensure numbering of tender;
 Ensure opening of Cover No. 1 of all firms
first;
 Checking of EMD(DD/BG);
 Ensure CIO properly;
 Ensure cellophane tape fixed on all cuttings/
insertion and total amount
 Signing of each paper in tender
 Check rates quoted in figure/ words
 Entry in register
Role of Finance Officer…
 Tender Processing
 Check comparative statement (Calculate
rebate etc.);
 Verification of quoted rates with
comparative statement available;
 Check A/A & E/S, TS issued by
appropriate authority.
 Any other requirement
Role of Finance Officer…
 WAB/ WAC/ RCAC proposals
 WAB note be processed through Finance
Directorate;
 Finance Officers shall ensure all the
parameters of concurrence have been
followed;
 Any adverse remark/ important issue
must be recorded upfront.
Role of Finance Officer…
 Billing
Check agreement signed or not;
Check Measurements;
Test Check statement;
Completion Certificate;
Part rate statement/ Theoretical
statement;
 Check Stock Entry/ MAS/ Challan etc.;
 Check deduction (Statutory + contract);
 Check deviation so that relative position
of L1 does not change.





Role of Finance Officer…
 Billing…..
 Monitoring of BG/ DD etc.;
 Ensuring timely recovery of various
advances (Mobilization/ secured etc.);
 In case of over payment, recovery of
interest as applicable;
 Check EOT, approval of Competent
Authority.
List of Documents required at
Various Stages of Contracts







Preliminary Estimate;
Detailed Estimate;
Technical Sanction (TS);
Draft NIT (DNIT);
Tender Document;
Agreement;
Bill.
CASE STUDY
Thanks