important points to be seen in audit of tenders and high...
TRANSCRIPT
3. Important points to be seen in audit of
tenders and high value contracts
An interaction on
Important points to be seen in audit of tenders and
high value contracts
sharing the experiences
Govt. is the biggest buyer of goods and sevices !
Some Basics What we buy or sell? (Goods, Services,etc to meet our needs)
Satisfaction ! (In terms of quality, quantity, rates and convenience)
What is required exactly should be clear to both buyer and
seller? (Often vague in new type of procurements ? Will get better response (go to
him he knows the job?)
Expectations of both the sides should be crystal clear :
DMS (Computerisation case- SRS), IGNOU (ERP), DDA (Bakkarwala)
(Requirements formulation)
Clarity will help better comptition, bid evaluation process
and contract execution.
(To understand above clearly by both the sides :Pre bid conference)
RFP Contents should clearly spell out our requirement/ needs ,
NIT should contain Agreement format
Basics
Important Points to be seen in Audit How balancing of Interests/Expectations : by following
rules & procedures (Bidding/tendering Process).
The two sides have conflicting interests/expectations but a
Win- Win situation when satisfaction is there on both the
sides. (In terms of quality, quantity, rates and convenience- creates issues later if any of
these is vague).
Important Points to be seen in Audit
Procurement when required (IGNOU: Transformers : Never used –
Warranty over – genuine ?;) Timely Procurement : Not much in advance nor delayed.
Quantities not in excess of requirement nor splitting of
tenders resorted to.
Source of Technical specifications ? : Not adopted/not
specific -- generic only ( IGNOU:TCS; DMS :CMC) .
Technical Evaluation and adequacy of weightage to
technical aspects (60:40 or 80:20)
Important Points to be seen in Audit Procurement procedure followed was as prescribed by the
rules in force. Clauses related to technical competency and capacity,
requisite skills and numbers ensured ?
NIT: No term or condition formulated or interpreted to the
advantage or disadvantage of any bidder/Govt. interests
protected (IMO : System suppliers, Two bid system they follow).
Adequacy of competition : Through proper procedure
ensuring transparency.
Reasonability of rates: How established ? When new procurement ?
(TCS).
Cartel formation? Adequacy of the steps taken to prevent it . (IGNOU
paper procurement, Nexus, Test Lab was managed).
Delivery : Wrt the approved specification/technical
parameters, adequacy of the tests conducted to check
quality parameters.
Important Points to be seen in Audit
e- procurement : if in vogue, how robust is the system ?
Price variation clause, if provided, in accordance with rules? Rates
revision especially when Petrol rates were being increased frequently. Rent,
rates, taxes, subsequent addition/deletion or revision by Govt.
Qualified staff deployed as per the contract.
Scope of work (IGNOU: Over prescription boulders, NRRDA :DPR Vs
Actual execution - culverts, quality superior than requisite, etc.)
Quality of work (NRRDA :Independent study – NQM Vs SQM, STA views –
not only financial but quality & quantity should also be seen by STAs in
respect of the works executed by the engineers)
Funds and other pre-requisites (encumbrance free site) were
available ?
Sanctions at prescribed levels available ?
Compensation/ Mile stones.
Important Points to be seen in Audit Arbitration when dispute arises
Explain DMS (SRS/Trg/ Execution) /TCS (Training
)/IMO Experience : People do not know the ERP
concept/ info is power so don’t want to share, change
management ineffective,Trg in effective, contract
infrastructure space, communication network, AC
facility, Power Back up, etc not provided.
Rent, rates, taxes, subsequent addition/deletion or
revision by Govt.
sharing the experiences
Audit objectives:
The aim of audit is to see that all works were executed
within the minimum possible cost and in accordance
with the procedure laid down for the purpose.
Time and cost over run are the universal observations
in India .
There are four main Stages connected with a project
clearance – which contain the contract management
problems surfaced later:
1. Administrative Approval
2. Financial Sanction
3. Technical Sanction and
4. Appropriation or Re-appropriation of funds
Audit objectives: contd..
Universal Observations :
Time Over Run &
Cost Over Run Or
Efficiency : At the cost of Economy and Effectiveness
Time Over Run : Non Availability of the Project/Work Site
Change in Scope of Work – Inadequate surveys
Change in Drawing and Design – Inadequate site/soil
survey/technology
Disputes with Contractor
Contractor has run away/Risk and cost formalities not fullfilled
Cost Over Run:
Adequate contractual Capacity not available in
the State
Adequate competition not generated :e-
procurement/tendering
Time Over Run
Disputes with Contractor : Arbitration
Turn key Projects :Defective agreements
Minimum possible cost:
Administrative approval (A/A): Necessity for the
work by the administrative department (Air
strip) . An approximate estimate and necessary
preliminary plans (land availability), Technical
estimate for the work to be prepared in advance.
Design and Drawing: To be based on proper field and site
surveys, necessary investigations (seldom found/normally
noticed at the execution stage in the form of large
deviations/variations in scope of work/quantities)
Road alignments based on transact walk (normally
dispute with forest department/land owners)
Proper soil survey in works (building , dams, canals
which do not come up timely or never used or
breached or washed away)
DPRs: Main problem in India. Quality
depends on accuracy of the data and facts
including technology (DPR preparation is
outsourced to consultants).
Comparison of work items and quantities
executed with those prescribed in the DPRs
(STA’s view points, WBM v/s WMM, CD
works, CC works, etc.
• Analysis of ALR and AHR in the financial bids,
justification/ markets trades (when prepared?)
• Bank guarantees genuine,
• Manintenace of contractor ledger, Inspection Book, Site
Register
• LD charge are levied correctly and recovered.
• Comparison of items and quantities: between DPR & G
schedule and G schedule and MB (Normally financial
implications are checked)
• final fill pendency
When contractor leaves the work:
See his profile (works in hand)/financial standing
Technical evaluation
Recoveries
Invocation of BG and
Formalities for risk and cost award.
Appropriateness of the action taken on the
observations of quality monitors
Comparison of observations of different quality
monitors
PMGSY experience(second and third tier monitoring
and
Effect in payment (rectification of the sample or the
entire work
Maintenance contract
PPP contd….
Requirement of huge funds:
Tools for meeting funds requirement - Diferrent Models:
PPP - JVs and
Others:
BOLT (Built, Operate,Lease and Transfer/MCA-
TCS)
BOOT (Built, Operate,Own and Transfer)
BOT (Built, Operate and Transfer/TCS-
IGNOU)
SPVs (opens a company for the purpose)
PPP contd…
Financing:
Toll (Estimation of Receipts & Payments/
Cost Benefit Analysis)
Cess on users who can afford (Mining and
other commercial users)
Annuity (Where Toll/Cess not possible):
Bunching to ivite financially and
technically sound big players.
Types of the works :
•Petty (not more than ` 50,000),
•Minor works (More than ` 50,000 but not more
than 50 lakh)
•Major works (More than ` 50 lakh)
Introduction:
• Audit Mandate : Sections 13,16 and 17 of CAG DPC Act
1971 provide that it is the statutory responsibility of CAG of
India for arranging audit of the Accounts of Public Works
Divisions, Irrigation Department, Public Health Engineering
Department etc.
• Procedure: The audit procedure of Public Works
Divisions/Offices is prescribed in chapter 2 of section VI of the
MSO (Audit) Second Edition and the paras 28 to 53 of the
memorandum of Instructions regarding the extent of Audit.