No. E/llllB/Misc/Vol - lV

Office of the CDA, Udayanviha,'

Narangi, Guwahati - 7 81, 17 1,.

Date : 27 10912016.

Subject

All Aos/AAos GEs/AGE(l)

(By name)

Audit of Deviation Orders and Recoverv of Compensation on account of delav

in completion of contracts in respect of Works Services.

Deviation Orders in respect of all MES contracts are being received in'E'section

of Main Office after pre-scrutiny by AOs/AAOs GE/AGE(|). However, it is often found that proper

preliminary checks are not being exercised by the AOs/AAOs before forwarding the same to Main Office.

ln this regard, the following guidelines are laid down for strict compliance by allAOS/AAOs GE/AGE(l) as

regards audit of Deviation Orders and recovery of Compensation from the RARs/Final Bills in respect of

Works Contracts.

2, Time is expressly stated to be the essence of Contracts in all MES Works.

However, most of the contracts suffer time and cost over runs with no proper justification being brought

on record. ln order to effectively audit of DOs the following documents must be called for at the time ofpreliminary scrutiny of DOs and one copy of the same invariably be enclosed with the DOs to be sent in

duplicate to Main Office.

a) Copy of Approval in Principle (AlP) accorded by the Accepting Officer.

b) Copy of the market rates quotations/AEs of relevant contract stated in support in

respect of the Star Rates mentioned in the DOs.

c) Copy of Notice required to be issued by the contractor as per condition No. 11(A)

of IAFW-2249 along with supporting documents in proof of the circumstances with reference to which

the time extensions are sought by the contractor.

d) ln all cases of covering DOs issued for time extensions, copy of notice of

compensation required to be issued by MES to the contractor under Condition No. 50 of IAFW-2249, as it

is mandatorily required under Para-l-7 .2.9 of MES Manual of Contract,)J. The DOs can be authorized only the officer who accepted the contract unless

such powers have been duly delegated. ln delegating the powers the delegating authority must specify

the general nature and the financial limits up to which such deviations may be ordered. DOs can be

approved only the authorities competent to order as per Para-436 of MESR and for the reasons which fall

under the scope mentioned in Para-435 of MESR.

4. DOs issued with financial effect must be audited to see that the Star Rates, if any,

mentioned are correct with reference to the supporting documents enclosed. lf not enclosed, the same

must at once be called for from the GE/AGE(l) and scrutinized. As per Para-439 of MESR the analysis of

rates must be made available to DAD. lt must be ensured that the Star Rates are fixed correctly by the

competent authority as prescribed in Para-439 ibid. Deviations with financial implications can be ordered

only for material improvements as are necessary for the performance of works and not for those

additions which would alter the scope of the contract and which need to be issued in the form of

Amendment under Para-440 of MESR.

V tu,)'" T^| $) \/JL\n W tltTo,

Contd............/z

5.

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DOs for extension of time must be scrutinized to see that the time extension is

conveyed to the contractor before the expiry of the PDC mentioned in the contract. ln case where the

decision with regard to extension of time has not been conveyed to the contractor by the GE before the

date of completion prescribed in the contract/phase of the contract, it is mandatory for the GE to issue

notice of compensation under Condition No. 50 of IAFW-2249 as per Para-I7.2.9 of MES Manual of

Contract. Once the notice of compensation is issued, the same cannot be revoked or withdrawn by the

MES authorities as the right to claim compensation is an act created by the lndian Contract Act, l-872 and

also the contract conditions automatically and immediately after the expiry of PDC. Consequently, it is

mandatory to recover compensation due as per the notice issued under Condition No. 50 of IAFW-2249

in the next RAR presented for payment or in the Final Bill if the Final Bill is presented for payment. ln no

case should the recovery of compensation due be deferred till the Final Bill, while making RAR payment,

as this would result in the Final Bill running to a minus figure. AOs/AAOs GE/AGE(l) should in no case

forward Final Bills to Main Office without recovery of compensation due as per above provisions, leaving

the same to the decision of Main Office. While it would be advisable for the Accepting Officers to add in

the AIP for time extensions that the time extension does not prejudice the notice for compensation

already issued, the legal right to recover compensation is not affected even if such a mention is not

made, since the right to claim compensation covered by Condition No. 50 of IAFW-2249 read with

Section 73 &74 of lndian Contract AcL,1872 is absolute and independent.

6. AlPs issued by the Accepting Officer must be audited to see that the specific

reasons for granting time extensions is furnished in the endorsement copy to CDA and the same is

justified with reference to the notice to be given by the contractor under Condition No. 11(A) of IAFW-

2249 and its supporting documents in proof. Mere reference to Condition No. 11(A)(vii) of IAFW-2249

stating that the Accepting Officer have absolute discretion to grant time extensions cannot be admitted

in audit, since the said clause is an expression of an unquestionable right only against the contractor and

not a Govt. letter vesting unquestionable powers to the Accepting Officer. Reasons such as sickness ofthe contractor, non-availability of labour/materials, rain, financial difficulties of the contractor/firm etc.

which are sometimes brought out in the AIP as reasons for granting time extensions are not admissible in

audit since ii would be part of risk management of the contractor to anticipate or make provision for

these issues while tendering and consequently, the time or fihancial loss, if any, sustained from such

reasons cannot be borne by the Govt. ln this connection, it is stated that whenever time of extension is

granted under Condition No. 11(A)(vii) of IAFW-2249,Lhe Accepting Officer must ensure that the specific

justification for granting extension falls within the same class as is applicable for the variety of

extraordinary external circumstances listed in Condition No. 11(A) (i)to (vii).

7. There is no authorization in RMES for Accepting Officers to issue covering DOs.

Para-435 of RMES clearly stipulates that the Engineer-in-charge of the contract must at once submit

proposals for deviations for approval as soon as it is known that the deviations cannot be avoided, Hence

issue of covering DOs are per se objectionable notwithstanding the justification which may be put forth

by the MES authorities.

Contd..........13

Without prejudice to the position stated in Para-6 above, it must be noted :*;itime extensions can be sought by the contractor only if a proper notice is served on MES under CondtirrNo. 11(A) of IAFW-2249 within 30 days of the happening of the event which necessitates time extenslo'

lf such a notice is not served, the contractor is not entitled to seek time extensions. ln such cases even i'a DO is issued the same would be void ab initio.

9. DOs should contain contractor's signature even when the contractor has signed

under protest. Refusal to sign in DOs would not give claim to the contractor for any further payment in

view of Section 51 & 52 of lndian Contract Act,1872.

10. Granting of piece meal time extensions by the Accepting Officers is irregular as

they must consider the extent of works yet to be completed and assess the time required for granting

extensions in permitted situations in one stroke. Audit can inquire the percentage of work completed in

case of subsequent extensions to verify the correlation between the percentage work unfinished and

extension of time granted.

11,. As per Para-!7.2.6.1 of MES Manual of Contract where time extensions granted

for CE's contracts are over 25% of original PDC or 9 months whichever is higher or in the case of GE/CWE

contracts over 25% of the original PDC or 3 months whichever is more, the case must be referred to the

next higher authority. As per Para-!7.2.6.2 of ibid Manual, while taking such decision, cognizance need to

be taken of lapses and disciplinary/administrative action initiated both against the executive(s) and

contractors as warranted. Confirmation to this effect must be sought for from the MES authorities and

enclosed with the DOs.

1.2. AOs/AAOs GE/AGE(I) must ensure while forwarding DOs bearing No. 3 onwards

that the previous DOs have been audited by MO and reply, if any, have been sent to CDA for considering

settlement. lt would be highly irregular for the AOS/AAOS GE/AGE(l) to forward Final Bills for audit before

getting the observations to the deviations fully settled by MO.

Please acknowledge receipt.

Copy to :

;-4G,r,EDP Cell (Local)

1tAsst. Controller

: For publication in web site of CDA Guwahati please.

Vt-( 5. Dey Sarkar )

Sr. Ao(E)

8.

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