'Contract Management in Road Works'

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'Contract Management in Road Works' Report of the Comptroller and Auditor General of India for the year ended 31 March 2016 on Performance Audit of ‘Contract Management in Road Works’ Government of Uttar Pradesh Report No 04 of the year 2017 TABLE OF CONTENTS Subject Reference Paragraph Page Preface vii Executive Summary ix CHAPTER - 1 INTRODUCTION Background 1.1 1 Organisational Structure 1.2 3 Audit objectives 1.3 4 Audit Criteria 1.4 4 Scope of audit and methodology 1.5 4 Acknowledgement 1.6 5 CHAPTER - 2 FRAMEWORK OF RULES Existing Framework 2.1 7 Gaps in Framework of Rules 2.2 7 Model Bidding Document 2.3 9 Solvency limit of contractors 2.4 11 Integrity Pact not included in NITs of big contracts 2.5 12 Lack of system for Road Safety 2.6 13 Obsolescence of Manual of Orders 2.7 13 CHAPTER - 3 ROAD DEVELOPMENT POLICY AND PLANNING Road Development Policy 3.1 15 Planning 3.2 17 Enlistment of contractors 3.3 19 Lack of data base of contractors 3.4 21 CHAPTER – 4 FINANCIAL MANAGEMENT AND REVISION OF SOR Budget provision and expenditure 4.1 23 Deduction of labour welfare cess 4.2 27 i Performance Audit Report on Contract Management in Road Works for the year ended 31 March 2016 Revision of Schedule of Rates 4.3 28 Functioning of ‘U P State Road Fund Management Committee’ 4.4 29 Maintenance of records 4.5 30 CHAPTER - 5 COST ESTIMATION AND SANCTION OF WORKS Irregularities in preparation and sanction of estimates 5.1 33 Inaccurate estimates 5.2 39 Proposals for Government sanction 5.3 39 Irregular technical sanction by Executive Engineers 5.4 40 Delay in issuing technical sanction 5.5 40 CHAPTER - 6 INVITATION OF TENDERS Notices Inviting Tender (NIT) and bid document 6.1 43 Irregular Publication of NITs 6.2 46 Limited publicity of NITs in newspapers 6.3 49 Publication of NITs 6.4 50 CHAPTER - 7 EVALUATION OF BIDS AND SELECTION OF CONTRACTOR Lack of competition 7.1 51 Negotiation with bidders 7.2 53 Deficient technical evaluation 7.3 53 Fresh NITs not invited despite revision in Bill of Quantity 7.4 58 Cartel formation 7.5 58 E-tendering 7.6 59 CHAPTER - 8 AWARD OF CONTRACTS Delay in finalisation of contracts 8.1 61 Loss due to less stamp duty charged on Bank guarantee 8.2 62 Contract bonds not signed 8.3 62 Scheduled completion time of works 8.4 63 Utilisation of departmental Plants and Machineries 8.5 64 Splitting of works 8.6 65 Works awarded without tendering by EEs 8.7 66 Road signage works 8.8 66 ii Table of Contents Works executed without sanction of works and allotment of funds 8.9 67 Preparation of incomplete contract bonds 8.10 67 Insurance cover not provided by contractors 8.11 68 Provisions for purchase of material not adopted 8.12 68 Deficient maintenance of Contract bond register 8.13 69 CHAPTER - 9 ADVANCES, RECOVERIES AND PAYMENTS Unwarranted payment of secured advance 9.1 71 Unauthorised advance payment 9.2 71 Payment of Equipment advance 9.3 71 Short performance security taken from contractors 9.4 72 Deduction of retention money 9.5 73 Diarisation of bills of contractors 9.6 73 Royalty payment and transportation of material 9.7 73 Security not credited to ‘Public Works Deposit’ 9.8 77 CHAPTER - 10 QUALITY CONTROL, MANPOWER AND MIS Quality Control issues 10.1 79 Functioning of Technical Audit Cell 10.2 83 Irrational deployment of Manpower 10.3 84 Management Information System 10.4 84 Electronic database of contracts and contractors not maintained 10.5 85 Lack of data on number of PEs 10.6 85 Digitalisation of road data 10.7 86 Computerisation of system not carried out 10.8 86 CHAPTER - 11 CONTRACT VARIATIONS Irregularities in sanction of time-extension 11.1 87 Irregularities in sanction of variation 11.2 88 Irregularities in sanction of extra-items 11.3 89 Delay in completion of works 11.4 90 Completion reports not sent 11.5 91 iii Performance Audit Report on Contract Management in Road Works for the year ended 31 March 2016 APPENDICES Appendix 3.1 Details of irregularities noticed in enlistment of contractors at 93 E-in-C/CE/SE/EE level Appendix 4.1 Advance payment to IOC (Direct debit to works) 94 Appendix 4.2 Details of labour cess deducted 95 Appendix 4.3 Different rates for same item in Schedule of Rates 96 Appendix 5.1 Inadequate traffic census 98 Appendix 5.2 Excess provision against IRC norms 99 Appendix 5.3 Deficient/wrong provisions against the IRC norms 105 Appendix 5.4 Irregular technical sanctions by EEs 110 Delayed TS (Zone-wise details of delay in issue of TS by 110 Appendix 5.5 (A) CEs) Delayed TS (Circle-wise details of delay in issue of TS by 111 Appendix 5.5 (B) SEs) Delayed TS (District-wise details of delay in issue of TS by 111 Appendix 5.5 (C) EEs) Appendix 6.1 Ineligible contractors allowed to bid 112 Appendix 6.2 Different machinery mentioned in bid documents by the 113 divisions Appendix 6.3 NIT before AA/FS (SE/EE level) 114 Appendix 6.4 NIT before Technical Sanction (SE/EE level) 115 Appendix 6.5 Opening of financial bids before TS (SE level) 116 Appendix 6.6 Contractors deprived due to revision of cost of work 117 Appendix 6.7 Details of NITs directly sent to press 118 Appendix 6.8 District-wise details of contract bonds executed on short term 119 tender basis (SE/EE level) Appendix 7.1 No. of bids received 120 Appendix 7.2 Details of bids received and negotiation held 121 Appendix 7.3 Cartel formation by the bidders 122 Appendix 8.1 Short stamp on Bank Guarantee 124 Appendix 8.2 Splitting of works less than ` 40 lakh 125 Appendix 8.3 Works executed without sanction and allotment of funds 126 Appendix 8.4 Insurance not carried out by the contractor 127 Appendix 8.5 Non-use of T3 for purchase of material 128 Appendix 9.1 Secured advance paid to contractors 129 iv Table of Contents Appendix 9.2 Un-authorised advances paid to contractors 130 Appendix 9.3 (A) Details of MM-11 provided other than district of execution 131 Appendix 9.3 (B) Royalty calculation due to non-availability of MM-11 132 Appendix 9.3 (C) Details of Calculation of cartage 134 Appendix 9.4 Non-crediting of deducted security to ‘Public Works Deposit’ 135 Appendix 10.1 JEs supervised by an AE 136 Appendix 11.1 Sanction of time-extension on inadmissible ground 137 Delay in sanction of time-extension after schedule completion 138 Appendix 11.2 of work Appendix 11.3 Imposition of insignificant penalties 139 Appendix 11.4 Sanction of time-extension on non-availability of funds 140 Appendix 11.5 Irregularities in sanction of variations 141 Extra-items not provisioned in bond but items provisioned in 142 Appendix 11.6 estimates Appendix 11.7 Extra-items are not related to this work (other works) 142 Extra-items/extra-payment for shifting of stone ballast/ 142 Appendix 11.8 material Appendix 11.9 Payment of extra-item without sanction 143 v Preface This Report containing the observations arising out of Performance Audit on “CONTRACT MANAGEMENT IN ROAD WORKS” has been prepared for submission to the Governor of Uttar Pradesh under Article 151(2) of the Constitution. The cases mentioned in the Report are among those which came to notice in the course of test audit of records of Public Works Department (PWD), Engineer-in-Chief (PWD) and selected Zones, Circles & divisions under Engineer-in- Chief (PWD). Performance Audit covered the period 2011-12 to 2015-16. The Audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. vii Table of Contents Executive Summary Chapter 1- Introduction Uttar Pradesh is the most populous State in the country and has made massive investments in road sector in recent years to improve connectivity. Still the State stands at 25th position in road density per lakh population and at ninth place in road density per 100 square km area. The State has 2,03,457 km of various categories of roads such as National Highways, State Highways, Major District Roads, Other District Roads and Village Roads. The road works are executed by Public Works Department through contractors by award of works. During 2011-16, the State government incurred an expenditure of ` 40,854.63 crore on construction and maintenance of various types of roads in the State excluding Pradhan Mantri Gram Sadak Yojana. About 77 per cent funds were utilised on widening/strengthening of existing roads and remaining 23 per cent funds were utilised on construction of new roads. The State government in 2007 had introduced a number of reforms in tendering procedures to enhance transparency and competition and check involvement of anti-social elements in tendering process of public works. In view of huge investments made by the State Government on construction of roads during the last five years and significant amount of market borrowings made to finance capital expenditure, it was important to ascertain whether the expenditure had been incurred transparently in a prudent and efficient manner, to achieve the desired objectives of providing effective road connectivity in the State. Audit, therefore, decided to carry out a comprehensive performance audit of the system of tendering and contract management of road works by the department.
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