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WORKSHOP ON ENFORCEMENT OF CONTRACT CLAUSES

WORKSHOP ON ENFORCEMENT OF CONTRACT CLAUSES. B.PRADHAN,CVO,AAI GUWAHATI 08.09.2011. STRUCTURE OF PRESENTATION. PUBLIC PROCUREMENT CVC GUIDELINES AREAS OF CONCERN SUGGESTIONS. PUBLIC PROCUREMENT.

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WORKSHOP ON ENFORCEMENT OF CONTRACT CLAUSES

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  1. WORKSHOP ON ENFORCEMENT OF CONTRACT CLAUSES B.PRADHAN,CVO,AAI GUWAHATI 08.09.2011

  2. STRUCTURE OF PRESENTATION • PUBLIC PROCUREMENT • CVC GUIDELINES • AREAS OF CONCERN • SUGGESTIONS

  3. PUBLIC PROCUREMENT • Public procurement plays a big role, as appxmly. 30% of India’s GDP gets converted to public procurement contracts. Departments like Railways, Defenceand 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.

  4. 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.

  5. 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

  6. CVC GUIDELINES

  7. Investment in Airport Infrastructure

  8. 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.

  9. 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.

  10. 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.

  11. Contd… • Allowing extra items at inflated rates. • Permitting alternative makes without adequate cost adjustments. • Accepting substandard work .

  12. 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.

  13. 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.

  14. 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)

  15. 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)

  16. 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)

  17. QUESTIONS ??? • 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?

  18. 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.

  19. 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.

  20. 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 .

  21. 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.

  22. GENERAL GUIDANCEcheck points duringexecution 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.

  23. 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.

  24. 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.

  25. THANK YOU!cvoaai@aai.aeroorb.pradhan@nic.in

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