SOUTH EASTERN RAILWAY

Prologue
The need for compiling a Compendium on instructions pertaining to Tenders and Contracts by officers and staff of Mumbai Division was felt with the objective of making a unified reference book for consultation and guidance of officers and staff. The procedure of tenders and contracts is the singular source through which bulk of railway investment is made. Lack of clarity or ignorance about rules and instructions has the potential danger of creating a situation where public money may get spent in an improper manner and investment decisions may prove to be wasteful and infructuous. Moreover, due to ignorance of rules a large number of officers and staff get implicated into vigilance cases and despite the intention not being mala fide they face disciplinary proceedings. The first such compendium was issued by Central Railway in March 1990. While the Compendium has served an extremely useful purpose of guiding the Railway functionaries, some recent instructions still require to be circulated. Subsequently another Compendium on recent circulars was issued by Railway Board in December 1998. The preface of the compendium issued by Board states that the compendium contains all circulars and letters issued on the subject prior to and on 30.6.1998. The preface further adds that circulars not contained in this compendium are deemed to be cancelled or superceded. These remarks are likely to send the message that besides the circulars contained in this compendium, no other circulars are to be acted upon. However, a scrutiny of the compendium reveals that there are only 31 annexures in this compendium which cover 12 subjects but under each of these 12 subjects there are some other related instructions covered through earlier circulars which cannot be considered to have been superceded as they do not run contrary to the 31 circulars included in the compendium of December 1998. The other circulars therefore are to be treated as supplements to the instructions contained in Boards Compendium of December 1998. Moreover, the consideration of tenders and the procedure about tendering cover a very wide canvas and it seems necessary to have a more holistic view of the subject, particularly for those officers and staff who have not been associated with the subject of tenders and contracts for a very long time. It is further felt that any such compendium should also bring forth some real life case studies and some analytical opinion on the same so that a climate of debate and discussion is created and some doubts are raised which would lead to further enrichment of the concept and ideas on tenders and contracts. In this compendium an attempt has been made to provide checklists wherever possible though the same may not be exhaustive.

Since the analytical discussion has been done by a group of Finance officers and staff, the contents may at some places appear to be a little overloaded in the context of working of Finance branch. The number of annexures have been kept limited to 67 and some letters have been reproduced verbatim in the write up or in some cases where the instructions contained in Boards letter are routine, only the letter number has been quoted. This compendium should not be quoted as an authority except where the circulars have been reproduced verbatim. The opinions expressed are strictly of the officers and staff of Sr.DAOs Office, Mumbai. The printed version is being followed up by a digital version which will have all the main topics and annexures hyperlinked and for the convenience of officers and staff, a search engine will be provided which will enable them to access the desired text immediately. It is also proposed to request the Webmaster of IRAS website to put the compendium on the IRAS Website. The officers and staff of Sr.DAO Office, Mumbai will be deeply indebted for any suggestions. These can be sent by mail to the undersigned with the words Suggestions on Tender Compendium subscribed on the cover or by e-mail to compendiumsrdaobb@hotmail.com or ranjanesh@hotmail.com The labour in compilation is equally shared by Suresh, Rajiv & Rajagopal with active support and assistance of the staff of Finance Section. Their families have had to bear with our obsession to complete the compendium and we thank them sincerely. We are deeply indebted to our DRM Mr.Vivek Sahai who kept us egging to do something more than routine. The encouragement received from our FA&CAO Smt. Sudha Chobe and FA&CAO(F&B) Shri Shahzad Shah enabled us to compile the compendium timely i.e. during the Railway Week of 150 years of Indian Railways.

R.SAHAI Sr.DAO/BB

Foreword
It is really heartening to know that the officers and staff of Mumbai Division have taken great pains to compile a Compendium of instructions on Tenders and Contracts along with an exhaustive commentary on the various aspects of tendering and contracts. The very high incidence of railway officers getting into vigilance cases, mostly due to errors of omission makes it all the more necessary that no mistake is committed on account of ignorance. CVC has recently reported that in the 340 cases pertaining to Railways in the year 2000, cases pertaining to tendering and award of contracts constituted 34%. I am sure that the effort made by Mumbai Division in this direction would help the officers and staff to work in a more cautious and effective manner. It is further seen that some pertinent issues have also been raised in this Compendium which would generate a healthy debate and lead to further enrichment of the general understanding on the subject. I commend the officers and staff of Sr.DAO/BBs Office for this unique and sincere effort.

Sd/(SMT.SUDHA M. CHOBE) FA&CAO

Message
In continuation of the pursuit of Mumbai Division to bring out system improvement, the Accounts Branch has come out with the third novel project by compiling a Compendium on Tenders and Contracts. In the recent past they have introduced PF IVRS Enquiry and compiled a Compendium on Bills Recoverable. In the Divisional set-up we have to undertake targeted works in which the deadlines are absolutely sacrosanct. My own understanding says that planning of an activity has to be undertaken with due allowance for the laid down procedural formalities like sanction to estimates, availability of funds and with concerted efforts to get the best possible rates. That the same is possible to achieve was more than adequately displayed when the stupendous task of CSTM Yard Remodelling could be completed within the target date without compromising on any extant rules. This Compendium would be of a great help to the officers and employees not only of Mumbai Division but to all administrative units who deal with tenders and contracts. The commentary on various topics is likely to generate a healthy debate and the ultimate beneficiary would be the railway organization. It is heartening to know that a digital version of the Compendium is also proposed to be released on CDs so that the information is easily accessible and a reliable storage device would lend a sense of permanence to the hard work put in. I compliment the officers and staff of Accounts Branch of Mumbai Division for this pioneering effort which is probably the first by a Divisional Accounts unit. I hope that they will continue to work with renewed vigour in pursuit of excellence in other fields. Sd/(VIVEK SAHAI) Divisional Railway Manager

Message
The Accounts Branch of Mumbai Division has been extremely pro-active on various aspects related to tenders and contracts. As FA&CAO(F&B) I have had a very close interaction with this office and have got valuable suggestions on a number of occasions. The contents of the Compendium and the commentary in the seven chapters would prove to be extremely useful to all officers and staff who are associated with the work of tenders and contracts. It is rather heartening to know that a digital version is also being made and hyperlinking of the annexures will be done for the convenience of the users. The idea of search engine for a compendium is also unique as the user would be able to easily locate the text desired. I am sure that this zeal and enthusiasm would continue in the times to come so that the vibrant style of working continues to inspire others to work beyond the normal brief assigned.

Sd/(SHAHZAD SHAH) FA&CAO(F&B)

TABLE OF CONTENTS

Chapter I Chapter II Chapter III Chapter IV Chapter V Chapter VI

Invitation of Tenders Tender Documents Submission of Tenders Consideration of Tenders Variation in Contracts Extension, Termination & Revocal of Contracts

1 to 14 15 to 22 23 to 40 41 to 57 58 to 62 63 to 67

Chapter VII Epilogue Annexures 1 to 67

Some Problems

68 to 75 76 to 79 80 to 181

CHAPTER I
INVITATION OF TENDERS
In line with the Canons of Financial Propriety [Annexure-1] it is the intention of the functionaries dealing with tenders to get the most economical and reasonable rates for works to be executed on contracts. Tenders are a useful means for getting the best possible value for the money spent. CLASS OF TENDERS 1.01 Open Tenders (Para 1213E) The system of invitation of tender by public advertisement in the most open public manner possible should be used as a General rule and must be adopted subject to certain exceptions. 1.02 How To Invite ? To comply with the condition of advertisement in the most open public manner possible wide publicity is to be given by putting a) Notices in Railway Offices b) Advertisements in vernacular/local newspapers c) Advertisement in National/International Newspapers. In case of important, highly technical or/and high value tenders, tender notice must be published in National newspapers. Though the ceiling limit for the same is not notified, it is normally followed in Tenders above Rs.30 lakhs. (Boards letter No.2000/W-I/NE/NL/10 of 17/10/2001 Annexure-2). 1.03 Time Frame for sale of Tender Papers & Publication of NIT Normally in all cases, Tender notice should be published at least a month in advance of the date of opening. Only in exceptional circumstances, where works are extreme by urgent, three weeks notice may be given.

2 Normally for big open line works, the tender papers should be available for sale at least three weeks before the opening the tender. For other smaller works, at least a fortnight should be the time. [Annexure-3 : GM(W)s Circular No.W.187.R.V. of 6th June, 1970] [Annexure-4 : Railway Boards letter No.93/CE.I/CT/85 of 9.5.1994].

These guidelines have been issued for adequate publicity and fair competition. If the minimum period of 30 days is not adhered to or curtailment in notice period is to be done, it can be done with the concurrence of Associate Finance after the urgency has been satisfactorily explained. Non-availability of tender papers leads to denial of a fair opportunity to prospective tenderers and can invite complaints. SUGGESTION SDGM, Central Railways, vide letter No.L.2000/6.130/C23/V.Con. dated 6/9/2000 [Annexure-5] has clearly instructed that sale of Tender Papers should not be denied to anybody who is willing to pay for the Tender forms. These instructions have been reiterated by Board [Annexure-6 Boards letter No.2000/CE-I/CT/42 of 12/2/2001]. There is therefore the need for making a centralised sale counter where Tender papers of all departments are available for sale. The idea of putting Tender Notices on the Web have also not fully crystallized though Construction organization and Stores Department have made a beginning on Central Railway.

1.04 Precautions in Tender Notice (1) Those dealing with Tenders should ensure that the minimum notice period is adhered to. Cases where a delay has taken place and the gap between the date of publication and date of opening, as advertised, is less than 30 days, a corrigendum to the Tender Notice must be issued before the advertised date of opening. Corrigendums should be worded clearly and must contain the original Tender Notice and Name of work so that the prospective bidders are not confused. Moreover, issue of a large number of corrigendums should be avoided [Annexure-7 Boards letter No.2001/U3/N/Misc/Tender dated 23/06/2001] (2) Tender Committee Members must ensure that a copy of the Newspaper cutting is invariably available on the Tender File.

Case Study 1 :
In one of the cases, the Tender Committee discovered while deliberating on a particular case that the Draft Tender Notice had not reached the office of CPRO and whatever Tender Forms had been sold (a very limited number) were on the basis of tender notice placed on the Notice Boards. The tender had to be discharged.

Case Study 2 :
Often there is a practice to cut the Newspaper cutting without reference to date of publication. The notice should be cut in such a manner that date of publication is clearly visible [See Annexure-8].

1.05 Precautions prior to invitation The executing officer must know clearly before invitation of tender about :What exactly is required to be done Where it is to be done By when it is reasonably possible to be completed To what extent Railways will be able to help/assist in execution work The realistic estimated cost, payment terms Whether drawings for the work are approved by the authorities competent to approve, whether the work is essential and not covered by another sanctioned work already under execution and the ultimate user of the proposed facility is satisfied about the scope of the work. [Annexure-9 Boards letter No.80/W2/3/33 of 29th August, 1980] Soil survey, wherever necessary has been done [Annexure-10 : Boards letter No. 68-B(C)PAC/IV/23 of 20.6.68] Whether the estimate is sanctioned and it incorporates the inputs of all departments concerned and the Tender Schedule is clear, unambiguous and complete. The tendency to get estimates sanctioned without getting the requirement of other participating departments approved by them needs to be curbed. Case Study 3 : In one case a work of replastering of quarters was got sanctioned. Owing to replastering the electrical wiring, plugs, sockets which were old were also required to be replaced. However no provision in the estimate had been kept for the magnitude of work involved. The Electrical Branch was therefore compelled to process their estimate afresh and the quarters

4 remained unoccupied for a substantially long time in spite of a heavy demand. The site of work is ready for handing over Supply of Railway material should be done with due caution [Annexure11 Boards letter No.68/WI/CT/25 dated 12/07/1968] and lead and lifts should be decided along with the place where the material will be supplied. 1.06 Sanction before Tender At times contracts are invited even without the sanctions to Detailed Estimate. On some occasions an estimate is got sanctioned without ascertaining the actual requirement of all participating departments. In terms of Boards letter No.94/CE-I/CT/4 of 17.9.97 [Annexure-12] only in case of extreme urgency, Tenders can be invited before sanction of the detailed estimate with prior concurrence of associate Finance and personal sanction of DRM for works costing upto Rs.50 lakhs PHOD for works costing upto Rs.1 crore GM for works costing beyond Rs.1 crore. It may be borne in mind that dispensation is allowed Only for extremely urgent cases Prior Finance concurrence is necessary and the dispensation is only for invitation as Sanction of detailed estimate is necessary before awarding the contract. 1.07 Other Typical Requirements for Tender Invitation 1) Railway boards approval has to be obtained before calling tenders involving Foreign exchange which is estimated to be in excess of Rs.50,000/-. 2) In case where the specifications in a tender have undergone any major change before the tender is finalised, fresh tenders should be called for, giving sufficient notice to tenderers. [Annexure-13 - Boards letter No.58/B(C)-2498/11/4th Report dated 27th/30th May, 1958]. 3) When the work is spread over various places on the Railway, it would be advantageous if the Railway Administration, while inviting tenders for such work, invites quotations for all the works at all places collectively as well as for the work of each place or groups of places fairly close to each other. [Annexure-14 - Boards letter No.61-B/C/NE/9 of 23.9.1960].

4) For inviting tenders in which design and construction are included, the following precautions need to be taken right at invitation stage :> > > Contract should be awarded on lump sum basis and not on item rate basis. Schedule of payment should be planned carefully. Excess quantities if any found at design approval stage should not be paid extra but reduction for minus quantities can be done (details in item 13 of Boards letter No.94/CE-I/CT/4 of 17.9.97 Refer back to Annexure-12).

1.08 Value of Tender Forms In terms of Advance Correction Slip No.24 added to Para 1240A of Engineering Code the cost of Tender forms will be as under :i) ii) iii) iv) v) For works upto Rs.5 lakhs For works above Rs.5 lakhs to Rs.20 lakhs For works above Rs.20 lakhs to Rs.50 lakhs For works costing above Rs.50 lakhs upto Rs.2 crores For works above Rs.2 crores Rs.500 Rs.1000 Rs.1500 Rs.2000 Rs.3000

(Authority: Boards letter No.94/CE-I/CT/53 of 25/7/94) 1.09 Minimum Eligibility Criteria Vide Joint P.O.O. issued by CE(Works) and FA&CAO(F&B) vide letter No.W.187.R.1/A/SPL.CON dated 2.1.2002, the following minimum eligibility criteria for Tenders above Rs.30 lakhs has been specified :i) Past Experience of Similar Works : The tenderer must have completed at least one work of similar nature, valuing not less than onethird the estimated cost of this work, in any period of 12 calendar months in last three years. Alternatively the aggregate value of works of similar nature executed in a period of 12 calendar months in last 3 years should not be less than 50% the estimated cost of this work. This evaluation shall be done on the basis of payments received for the corresponding period in respect of work/works of similar nature. For this purpose the tenderers are required to furnish the necessary details duly attested by the concerned office/department. The Annual Turnover : The annual turnover of the tendering firm in last 3 years shall not be less than 1.5 times the estimated cost of this work as per ITCC to be submitted along with this tender.

ii)

6 Machinery and Plants : The tenderers will submit with the tender a list of required machinery, plants and tools along with necessary documents to establish the ownership/hiring. iv) Financial Solvency : The firm shall submit a solvency certificate from a Nationalised or Scheduled Bank for an amount not less than 1/4th of the estimated cost of this work. v) Organisation : A list of personnel, technical and otherwise, as available on hand and as proposed to be engaged for the subject work will be submitted with the tender. The offers from the tenderers not satisfying the above mentioned eligibility criteria, are liable to be rejected. Notes: (a) For tenders below Rs.30 lakhs, eligibility criteria if any should be vetted by associate Finance. (b) Combined Tender Notices are published with Minimum Eligibility Criteria in which works of more than Rs.30 lakhs are combined with works below Rs.30 lakhs. This is incorrect and separate Tender Notices in such cases should be published. 1.10 Model Tender Notice (Para 1239 E) The tender notice should in all cases state :i) ii) iii) iv) the place and time where contract documents can be seen. the place and time where blank tender forms can be obtained. the amount, if any, to be paid for such documents. the place, where, the date on which and the time at which tenders to be submitted and are to be opened. iii)

Model Tender Notice (A hypothetical case of NIT published on 1/4/2002) DRM(W), 3rd Floor, above Computer Reservation Centre, CST Mumbai 400001, invites sealed Tenders for the following works. (Tender forms will be available in DRM(W)s Office which is also the place of sale, submission & Tender opening). Name of Work: Estimated Cost: Completion Period: Commencement of : Sale of Tender Form Repairs to leaky roof in Annexe Building. Rs.50 lakhs 6 months (including monsoon) From 14/04/2002 from 10.00 hours

Last Date of Submission: On 5/5/2002 till 12.00 hours Date & Time of Closing: On 5/5/2002 at 15.00 hours Date & Time of Opening: On 5/5/2002 at 15.05 hours

7 Cost of Tender Form: Earnest Money: Rs.1500/- (Rs.60 extra if required by post)

Rs.10,000/- (Form of submission of Earnest Money can be checked in the Tender Booklet) Note: Tenderers or their authorized representatives can be present at the time of Opening of Tender. Explanation : The above model tender notice ensures that the : 1) Date & Time of receipt, submission, closing and opening are clearly specified. 2) Earnest Money amount and cost of Tender form are as per Boards instructions. 3) Minimum time gap between publication and opening (30 days) has been maintained. 4) Stipulated time of commencement of sale of Tender papers (21 days) has been observed. 5) Eligibility criteria has not been given in spite of the cost of the work being above Rs.30 lakhs. Therefore the items under Minimum Eligibility Criteria as per Joint P.O.O. issued vide letter No.W.187.R.1/A/SPL.CON dated 2.1.2002 (in Para 1.09 at Page 5 & 6) should be given in such cases and the model tender notice is deficient to that extent. Check List for Invitation 1. Advertise high value tenders in National Newspapers 2. Minimum gap between Publication and Opening 30 days 3. Tender Forms to be available for sale 3 weeks before opening (minimum 15 days before for small tenders) 4. Curtailment of notice period (minimum 21 days) with prior Finance concurrence 5. Sale of Tender Form not to be denied to anyone 6. Corrigendums to be published before original date of opening and date of publication of original tender notice and name of work to be mentioned 7. Newspaper cutting a must and should be pasted on tender file 8. Get Estimates sanctioned before invitation or obtain competent authoritys sanction after prior accounts concurrence 9. If specifications after invitation undergo a major change, reinvite tenders 10. Scope, completion time is known 11. Drawings/site is ready 12. Requirements of all participating Departments have been taken care of in the scope of work

8 2.0 Limited Tenders The contents of Para 1214-E in this context are reproduced as under :(i) Where for reasons, which should be in the public interest it is considered not practicable or advantageous to call for open tenders, limited tenders may be invited with the concurrence of the FA&CAO and approval of the competent authority. The reason for inviting limited tenders from firms/contractors should be kept on record while approaching finance for concurrence. In open line railways, the systems of inviting tenders for works costing up to Rs. 5 lakhs (Five lakhs) each from amongst the contractors borne on the approved list may also be adopted when it is considered advantageous to do so, provided the number of contractors borne on the approved list for the particular type of work is not less than 10(Ten). Some percentage of the tenders, which would normally be finalised by calling limited tenders, be finalised by calling open tenders so as to test the market rates periodically. Notice for Limited Tenders be sent to all eligible contractors borne on the approved list. Notwithstanding the provision contained in para 1214(ii) above, the Railways may, in consultation with the associate finance, invite open tenders in the following circumstances: (a) In the event of insufficient response to the tender from the contractors borne on the approved list; (b) When the work is of special nature and contractors with requisite experience are not available on the approved list; and (c) When ring formation is suspected.

(ii)

(iii)

(iv) Note:-

Open tenders are however to be invited as a General Rule (Para 1213E). In terms of item 1.18 of SOPGEN, the powers for invitation of Limited Tender are as under :PHODs ) CHODs ) Rs.15 lakhs SAG ) DRM/ADRM Rs.10 lakhs SG/JA Rs.5 lakhs Sr.Scale Rs.1 lakh

9 i) In terms of Boards letter No.83/W1/CT/14(Policy) of 30.3.1987, prior Finance concurrence is not necessary if Limited Tenders are being called from approved list. If however Special Limited Tenders are to be called (Boards letter No.94/CE-I/CT/4 at Annexure-12) prior concurrence of FA&CAO and approval of GM is required. As per this letter, all contractors on the approved list may also be included. This letter has also enhanced the powers of General Manager for calling Limited Tenders to Rs.40 lalkhs. However, these powers have not been redelegated on Central Railway yet beyond Rs.15 lakhs. In terms of Boards letter No.94/CE-I/CT of 22.10.2001 some additional instructions have been issued [Annexure-17] as per which Notice for inviting Limited Tenders should also be published as in the case of Open Tenders. Offers for Special Limited Tenders should be invited preferably from at least six but not less than four tenderers.

ii)

iii)

Precautions : (a) (b) Rates received in Limited Tenders should be compared with Open Tenders also. Till the system of advertisement in newspapers has not been streamlined for Limited Tenders, clear acknowledgement from all contractors from approved list should be obtained about receipt of Tender papers/Notice and the invitation should not be restricted to only 10 contractors of approved list. In case a Limited Tender has been invited on an estimate of lower value (say Rs.4 lakhs) and the lowest offer is higher (say above Rs.5 lakhs) approval of next higher authority as per delegation should be taken. While obtaining acknowledgement, the name of work should be clearly mentioned on the document in support of acknowledgement of receipt. The receipt in original should be kept on the Tender file. For single offers received in Limited Tender refer Para 3.0 at Page 42 of Chapter IV. Case Study In one case a contractor complained that he had not received the tender enquiry for a particular work in spite of being on the approved list. Investigations revealed that the tender file contained a photocopy of acknowledgement on which the name of that work for which the complaint was received had been mischievously put by taking a photocopy of acknowledgement of another work invited on Limited Tender basis.

(c)

(d)

(e)

10

3.0 SINGLE TENDERS 3.01 Railway Board vide its Letter No.93/W2/PQR/SC/4/Pt of 24-9-96 has further elaborated upon the procedure with regard to Single Tender which is extracted below: Sub: 1. Procedure with regard to Single Tender/Awards of Contracts on Zonal Rlys.

The Chairman, Rajya Sabha Committee on Govt Assurances while taking oral evidence of Board (CRB and ME) in connection with the system of award of contracts on one of the Zonal Railways had adversely commented upon the high incidence of Single Tenders particularly on that Railway. The Committee has desired this Ministry to order an enquiry into the incidence of Single Tenders resorted to during the last three years on the zonal railways and to suggest measures to streamline the procedure for inviting single tenders so as to curb their misuse. On the basis of the report furnished by the enquiry committee, it has been decided that the following procedures should be strictly observed by the zonal railways, in cases of award of single tenders :i) Award of works on single tender should be restricted to restoration works in cases of accidents, breaches and other emergencies, as also to works of very specialised nature. The decision in regard to these specialised works should be taken by the CAO(C) or the GM and cannot be delegated further. Routine nature of works like transportation of ballast, P.Way, cement, renovation of canteen complex and renovation of officers chambers should not be undertaken on a single tender basis under the garb of urgency. Adherence to stiff target dates, or any shift in target dates of completion of projects like gauge conversion etc. should not be a cause of awarding works on a single tender. Such exigencies can be taken care of by special limited tender by the railways. It has been noticed that in many cases of single tenders, the delay in completion of contracts has resulted in time over-runs as well as incurring of extra expenditure, which completely nullified the calling of single tenders on grounds of urgency. Therefore, single tender should be invited on a very restrictive basis, as brought out above.

2.

ii)

11

iii)

Selection of agencies for award of work on single tender basis should be from the approved list of contractors on the zonal railways, except in respect of works of a specialised nature for which no approved list is usually maintained. Detailed reasons justifying the need for resorting to single tender should be spelt out. The tender value should be worked out carefully based on realistic quantities and rates, and keeping in view the time frame for completion of the works. All cases of single tender shall require prior finance concurrence before the competent authority accords administrative approval for the award of the work on single tender. The delegation of powers below the level of GM for according administrative approval for award of work on single tenders for works connected with restoration of traffic will henceforth be as below :a) b) c) d) Upto Rs.20 Lakhs per case per PHOD subject to annual limit of Rs.1 Crore per PHOD. Prior finance concurrence at the level of FA&CAO should be obtained in each case. Upto Rs.10 Lakhs per case per DRM subject to annual limit of Rs.50 Lakhs. Prior finance concurrence at the level of Sr.DAO should be obtained in each case.

iv)

v)

vi)

Once Administrative approval for awarding the work on single tender has been accorded by the competent authority, the reasonableness of the rates quoted by the tenderer as also other terms and conditions, if any, would require to be considered by a tender committee and accepted by competent authority at appropriate level. The acceptance of the TC recommendations would be determined with reference to the delegation of powers prevailing on that Railway for open tenders. Where award of contract on single tender basis is for a very specialised nature of work, extension may be considered as per extant rules and instructions. No extension should normally be granted for works awarded on single tender basis for works connected with restoration of through traffic. However, in case of extreme necessity warranting grant of extension on account of

vii)

12 unforeseen exigencies, the same should be done by levying adequate penalty (if extension is on contractors account). Prior finance concurrence and sanction of competent authority that had earlier accorded Administrative approval for the award of the work on single tender, should be obtained irrespective of whether the extension is being granted on contractors account or Administrations account. If the value of the single tender goes beyond the original competent authoritys powers, in the regard, then prior approval of the next higher authority (i.e.PHOD/GM) should be taken. 3. This issues with the concurrence of finance directorate of Boards office. -sd(K.P.Singh) ED(Works) Rly.Board. Based on the letters mentioned above FA&CAO/CR vide letter No.AC/FX/1402/RB/IV of 02-02-98 has further laid down the Procedure with regard to Single Tender which is reproduced below: Sub: Procedure with regard to Single Tender of 27.8.97 &

3.02

1. Please refer to Rly Bds L.No.97/CE-1/CT/32 No.93/W2/PQR/SC/4/Pt of 27.9.96.

2. As per the Boards letters quoted above single tenders are permitted only where restoration of traffic is involved subject to the monetary limits laid down as per the above quoted letters. 3. In this connection, the following procedure may be followed with immediate effect:a) All single tender cases (Other than Stores supply contract) will require GMs personal sanction and FA&CAOs personal concurrence. The only exception would be where restoration of traffic is involved in case of accidents. No post-facto concurrence of sanction will be given. Single tender should be resorted to only after exhausting Open tenders and Special limited tender routes.

b) c)

13 d) Tight targets and urgency cannot be accepted as a ground for calling single tenders. After obtaining the administrative approval from GM, the reasonableness of the rates should be examined by a duly constituted tender committee at appropriate level.

e)

4. In the case of Annual Maintenance Contracts, repairs etc. the single tender may be proposed with the original manufacturer/authorised dealer upto a monetary limit of Rs.10,000/- by PHOD/Co-Ord.HOD. On certification by HOD that the repairs/AMC, are of a sophisticated nature and have to be undertaken by the original manufacturer/authorised dealer. If the amount is above Rs.10,000/-, it will require GMs personal sanction with FA&CAOs personal concurrence. 5. As regards single tender purchase of Catering items/Rate Running Contract for ready made items for resale etc. HODs power is restricted to Rs.1 Lakh per contract and PHODs upto Rs.2.50 Lakhs in each case with Accounts concurrence. If the value is above these limits, FA&CAOs personal concurrence and GMs personal sanction should be obtained. 6. Extant Code rules and Rly Bds orders pertaining to the above should be kept in mind while exercising the powers. This issues with the approval of General Manager. -sdA.K.BHATNAGAR FA&CAO(F&B)/CR Rly. Bd. vide its letter No.97/CE.I/CT/32 of 27.8.97 [Annexure 39] & 24.2.99 and F(X)II-99/PW/3 of 29.10.99 have issued Advance Correction Slip to the above para 1214-E by adding a sub para (a) as under : (1214-E) (a) Single tender can be awarded under following situation such as :1. Emergent Situation (a) Accidents, breaches involving dislocation to traffic. (b) Works of specialised nature to be personally approved by the GM/CAO(C) with prior concurrence of the FA&CAO. This power is not to be delegated to any other authority.

14

(c) Any other situation where GM personally considers it inescapable to call single tenders subject to these powers can be exercised by GM only with prior concurrence of finance. 2. Annual Maintenance Contract for equipment can be placed on single tender basis on authorised dealers with approval of AGMs of Railways. Note: These powers may be delegated by the GMs in consultation with FA&CAOs to PHODs/DRMs upto a maximum of Rs.5 Lakhs per item per annum. On re-delegation, these powers would be exercised by PHODs/DRMs in consultation with associate finance.

3.03 SINGLE TENDERS should be rarely resorted to. Only in case of extreme urgency and unavoidable circumstances like restoration of traffic due to accident and breaches should single tender be resorted to. The obvious reason being higher rates being quoted by the lone offerer and resultant loss to public money. Instances of single tender due to excess variation of more than 25% of the original contract value need to be curbed. Important: As per Central Railway SOPGEN, TCM for Single Tender is to be done at one stage higher which also takes the acceptance to a step higher as compared to Open Tender except when GM is the accepting authority. [Item No.2 of Annexure-12]

15

CHAPTER II

TENDER DOCUMENT
Prior to issue of Tender Form, care should be taken for preparation of an error free tender document [Annexure-15 - GM(W)s letter No.W.187.R/II of 20/7/1964] 1.1 Preparation of Tender Documents It should be ensured that the tender documents should be approved by the competent authority before issuing of tender papers. Tender schedules are to be prepared with utmost care following all the existing provisions in the Code as also administrative instructions without fail after detailed site inspection and soil investigation wherever necessary eliminating as far as the need for bringing any new items during execution of works. [Refer Annexure-12] 1.2 Schedule of Rates Having too many Non-Schedule items in the tender schedule may lead to vitiation at the execution stage. Hence even for non-schedule items basic rates should be worked out and got vetted by Finance. These items should appear in tender schedule as a group and the tenderer will be required to quote a flat percentage above or below these basic rates [Annexure-16 Item No.4 of Rly.Bds letter no.87/WI/CT/65 dated13/01/88) or alternately the rates for NonSchedule items should be derived from the items included in the SOR. Where new items vary marginally from standard SOR item/items, market rates should be used only to the extent of variations to work out new ones (Rly.Boards letter No.94/CEI/CT/4 dated 17.9.1997) [Refer item No.10 of Annexure-12]. (See further discussion on this aspect in Chapter IV) 1.3 Vetting of Tender Schedules Tender Schedule vetting is being followed on some Divisions/Construction units while this practice is not prevalent on some units. Vide Railway Boards letter No.94/CE-I/CT/4 of 22/10/2001 [Refer Item No.5.3.2 of Annexure-17], the instructions on schedule vetting have been elaborated upon as under : i) Tender schedules should be approved by JAG/SAG officers

16 ii) iii) Vetting of tender schedules is not necessary if the tenders have been called after sanction to detailed estimates. Vetting of tender schedule is also not necessary in case of zone works or works charged to ordinary revenue valuing upto Rs.50,000/-.

The above instructions, issued with the intention of cutting down procedural formalities pre-suppose that > > The JAG/SAG officer approving the tender schedule will ensure that the tenders are invited within the scope of sanctioned detailed estimate. No condition having financial implication will be included which will lead to over-loading of rates quoted or inclusion of items that are not related directly to the scope of the work. The nature of activity included in the tender schedule will not lead to any misclassification of expenditure. No tender is invited for a work for which the detailed estimate has already been exceeded substantially. Tenders are not invited for works which may prove to be infructuous as a consequence of some other works getting executed. Ambiguous items are not included in the tender schedule which may lead to ambiguity during payment.

> > > >

Dispensing with tender schedule vetting can create a situation in which the executive concerned is denied the benefit of scrutiny of the schedule by another department and is consequently not able to attend to some shortcomings. Some examples are as under :(a) In terms of Boards letter No.94/CE-I/CT/4 of 17/9/97 [Refer item No.12 of Annexure-12], Schedule of Rates should be periodically revised within 3 years. Zonal Railways should set up a cell for doing this work with the help of computers. On Central Railway the last revision of SOR took place in 1990. Consequently some items in the SOR have been provided for at a base rate, the market rate of which has come down over a period of time and the contractor can get unintended benefit in a contract accepted on flat percentage basis if these items (with high base rate) are varied in excess of schedule quantities at the execution stage.

Case Study
While vetting Tender schedules, one of the Divisional Accounts offices pointed out that the basic rate in SOR for the following SOR items are on higher side :Item 12101, 12102 & 12112 - Structural Steel Item 07413 (a to d) - Tiles

17

The Engineering Branch agreed to this advice and segregated the tender schedule into three parts. Part I consisted of all SOR items. Part II consisted of steel items and Part III consisted of Ceramic tiles. When tenders were invited, the lowest offer was as under :1) All MS items 2) Steel items 3) Ceramic tiles 105% above SOR 70% above SOR 20% above SOR

Not only the overall tender rate came down but the liability of Railways in the event of excess variation in Steel and Ceramic Tile items was considerably reduced. The exercise of revision of schedule of rates is presently in progress on Central Railway and a team of experienced officers is engaged in this exercise. Schedule of Rates is the product of an extremely meticulous exercise undertaken on major zonal railways for publishing a benchmark of rates on which the contractors can quote in terms of percentage above or percentage below. The provision for revision of Schedule of Rates every three years has been made by Railway Board in view of the market situation being dynamic in which the prices of services/goods keep wavering from high to low depending on the forces ruling the market. On Mumbai Division itself there has been a distinct fall in the prices of some items like construction of boundary wall, supply of ballast, construction of drains, mastic asphalt work, removal of much, RCC concreting etc. From example of Steel & Ceramic Tiles quoted above, it would be obvious that revision of Schedule of Rates is therefore necessary as composite percentage rate may give an unintended benefit to the tenderers. The example quoted above in the Case Study is however not a desirable situation as it would be ideal to have a balanced schedule of rates so that composite rate can be quoted and tenders are not vitiated. (b) Instructions persist that hiring of vehicles on a regular basis can only be included in Estimates which require Railway Boards sanction. Scrutiny of tender schedule revealed that there was a tendency to include this item as NS items or as a special condition leading to expenditure not covered by extant rules or overloading of rates. Tendencies to include unrelated items like photocopiers, scanners, cellular phones etc. in estimates can also be curbed in careful Tender Schedule vetting before tendering. Now with the revised instructions in force, such unrelated items/conditions should be deleted at tender finalisation stage. [Annexure-18 - Railway Boards letter No.F(X)II-2000/Exp/4/Austerity of 27/7/2000).

18 (c) In spite of the estimate being sanctioned, it was noticed during tender schedule vetting in one case that some tools and plants had been included which were available under DGS&D rate contract at much cheaper rates. These items were deleted during tendering stage. In one of the tenders, the tender schedule provided for a lump sum provision of Rs.5 lakhs as any other SOR item in a tender floated for an estimated cost of Rs.60 lakhs. Thus for 1/12th of the tender value, the exact description of the work was not provided. The detailed estimate obviously did not have any such provision. [Annexure-19 - Boards letter No.78/W6/TR/O of 2/9/78 & Annexure-20 Boards letter No.76/W1/CT/53 of 22/4/77].

(d)

Pre-vetting of Tender Schedule is therefore desirable to avoid discrepancies of above nature. In terms of FA&CAO9F&B)s L.No.AC/FX/1402/RB/IV/Corresp of 0711-2001, the instructions in Boards letter No.94/CE-I/CT/1 of 22-10-2001 are to applied only after issue of a Joint Procedure Order. Tender schedule vetting and the existing procedure of negotiations above 25% excess variation are therefore still being followed. An example of serious irregularity in a CTR case

Case Study
In the CTR estimates, the Pink Book item provides for only a broad description of the section in which the work is to be executed. In one case the description of the work was CTR between CSTM-BY. The tenders were floated for 10 kms. of CTR even while the FWP booklet stated that the work is to be done only in Up Through Line. This led to the finalisation of a tender much in excess of the sanctioned detailed estimate. (e) Schedule vetting is also necessary as there is a very strong tendency to introduce new non-schedule items without undertaking a serious exercise to execute works through SOR items. Since rates of new NS items are not standard and have not stabilized over a period of time, tender evaluation becomes difficult as tender schedules are made with NS items in spite of the fact that the estimation was done on the basis of SOR items.

It was in view of an indiscriminate introduction of NS items that CE Central Railway vide Circular No.176 of 18.8.1999 [Annexure-64] has instructed that :

19

Proper care and attention is not being given to the operation of NS items in respect of description, specification, mode of measurement, rates etc. causing ambiguity and vagueness in NS items which, at times may result in overpayment to the contractors.

The safeguards outlined by CE are :(i) (ii) Specific approval of Sr.DEN(CO)/Dy.CE(C) is required for introducing NS items. Such items shall be operated only when it is unavoidable and if a) No item with similar description in the Master Schedule can serve the purpose b) The description of NS item is not prepared by combining more than one SSR item c) The description of NS items are not prepared by splitting the existing SSR items/item into more than one NS item. (For b and c above, specific approval of CE is available) d) Description of a NS item should not be overlapping with another SSR item in the same schedule to avoid double payment. The letter from CE is reproduced verbatim at Annexure-64. The para (vii) on rate analysis is particularly important. It is however seen that in some tenders, a single item schedule is being made which makes the following items difficult :(a) Comparison in an objective way with LARs (b) Determination of payment if variation in quantity (+ or -) takes place (c) Determination of stages at which payments can be released as per the progress of the work. One such example in the case of a work of RCC Box Pushing work is given as under :Sr. No. NS/1 Description of work & Qty. Designing and Construction of RCC controlled concrete of M/35 grade concrete in Precast box of internal size 4.5m x 3.00m as per GAD Drawing including curing of box for specified period, and jacking of box below Rly. track under running Rly. traffic by jacking, pushing technique including provision of drg. sheets on top of box, providing intermediate jacking station, including excavation in approaches inside the box cutting of bank to required level disposal of earth to the Unit M Rate Rs. Amount Rs.

20
nearest BMC dump any temporary arrangement for retaining cut portion of embankment, designing, casting & curing of RCC thrust bed, provision of cutting edge including the cost dewaters/bailing out of water wherever required at site due rains or subsoil water, weigh batching, mechanical mixing and vibrating of concrete including cost of curing compound and plasticiser of approved quality staging, shuttering, hooks, bending binding, uncoiling, straightening & placing in position. All the reinforcement provided with anticorrosive treatment by C.P.C.C. system developed by CECRI including cost of G.I. binding wire. The cost of all tool, plant machinery, labour material as a complete job, cement and steel has to be procured by contractor at his own cost. The work is to be completed as per the instruction of Engineer in Charge and to his satisfaction. (Qty. 38.50 M).

From above it would be evident that one single item has been provided as a NS item which would comprise a large number of SOR items and some NS items. Objective rate analysis for such cases is therefore extremely difficult and tender schedule vetting therefore would preclude possibilities of any such item being tendered for. 1.4 Conditions While the Standard General Conditions of Contract are uniform, it is the special conditions that are framed as per typical requirements of a work. Since such conditions may have serious financial implications, it is necessary that the conditions are meticulously drafted and wherever necessary, legal and financial advice should be taken. It is not however necessary to take legal guidance in individual cases of contract where the standard conditions of contract are adopted. [Refer Annexure-24]. Normally a note is included stating that in the event of a conflict between GCC and Special Conditions, the Special Conditions will prevail (Para 1235 E).
General Principles, to be observed in framing contract Agreements

1. The basic principles to be kept in view by those who are authorized to enter into contract or agreements are given below :i) The Terms of contract must be precise and definite, and there should be no room for ambiguity or misconstrue and the matter to be agreed upon should include, in detail, the following (a) What the contractor is to do; when, where and to whose satisfaction it is to be done. (b) What the Railway Administration is to do and on what terms.

21 (c) What payment is to be made; what it is to cover, to whom it is to be made, and the method and basis of making it. (d) The responsibility of the contractor in respect of adequate supervision, care of government property, and the protection of outside interest and those of the staff and workmen. (e) The terms on which variations and modifications, if any, are to be permitted, and authority competent to order and assess them and the occasion and basis of such assessment. (f) The measures to be adopted, in the event of a breach of the contract by either party thereto; and the correct method of and grounds for determination thereof. (g) The method of settling disputes. ii) iii) iv) As far as possible, legal and financial advice should be taken in the drafting of contracts before they are finally entered into. Standard forms of contract should be adopted wherever possible, the terms to be subject to adequate prior scrutiny. The terms of contract once entered into should not be materially varied except in consultation with the competent legal and financial authority. No contract involving an uncertain or indefinite liability or any condition of an unusual character should be entered into without the previous consent of the competent legal and financial authority. Provision must be made in contracts for safeguarding Government properties entrusted to a contractor. In entering into long term agreements or contracts, consideration should be given to the desirability of providing for the Railway Administration power to cancel the agreement at any time after the expiry of six months notice to that effect. The power to retain and set off all claims whether arising out of the particular contract or out of any other transaction or claim whatever against the contractor should be secured for the Railway Administration.

v)

vi) vii)

viii)

Some Railway Boards Instructions on the subject : 2. Protective clause to the effect that the delivery date quoted by the tenderer is contingent on the tenderer not being delayed as a result of non-delivery of raw materials or by any other cause beyond his control should not find its way into the contract. [Annexure-21 Railway Boards letter No.58B(C)3072 dated 15.5.1958].

22 3. The agreement should invariably contain a penalty clause in all cases involving advance payment to private firms and payment of liquidated damages by the defaulting firms by way of interest on the money advanced to it. [Annexure-22 Boards letter No.58/B/(C)/2498/II/7th Report dated 12.9.56]. 4. All the cases of extension/renewal of agreements involving payments to outside agency should be reviewed with a view to see that whatever action is necessary either to renew the agreement on terms more favourable to the Railway Administration than those operating earlier or to terminate it. Action should be initiated sufficiently in advance and completed in time before the date of expiry of the agreement. [Annexure-23 Boards letter No.59/B/(C)/PAC II/15th Report/23 dated 29.6.59].

23

CHAPTER III

SUBMISSION OF TENDERS
To create a level playing field, perfect competition and thereby ensuring maximum benefit to Railways at minimum cost it should be ensured that adequate facilities are offered for new and prospective tenderers. Arrangements should be such that tenderers should face minimum difficulty in submitting their offer for tender. Test checks should be conducted by executive engineers to check whether any working railway contractor, railway employee or any other individual is obstructing or barring any tenderer from depositing his offer in the tender box. For high value tenders, arrangements should be made for keeping tender boxes at 2 to 3 different railway offices at various locations so as to give maximum scope for contractors residing in far off remote areas to submit their offers. (Boards Letter No.90/CE-I/CT/I of 28-10-98[Annexure 26]. The tenderers should be allowed to drop their offers in the tender box upto 15 minutes prior to the opening of the tenders whereafter the boxes may be sealed. This should be indicated in the NIT. 1.0 Modus Operandi for submission of tender forms After the tenders are put on sale, the tender box should be placed at the specified place, locked and sealed with only a horizontal slot kept open on the top which should be large enough to drop the tender papers inside the box. The tender box should indicate, by a slip pasted on the box conspicuously, the name of the work for which the tenders are to be deposited therein and the date & time upto which the tenders can be placed in the box. The key of this lock should be kept in the custody of the Supervisory official. Tenders received by post should be entered in the Tender Register and the time of receipt should he recorded on the cover of the tender kind deposited before the closing time in the tender box. (1247-E). At the specified time for closing of tenders, the hole in the box should be covered by a slip pasted over it under the signature of the official holding the key to the tender box and preferably in the presence of the Section Officer (A/Cs).

24

Immediately after sealing of the tender box the same should be kept in the chamber of the Gazetted officer nominated for tender opening.

2.0 Opening of Tenders Tenders should be opened at the specified time, date and place by the Officer nominated for this purpose. The presence of an Accounts representative at the time of opening of tenders is required, if the tender value is above Rs.10,000 in the presence of the intending tenderers. (1248-E) For specific responsibility involving opening of Tenders, please refer Para 10 of CE/CRs L.No.W.187.R.VII of 31.10.79 place at Annexure 56. Tender boxes once sealed should be opened at the specified time and the opening should under normal circumstances not be postponed. Wherever due to unavoidable circumstances the tender opening has to be postponed, all the tenderers/their representatives should be informed about the same in writing and their acknowledgement should be obtained. In such cases the Accounts representative nominated for tender opening should initial with date on the seal on top of the tender box and the seal covering the lock. He should also mark the date and time alongside his signatures. It should be ensured that the sealed tender box is not tampered with and adequate arrangements for its security are made to avoid complaints from any of the tenderers.

Case Study No.6

There may be some exigency in which it may become impossible to open the tenders at the stipulated time. On one particular day on BB Division the suburban services had got disrupted due to heavy rains. The tenderers requested Railway Administration to extend the stipulated time of closing of the Tender box by one hour. This request was made in writing by the tender opening official to associate finance as Section Officer had been deputed for opening as per the originally stipulated time. In normal circumstances such requests should not be entertained and the closing time should be extended formally through a newspaper advertisement. However in this case the request was agreed to as all tenderers who had purchased the tender form submitted the representation after their arrival and equal opportunity was therefore given to all and the aspect of late running was verified from Central Control Office.

25 2.1 Modus Operandi for Opening of tender box/forms

At the time of opening of the tender box, members forming the "Opening
Committee which includes a Gazetted official from the executive department and a section officer from the accounts dept along with the tenderers or their representatives who are present at that time should be shown the pasted slip on the top of the box covering the horizontal slot and also the seal on the lock is intact. The seal should then be broken, the lock opened and all the tenders in the box taken out, counted and empty box seen by the opening committee and shown to other persons present. All tenders should then be taken out from their envelopes, if any, and should be duly numbered by indicating the serial number in the numerator and the total numbers of tenders received for that particular work in the denominator. 2.3 Late & Delayed Tenders (610-F/1251-E) Delayed tenders, i.e., tenders received before the time of opening but after due date and time of receipt of tenders, should also be opened and dealt with in the same manner as tenders received before the due date and time. 'Late' tenders, i.e., tenders received after the specified time of opening should be opened by the concerned Branch Officer and marked as such in red ink prominently on the envelop as well as on the tender papers. A suitable remark in regard to both the 'delayed' and 'late' tenders should be made both in the Tender Register as well as the comparative statement. Late & Delayed tenders are to be dealt with as under as per instructions contained in Boards letter No. 71/RS(G)/777 dated 01-08-81; 19-04-84 & Letter No. 83/WT/CT/17 of 30-07-84 [Annexure 27 to 29] For tender opening purpose the Accounts representative witnessing the tender opening should : Preferably reach 15 minutes before the scheduled time of opening i.e. witness the sealing of the tender box; ensure that the tender box is moved from the nominated spot to the chamber of the nominated tender opening officer under his supervision and should not leave the tender opening room till the entire process of Opening of tenders has been completed. He should ensure that he witnesses the tender opening with complete concentration and adequate presence of mind since he along with the executive officer nominated for tender opening are directly responsible for the entire process of tender opening. He should use a Red ink pen for opening of the tender forms.

26

Precautions to be observed while opening the tenders.-The Officer who opens the tenders and the Accounts representative witnessing the tender opening, should:(1251-E) (a) Initial (with date) the cover containing the tender(next to the numbering), front cover page of the tender(next to the numbering) and every page of the tender on which the rates or special tender conditions are quoted (b) Initial (with date) all corrections in the schedule of quantities, schedule of materials to be issued and specification and other essential parts of the contract document (c) Mark and initial all over writings in red ink. The corrections, over writings and omissions should be serially numbered and the total number of such corrections etc. should be clearly mentioned at the end of each page of the schedule attached to the tender proper and attested with date (d) Clearly indicate on each page of the schedule attached to the tender, any ambiguities in rates quoted by the tenderer in words or figures (e) Should specifically record whether samples have been supplied or not along with the tender (f) The corrections and over writing should be allotted separate numbers i.e. corrections should start from 1,2,3,etc. and over writings should similarly start separately from 1,2,3,etc. (g) The rates quoted on figures and words should be circled in such a manner as to not leave any space after the starting or the ending digit/alpha)

Case Study
In one case, a tender was invited for supply of Ballast on one of the Divisions. The lowest offer was Rs.109/m3 plus Royalty extra. The Royalty prevailing at that time in Madhya Pradesh was Rs.10/m3. The offer therefore stood at Rs.119/m3. The second lowest offer was Rs.120/m3. The tender opening officials were careless in circling the rates and they left spaces between starting and ending digits/alphabets. After award of the contract to the lowest, the second lowest complained that the words Royalty extra were inserted later by the tender opening officials as the inter-se position would not have changed due to this manipulation. The complainant therefore alleged that with mala fide intent an extra benefit of Rs.10/m3 was given to the lowest tenderer. This case was taken up by vigilance and the tender opening officials had a tough time defending themselves. (h) The names of the tenderers and the rates quoted by each tenderer should be read out, wherever practicable, to the tenderers or the representative who may be present at the time of opening of the tenders. While opening the

27 tenders no opportunity should be given to any tenderer to repudiate, amend or explain the rate and or any condition quoted in the tender. No tenders should be entertained from any party in his private capacity who is directly or indirectly connected with Government service, or for which the specified earnest money has not been received. (1250-E/609-F). (i) The Tender Opening register should inter-alia reflect :Serial Number; Date of Opening; Name of the Work; Tender Notice No. & Date; Name of Tenderer; ITCC Details; EMD/SEM particulars; Rate Quoted; Nature of Tender(In case of Late & Delayed Tender) Number of forms sold; Number of forms received and opened Signature of Tender Opening Officials: (Executive officer and Accounts representative (SO-A/Cs) 4.0 Comparative Sheet & Briefing Note (1252-E). A statement of comparative rates and other important tender conditions should be prepared by the branch concerned and verified by the Accounts Department. It must be ensured that all tenders received are tabulated in the above comparative statement and put to a Tender Committee constituted for the purpose for consideration without any screening by any other official (c.f. 611-F). For specific responsibility involving Preparation of Comparative Sheet & Briefing Note, please refer Para 2 of CE/CRs L.No.QW.187.R.VII of 31.10.79 [Annexure 56]. Based on Railway Boards L.No.78/W1/CT (Task Force) dated 3.3.79 [Annexure 55] 4.1 Briefing Note Essential information (1253-E) Briefing notes for the Tender Committee- along with the tabulation statement a briefing note duly authenticated at an appropriate level should be submitted clearly indicating the following details: -

28 i) ii) iii) Complete and latest information with regards to lowest contract rates for the same or similar materials or work for the particular or contiguous area; The conditions of supply or undertaking to work with reference to information under item (i) above; The latest data in regard to the availability of materials and prices thereof and the working conditions etc. to co-relate the present quotation with those obtained earlier; Any special condition attached to the rates and works or supplies referred to in (i) above as well as technical data required for dealing with the tenders under consideration; and Any other relevant information worthy of consideration in the tender (612F).

iv)

v)

4.2 Essential Items of Briefing Note Briefing notes for the Tender Committee along with the tabulation statement duly authenticated at an appropriate level should be submitted clearly indicating the following details : Tender Notice No. Name of the work Completion Period Approximate cost as per tender notice No. of tenders sold No. of offers received Sanctioned cost with details Work Chargeable to (Full Allocation to be indicated) Earnest Money Date of opening Validity of Tender expiring on and Information indicated in (i), (ii), (iii), (iv) and (v) above.

4.4 Briefing Note It is an authentic factual information, to be submitted to a tender committee, on various aspects of offers received against a tender notice, their completeness, credentials of tenderers, rates, special conditions, etc. Benchmarking of offers received in present tender with respect to offers accepted in near past for similar conditions is an important item of briefing note. Briefing note helps the TC in reducing the time to be taken in arriving at their recommendations. Briefing note serves as one of the many inputs that the TC may consider while arriving at their recommendations.

29 Format of Briefing Note (adapted from instructions issued in IRICEN) I. II. III. IV. V. VI. VII. VIII. Tenders in connection with (Give name of work, section, chainage, etc) File No.(Give the name of the office also) Name Of Work Authority & Estimate Provisions (only the provision of payment to contractor should be shown here & not the total estimated cost) Tender Notice Number against which these tenders have been called Tenders opened on ___________ at _______ hours Tenders Sold ______ (nos.) Offers received ______ (nos.) Tenders opened by : Shri _________________________ Designation__________________ Shri _________________________ Designation__________________

IX. Earnest Money: The tenders have deposited Earnest Money against this tender as under :Tenderers 1. 2. 3. etc.etc. Details of Earnest Money Validity

X. Validity of Offers : Tenderers are expected to keep their offers open till ______________ (date as stipulated in the Tender) against which the tenderers have stipulated their validity period as under :Tenderers 1. 2. 3. XI. Credentials of the Tenderers : As per tender documents/tender notice the required minimum eligibility criteria is as under : Technical Financial Credential submitted along with the tender document are as follows : Tenderer 1. 2. 3. Details Offers valid upto

30

(State whether they are working contractors and produce the confidential reports if available or obtained. In case the contractor is a working contractor then give details regarding awarded/ongoing works, their progress status, quality, original completion period, likely completion period and reasons of delays, if any). XII. I.T.C.C. : The tenderers have submitted their ITCC as under :Tenderers 1. 2. etc. etc. ITCC valid upto

Note: Those who have not submitted their valid ITCC have been asked under this office letter No.____________________________________ to do the needful in the matter. (Their replies are awaited/enclosed). XIII. Completion Period : As per Railways stipulated period of completion, the tenderers are expected to complete this work within _______ months (excluding monsoon. Monsoon will be reckoned from 1st June to 30th September each year). The tenderers have however stipulated the period as under :Tenderers 1. 2. Period of Completion

XIV. Special Conditions of the Tenderers : Appendix A attached to these briefing notes shows the various conditions stipulated by some of the tenderers together with corresponding Railways remarks against such conditions. XV. Tenders Received : In response to the above call, ______(nos.) tenderers have submitted their offers and their inter-se position is as under. The details of the cost against various tenders is shown in the comparative cost statement attached as Appendix B, (Details of financial implication of special conditions should be annexure to this Appendix B) (A)
Tenderers Tender Cost Excluding financial implications of special conditions All in cost (Rs.) Excluding financial implications of special conditions

1. 2.

31 (B) If the offers are negotiated

Tenderers Original Offer Tender Cost Including Excluding financial financial implication implication of special of special conditions conditions All cost in Negotiated Offer Tender cost Including Excluding financial financial implication implication of special of special conditions conditions All cost in

1. 2.

XVI. Works on hand of lowest tenderer :

Name of work C.A.No. Contract value Balance payment % of work completed

XVII. Tender Committee : In terms of Schedule of Powers __________________ __________________ the composition of the T.C. will be as under, for considering these tenders. The value of this tender Rs._____________. 1. Convenor (Designation)_____________________ 2. Member (Designation)_______________________ 3. Member (Designation) _______________________ XVIII. Competent Authority to accept these tenders is __________________ XIX. Discrepancies noted in the various tenders XX. Reasonableness of Rates : Appendix ___________ showing the recently accepted rates for similar works is attached. XXI. Samples as required are submitted / not submitted along with tenders. XXII. Special features if any to be brought to the notice of the T.C.
Signature Countersigned (Name) (Name) Designation Designation (Officer/Supervisor preparing the Briefing Note) Scrutinised (Name) Designation (Accounts Official)

Note: Each page of the Briefing Note should be signed. This briefing note should be sent to the accounts branch for vetting and the duly vetted briefing note together with the Accounts remarks should be given to the TC members for consideration. Responsibility of facts lies with official preparing the briefing note. Accounts department is responsible for verifying the facts, calculations and figures.

32 4.5 Vetting of Brief Note (1254-E) Scrutiny by the Accounts Department - The tabulation statement and the briefing notes shall be sent thereafter for scrutiny together with the original tenders to the Accounts Officer concerned. The tabulation statement should be signed by the Section Officer (Accounts) nominated for the purpose in token of his verification (613-F). For specific responsibility involving Vetting of Briefing Note, please refer Para 2(b) of CE/CRs Letter No.W.187.R.VII of 31.10.79 place at Annexure 56. The tabulation statement and the briefing note both in duplicate shall be scrutinized by the Departmental Officer nominated. The tabulation statement should be verified by the Works Accountant (SO/Acs) and should be signed by him. The same together with the tender papers shall be sent, thereafter to the Accounts Officer nominated to attend the tender committee, for scrutiny together with the original tenders, at least one week in advance of the date fixed for the consideration of tenders. 4.6 Checks on Brief Note On receipt of the Brief Note, Tabulation Sheet and Original tenders, it is the responsibility of the finance section to: Check the correctness of the summarized information of the tender papers brought out in the Briefing note. Comparing the rates quoted by the lowest vis--vis the last accepted rate brought out in the brief note. Finance section should maintain its own database of accepted rates. It should be ensured that the LAR indicated in the Brief Note is correct as per its own database and is the lowest & most recent LAR. If the rates indicated in the Brief Note is a higher one, finance should, in its check sheet point out the lowest LAR as per its own record along with the contract agreement number. In such cases efforts should be made to indicate the lowest accepted rates for similar type of work, preferably from on going contracts where the items having maximum impact are having similar impact in the current tender. Bring out in the check sheet any special condition quoted by the tenderer or in tender paper having financial implication. Ensure that the minimum notice period of 30 days has been adhered to. (This should be calculated from the date the Notice Inviting Tender has been published in the newspapers till the date of closing of acceptance of tender forms). The corrigendum if any issued in the interim period should also be taken into account.

33 It should be checked to see that there is no delay in forwarding the Brief Note to the section by the executive dept. If an abnormal delay is noticed, the same should be pointed out in the check sheet. Check that the validity of the offer quoted by the tenderers has not lapsed. Ensure that the tenderers have furnished EMD in the acceptable forms. (Acceptable forms of EMD are enumerated in para 1241E below) Ensure that there is no ambiguity in the schedule of work/special conditions of work of the tender. The scope of work clearly ensures that the required work is completed in all respects and that railway is paying for the work it wants to be executed and no loss in any form is brought about to railways due to the work. It should be ensured that the tender has been invited after the expenditure has been concurred; the estimate has been verified by finance, and the estimate has been sanctioned by the competent authority. In cases where BN is not accompanied with sanctioned estimate, and competent authoritys sanction for invitation of tender in absence of sanctioned estimate has not been obtained, the brief note along with the tenders should be returned to the executive department unvetted. Care should be taken to avoid making qualitative remarks in the check sheet, which is the exclusive domain of the Tender Committee. Only the facts as seen in the Brief Note and tender papers should be brought out in the Check Sheet for the perusal of the TC. It should also be ensured that Tender Committee is conducted at the appropriate level. A level that is competent to attend the Tender Committee as per the prevailing/current extant rules. Check that the items and their quantity is as per the tender schedule vetted by finance before floating of tenders and no new item has been introduced or any extra quantity has not been incorporated than the one which was vetted. If such an irregularity is found the Briefing Note should be returned to the executive department unvetted. Time being the essence of Tender finalisation, brief notes should be vetted within the least time possible. Preferably brief notes should be dealt with in 23 days of receipt in finance section. Check sheets should be checked and signed by a Gazetted Official of the Accounts Dept [FA&CAOs L.No.AC/FX/1402/CE/BB dt.17.5.2000 Annexure-25] after the same has prepared under the signature of the Section Officer (A/Cs) of the finance section. This Official should preferably be the Officer nominated to attend the Tender Committee as a Finance member. 4.8 Model check sheet [Annexure 30]

34 5.0 Earnest Money Deposit/Security Deposit (1241-E). Earnest Money -The amount of earnest money deposited should be sufficiently large to be a security against loss, in event of the contractor failing to undertake the contract or to furnish the required security within the appointed time after the acceptance of his tender or until such time as the sums due to him form a sufficient guarantee, as the case may be. Earnest Money is a security against loss to ensure that the tenderers do not resile on the rates quoted by them in their offer during the validity of the same or fail to undertake the contract or to furnish the required security within the appointed time after the acceptance of his tender or until such time as the sums due from him form as sufficient guarantee. The EMD of the unsuccessful tenderer is returned as expeditiously as possible after the offer of the successful tenderer has been accepted. No interest is paid by Railways for the EMD. Earnest Money can be accepted in any of the following forms: 1) Cash deposited with Chief Cashier. A copy of the money receipt should be attached alongwith the tender papers. 2) Deposit Receipts. FDR/TDR of Nationalised Bank/Scheduled Bank. The FDR/TDR should be issued in favour of FA&CAO/Sr.DAO or the appropriate associate finance officer. The FDR/TDR should issued on a date not later than the date of opening of the tender and should be valid till the date asked for by Railways. The FDR/TDR should be in the name of the firm who is quoting the tender. A particular executive office was quoting the following condition in the tender notice, the tenderers should affix a revenue stamp and sign on the reverse of the FDR/TDR and should affix thereunder. This is a highly objectionable condition which may lead to fraud and misutilisation of the FDR/TDRs and it should be ensured that such conditions are not included either in the NIT or the tender papers. 3) Demand Drafts, Pay Orders or Bankers Cheques issued by Nationalised Bank/Scheduled Bank in the favour of FA&CAO/Sr.DAO or the appropriate associate finance officer. The DD/PO/BC should be issued on a date not later than the date of opening of the tender 5.1 (1242-E). The amount of earnest money required to be deposited with the tenders as initial security shall be as under:

35 (i) for works costing upto Rs. 5 lakhs - 2% ad valorem subject to a maximum of Rs. 10.000. (ii)for works costing more than Rs. 5 lakhs - 2% ad valorem subject to maximum of Rs. 20,000. The cost of work for computing earnest money will be calculated based on prevalent rates and not at par with schedule of rates. (Boards Letter No.53/W/25/3 dt.22.9.58 & No.78/W1/CT/19 dt.27.5.78) While calculating the earnest money for works, the amount should be rounded off to the next higher ten rupees for amount of earnest money less than Rs.1000/and to the next higher hundred rupees for the amount of earnest money more than Rs.1000/- (Boards Letter No.78/W1/CT/43(Policy) dt.22.12.78). (1243-E). The Railway Administration may however at their discretion fix a lower or higher percentage and or the maximum amount of earnest money for any individual work in consultation with their Financial Adviser and Chief Accounts Officer, keeping in view the value and nature of the work and also ensuring that provisions of para 1241-E above are followed. 1/5th of the amount indicated in para 1242-E above should be notified and collected as a security deposit for the due performance of the stipulation to keep the offer open till such date as may be specified in the tender. The tenderer after submitting his tender will not resile from his offer or modify the terms and conditions, If the tenderer fails to observe or comply with the stipulation the amount indicated aforesaid shall be forfeited by the Railway. The balance 4/5th amount should be notified and recovered as a part of earnest money along with the amount indicated in sub-para above, which together constitutes the earnest money. If the tender is accepted this earnest money will be retained by the Railway as a part of security for due and faithful fulfillment of the contract. 5.2 (1244-E) Security Deposit Security Deposits are to be paid by contractor in token for the due fulfillment of a contract. The amount of security deposit required will be as under: (i) for contracts upto Rs. 1 lakh in value : 10% of the value of the contract. for contracts costing more than Rs. 1 lakh upto Rs. 2 lakhs in value : l0% of the first Rs. 1 lakh and 7% of the balance.

(ii)

36 (iii) for contracts amounting to more than Rs. 2 lakhs : 10% for the first 1 lakh, 7 % on the next 1 lakh and 5% of the balance subject to a maximum of Rs. 1 lakhs.

In special cases where a reduction in security deposit may enable the Railway to obtain a more favourable rate, the percentage of security may be reduced or a suitable lump sum, as considered necessary, be fixed by the General Manager in consultation with his Financial Adviser and Chief Accounts Officer. The security deposit may be collected by deduction from running bills of the contractor at the rates mentioned in sub-para above. The total security recovered from a contractor including the amount of the earnest money should not exceed the security amount recoverable at the rates mentioned in sub-para above This does not, however, preclude the contractor from depositing the security money either in cash or in other accepted forms of payment. (1813-A) Fixed Deposit Receipts: FDRs when accepted, should be made out in favour of the Accounts Officer. The dates of maturity of the FDRs will be watched by the Accounts Officer. The Executive Officer concerned should be asked in good time before the expiry of the FDRs to intimate how long the contract is likely to remain current. (1814-A) It should be made clear to the contractors tendering FDRs as security that they should take action in good time regarding renewals of the FDRs and that the Railway Administration will not be held responsible for any loss of interest, if timely action for renewal of these Receipts is not taken by them. 5.3 (1245-E) Standing Earnest Money - A standing earnest money of the values indicated below can be accepted from a contractor borne on the Railway list of approved contractors to cover tendering against any number of works costing upto the limit indicated against each amount on the Zonal Railway Civil Engineering Dept :For works costing upto Rs.1 lakh For works costing over Rs.1 lakh & upto Rs.5 lakhs For works costing above Rs.5 lakhs Rs. 5,000. Rs.10,000. Rs.25,000.

This amount would not be adjustable towards the security deposit of individual contracts obtained by a contractor. A discussion on Approved List of contractors has been included here.

37 6.0 Approved List Of Contractors (Extract of Boards letter of 22-10-2001) The Approved List will be in four monetary slabs only as below : i) ii) iii) iv) Class D Class C Class B Class A Upto Rs.10 lakhs. More than Rs.10 lakhs & upto Rs.25 lakhs. More than Rs.25 lakhs & upto Rs.50 lakhs. More than Rs.50 lakhs & upto Rs.1 crore.

The approved list as a whole will be valid for a period of 3 years. The list will be reviewed every year for deletion which will be effective from 1st July and additions if any will be done once in six months and which will be effective from 1st January and 1st July. Once the contractor is borne on the Approved List, it will be valid for 3 years, unless already deleted during the Annual Review or the expiry of the validity of the Approved List as a whole, whichever is earlier. There will be separate Approved Lists for Open Line and Construction Organisations for each identified category of work. In Open Line, Approved List for classes B, C and D will be maintained Division-wise and for Class A, there will be one common list or the Railway as a whole. In Construction Organisations, Approved List for classes B, C and D, will be for a particular pre-determined geographical area or Dy.C.E.(Con)-wise and for Class A, it will be CAO(C)/GM(C)-wise. Selection of contractors for enlistment in the Approved List should be done by a Committee to be nominated by the authority not below the Accepting authority as given below. The composition of the Committee will be as follows: Class of Contractors Class A Select Committee Composition One SAG Officer each of Executive Dept and Finance Dept One JAG Officer each of Executive Dept and Finance Dept. One Senior Scale Officer each of Executive Dept and Finance Dept Accepting Authority Executive Dept PHOD

Class B and C

Class D

DRM in the Division / SAG Officer of the Executive Dept. Sr.DEN(Coordination) in Division and Dy.CE(C) in Construction.

38 Note: Normally, in Construction, no contract below Rs.10 lakhs value should be called. 6.1 For registration in Approved List the contractor will have to furnish nonrefundable fee of Rs.5,000/Rs.7,500/Rs.10,000/Rs.15,000/for for for for Class D, Class C, Class B and Class A.

This will cover the entire period of 3 years or part thereof. Contractors desiring registration should submit the application in the proforma prepared on the Railway with the prescribed fee for each category of work in that slab. Contractors having Standing Earnest Money (SEM) may avail this opportunity in that organization only. 6.2 Doubts with regard to above instructions (a) From above it is evident that a contractor registered in one category, e.g. Track Works can be debarred from utilising his SEM for participating in Limited Tenders of other category e.g. in Bridge Works. It has been stated that contractors having SEM may avail the facility in that organization only. It is therefore presumed that a contractor registered in Construction Organisation cannot quote on the basis of his SEM in openline works and on a Division/geographical area (for construction) where he is not registered as Boards letter speaks of maintenance of approved list of B, C and D categories Division-wise.

(b)

6.3

(1246-E). Forms in which earnest money and security deposit is acceptable - The earnest money should be in cash or in the form of deposit receipts. pay orders, demand drafts issued by State Bank of India or any of the nationalised bank or by a scheduled bank. Government Securities (Stock Certificates. Bearer Bonds, Promissory Notes, Cash Certificates etc.) and Bank Guarantees should not be accepted as earnest money. The provision regarding earnest money does not apply to other railways or departments of Government.

The security deposit may be in the following forms :i) a deposit of cash;

39 ii) Government securities including State Loan Bonds at 5 per cent below the market value; iii) deposit receipts. pay orders, Demand drafts and guarantee bonds. These forms of security deposit could be either of the State Bank of India or of any of the nationalised banks. iv) guarantee bonds executed or deposits receipts tendered by all scheduled banks; v) a deposit in the Post Office Saving Bank; vi) a deposit in the National Savings Certificates; vii) twelve years National Defence Certificates; viii) ten years Defence Deposits; ix) National Defence Bonds; and x) Unit Trust Certificates at 5 percent below market value or at the face value whichever is less. (c.f. 1801-A). 6.4 Guarantee Bonds Where Guarantee Bonds are submitted in place of Security Deposit, their validity for sufficient period be insisted and ensured. The format of model guarantee bond is as prescribed in L.No.9/7/75/B.O.III dtd.20.7.82 of Ministry of Finance [Annexure 31]. Letter No.F.9(7)-B.O.III/75 of 2-11-77 [Annexure 32] may also be referred to initiate action against Banks who do not honour the Guarantee Bonds when they are revoked due to some default on the part of the contractor. 7.0 (1278-E & 1816-A) Custody of Security Deposits : The rules regarding custody of security deposits are contained in chapter XVIII of the Indian Railway Code for the Accounts Department (Part I). In the case of guarantee bonds, the Accounts Officer is responsible for safe custody as well as for giving timely intimation (say three months in advance) to the executive officer of the date of expiry of the guarantee bond. The executive officer shall take action to extend from time to time the validity of the guarantee bond for such periods as may be necessary in relevance to the completion of the work or in subsequent period of maintenance that may have been provided for in a particular contract. It will be the responsibility of the Accounts Officer to encase the guarantee bond before its expiry in case it is in necessary to take such step. Specific duties with regard to maintenance of Guarantee Bonds are laid out in O.M.No.G.191.G.I.0/II of 17-5-80 [Annexure 33] (1815-A) The Guarantee Bond issued by Banks as SD will be checked by Accounts Officer to see:-

40 1) that it conforms to the conditions stipulated in para 1801-A i.e. the BG is executed with SBI, Nationalised Bank or Scheduled bank. 2) that it is in the prescribed form laid Appendix X [Annexure 31] 3) that the amount and period shown therein is in accordance with the terms and conditions of the contract. 4) that it has been properly stamped as required by law. After scrutiny the BG should be noted in the register of paper securities form A.1817. The receipt and acceptance of the BG should be promptly intimated to the departmental officer concerned to enable him to execute the contract. The date of expiry of the BG should be watched and timely action taken for its renewal.

41

CHAPTER IV
CONSIDERATION OF TENDERS
1.0 Time Frame For Finalisation Of Tenders Tenders should be considered without delay (Boards letter No.66/B(C)PAC/III/53/10 dated 7.12.1966. [Annexure-34]. It is even more crucial that tenders are finalised within the validity of the offers [Annexure 35 and 36]. Non-finalisation of Tenders within the validity period often leads to situations in which higher rates have to be accepted after reinvitation. In some situations the Tender Committee is compelled to find justification for higher rates received subsequently if a work is indispensable and this exposes them to risks of an Audit objection or Vigilance case.

Case Study
In a case on one of the Divisions of Central Railway, the Tender Committee could not make its recommendations timely in spite of the offer being reasonable. The lowest tenderer backed out due to price escalation in the intervening period. During retendering much higher rates were received which had to be accepted. As per instructions issued by CVC vide order No.98/ORD/I of 24th August, 2000 [Annexure 37], if the L1 withdraws his offer before the work order is placed or before the supply or execution of work order takes place there should be retendering. Instructions have in fact been issued at the level of MR that [Annexure 38] the tender files must be put up to the accepting authority for final decision within three months of receipt of offers (Boards letter of 24/8/2002). 1.1 Problems in the way of Timely Finalisation 1. Failure of the executive concerned to get the estimate sanctioned before finalisation if the tender has been invited before sanction as per Boards letter No.94/CE-I/CT/4 of 17/9/97 (Para 8) [Annexure-12]. 2. Ambiguous Tender Schedule leading to receipt of offers which are not comparable or receipt of unclear offers which necessitate post tender clarifications from bidders. Boards letter No.67-6(b)PAC/ III/72/16-17 of 29/31.7.1967 [Annexure 36] therefore stipulates that all the information

42 necessary for consideration of offers should be called for at one time leaving no scope for seeking further clarification & consequent time extension. 3. Lack of alertness on the part of Convenor in getting the TC Proceedings signed. In fact the gist of the decision taken by the TC should be recorded immediately which should be followed up with formal proceedings. 4. Unavailability of a particular member of TC. In such cases, change in nomination if necessary may be got processed by the Convenor immediately. 2.0 Late and Delayed Tenders (Refer Chapter III for details) Tenders Not Accompanied by Requisite Earnest Money have to be summarily rejected (See Chapter III). Annexure-40 & Annexure-41 reiterate these instructions that tenders without Earnest Money or with Earnest Money but not in acceptable form should be summarily rejected. 3.0 Whether Single Offers Can Be Considered In open tenders, if a single offer has been received, it can be examined by the Tender Committee. However when only one offer is received in Limited Tender fresh tenders should be invited except in very urgent cases. The discretion to classify a work as Very urgent for this purpose is not to be exercised by an officer lower in status than the DRM. Full reasons for taking such an action should be recorded on file by the executive concerned while obtaining DRMs approval. [Annexure-42 - Boards letter No.50/145/1/5 of 12th January 1950]. 4.0 Previous Experience In case of Limited Tenders, the credentials of a tenderer are known. However in the case of Open Tenders, if a tenderer has not executed any work on the Railway/Division where he has tendered, his credentials/work experience etc. are required to be known. Undue emphasis on past experience should however not be placed as it would defeat the very principle of open tendering which is the only entry source for new tenderers. Moreover this will promote monopolistic tendencies and give a fillip to tendencies towards ring formation. The essence of wide publicity and fair competition with equal opportunity will be defeated [Boards letter No.59/B(6)2498/II/4 Report/8 o 27-30/5/1958 Annexure 13].

43 If however the lowest tenderer fails to produce his credentials, this fact should be placed on record while considering the next highest tender [Annexure-43 Boards letter No.52/W/229 of 9.5.1952]. On such occasions it is important that proper documentation of receipt of letter asking the tenderer to produce his credentials has been kept and clear acknowledgement is available. adequate time has elapsed between asking for credentials, its receipt and also between receipt and the decision to consider the next offer so that it is clearly evident that reasonable opportunity has been given. the next lowest tenderers capacity/credentials etc. have also been examined and in the event of the same being suitable, extension of offers validity has been taken if required. 4.1 Emphasis on previous experience may not be necessary in the event of value of the work being low and the work being unspecialized in nature. In such cases solvency, income-tax payment made etc. may be adequate. However in high value and works of specialized nature, experience may be an important criteria. The tender committee should therefore bring forth the reasons for rejection of the lowest offer in complete details. [Annexures 44 & 45 - Boards letter No.68/W1/CI/15 of 15.7.68 and No.68/B(C)PAC/IV/23/20 of 25.10.1968]. 4.2 It has been the practice to put some eligibility criteria in Tenders above a certain value (Rs.30 lakhs on Central Railway) to keep out inexperienced contractors. At times some conditions like RDSO approval etc. are also put. It has to be ensured that such preconditions were there in the Tender Documents as essential and not as desirable before overlooking an offer for not meeting a particular eligibility condition. In addition to above, if an eligibility condition has been put, the Tender Committee should examine that no unscrupulous efforts to meet the eligibility criteria are permitted. Some examples are : Showing partnerships which have been surreptitiously formed after the tender notice has been published Claiming to have a Workshop/Machinery & Plant crucial for meeting the work requirement without actually possessing it Producing details of works executed in which they have performed badly, have failed to complete it or done substandard work.

44 5.0 Existing Workload While lack of experience may be a ground for overlooking an offer, there may be a case when a tender having a large number of works on his hand may have to be overlooked. This is important to determine his capacity, solvency, resources etc. and to know whether he can undertake additional work despite his experience. Irrespective of the fact that the rates quoted may be reasonable or workable, capacity is an important consideration. 5.1 It is important therefore that the details of work on hand are brought out in the briefing note itself. This is extremely difficult to establish for overlooking an offer but nevertheless important [Annexure-46 - Boards letter No.60/W1/DMF/10 of 4.11.1960]. 6.0 Fair Competition Once proper formalities about wide publicity, adequate notice period etc. have been observed, Tender Committee should also see whether there is a real and fair competition. There may be occasions when a group of persons or firms having different names but controlled by the same management may have tendered for the same case to project an artificial competition. This can be checked through a proper scrutiny of credentials, partnership deeds, address, phone numbers etc. In the event of such a real situation being there it should be ensured that no undue advantage accrues to a group of persons/firms controlled by the same management, should they alone be in the field of competition in response to open tenders. [Annexure-47 - Boards letter No.72/W1/C1/32 of 14.5.1974]. What is implied here is that in the event of the rates being reasonable, even such an eventuality can be favourably considered. However whether such a situation exists needs to be known for an even more thorough scrutiny of rates received and to bring on record if a new kind of work is being tendered for that the rates received are not representative as they are not received on competitive terms. 7.0 Rate Reasonableness Rate reasonableness is the most important factor which a tender committee has to examine as the rates may vary

Depending on the location where the works are to be executed Quantum of work Geographical expanse in which the work is spread out and availability of resources.

45

Technical requirements of a higher or lower level even if the nomenclature may be the same. Composition of various items in a tender schedule with regard to the weightage of profit yielding and non-profit yielding commodities. Inflation over a period of time. Change in rates/taxes/Govt. policies on the labour/material input Mode of tendering Limited/Open etc. Completion period / Urgency as understood by tenderer etc. Time of award of a contract i.e. pre-budget, post-budget etc. with monsoon intervening working period, harvest season coinciding with completion period etc. Special conditions of contract etc.

The list is long and endless and had it not been for the complexities involved from case to case, a tender committee would not have been necessary if a foolproof list was possible. 8.0 Last Accepted Rates Tender Committee should be cautious enough to ensure that the LAST ACCEPTED RATES are realistic and the complete range is known instead of depending on a single LAR or a few LARs which may be high and accepted under some typical circumstances. The LARs therefore should be of similar and comparable works, of same or contiguous sections and not of tenders where a particular item having a small financial implication has been accepted in view of the overall rates being reasonable. The comments of Finance made while vetting the briefing note may prove useful if the scrutiny has been done properly at this stage. (See Chapter III for model check sheet and model briefing note). Wherever the LARs are not available, a proper rate analysis based on exhaustive market survey should be produced by the Convenor. The Tender Committee should verify whether the rate analysis was made before receiving the rates or after the tenders have been opened. In the event of the latter being true, care should be taken to ensure that the rate analysis has not been tailor made to the rate received. It is always desirable to have the rate analysis made at estimation stage itself. 8.01 Rates of Individual Items The Tender Committee has to take particular care to ensure that the rates quoted for individual items are realistic and are not abnormal and unworkable in respect

46 of any item of work. [Annexure-48 - Boards letter No.63/T6/II/6 of 13.9.1968 and Annexure-49 Boards letter No.72/W6/CT/42 of 17.11.1972]. If reasonable rates are not quoted for all items, the following situation may arise in case the quantities in the item for which higher rate has been quoted varies: Example Rate of L1 Item 1 Item 2 Item 3 Rs.100 Rs.300 Rs.200 Rate of L2 Rs.110 Rs.250 Rs.250 Quantity 6 3 2 Original 600.00 900.00 400.00 1900.00 660 750.00 500.00 1910.00 Value After Variation 600.00 1200.00 400.00 2200.00 660.00 1000.00 500.00 2160.00

6 3 2

In the above scenario , L1 has quoted unreasonably high rate for item 2. If during execution if the quantity of item 2 becomes 4, the tender will be vitiated (i.e. the inter se position will change) leading to losses to Railways. In a similar case, the tender committee did not take precaution to find out that the rate for a particular item is high and later on when the case came to the notice of Railway Administration and Railway decided not to operate the particular item, the contractor went in for arbitration. Such situations can be avoided if at Tender Committee stage itself, rates of individual items are carefully scrutinized. At times there may be a situation when the rates on overall basis may be reasonable but for some items having a very minimal financial implication may have been quoted at unreasonably high rates. In such situations, the Tender Committee can take the following measures:(1) It should quantify the percentage impact of such items and explore the possibility of reduction in rates if the combined value of such items accounts for a sizeable amount. (2) If it has to recommend for acceptance, such items must be clearly commented upon and a stipulation must be put that the rates should not be considered as a LAR in other tenders. Moreover it may further

47 stipulate that any variation on excess side for such items during execution should be paid at a rate considered reasonable by the Tender Committee or as per lowest reasonable rate received for such item. This stipulation must clearly come out in the acceptance letter and the same must be ensured while vetting the contract agreement by the associate Finance. (3) In case of vitiation the case has to be treated as a single tender. If (2) above is followed, there should be no occasion for vitiation or undue loss to Railways. However if the contractor refuses to accept such a binding, the case may require retendering if the possibility of excess variation cannot be ruled out at the Tender finalisation stage or for any excess quantity only fresh tenders should be invited for such items. 9.0 Rates Received as FREE for some Items Another pitfall that the Tender Committee shall watch against is the effort by some tenderers to become the lowest successful bidder by quoting to execute some items of work free. This is particularly common in works involving underground items in which a contractor may have a better knowledge of soil strata. If he quotes to execute some items free and that item is not operated at all due to site condition, he stands to gain by becoming the lowest bidder in spite of rates of other items being higher. Workability of rates quoted is therefore another important factor that the Tender Committee has to examine. 10.0 Time Preference for Accepting Higher Rate At times, a higher rate may be argued to be justified on the grounds of tight completion period or the ability of a particular tenderer to meet such tight time schedules. In all such cases, the Tender Committee must make sure that the time projected by Railway and the time quoted by Tenderer are practicable and realistic. [Annexure-50 Railway Boards letter No.63/747/29/Track of 5th July, 1968]. Extensions granted in such cases could be read as irregular and contrary to the urgency expressed at T.C. stage. 11.0 Conditions by Railways Contract documents have to be drafted with great care, seeking appropriate legal and financial advice when

48 a contract having some typical conditions is being entered into which may require modifications in the Special Conditions for tenderers normally included in Tender papers Tender committee also has a special responsibility to scrutinize carefully the rates tendered with reference to the scope of the various provisions in the agreement governing the contracts so that no unintended benefit accrues to the contracts on the basis of certain clauses in the agreement which may be appropriate for one kind of contract but not for another category [Annexure51 - Railway Boards letter No.57-B(C)3034 of 28.5.1959]. 11.1 Conditions by Contractors The tender committee while accepting conditions by Tenderers should make sure that no unintended benefit is being given which runs contrary to the principles of equal opportunity, natural justice and canons of financial propriety. Conditions having financial implications must be examined thoroughly and evaluated in monetary terms. There is a tendency to quote such conditions in ambiguous terms and seek unintended benefit once the contract is awarded. It is necessary therefore that deviation from standard specifications and procedures etc. are clearly brought out in the briefing note and Railways decision thereof are communicated to the successful tenderer in the acceptance letter. 12.0 Modification in Specification / Scope of Work [Annexure-13] Modification in specification, scope and cost of the work may take place either
> > >

before sale of the tender forms after sale of tender forms or even after receipt of offers.

The following course of action should be taken to adhere to principles of equal opportunity and the spirit of Boards letter of 27/30.5.1958 :(a) Before Sale of Tender Forms If the tenders have not been opened yet, the modified specifications, scope and cost of work should be specified by issuing a suitable corrigendum. The opening date should be at least 30 days after the issue of such a corrigendum or fresh tenders should be invited to prevent any complaint and for ensuring a fair competition. (b) After Sale of Tender Forms

49 After sale of Tender Forms also, a fresh tender notification or corrigendum with 30 days notice is necessary.

(c)

After receipt of offers Offers received are of no consequence if specifications, scope and tendered cost get modified significantly and if such offers were received on a tender notice as per old specification/cost/scope.

Even if tender notice has been published as per old specification but tender forms have been sold as per modified specification, the corrigendum with 30 days notice period is necessary to give equal opportunity to tenderers who may not have evinced interest as per old specification/scope/cost. It basically tantamounts to invitation of fresh tender. The corrigendum must get published before the date of opening advertised originally. 13.0 I T C C Tenders not accompanied by valid and current ITCC should not be rejected summarily. [Annexure 52] 14.0 Negotiations Negotiations for exploring the feasibility of reduction in the rates received can be done if the rates are unreasonably high and It is felt that retendering would not secure better advantage to the Railway; and/or Where the lowest tender is technically not acceptable or is rejected because of unsatisfactory credentials, inadequacy of capacity or unworkable rates and next highest offer to be considered in accordance with the established procedure is found to be unreasonably high. 14.1 With whom to negotiate Earlier instructions prevailed that at least two tenders should be called for negotiations. There was only a restriction on calling tenderers who had not tendered originally or those whose offer had been found unsatisfactory due to inadequacy of capacity, unworkable rates, insufficient earnest money, incomplete offer etc. With the issue of CVCs orders on post tender negotiations vide letter No.8(1)(4)98(1) of 18.11.1998 negotiations with tenderers other than L1 was banned [Annexure-37].

50

Case Study
However an exception has been made by CVC vide their letter No.98/ORD/1 of 15.3.1999 Annexures-37 that the policy of purchase preference for PSUs will be followed. In accordance with this Railway Board in Para 3.4.3 of letter No.94/CE-I/CT/4 of 22.10.2001 [Annexure-37] have reiterated that in tenders, providing for Purchase Preference in favour of PSUs, the participating PSUs may also be called for negotiations along with L1 provided their offer is not higher than 10% of the offer of L1 and the price preference for acceptance will be operative if negotiated rates are less than 10% higher than the negotiated rate of L1. 14.2 Other Precautions in Negotiations (1) A Tenderer being called for negotiation have to submit a declaration that in the event of failure of contemplated negotiations, his original offer shall remain valid on the original terms and conditions (Annexure 53 Boards letter No.61/W11/CT/24 of 31st October 1965). (2) Negotiation is an active exercise. As such the entire tender committee should be present and they should strive to get an optimal reduction in rates. (3) Offers received should be circled, signed, entered into negotiation register and signature of the tenderer should be obtained. (4) All the members of the Tender Committee should initial on all pages of the TCP, including the Annexures thereto. The rate analysis should be signed by the Convenor. (5) It should be ensured that the item-wise accepted rates are indicated in the acceptance TCP preferably in the recommendation para. (6) Ideally, the TC should also try to include a deterrent against variation in costly items also. (7) As in the case of original tender, the proceedings of the tender committee should be put up to the accepting authority, duly commenting on the reasonability of the negotiated rates. Care should be taken to ensure that in case the negotiated rates are to be justified on being found reasonable, the reasons furnished do not run contrary to the arguments furnished in the original TC Proceedings.

Case Study
In one case of supply of Ballast, it was found by the Tender Committee that the rates of the L1 were about 25% higher than a recent LAR (one year old). The T.C. recommended negotiations suggesting that if one year escalation is

51 taken into account, a rate of 10% above the LAR will be justified and the recommendations for exploring the feasibility of reduction in rate was accepted. However when the negotiated rates were received, the offer was still about 15% higher. The T.C. keeping in view the urgency of the work justified the rate on consideration like
> >

the lead from quarry being longer than the LAR rate urgency of procurement due to poor track condition etc.

While these reasons may have been justified, since only about 10% escalation had been justified in the original T.C., the post-negotiation justification appeared to be doctored and invited adverse comments from the inspecting agencies. 14.3 Post Facto Offers A case of post-facto offer has been cited in Boards letter No. 77/W1/CT/20 of 29.4.77 [Annexure-54] in which an example has been quoted that while evaluating a post tender offer which could have led to a higher advantage to Railways, the Tender Committee ignored the offer on the grounds that it was not received originally or during negotiations. This was done in spite of the fact that
> >

the inter se position was not changing the party being awarded the contract would have remained the same.

One care that has to be essentially taken while considering post tender/post negotiation offers is that the tender whose post facto offer is to be considered would have been acceptable even otherwise, i.e. without taking into account the post facto offer. Otherwise this may tantamount to grant of an additional opportunity to the L1 after knowing that Railways have rejected his offer. However now that negotiations with any tenderer other than L1 has been restricted, the issue of post facto offer needs to be reconsidered as if after receiving the negotiated bid, if the rates are still not acceptable, there is no restriction on a second round of negotiation. Specific Responsibilities in TC Railway Board vide letter No.78/W1/CT/47 (Task Force) of 3.3.79[Annexure 55] have communicated the recommendations of the Task Force set up to make a comprehensive study of the subject of corruption on Railways. In accordance with recommendation No.212, Railway Board desired that the Railway administration should issue necessary instructions in respect of the

52 responsibility for preparation and checking of comparative statement, briefing note, opening of tenders, tender committee etc. In pursuance of the recommendations of the Task Force, specific responsibilities were laid down by CE, Central Railway, in consultation with FA&CAO vide letter No.W.187.R.VII of 31.10.1979 (reproduced as Annexure-56]. The letter clearly brings out that the members of the tender committee shall be individually and severally responsible for the contents of the proceedings/recommendations made by them. The responsibility of the Accounts Member shall, however be restricted only to the advice rendered by him in respect of financial matters. In respect of technical matters, such as specifications, unsuitability of the contractors due to lack of practical experience, acceptability or otherwise of samples etc., the entire responsibility shall be of the members of the Technical Department. However the following aspects must be examined by all members of a TC :(a) Briefing Note duly vetted is available and Convenor has attended to the lacunae pointed out and the comments thereof have been brought out on the body of the TC. Comments like noted discussed in TC should be avoided as the unanswered queries may be the source for future problems.

Case Study
While vetting a briefing note, the accounts officer had pointed out that the LARs shown in the briefing note are old and of a different section, having different features which could have an implication on the rate. In the T.C. proceedings, the entire discussion took place on the same old LARs without commenting on whether rates of same section or current LARs were available. This led to acceptance of high rates and consequent problems for the entire Tender Committee. (b) Any qualifying condition which got notified after the opening of the tenders should not be the basis for rejection of an offer and consideration of another offer in the same tender. (c) The precondition of a party having executed a similar work in the past is applied with due caution so as not to make it an excuse for rejecting an offer. (d) Advice rendered by Finance should be given full consideration before finalisation of TC [Annexure-57]

53

Case Study
Central Railway invited open tender for a work with an approximate cost of Rs.2.5 crores with a stipulation that in order to qualify for this work tenderers quoting for this tender should have completed at least one similar work costing not less than 1/4th of the value of the total cost of this tender during the last three years. In response seven offers were received. The lowest offer L1 from M/s.A being less than Rs.2 crores (Rs.1.86 crores), the tender committee meeting was held at JA grade level in which the committee observed that L1 is not suitable since the firm have not executed similar type of work having 1/4th value in the past three years, which is a precondition. The next offer being more than Rs.2 crores the papers were put up to SAG level tender committee for deliberations. After perusing the documents, Finance Member of SAG level committee observed as under :The latest specification of RDSO came into force hardly one year back, whereas Tender condition is that the tenderers should have completed similar work of 1/4th value in the past three years. JAG committee has seen the latest specification and observed that L1 does not have sufficient experience of similar type of work having not done 1/4th value work as per the latest specification. However, it was observed that L1 already had done similar type of work i.e. commissioning of exchanges, some of them costing more than a crore of rupees (with old specification). He argued that similar work is not same work. Finance Member also pointed out that the turnover of L1 as per the ITCC submitted in the last three years is about Rs.1750 crores per annum. It was therefore felt that a firm having such a big turnover will definitely have sufficient capacity for executing a work of Rs.1.85 crores. After due deliberations Convenor of SAG level committee and other member were convinced by the Finance Members argument. Tender Committee at SAG level finally decided to go in for the offer by L1 which was subsequently accepted by the competent authority and agreement is also executed accordingly. The difference between L1 & L2 in this case was Rs.38 lakhs (approx). As a precautionary measure to guard against failure of L1, the tender committee also recommended that since this new type of exchange is not so far installed in this zonal railway L1 would be asked to submit bank guarantee of about 45% of the value of work, amounting to Rs.85 lakhs for the cost of imported equipment, which would be valid for six months after the Warranty period.

Conclusions :

The date of specification must be seen before asking for previous experience.

54 All TC members must study all the offers as well as the Tender specifications. Higher level TC must see whether lower level TC has rejected the lowest correctly or not. 16.0 In one of the Vigilance Bulletins issued in DRMs Workshop in Railway Staff College, the following specific responsibilities have been outlined broadly :16.1 Role of Tender Committee Memebrs > The TC essentially consists of : A Technical Member, who is normally known as Convenor Finance Member A member from Associate Finance Third Member From any other Technical Department

16.2 Role of Convenor > He has normally full knowledge of work to be executed, all special features, site conditions, specificatios of the work, credential of the tenderers, time frame, urgency. Market survey for rate analysis and implication of special conditions, if any, are also to be evaluated by him. He must fully brief the TC.

> >

16.3 Role of Finance Member > He must ensure that : All tenderers have fulfilled the pre-requisite conditions, i.e. : Tenders are in properly issued form Tenders are signed by authorized persons All tenders are correctly filled and if there are corrections and overwritings then they have been initialed by tender opening officials Tenders have been opened correctly Earnest money is requisite and in acceptable form All valid tender offers are serially placed and put up in a comparative statement along with a briefing note, duly vetted. All special conditions have been mentioned and those having financial implications are evaluated. The arithmetical accuracy of the offer. A proper rate analysis has been prepared and placed on record by the Convenor. The funds position and if a work is sanctioned

55 The partnership deed and any legal issue involved is examined. All special conditions having financial repercussions have been examined Consistent approach is taken in dealing with tender for all similar cases, as he is a common member for all tenders. 16.4 Role of Third Member > He must ensure that : Rules are followed in general Reasonableness of rates has been properly examined A uniform and consistent approach has been adopted in dealing with the tender In cases of difference of opinion between members of TC he gives his definite opinion. 16.5 Responsibility of TC as a whole It is the collective responsibility of the TC to give a definite recommendation with full facts and reasons bringing out all the known facts, background and valid apprehensions which have formed the basis for its recommendations. It must also clearly specify the authority competent to consider recommendations of the TC. 16.6 Role of Tender Accepting Authority > TAA is finally and ultimately responsible for the acceptance, although the TC is also responsible for its recommendations. Therefore, TAA, while considering the TC proceedings, should examine : Work is essentially required and is covered by sanction and funds are available. In case of Open Tender, full opportunity has been given to all the tenderers. This includes sufficient notice for the tender. That response has been adequate, i.e. the number of tenders sold vis--vis number of offers received. In case of poor response, this aspect should be specially examined. Reasonableness of offers has been properly examined by the TC. 16.7 Dealing with TC Recommendations The first step is to examine all the basic facts about the tender. Whether the recommendation of TC is unanimous or otherwise.

56 Even in case of unanimous recommendation, all the aspects about reasonableness of rate must be examined. Any deficiency noticed may be referred to TC. TAA cannot function as a rubber stamp and must apply his/her mind independently and such appreciation should be visible. The acceptance or otherwise must be recorded on the body of TC proceedings itself. In case of non-unanimous recommendations, if TAA wants to accept either single or majority recommendation, it should record detailed reasons for doing so. TC recommendations should normally be accepted, but in case TAA rejects/modifies the same, clear-cut detailed grounds should be given for the same. It is not correct to obtain additional details from a third person but if such details are considered necessary, TC should be asked to obtain them and put up to TAA after proper examination of the same by TC. TAA should take the decision in a reasonable period of time. Unavoidable delays should be explained. 16.8 Acceptance of Tenders The accepting authority must clearly bring out the reasons for not accepting the recommendations of a T.C. not agreeing with the recommendations of any dissenting member He may also refer the recommendations back to the TC to seek some clarifications to review the decision in case he feels that some aspects have been left unattended/unconnected which are relevant to the case. As per Boards letter No.74/AC/III/30/6 of 11/3/1977 [Annexure 58] the accepting authority can take a decision against the advice of Finance Member without consulting a higher Finance officer but if the Finance Member as an internal check authority feels that some gross, financial impropriety is involved, he can report the matter to FA&CAO and seek his further instructions. Annexure-59 (Boards letter No.93/RS(b)/645/1/PAC-165 dated 11/3/93) gives details of General Responsibilities of the Tender Committee. Annexure 66 gives CVCs guidelines in this regard which is very crucial for Tender Committee and Tender Accepting Authority (TAA). 17.0 Check List for Consideration of Tenders 1. Late & Delayed tenders are not entertained

57

2. Earnest Money is available in acceptable form 3. Single offers in Limited tenders are considered only in extremely urgent situations with approval of authority not lower than DRM 4. Undue emphasis on past experience is avoided 5. Undue emphasis on past experience is not put in Open Tenders. Date of specification desired is seen 6. Before overlooking L1, all reasons are recorded and if L1 has failed to submit his credentials, documentation about having asked him to submit credentials is available 7. Eligibility condition is not being tampered with 8. Existing workload has been examined 9. Tenders are finalised within validity period 10. Briefing Note is vetted and copy of Newspaper cutting is available on file 11. Observations raised in check sheet of briefing note have been commented upon in T.C. Proceedings and deficiencies have been attended to by the Convenor 12. Estimate is sanctioned before invitation or approval of competent authority is available and Tender Schedule in such cases has been vetted 13. Specifications of Tender have not undergone any major change after invitation 14. Free items, unworkable rates and unusually high rates for some items have been looked into 15. Fair competition exists 16. More than one LAR is available and lowest LAR has been taken into account 17. Rate analysis is not tailor-made 18. Conditions have been fully evaluated 19. Post facto offers are not considered

58

CHAPTER V
VARIATIONS IN CONTRACTS
1.0 Para 1265 E states clearly that the powers to vary the terms of a contract lies only with actual parties thereto i.e. the contractor and the Railway authority who has signed the contract. Consent of the contractor is necessary and a subsidiary agreement must be entered into, stating What is to be varied What will remain unchanged The variation could be in Conditions of contract (Finance concurrence is necessary) Rates or items Variation of the quantities of any item/items A very important consideration in variations is to ensure that the scope, character and purpose of the original contract is not changed. 1.1 Some important safeguards in variations is to ensure that prior Finance concurrence is obtained in cases where variation exceeds the limits delegated (25% in individual items or 25% in excess of original contract value for both positive (+) and negative variations (-) (SOPGEN item 1.25(a) and (b) of Central Railway) that whenever as a consequence of variation, the total value of contract goes beyond the competence of the authority who originally approved the contract, sanction of higher authority must be taken vitiation of original tender (change in inter se position) is not taking place as a consequence of variation in cases of minus variation, it is clear that the work will not be required at a future date and at higher rates while proposing excess or minus variations, the rates of contracts for the same type of work in contiguous areas have been seen.

Case Study
In a case of night lighting for track maintenance and work of mastic asphalt, Finance scrutiny revealed that minus variation had been proposed in a contract having lower rates and excess variation in a contract having higher rates. The re-examination of the matter led to savings.

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1.2 Execution of Extra Quantities (Para 1268 E)

When the Work is NOT SEGREGABLE

Whenever variation is likely in excess of reasonable limits (15 to 25%), the railway administration should immediately examine whether it is practicable to bring in a new agency to carry out the extra quantity of work, keeping in view the progress of the work on the original contract and the nature of layout of the work. The most important factor to be determined is whether the work is segregable. If the work is not segregable, the reasons thereof must be recorded and negotiation should be carried out with the existing contractor for arriving at a reasonable rate for the additional quantity of work. In terms of Clause 42(2) of GCC unless otherwise specified in the special conditions of the contract, the accepted variation in quantity of each individual item of the contract would be upto 25% of the quantity originally contracted, except in case of foundation work. The contractor shall be bound to carry out the work at the agreed rates and shall not be entitled to any claim or any compensation whatsoever upto the limit of 25% variation in individual works. In terms of Clause 39(1) of GCC, any extra item, not already available in the Schedule of Rates (SOR) of the railway concerned, should be paid at a rate mutually agreed to between the Engineer and Contractor. It is in the light of emphasis on individual items in the GCC that SOPGEN item 1.25 of SOPGEN 2001 of Central Railway stipulates that prior Finance concurrence would be necessary in cases of variations in excess of 25% (+ or -) in the individual items as well as in the overall contract value. For extra items also, since arithmetically the variation vis--vis the tender schedule will be in excess of 25%, the rates should be determined carefully, keeping in view the LARs and acceptance of the contractor should be obtained. Railway Boards letter No.94/CE-I/CT/37 of 5.5.1995 (Para 2 of Annexure-I to the letter) [Annexure-60] stipulates that CE(C) (which may be read as SAG officer) can approve variations upto 25% of accepted tender value or Rs.25 lakhs whichever is less. It is in line with these instructions that Para 1.25 (b) of Central Railway SOPGEN states that Variations between 10% to 25% of contract value have to be approved by DRM/ADRM/SAG officer with prior Finance concurrence Variations in excess of 25% have to be approved personally by GM with prior Finance concurrence.

60 The question of 25% is to be arrived at in total terms, i.e. due to variation in quantities and also due to introduction of new items and not separately for both. In cases where enhanced value of the contract goes beyond the powers of GM or if the variation in excess of 25% of contract value has been done in a contract accepted by Railway Board, approval of Railway Board is required. 1.3 Situation in which the work is segregable In terms of Para 1268 E, if it is found that there will be no serious practical difficulty in meeting the additional quantity of work done by another agency, one of the following two alternatives as found feasible may be adopted :i) ii) inviting fresh tenders for the extra quantity negotiating the rate for the extra quantities not only with the existing contractor but also with all the tenderers who had initially quoted for the work.

Boards letter No.94/CE.I/CT/37 of 5/5/95 stipulates that in case the work is proposed to be awarded to an agency after negotiating with all original tenderers along with existing contractor or by inviting fresh tenders for extra quantity, necessary sanction will be accorded as per normal delegation prevailing on the Railway for extra quantity only. On Central Railway GM has not redelegated the powers for variation in excess of 25% of the original contract value. 2.0 New Instructions While Boards letter of 5/5/95 stipulates that enhancement of contract value beyond 25% of the original contract value should be resorted to scarcely, Railway Boards letter No.94/CE-I/CT/4 of 22/10/2001 [Annexure-17]goes a step further by stipulating that Execution in quantities beyond (+)50% of the overall agreemental value should not be permitted . In the event of such a variation being found necessary (as per stipulations of Para 1268 E) fresh rates should be negotiated with existing tenderer or fresh tenders should be invited. To control such situations of excessive variation, the letter stipulates the following safeguards. 1. Whenever a contract has been executed upto 75% of agreemental value (original value), if any doubt persists that the agreemental value may go beyond 50%, execution of any further quantity beyond 75% of original contract value will have to be monitored at the level of JAG officers. The intention therefore is to prevent any such variation.

61

2. The letter provides for an inbuilt regulatory mechanism on variations beyond 25% by stipulating an automatic : 2% reduction in rates for variations between 25% to 40% additional 2% reduction for variations between 40% to 50% (i.e. 4%).

This may prove to be a serious deterrent against excessive variations. With the provision of this regulatory mechanism there is a need to provide this clause in tender papers of all tenders which are being floated afresh as negotiation for fresh rates as per Boards letter dated 22.10.2001 are to be carried out only in cases where variation exceeds 50%. Notwithstanding the fact that Boards letter clearly stipulates that execution of quantities beyond 50% of the overall agreemental value should not be permitted normally, since negotiations in excess of 50% variation are now stipulated to be done only with the existing contractor, the old instructions with regard to negotiations with all tenderers who had originally quoted seem to have been superceded. In any case it was noted that in cases of variation in excess of 25%, when the executive certified that the work is segregable, and when a decision to negotiate with all tenderers who had tendered originally was taken, there was normally no response from any tenderer but the one who was executing the work. Cases above 25% variation will be treated as single tender as negotiation with existing tenderer is to be done and GMs personal sanction will be necessary. Reactions Ideally the percentages of reduction provided for @ 2% or 4% should be the minimum compulsory percentages for reduction in rates. Negotiations in excess of 25% over original contract value should strive to reduce the rates further, particularly so since rates of some items may have gone down over a period of time while the old contracts may still be current. Instructions in this regard are desirable for exploring the possibility of reduction in rates over and above the stipulated percentages of 2% and 4%. In terms of FA&CAO9F&B)s L.No.AC/FX/1402/RB/IV/Corresp of 07-11-2001, the instructions in Boards letter No.94/CE-I/CT/1 of 22-10-2001 are to applied only after issue of a Joint Procedure Order. Tender schedule vetting and the existing procedure of negotiations above 25% excess variation are therefore still being followed.

62 3.0 Precautions to be taken in Variation cases (1) It should be seen that when excess variation is being proposed, the work is not being proposed for items for which rates in subsequent contracts have come down sizeably. (2) Reasons for variation in individual items are not contradictory. For example, if dismantling quantity has gone down, the quantity of removal of dismantled muck does not go up. (3) Variations are not being proposed for profit making items without adequate justification even if it is not leading to a vitiation in the contract. (4) The reasons furnished do not give an impression that the work has been already completed. (5) As a consequence of the proposed variation, the competency of sanction is not getting changed and while concurring such variations, the appropriate authority under whose sanction the revised value will lie has been duly pointed out. (6) As a consequence of proposed variation, the estimate is not being exceeded so as to necessitate higher authoritys sanction and in the event of the same sanctions are processed before concurrence is accorded. (7) Excess variation is not caused due to work being proposed at some other site.

63

CHAPTER VI

EXTENSION, TERMINATION AND REVOCAL OF CONTRACTS 1.0 The General Conditions of Contract provide for adequate safeguards to be followed for timely execution of the contract. Clause 19 of the GCC states that it is understood and agreed that the contractor has by careful examination, satisfied himself as to the nature and location of the work and other aspects like ground, character, tools etc. For contracts with completion period of two years or less the work shall commence within 15 days of receipt of acceptance letter and not later than 30 days after its receipt. For other contracts a deadline of 90 days has been kept. 1.1 Extension however can be granted under : if modifications ordered have materially increased the magnitude of the work if the progress has got affected due to an act or neglect of Railways employees, for want of instructions railways failure to hand over the lands necessary for execution of the work, provide drawings, instructions etc.

Clause 17A(i) Clause 17A(ii) Clause 17A(iii)

However extensions can be given with LD under Clause 17B. Clause 17B due to contractors default wherein Railways are entitled without prejudice to any other right or remedy available to recur a sum equivalent to one4 half percent of the contract value of the work for each week or part of the week.

1.2 There is however a maximum amount of liquidated damages specified which shall be : 10% of total value of contract for contracts upto Rs.2 lakhs 10% for first two lakhs and 5% of balance - for contracts above Rs.2 lakhs.

If no progress is still forthcoming, Railway can rescind the contract under Clause 62 of GCC.

64 1.4 Procedure & Problem The contractor should not be granted any extension unilaterally. He has to apply for an extension quoting the clause under which extension is sought specifically and giving reasons in support of the clause chosen and the request thereof. Very often, even if the default is on the part of the contractor, the executing engineer grants extensions under Clause 17A(I to iii) under a fear that the progress of the work will get affected further. Such soft decisions often create a climate in favour of the contractor when he makes claims for compensation on account of delays by Railways in Arbitration proceedings. While the effort definitely should be to keep the progress of the work under control, an unfettered series of extensions often leads to unreasonable delays, time and cost overruns and claims during arbitrations. (FA&CAOs letter to CE Annexure 61) 1.5 Remedial Action suggested (1) Maintain proper site registers. Day to day record of progress, reasons for delay, unusuals etc. should be brought on record and contractors signatures should be obtained. The site order book, bar charts/CPM charts etc. should be properly dated and kept current during the progress of the work. (2) Rates for extra items should be mutually agreed to, processed formally with prior Finance concurrence and in case the contractor is unwilling to execute the same at rates acceptable to Railways, such items can be got executed by other agencies (clause 39(1) of GCC). Progress of a work should not be held up on this account as an alternative is available and extensions in such cases need not be necessary. (3) All modifications in contract should be incorporated in a formal instrument (clause 41 of GCC) and Railways are not bound by the same otherwise. Claims for extensions for delays on account of modification in provisions of contract therefore have to be examined with circumspection. (4) Any claim for any additional work must be made by the contractor through a monthly statement (clause 43(1) of GCC). (5) Non-availability of contractor for signing the Measurement Book for works executed upto a particular date should not be a ground to be considered favourably for granting him extension without penalty. Clause 45 of GCC duly provides for ex-parte measurement for contracts entered into in case the contractor fails to turn up for measurement in spite of due notice.

65

2.0 Termination of Contract (1) Clause 61 of the GCC gives adequate protection to Railways interest by allowing the Railway administration to determine a contract owing to paucity of funds or for any other cause whatever In such cases only the value of materials approved at site and the work done till the date of determination are payable. The contractor cannot claim for any expenditure incurred by him in anticipation of completing the whole work in excess of vouchers produced to the satisfaction of Railway engineer. The contractor cannot claim any amount of profit anticipated if full work was completed. (2) Clause 62 of GCC provides for determination of contract on account of contractors failure/default. In the event of such a default the Engineer on behalf of the Railway may serve the contractor with a notice in writing to that effect and if the Contractor does not within seven days after the delivery to him of such notice proceed to make good his default in so far as the same is capable of being made good and carry on the work or comply with such directions as aforesaid to the entire satisfaction of the Engineer, the Railway shall be entitled after giving 48 hours notice in writing under the hand of the Engineer to rescind the contract as a whole or in part or parts (as may be specified in such notice) and adopt either or both of the following courses :(i) to carry out the whole or part of the work from which the Contractor has been removed by the employment of the required labour and materials, the costs of which shall include lead, lift, freight, supervision and all incidental charges. to measure up the whole or part of the work from which the Contractor has been removed and to get it completed by another Contractor, the manner and method in which such work is completed shall be in the entire discretion of the Engineer whose decision shall be final.

(ii)

In both the above cases, the Railway shall be entitled (i) (ii) to forfeit the whole or such portion of the security deposit as it may consider fit, and to recover from the Contractor the cost of carrying out the work in excess of the sum which would have been payable according to the certificate of the Engineer to the Contractor if the works

66 had been carried out by the Contractor under the terms of the contract, such certificate being final and binding upon the contractor. Provided however that such recovery shall be made only when the cost incurred in excess is more than the security deposit proposed to be forfeited and shall be limited to the amount by which the cost incurred in excess exceeds the security deposit proposed to be forfeited. The amounts thus to be forfeited or recovered may be deducted from any moneys then due or which at any time thereafter may become due to the contractor by the Railway under this or any other contract or otherwise. 2.1 Is Termination Always Desirable ? In terms of Boards letter No.78/W1/CT/37(Rev.Comm) of 19/1/1979 [Annexure 62] whenever it is proposed to terminate a contract which has sufficiently advanced, a departmental committee may be appointed to discuss the progress of the contract with an intention to resolve the problems and avoid termination. 3.0 Completion of Termination Action and Revocal of Termination In terms of Boards letter No.99/CE-I/CT/28 of 24/05/2001 [Annexure 63] it is necessary to issue a Final termination advice to the contractor after the issue of 48 hour notice. A contract can be revived on merit by withdrawing the 48 hours notice if the final termination advice has not been issued. in cases where a final termination advice has already been issued, the contract can be revived only as a single tender observing all the requisite formalities. 4.0 Risk & Cost Tenders When there is a default on the part of the contractor and the contract has been rescinded under Clause 62 of GCC, the executive concerned is required to get the balance works completed at the risk and cost of the defaulting contractor. Care may be taken in such cases to ensure that :i) the defaulting contractor has been invariably advised about such tender by serving him a notice so that he gets an opportunity to participate and minimize his losses. ii) the scope of the work and the quantities of left over work and the conditions for the risk tender are identical with that of the original tender [Annexure 65 Boards letter No.88/CE-I/CT/31 of 29.01.1996].

67 Some zonal Railways have represented to Railway Board that the above instructions do not serve any purpose as the defaulter can again become the lowest and create a problem. Board have clarified vide letter No.88/CE-I/CT/31.Pt. of 23/05/2001 [Annexure-66] that while the defaulting contractor must be given a chance to participate the decision to accept his offer has to be taken by the Tender Committee in accordance with his capacity, credentials, financial status and changes in relevant circumstances which might have taken place in the intervening period of award/termination of the earlier contract and opening of risk and cost tender. Check List for Extension/Termination/Revocal of Contracts 1) As per Clause 19 of GCC, contractor is supposed to have satisfied himself about nature and locations of work. No extension on this account should be granted. 2) After receipt of acceptance letter, works with completion period of less than a year must commence within 15 days. 3) Maximum LD is Rs.20,000 for contracts upto Rs.2 lakhs and 10% of first two lakhs (i.e. Rs.20,000) and 5% of balance for contrats above Rs.2 lakhs. 4) Extension must be granted only when applied for. 5) Records at site must be maintained. 6) If extension under Clause 17A(i) have not been given and a formal agreement has not been entered into, no claim should be entertained for any modification in contract. 7) Contractor must be asked to give a monthly statement for any additional work. 8) Ex-parte measurement must be taken if the contractor fails to turn up despite due notice. 9) Railway can determine (short-close) a contract as per its own need and in such cases the contractor cannot claim for any expenditure incurred by him in anticipation of completing the whole work in excess of vouchers produced to the satisfaction of Railway Engineer. In such situations, any correspondence made must be replied to and records of the same must be kept. 10) Final Termination advice has to be issued after 48 hours notice if the contract is not to be revived.

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CHAPTER VII
SOME PROBLEMS
1.0 Estimates In terms of item 40(2) of GMs Schedule of Powers, sanction of Railway Board is required for any excess over the estimated cost if the cost increases in excess of 50% due to escalation or 10% due to variation in quantities. Since more than one tender is floated (section-wise/station-wise) under one detailed estimate and variations take place over the originally cont6ractor quantity, the excess over estimate due to variation in quantity is difficult to watch unless the work register is maintained carefully. This becomes particularly difficult if the work is spread over more than one division. For each sanctioned work (and not for each tender) a separate folio should be maintained and the booking of stores must be also done to the relevant work only. Tenders must be floated strictly as per the description in the estimate and no location other than the one provided for in the estimate should be tendered for. For CTR estimates in particular excess over estimate is not uncommon as FWP booklet describing the locations is not made available Tenders are floated for items for which necessary provision is not available in the concerned portion of the CTR estimate and not as per the cash provision. Track material is received in bulk and the same is not segregated workwise in the works registers.

Case Study
PROBLEMS IN CTR TENDERS In the scrutiny of a briefing note for TRR works it was noticed that tenders had been floated for 10 kms. of TRR whereas the work was sanctioned for TRR of Up Through Line between CSTM to BY which is only 4 kms. Efforts were therefore made to look into the reasons which lead to such anomalies and wide gaps between the sanctioned provision and sanctioned detailed estimate. This is also the primary cause for unsanctioned expenditure and on the division on which this case was detected it was found that 90% of the excess pertaining to the category of excess over estimates are of CTR/TRR/TSR and other Track works. The detailed scrutiny of the case and other cases of excess over estimate has

69 revealed that the following anomalies take place in the processing of CTR work:(a) WRONG LOCATIONS CHOSEN Since CTR works are programmed activities, when proposals for Preliminary Works Programme (PWP) are received by Board from Zonal Railways, CTR works are selected depending on the need based requirement and planned procurement action of track material. Once the works are selected the works appears in the Pink Book wherein the description of the work appears without the detailed scope of work. The Pink Book item only gives a broad nomenclature of the work but the site/location wise break up of the work appears only in the booklet of the Final Works Programme (FWP). The brief description appearing in the Pink Book therefore is inadequate to exactly ascertain the sanctioned locations and the FWP Booklet therefore must be linked with the Detailed Estimate. For example Pink Book item No.302 of 2001-2002 shows the name of the work as "Mumbai Division: Fitting Renewals - 49.86 kms, CTR - 40 Kms, TSR(S) - 25.75 Kms." (b) Based on this sanction, the detailed estimate for this work was made in three parts showing the location as under: Part-I (TSR-S) Part-II (CTR-S) Part-III (TFR) Commencing kms 0.000 0.000 0.000 Terminating kms 25.750 40.000 49.860 Going by the above description, it is implied that since CSTM is at kms 0.000, Part-I is for work from CSTM to Bhandup, Part-II is for work from CSTM to Diva and Part-III is for work from CSTM to Thakurli. The FWP Booklet, which is framed by CEs office and which is often not available for scrutiny by HQrs finance which deals with CTR estimates or the Divisional Accounts Office which deals the Tender cases for the above works, however shows an altogether different location for these works: For example, the locations in Part-I as per the FWP booklet for TSR is:VGI-Down loop BUD-Down loop VGI-Up loop 0.700 kms 1.000 kms 1.100 kms

70 CLA-PFNo.10 0.400 kms Titoli- Up/Down yard 9.000 kms JSPT yard - Bulk lines 2.500 kms UNCT yard-I LP & ML 1.500 kms KSRA - Up/Down Yard line 4.000 kms VVH Loop- I 0.750 kms KPT yard 4.800 kms --------------------------------------------Total 25.750 kms --------------------------------------------Reference to the FWP No.(example 215/1) is available in the Detailed Estimate but since the FWP Booklet is not available, almost in all cases, with the Divisional Accounts Offices, the exact kilometres for which sanction is available does not get linked. Consequently, the executives float tenders for any location between the commencing and terminating kilometres mentioned in the detailed estimate. This leads to a wide variation in the scope of the work as depending on the track profile the nature of the work may vary both in terms of labour and material. Moreover if duplication takes place or premature CTR is carried out, it cannot be identified. Moreover the same provision can be used by more than one Executive in their respective sections leading to excess booking. (To prevent this anomaly , it is necessary that the exact locations as per the FWP booklet are also mentioned in the detailed estimate.) (iii) EXCESS QUANTITY

Non-availability of the FWP booklet at the time of scrutiny of estimates also leads to excessive quantities being taken in detailed estimates and the sanctioned cost therefore gets exceeded. As explained in the introductory para, in the case of Pink Book item No.196 of 20012002 the name of the work in the Pink Book is "Mumbai CST - KYN 15.20 km, TSR - 4.6kms and CTR - 8.16 kms." (Incidentally the total of TSR & CTR length does not add up to 15.20 kms.) In Part-II of the detailed estimate a provision of 10 km of TRR was made. The FWP item no.201 describes the location as Up-through line of CSTM to Byculla which is only 4 kms. The detailed estimate was therefore sanctioned for 6 kms in excess of the length provided for under FWP due to the FWP booklet not being connected/made available.

71

(c) TYPE OF CTR The type of material to be used for Secondary CTR and its value also differs vis--vis Primary CTR. Since Tender Schedule vetting is proposed to be dispensed with, it is not possible to pinpoint whether material for primary CTR has been charged to a work in which Secondary CTR was due. d) NO STANDARD TENDER SCHEDULE Detailed Estimate shows only four items in case of TSR, namely: (1) MBC Sleeper (2) Laying charges (3) Unloading sleepers in Block section (4) Carriage charges The tender schedule however contains 15 to 20 items and with no stated guidelines available about the SOR items that would be required under the four items stated above, the correctness of the tender schedule cannot be examined. The quantity of some items like Through Packing and whether it has to be done one time, two times or three times is also not known. There is therefore a need to have a Standard Tender Schedule for various works like CTR, TFR, TSR, TRR seperately for primary & secondary schedules. e) MORE THAN ONE ESTIMATE CTR tenders at time in one AEN's sub-division are charged to more than one CTR Estimate. It is difficult to bifurcate the expenditure booked between the two or more works to which the tender is charged. Queries made by finance in such cases about how the expenditure will be booked is not taken kindly by the executives concerned who think that the combined provision of more than one estimate is adequate. This often leads to excess booking in one particular work and savings in another. f) CASH PROVISION EXCEEDED The tenders should be floated only as per the cash provision available in the estimates and cash portion also includes contingencies, S&T portion and Electrical portion etc. However there is often a tendency to float tenders for the entire estimated value and since the vouchers for the material received at site are

72 not sent by the PWIs and even if they are sent, the exact agreement number or work to which the material has been booked is not mentioned on the vouchers, there is a tendency amongst the budget section staff of the executives to book the material cost to any convenient CTR work which is in progress. Consequently not only the booking is unrealistic but the Completion Reports also do not get drawn. Tenders should therefore be floated strictly as per cash provision and the provision of other departments and Contingency provision should not be touched. g) RELEASED MATERIAL'S CREDIT AND DEBIT FOR STORES With every CTR work, some track material gets released. When the DS8 Note is prepared the work should get a credit for the released material. This transaction is extremely low on the priority list of the executives and all that they are concerned is that the scrap disposal target of the Railway is met. With no credit coming to the work concerned, the excesses over estimate do not get nullified to that extent. In terms of Para 720 of the Engineering code, all CTR works should be completed within the same financial year in which they are sanctioned so that accounts of the works are not kept open after the close of the financial year. This may not be practically feasible and hence debit for Stores comes at rates higher than one for which provision in the estimate has been made. On the other hand credit for released material is not afforded at the rate at which the sale takes place. h) MAINTENANCE OF WORKS REGISTERS There is a practice of maintenance of single set of Work Register on the Divisions of Central Railway. Even while the works are sanctioned the details of the name of the work, estimated cost, sanctioned amount, reference to sanction, budget provision, breakup of cash/stores/labour etc. is never posted on the works register by the executives concerned. The register is not updated regularly as and when payment/adjustment transactions take place and the financial progress of the work at any particular point of time can therefore not be ascertained. There is an urgent need to have a separate works register for each Pink Book item with different folios for each sub-work at different locations. There is a tendency to have a common register of various CTR works and the folios for the sub-work are maintained in a

73 haphazard manner. If different folios are kept for each work, the financial progress would be known and monitoring of completion report, unsanctioned expenditure due to excess over estimate etc. would be possible in an effective manner. This item needs to be strictly enforced. There is therefore an urgent need to ensure that (a) Detailed Estimates are vetted strictly as per the locations and quantities available in the FWP booklet. (b) Standard Tender Schedule for various types of CTR works is made. (c) CTR tenders are floated strictly as per cash provision excluding contingencies, S&T portion and Electrical portion and booking of Stores and Credit for released material is streamlined. 1.1 Excess over estimate also takes place as there is a tendency to make estimates in a hurry without taking into account all relevant provisions and realistic rates. At times the estimated cost is deliberately under-cast to keep within the powers of sanction of a lower authority. 1.2 Very often the estimated rates are taken on very high side and when an excess takes place after execution, the same cannot be explained in terms of escalation as the tender rates are lower than the estimated rates. 1.3 Vide letter No.AC/FE/1401/Estimate/Policy of 12.09.201, FA&CAO has clarified that the provisions of item 40(2) of GMs Schedule of Powers are to be read in consonance with item 40(4)(ii) and irrespective of percentage variation, Railway Boards sanction will be required only if excess over estimate exceeds the powers of sanction (Rs.30 lakhs) of GM. 2.0 Multiple Agencies Some major works are executed by Construction organization and MTP. Details (though in brief) of scope of such works should be known to contiguous Divisional units to avoid duplication. On Mumbai Division, works of Rs.1.60 crores were dropped as it was found after tendering that similar works are being done by Construction organization. 3.0 Splitting of Works Very often the work at the same location is split so as to bring it within the powers of a lower authority. Such tendency should be avoided.

74 Check List for Investment Proposals 1) Realistic estimation of project cost with proper detailed plans, estimates and competent authoritys sanction 2) Unproductive deployment of resources, wastages, peripheral items to be avoided 3) Period of completion should be well anticipated to avoid unrealistic projection and for estimation of cash outflows and inflow a sensitivity and risk analysis should be undertaken in a professional manner and no project should be justified merely on grounds of assumed savings. 4) The working expenses to move the extra traffic adopted should be realistic and the same should not contribute to inflate the rate of return. 5) Life of various assets should be taken in accordance with codal provisions and credit for released material should be provided invariably. 6) Earning/Saving in expenditure should be realistically worked out for each year of economic life of a project. 7) D&G charges, labour charges and overheads should be strictly need based. 8) Proposals for ROB should be included only after State Governments approval on plans and estimates has been taken and the modus operandi of cost sharing has been decided. 9) Consultancy should be resorted to only if in-house consultancy is not available. 10) In works like panel inter-locking/RRI, reduction in staff strength after completion should be clearly quantified. 11) Foreign exchange element should be clearly worked out. 12) Wherever buildings are proposed, feasibility of utilizing old buildings through improvement/modification should also be looked into. 13) Procurement of M&P should be done only through M&P Programme. 14) Proposals for passenger amenity works should be jointly framed in consultation with Civil Engineering department. 15) Uniform percentage for tools and plants should not be provided in all estimates and tools and plants rendered surplus from earlier works should be redeployed. 16) Contingency provision should be used as per Para 727E with specific approval of proper authority and for items such as vehicles, VCR/TV etc. should not be charged to contingencies. 17) Establishment proposal should be made as per life of the project so that the same is not exceeded before the project is complete or the same is not continued beyond the completion period. 18) Authority competent to sanction the estimate should examine the following factors :19) The work is sanctioned 20) Funds thereof have been provided

75 21) Requirement of all participating departments has been taken into account 22) An attempt has been made to effect savings by curtailing unnecessary items 23) The investment will not lead to any infructuous expenditure as a consequence of works being executed in other on going projects 24) The drawing is sanctioned and the site is available for the proposed work.

76

Epilogue
The Compendium on Tenders, it is felt, would remain incomplete if a brief mention is not made of the background of Railway Finances and Investment proposals. The information is primarily meant for executives who have to frame investment proposals.

Separation
In order to secure stability for Civil estimates by providing for an assured contribution from Railway Revenues and also to introduce flexibility in the administration of Railway Finances, the Railway Finances were separated from the General Finance by a Resolution of the Central Legislature adopted on September 20, 1924. Under the Separation Convention the Railways are required to pay dividend at a fixed rate on the capital and the rate thereof is decided by the Railway Convention Committee of the Parliament. Initially the principle of rate of dividend being higher than average borrowing rate was followed by the successive Railway Convention Committees but since 1981-82, the rate of dividend has been lower than the average borrowing rate of interest. Railway projects are not cleared by Public Investment Boards, as is done for projects of other Ministries. Once the survey reports become available, these are thoroughly scrutinized in the Railway Board and those which show some potential are recommended to the Planning Commission for consideration. For projects costing upto Rs.50 crores, Planning Commission is required to concur before the work can be included in the Budget. For works costing over Rs.50 crores the Planning Commission prepares an appraisal note which is then considered by an Expanded Board which consists of Members of Railway Board and Secretaries of Ministry of Finance(Expenditure), Planning Commission, Department of Programme Implementation. The proposals cleared by the expanded Board are sent to Cabinet Committee on Economic Affairs for approval and the approved projects are included in the Budget for seeking Parliaments approval.

Works Expenditure
Plan Expenditure towards asset addition, asset replacement, reconditioning of Plant & Machinery, improvement in operation efficiency which is not of recurring nature is charged to Demand No.16. Depending on the type of activity,

77 the Fund to which a works expenditure is to be charged is selected. Executives concerned who are responsible for controlling their own funds must know the Budget Grant they have received under each Fund for a particular Plan Head. For example, under Plan Head 36 Other Electrified Works any new work of provision of OHE structure will be charged to Capital. Since we pay dividend on Capital, the proposal has to be financially justified on DCF Technique to give a rate of return after commissioning of at least 14%. The works charged to Capital pertaining to New Assets creation like New Line, Doubling etc. are normally carried out by Construction organization. Replacement work, for example the work of replacement of corroded OHE structure, will be charged to DRF. While capital is funded by General Exchequer i.e. a dividend bearing grant from the Government, DRF is funded through reappropriation from operating surplus (i.e. excess of revenue receipts over revenue expenditure). Some Plan Expenditure is also charged to DF on activities like : Passenger & Users Amenities Labour Welfare Works Unremunerative Operating Improvements Safety Works DF-I DF-II DF-III DF-IV

Capital Fund
After reappropriation to DF, any excess surplus is used to finance Capital Fund which is a non-dividend bearing fund for New Assets creation. In view of the poor operating surplus this fund has also been financed by taking loans from General Exchequer in the recent past.

SRSF
A new fund called Special Railway Safety Fund has been recently created which has been financed through > > > reappropriation from various works of DRF on which outlay had initially been given in the Pink Book against DRF. levy of a Safety Surcharge and financial assistance from General Exchequer

The executive while proposing an expenditure under Demand No.16 should ideally know :the Plan Head to which the expenditure is to be charged

78 the Fund to which the expenditure is to be charged whether there is a need to give rate of return.

Ceiling Limits for Works Expenditure

Below Rs.5 lakhs for works to be sanctioned at Divisional Level subject to a clear-cut lump sum grant being made available with prior Finance concurrence. Proposals of Passenger Amenity should be routed through Sr.DCM. Rs.5 lakhs to Rs.30 lakhs with Divisional Finance concurrence, approval of DRM and sanction of GM under all Plan Heads for inclusion in the LAW Book as regular works. Rs.5 lakhs to Rs.50 lakhs in Line Capacity work with Divisional Finance concurrence, approval of DRM and sanction of GM. However, Plan Heads Computerisation, New Line, Gauge Conversion, Railway Electrification and MTP are restricted Plan Heads where only Railway Board can sanction works under these Plan Heads.
(Proposals between Rs.30 lakhs to Rs.50 lakhs are approved by Board and they appear in a Zonal Ralways LAW Book as itemized works. The LAW Book also contains works sanctioned by GM (below Rs.30 lakhs) for which Lump sum grant is given by Board)

For M&P the ceiling limit is Rs.10 lakhs GM can also approve OOT works upto Rs.30 lakhs with Divisional Finance vetting, DRMs approval and FA&CAOs concurrence and GMs personal sanction with a ceiling limit of Rs.6 lakhs for all Plan Heads taken together for one financial year. For OOT works no separate Funds are allotted and the work has to be financed through reappropriation provided the progress of works from which reappropriation is proposed does not suffer. Moreover, reappropriation has to be done from works charged to same Plan Head as reappropriation from one Plan Head to another can be done only by Railway Board.

Works to be included in the Pink Book

Works above Rs.30 lakhs are to be sent with Divisional Finance vetting, DRMs approval, FA&CAOs concurrence and GMs approval for obtaining Railway Boards sanction. Works sanctioned by Board below Rs.50 lakhs will appear in the zonal railways LAW Book whereas works above Rs.50 lakhs will appear in the Pink Book.

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Pace of Expenditure
To avoid time and cost overrun, judicious utilization of funds made available in the face of competing projects looking for Funds and for getting the benefits of investment early, no surrender of funds in Demand No.16 is normally desirable.

Revenue Expenditure
The revenue expenditure on non-plan activities is met through revenue receipts of Railways. It consists of ordinary working expenses and appropriations to the various reserve funds. Unlike works expenditure, the ceiling limits for sanction to revenue expenditure are delegated to divisions and availability of funds as per monthly proportionate budget grant and throw-forward liability of ongoing works of previous years is the determining factor for controlling revenue expenditure. Since the expenditure is financed from Operating Surplus and appropriation to various Railway funds is dependent on revenue receipts, it is necessary to exercise extreme caution. Funds for contractual payment under each Demand (3 to 13) are received under Primary Unit (PU) 32. The executives should be aware of the grant received, expenditure vis--vis Budget Provision, trend of expenditure in last financial year and also the throw-forward liability. Every department gets its own grant for the type of activity it undertakes and it is a misnomer to accept work orders from other departments and enter into liabilities. For example, if Electrical General Branch wants a toilet to be repaired in office premises, it cannot give a work order charged to its own funds to Engineering Department since the expenditure on repair to toilet will be booked to Demand No.4 only and not to Demand No.7 or 8 as Electrical Branch has no allocation for such expenses even if it has a saving under the demands pertaining to Electrical Branch (example Demand No.7 & 8).

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ANNEXURE 1
Standards of Financial Propriety
In the exercise of their sanctioning authorities must following principles: (1) financial powers, pay due regard to the the

(2)

(3)

The expenditure should not prima facie be more than the occasion demands, and that every Government servant should exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of the expenditure of his own money. No authority should exercise its powers of sanctioning expenditure to pass an order, which will be directly or indirectly to its own advantage. Public moneys should not be utilised for the benefit of a particular person or section of the community unless (i) the amount of expenditure insignificant ; or (ii) involved is be

a claim for the amount could enforced in a court of law ; or

(iii) the expenditure is in pursuance of a recognised policy or custom. (4) The amount of allowances, such as travelling allowances, granted to meet expenditure of a particular type, should be so regulated that the allowances are not on the whole sources of profit to the recipients. *********

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ANNEXURE 2
GOVERNMENT OF INDIA MINISTRY OF INDIA RAILWAY BOARD No: 2000/W-1/NE/NL/10 The General Managers, CR/Mumbai All Indian Railways/Pus etc. New Delhi 110 001 Date: 17.10.2001

** Recently while dealing with a tender case, it was observed by MSR(OR) that the manner in which the case had been dealt with suffered from certain deficiencies. I. Firstly, there was huge gap in the cost estimate prepared by the Railway and the offers quoted by the Tenderers. This could be either due to an incorrect and unrealistic cost estimate or due to not laying down exact specifications of the work leading to a considerable scope for speculation. II. Secondly, the advertisement for the tender had been released in the newspapers most of which did not cater to the business/commercial world. This resulted in poor response to the tender invitation. While the role of the local/regional newspapers cannot be undermined, an unnecessary bias towards these newspapers seemed to be an important reason for poor participation by the prospective Tenderers.

Sub: Processing of Tenders.

As a result of these shortcomings, the tender had to be ultimately discharged leading to a wastage of time and resources.
With a view to guarding against such wastage, it is essential that before inviting the tenders, the cost estimates are prepared realistically based on duly approved plans and drawings, properly defined specifications and taking into account realistic market rates so as to eliminate any scope for speculation.

Further, it should be ensured that the tender notice is given maximum publicity while releasing the advertisement for tenders depending upon the importance of work has, care should also be taken to have a judicious mix of local, national or financial dailies in order to generate adequate competition.
This issues in consultation with the Finance Directorate of the Ministry of Railways Sd/(K.P.SINGH) Executive Director/Work

*******************

Railway Board

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ANNEXURE - 3
GM(W)'s letter no w.187.R.V. dated 6th June, 1970. Calling and Opening of tenders. 1. A case has come to the notice of this office wherein a Division had invited Open Tenders giving about 35 days' time for opening the tenders form the date of the issue of the notice. The tender papers could not be issued to the Contractors till about one week before the opening of the tenders as the tender papers were not ready till then. The papers so issued by post got delayed which led to certain complaints and complications in deciding the tenders. 2. The tender notice published should indicate the date from which the tender papers will be available for sale to the intending Tenderers. Normally for big open line works, the tender papers should be ready for sale at least three weeks before the opening date of the tender. In the case of other similar works at least a fortnight should be the time. There is, however, no objection to the issue of tender paper on demand upto the usual hour on the date of opening of the tender.

Sd/(J.Y.MARATHE) For General Manager (W)

*************

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ANNEXURE 4
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD) No.93/CE-I/CT/85 Addressed to: As per List attached. New Delhi, dated 9-5-94

Sub: - Tenders for works- Sale of tender documents. -------------------------------During the course of Vigilance investigations, one instance has come to notice where tender papers had been dispatched in the nick of time by a short time-gap of 7 days including 2 weekly holidays print to the opening date of tender, thereby restricting the wider scope of participation by a large number of Tenderers. Instructions exist under Boards letter no.77/W.I/CT/40 dated 24-10-77 that the Railways should ensure availability of tender documents for sale immediately after the tender notices are published in the newspapers, in cases where tender notices are published much in advance, the date from which the documents would be available should be notified. The date since when tender documents should be made available for sale should not be less than 15 days prior to the due date of opening of tenders. Printed SOR should be made available to the fresh entrants on demand. This procedure may be followed strictly, the intention being to allow sufficient/reasonable time to the prospective bidders to obtain tender papers and submit them in the normal course. The receipt of the letter may be acknowledged. Sd/( Ved Prakash ) Executive Director, Civil Engg.(G) Railway Board.

**********

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ANNEXURE - 5
CENTRAL RAILWAY FA&CAOS OFFICE MUMBAI CST. No: AC/FX/1402/RB/IV.Corress Date; 15-09-2000.

SR. DAO BB,BSI,NGP,JHS,PA, DAO JBP,SUR. Sub: Tendering process in case of works tenders. Extract of SDGMS L.NO. 2000/G.130/C.23/V.con. Dt.6/9/2000 is copied below for guidance and necessary action at your end. ( Mrs. Tripti Mehra ) / FA&CAO EXTRACT During preventive checks of works tenders on this Railway, following irregularities have come to notice. It is requested that action as indicated against each item, may kindly be taken by all the offices under your control. 1. In some of the cases, tender conditions were found to have been incorporated that the tender papers will be given only to those persons/firms who fulfil certain qualifying/ suitability criterion like working experience, ITCC, proximity of firm to site of work financial soundness etc. It is advised that this type of conditions is ultra virus and also defeat the basic purpose of competition in the open tenders. You are requested to advise all executives working under you that such conditions should not be incorporated in the tender papers and the screening of tenders, if any, may be done only after opening of tender. In fact, tender conditions should be such that no one who pays for the tender papers is denied participation in the tendering process. 2. Tender papers are also being refused on some pretext or other like tender papers not ready etc. Refusal to issue tender papers in such cases is very serious. Efforts therefore, have to be made to keep tender papers ready before issued of advertisement and these should be available for sale from the date as indicated in the advertisement. 3. In some cases, tenders are being prevented from dropping the tenders in the tender box. For this suitable methods have to be devised so that tender papers can be dropped freely in the box without obstruction. Sd/( B.M.Lal ) Sr. Dy. General Manager ******************

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ANNEXURE 6
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS ( RAILWAY BOARD ) No: 2000/CE/I/CT/42 Addressed to: As per list attached. Sub: Selling of tender documents for open tenders. In reference to above following clarification is issued n consultation with Finance and Vigilance Directorate of Railway Board. The tender documents in the case of open Tenders, are to be issued to all those prospective tenderer who deposit the fee for tender documents irrespective of whether an eligibility clause is prescribed or not. In case, an eligibility clause is prescribed, it is for tender committee to evaluate whether the tenderer satisfies the prescribed eligibility clauses. This also disposes of the MTP ( Railways ), Mumbai letter No. MT/W/G/375/XI Dated 28-09-2000. New Delhi, Dt. 12-02-2001.

( Pradeep Kumar ) Exec. Director, Civil Engg ( G) Railway Board Copy to : 1. PPS/PSs to CRP,FC,ME,ML,MS,MM,MT. Secy. 2. AM.CE, AM( Works ), AM (Projects ), AM( Plg.), AM (Sig.). 3. EDCE(P), EDCE( B& S), EDTK(M),EDTK(MC),EDTK(P),EDW, EDTR,EDRC,EDR(X).EDTT,ED(RE),DTI(PCL),EDV(L).

EDLM,

*******************

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ANNEXURE 7
MINISTRY OF RAILWAYS (RAILWAY BOARD) Railway Bhavan New Delhi No. 2001/V3/N/Misc./Tender The Chief Administrative Officers/ Chief Engineers, All Indian Railways. Sub:- Issue of repeated corrigenda to original Tender Notice. _____ It has come to the notice of Boards Office that the Construction Organisation of one of one Zonal Railways has tendered the work of Bridge construction and issued as many as 9 Corrigenda in the Notice for inviting Tender (NIT) obviously to add or delete some items of the original tender notice. The matter has been viewed seriously in Board. To avoid such repeated corrections in the Tender Notice, it is advised that before issue of tender notice, complete preparation is to be insisted upon by senior executives. The preparation may include availability of detailed plans, & design details, completion of Tender documents etc. and its vetting by associated accounts of tender documents as & when required. Unless such items are attended to, the tender notice should not be sent for publication in the newspapers. Sd/Executive Director, Civil Engineering(G) Railway Board Dated:- 23/6/2001

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ANNEXURE 8

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ANNEXURE 9
Copy of Railway Board's letter No.80/W2/3/33 dated 28/29th August,1980 addressed to General Managers. All Indian Railways and others. SUB: Invitation of tenders before finalizing the site plants. 1.An instance has come to the notice of the Railway Board where a Zonal Railway invited tenders and awarded contract for a station building before completing the following necessary preliminaries formalities: 1. Approval of site and detailed plans by competent authority. 2. Though the building was in Tarai areas, soil tests for safe bearing capacity ere not conducted to determine the type of foundation that would be suitable for the local soil conditions, which were poor. 2.Due to these deviations from formal rules and practices, there was considerable delay in the execution and completion of the work by the contractor. This was adversely commented upon by Audit in view of the claims the Railway had to face from the Contractor. 3.Instructions have been issued by the Board from time to time enjoining upon the Railways to take up works for execution only after suitable investigation have been completed, detailed drawings and plans have been approved and detailed estimates/ urgency certificate sanctioned by the competent authority. Attention is also invited to para 1002 of the Indian Rlys Code for the Engineering Department as also to Board letter NO.72/W1/CT/43 dated 21.09.1972 (copy enclosed). Board desire to reiterate that contracts for works should not be awarded unless soil tests, site investigation have been completed, all plans, drawings and estimates duly approved/ sanction by competent authority and that there is no hitch in handling over the site to the contractor. Board desire that suitable instructions may be issued to all concerned. Please acknowledge receipt. Sd/(J.K.KAUL) Addl.Drector, Civil Engg., Railway Board.

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ANNEXURE 10
Copy of letter No.68-B(C ) PA/IV/23( 23) dated 20-08-68 from Sri M.G.Nair, Jt.Director- Works, Railway Board, New Delhi, addressed to the General Manager, All Indian Railways and Copy to others.
Recommendation No.23 of the 23rd report of the Public Accounts Committee (4th Lok Sabha) on Para 37 of Audit Report (Railways) 1967-Extra Expenditure due to execution of work without exploration. In connection with remodeling of a station a contract was awarded by a Railway Administration on the basis of specification for ordinary open foundations before carrying out soil exploration work, even though it was known to the administration that the land on which the structures were to be provided was a filled-up tank. The soil investigations which were carried out shortly after the award of the contract, pointed to the necessity of pile foundations because of the soil being found unstable to a great depth. Due to the change in the design of the foundations after the award of the contract, the contractor expressed his unwillingness to proceed with the work except to a very limited extent. The remaining items of the work had, therefore to be got executed through fresh contracts at higher rates than those quoted in the original tenders. It was explained to the Public Accounts Committee that the Railway Administrations original decision to have open foundations was based on the consideration that the tank which had been filled up about 30 to 40 years back must have settled down and consolidated and that there were already other buildings built on open foundation on that site. The Public Accounts Committee have, however, observed as under:1) The Committee are constrained to note that, before inviting tenders and awarding a contract for the work, the Railway did not carry out essential investigations. It is all the more surprising when it was known that the structures were being provided on a filled up tank, no soil tests were made and the work was taken up on the assumption that buildings on open foundations existed in the area. The Committee suggests that the Railway Board should issue suitable instructions for soil exploration being carried out at sites, which are located on filled-up tanks or hollow ground so as to avoid any changes in the design of foundations and structure at a later date. 2) The Committees recommendation may be noted for strict further compliance. 3) Please acknowledge receipt.

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ANNEXURE 11
Letter No.68/W1/CT/25 dated 12th July, 1968 from Director (Civil Engineering), Railway Board, New Delhi addressed to General Managers, All Indian Railways. Sub: Supply of Railway Materials to Contractors

Certain disputes have arisen in respect of additional lead and lift for taking Railway materials to the site of work, because the point where the Railway materials would be supplied was not specified in the contract. The Board desire that in all contracts where Railway materials are to be supplied, the special conditions of contract should specify the place where various materials are to be handed over to the contractor and it should also be made clear that all lead and lift from that place to the site of work would be at the expense of the contractor.

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ANNEXURE - 12
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD) No.94/CE-I/CT/4 New Delhi, dated 17-9-97

Sub: Procedure for inviting tenders and awarding works contracts. -----------------------------------------Central Vigilance Commission have pointed out common defects in execution of works by the Railways. They have given a list of such defects which are commonly prevalent in execution of works on the Railways. Accordingly, a Committee of 4 SAG Officers have gone through in detail and submitted its recommendations, which have been considered by board. A copy of the recommendations is enclosed for necessary action. Sd/( Ved Prakash ) Executive Director, Civil Engg.(G) Railway Board.

EXTRACT
Instructions regarding procedure for inviting tenders and awarding of Works contracts. 1) CALLING OF LIMITED TENDERS: Open tenders are to be the established practice. However, limited tenders, as per Para 1214(ii) can also be invited from the approved list of contractors subject to the ceiling and other conditions prescribed therein. Further in terms of Para 1214(i), special limited tenders mat be invited under certain conditions with the prior concurrence of the FA&CAO and approval of GM. The reasons for inviting special limited tenders should be kept on records while approaching Finance for concurrence. While the firms to be so approached need not be confined to the contractors borne on the approved list, they should all the same fulfil the criteria laid down by Board from time to time for being borne on the approved list for the specific category of work. However, all the Tenderers on the approved list for that category should invariably be included in the special limited tender, where it is proposed to exclude any contractor, detailed reasons for the same should be recorded while approaching Finance for concurrence. The limit for calling of limited tender is increased to Rs.40 lakhs instead of Rs.20 lakhs as was fixed vide Boards letter No.83/W.I/14/Policy dt.4-4-89.

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2) CALLING OF SINGLE TENDERS: Single Tenders should be invited in rare or emergent situation with the concurrence of FA&CAO and administrative approval of General Manager/CAO(Con). The procedure laid down in Railway Boards letter No.93/W2/PQR/SC/4 Part dated 27.09.96 & No.97/CE.I/CT/32 dt. 27.08.97 should be strictly followed. In case of Single tenders, Tender Committee and the accepting authority should be one step higher than in case of open tenders / limited tenders excepting where GM is the accepting authority. 3) PROCESSING OF TENDERS: Processing of offers received in a tender should be dealt promptly at every stage. As far as possible, it should be finalised by competent authority well before expiry of the validity. Whenever delays take place, Tender committee should suitably explain it in the minutes. 4) APPROVED LIST OF CONTRACTORS: Executive orders as per Annexure-I should be strictly followed. 5) ELIGIBILITY CRITERIA FOR AWARDING WORKS: In case of Open tender, a minimum eligibility criteria, keeping in view the nature of each work should be specified in the tender documents preferably in the Tender notices also. Two Packet System should be adopted for larger value of works as per Boards guidelines issued Vide Boards letter No.90/CE.I/CT/27 dt.17.8.95. However, for smaller works, the tender Committee should ascertain the credentials. 6) HOLDING OF NEGOTIATIONS: SUPERSEDED BY Letter No.90/CE-I/CT/1 of 27-1-99 placed at ANNEXURE-37

7) ASSESSING THE REASONABILITY OF RATES: Assessing the reasonability of rates should be gone into detail by the Tender Committee. When making a comparison, instead of last accepted rates, the average of last accepted rates for similar type of works under similar conditions and geographical proximity should be worked out. Where only one case of accepted rates is available, analysed rates based on market survey should be derived for ascertaining the reasonability of rates. 8) INVITATION OF TENDER: In exceptional cases where tenders have to be invited in view of extreme urgency before sanction of the detailed estimate, it should be done with the personal approval of DRM upto tender value of Rs.50 lakhs, PHOD upto Rs.1 crores & GM above Rs. 1 crore, with prior concurrence of associated finance. However, award of contract will only be after sanction of detailed estimate & specific allotment of funds.

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9) ESTIMATED COST OF CALLING OF TENDERS: Estimated cost should be worked out on the basis of average of a number of last accepted rates on the Division / Railway duly catering for any special features of the work, e.g site conditions, type of work, weather conditions, completion period, law and order, availability of labour and materials etc. enhancement of estimated rates should be based on building cost index / RBI indices for the period elapsed between the preparation of estimate and the date when last accepted rates were received. 10) RATES OF NON SCHEDULE ITEMS IN THE CONTRACTS: Whenever operation of Non-Schedule ITEMS IS INESCAPABLE, rates should be derived from the items included in the Standard SOR where new items vary marginally from standard SOR item/items, market rate should be used to the extant of variation to workout new rate. 11) APPROVAL/SALE/CORRECTION OF TENDER DOCUMENTS: i) ii) iii) It should be ensured that the Tender documents should be approved by the competent authority before issuing the tender papers. The Sale of tender documents should be stopped 4 hours before opening of tenders. Corrections and over-writings in rates should be numbered and attested by the tender opening officer.

12) REVISION OF SOR AND QUOTING OF RATES: i) SOR should be periodically revised within 3 years. Zonal Railways should set up a Cell for doing this work with the help of computers. In case of Zonal contracts the contractors should be asked to quote percentages above/below the basic rates given in SOR for various Chapters by grouping them suitably including the money value. All railways should update their SORs to include items with contractors cement and steel in addition to item with Railways cement and steel supplies free of cost. Instructions have already been issued vide Boards letter No.94/CE.I/CT/30 dated 7.7.94 permitting calling of tenders with contractors cement and steel.

ii)

13) CALLING OF TENDERS ON LUMPSUM BASIS: (COMBINED DESIGN AND CONSTRUCTION CONTRACTS) i) The concept of inviting combined, design and construction contracts should be avoided as far as possible. However, in unavoidable circumstances combined, design and construction contracts should only be

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awarded on lump sum basis and not on item rate basis. RDSO should be appointed as proof consultants to check the design & drgs, submitted by the contractors at various stages to the work. To facilitate the interim payment to the contractors, the schedule of payment should be decided before entering into the contract agreement. It should be ensured that the Schedule payment takes care that the portion of work planned to be executed at the end is priced adequately so as to avoid the contractor abandoning the work at the later stage. In these contracts on lump sum basis, the Tenderers should be asked to indicate quantities along with design. It should also be mentioned in the documents that any excess in the quantities indicated by him at the time of tendering due to changes in the design at the approval stage by the Railways would not be paid extra. However, if there is any reduction in the quantities actually executed, there would be a proportionate reduction in payment. ii) In the exceptional circumstances where combined design and construction contracts are to be invited, Cement & Steel should be supplied by contractors. However, in case the Railway is to supply cement/steel to the contractor free of cost, its quantity should be fixed at the time of tendering. In the Tender documents, the rate of recovery for variation in quantities should also be incorporated.

14) EVALUATION OF TENDERS: Tender Committee should evaluate financial implications of conditions given by Tenderers to decide the relative positions of Tenderers. 15) SUBLETTING OF TENDERS BY MORE THAN ONE CONTRACTING AGENCIES UNDER THE SAME MANAGEMENT. In case there are more than one contracting Agencies under the same management, there seems to be no harm in their tendering. Moreover, Railway cannot discard such Tenderers. However, when such offers are evaluated, norms of adequate and fair competition must be ensured. 16) INCOME TAX CLEARANCE CERTIFICATE: Income Tax clearance certificates should be insisted upon from the successful Tenderers before making any payment. 17) TENDER DOCUMENTS: i) ii) Boards instructions issued vide letter No.93/CE.I/CT/11 dated 04.05.93 should be strictly followed. Reference to complete specifications/drawings should be mentioned in the tender documents.

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iii) Wherever a mention is made in the tender documents for supply of material by the Railways, specific mention of the place/office be made in the tender documents. It should not be left vague.

18) MATERIALS ISSUED TO THE CONTRACTORS: a) Provisions of Para 1269 of Engineering Code should be strictly followed. b) The recovery rate for excess material supplied by the Railways should be 1.5 times the cost of procurement, which is inclusive of Freight.

c) Maximum percentage of cut-pieces, which can be returned by the contractors without any deduction, should be specified in the tender documents when full-length bars are supplied. It should be mentioned in the tender documents that for any excess over this quantity, deduction at the rate of 50% of the cost of material worked out as per Para (b) above would be deducted. d) Hire charges of equipment/machinery should be specified in the tender documents itself. Such hire charges should be periodically revised. e) Proper record of daily consumption of cement should be maintained at site. This register should be initialled by Supervisory staff and periodically test checked by the officers. f) Day to day consumption record of chemicals such as water proofing, antitermite used at site should be maintained properly. Actual consumption of cement and these chemicals should be checked with theoretical requirement to ensure quality of work. 19) SITE ORDER BOOK: It should be insisted upon the contractors to indicate the action taken on the observations/instructions given by the supervisory staff/officers in the Site Order Book. 20) TESTING OF BUILDING MATERIAL: i) ii) Regular testing of building materials such as bricks, sand, aggregates, tiles, waterproofing compounds, doors and windows etc. should be done. Day to day quality control, sample testing facilities should be available at large sites. It should be incorporated in the tender documents that the contractor would set up such testing facilities including their maintenance. Separate item should be provided in the tender schedule for making payment to the contractor for setting up of these facilities.

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iii) iv)

Test Cubes for the concrete should be made and tested as per IS specifications. Concrete mix as specified in the tender documents should be followed at work site. In case of design mix, IS specifications for designing, producing, using, testing and accepting/rejecting must be followed. Cement should be used by weight only in cases of design mix concrete. In case of cement, steel, HTS, wires, besides obtaining test certificates from the contractors, regular independent tests to check the quality as per specifications should be done. Railways should procure materials from IS approved firms. Independent tests should be conducted to ensure that the materials conform to IS specifications.

v) vi)

vii)

21) RECORDING OF MEASUREMENTS: i) ii) Measurements must be recorded directly in the Measurement books by authorized officials. Prescribed checks on the measurements should be carried out by senior officers and references made in the Measurement Books as well as in relevant bills. Payments at full rate must be made for an item unless the item has been completed as per the specifications and accepted by the competent authority.

iii)

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ANNEXURE - 13
Copy of letter No.58-B(c)-2498/11/4TH report dated 27th /30th May,1958 from Shri C.T.Venugopal, Director, Finance, Railway Board, addressed to GM's All Indian Railways etc. Sub: Selection of Contracts through open tenders. A reference is invited to Railway Board's letter No.55-B(c)2498(35) and (36)/XIII dated13th January, 1956 copy of which together with a copy of enclosure thereto is enclosed for ready reference. The question of allowing free play to a competitive tender system and of ensuring for this purpose that the prescribed period of notice is generally allowed when inviting tenders, as brought to the notice of Railway Administration in the aforesaid instruction of the Board. 2. The general principles in this connection have again been discussed by the P.A.C in connection with a paragraph in the audit Report Railways 1956 and a copy of the Committee's Recommendation No 8 contained in Appendix II of the 4th Report (2nd Lok Sabha) of the P.A.C is self explanatory, is reproduced below: "The Committee feel that undue emphasis on previous experience of contractors would cut across the very principle of inviting tenders and by shutting of all new comers, it would tend to create monopolistic tendencies. The Committee trusts that the instructions issued by the Railway Board in January, 1956 in pursuance of Para 72 of their Thirteenth report would be strictly adhered to. The Board have impressed therein the need for allowing the prescribed period of notice for submission of tenders. The Committee desire that sufficient notice should also be given in cases where the specifications in a tender have undergone changes and fresh tenders called for in cases where the modification are major in character warranting such a course". 3. In bringing to the notice of Railway Administrations once again these essential aspects (amongst others) in the matter of inviting tenders and considering them, the Board desire that the importance of these instructions may once again be impressed on all Authorities subordinate to you who are empowered to invite and deal with tenders.

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ANNEXURE - 14
Copy of Railway Boards letter no.61-BNE/9 dt 23rd Sept, 1960 addressed to G.Ms All Indian Railways. A case has been brought to the notice of Railway Board by the ADAI (Railway) where a single tender was invited for the work in connection with the internal wiring spread over various places on a particular Railway. The ADAI has pointed out that since the work was spread over various places, the factor itself would debar the contractors from quoting whose rates might otherwise be lower, but who may not be interested in undertaking the work at places far too distant from each other or from their headquarters. The Railway Board agrees with ADAI that it would be advantageous if the Railway Administrations while inviting tenders for such work invite quotations for the work at all places collectively as well as for the work as each place or group of places fairly close to each other. Necessary action may kindly be taken accordingly.

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ANNEXURE 15
GM(W)'s Letter No.W.187/R/II dt.20.07.1964. Sub: Preparation of Tender Documents The careful preparation of tender documents has been stressed by this office from time to time but it is still noticed that no serious efforts are being made by the Divisional Offices to improved the position, and while scrutinizing the tenders, received in this office, the following mistakes, omissions and unnecessary additions are noticed: 1.The correction slips are not initialled by the authority issuing the tender forms. 2.The correction slips keeping the offer open for a fixed period shows three periods 30/60/90 days. Two of these are not scored out by the issuing office before the tender is issued. 3.The tender form is not signed by the issuing authority before issue. 4.The name of the work on the front page is not given correctly. 5.The description page is often left black or the description given is incomplete. 6.The blank spaces in the various clauses are not filled in before issuing the tender forms. 7.Some of the divisions have stencilled the special conditions and these conditions are inserted in the tender forms irrespective of the fact whether or not they are applicable to the particular work. In most cases these conditions are not serially numbered, and in may cases, they are repeated. All officers responsible for drawing up tender forms and issuing them should, thereof ensure that: a) All correction slips are pasted at the correct places and are initialled by the gazetted officer. b) Alternative wordings required to be struck out are struck before the issue of tender forms. c) The tender form at page 7 is signed by the issuing authority or the person authorized to sign on his behalf. d) The name of the work on the front page is correctly given. e) The description of the work at the description page is given in detail. f) The drawing numbers, where necessary are invariably entered. g) Only such of the special conditions, which are applicable for the work, are attached to the tender form, and these conditions are serially numbered and placed at the appropriate places. h) Repetition of conditions is avoided. i) The 'blank' spaces in the tender forms where necessary are filled in. j) At the time of issuing the tender form the tenderer to asked to attest all the corrections and corrections slips. k) At the time of opening of the tenders, if any of the slips are found to be unattested the tenderer or his authorized agent, if present, be advised to initial them in the presence of the opening authority. Please acknowledge receipt. Sd/For General Manager (W).

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ANNEXURE - 16
Copy of Railway Board's letter no.87/WI/CT/65 dated 13/01/1988 Sub: Rates for items of work. 1. In para 12 of C & AG Report of 1985-86(Railways), it has been brought out that on Central Railway, in a contract for earth work and bridges for a new line project, a new item for dewatering, not included in the original tender schedule, was required to be operated. The rate for this item was negotiated with the existing contractor since bringing any other agency for this item was not considered feasible. 2. A committee which negotiated the rate for this item based its recommendations on the accepted rates for the same item on the section of the project .No analysis of rate was made. It was also seen that the accepted rates for this item varied considerably in different sections and the committee's recommendations was not based on any logical reasoning. 3. In the tenders for earthwork, the Tenderers were required to quote their rates for soil, rock not requiring blasting and rock requiring blasting. However,in a few sections, some Tenderers quoted the same rates for all the three items and ,based on assumed quantities, their tenders were lowest and hence accepted. In actual execution, the quantities of rock not requiring blasting and rock requiring blasting were found to be much less than anticipated, resulting in vitiation of the tender acceptance and the element of avoidable expenditure arising from the same. 4. To avoid such exigencies, the board desires that the practice of calling item wise rates to be quoted by tenderer should be avoided as far as possible. For items covered by the standard schedule of rates, tenders should be called for on the basis of the percentage above or below the standard schedule of rates. Even for non schedule items for which it is possible for the Railway to work out basic rates corresponding to the standard of rates, the tender schedule may be prepared giving the basic rates as thus worked out. On this, the tenderer may quote a percentage above or below these basic rates. With this system, the number of items for which the tenderer is required to quote item wise rates of his own will be limited to a small number. Such items may be made into a separate tender schedule. 5. For any new item not included in the agreement but considered inescapable, the rates should be negotiated on the basis of a realistic analysis of the quantum of work involved. This issues with the concurrence of Finance Directorate of the Ministry of Railways. Please acknowledge receipt. Sd/(S.M.Singla) Exec.Director,Civil Engg.(G) Railway Board.

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ANNEXURE 17
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD) ***** No.94/CE-I/CT/ To, As per list A attached. Appointment of Works Contractors Finalisation of tenders. **** A committee of experienced field officers of Engineering and Finance Departments, namely, Shri B.S.Sudhir Chandra, the then CAO(C), S.E. Railway, GRC (now GM/Central Railway), Shri S.R.Ujlayan, CAO(C)/Northern Railway, Shri G.Krishnamurthi, FA&CAO, S.C.Railway, and Shri K.K.Verma, FA&CAO(T), Central Railway, was constituted by the Railway Board in June, 1999 to formulate and finalise the procedures to overcome some of the problems being faced at present in the field for fixing works contracts. The Committee submitted its report to Board in July, 2000 which has been examined in Board and while some of the recommendations, as given in Annexure-I (enclosed in 4 pages), have been approved by the Board (ME AND FC) remaining recommendations are still under examination. These recommendations (annexure-I) would be applicable prospectively only as will preclude contracts which have already been entered into or have been called and is under process of finalisation. Further action is being taken by Board to issue necessary Correction Slips to the relevant paras of Engineering/Finance Codes so as to modify codal provisions in line with these recommendations. Pending issue to Correction Slips, these recommendations as approved, would override the codal provisions to that extent. This issues with the concurrence of the Finance Directorate of Railway Board. Encl: As above (4 pages) (Parmod Kumar) Executive Director Civil Engg(G) Railway Board. Sub: New Delhi, the 22/10/2001

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ANNEXURE I (4 Pages) RECOMMENDATIONS OF THE COMMITTEE OF SHRI B.S. SUDHIR CHANDRA AND et al AS APPROVED BY THE RAILWAY BOARD.

OPEN TENDERS
Para No. of the Report 2.3.4.2

The following documents should be specified for submission along with the tender. a) List of Personnel, Organisation available on hand and proposed to be engaged for the subject work. b) List of Plant & Machinery available on hand (own) and proposed to be inducted (own and hired to be given separately) for the subject work.

LIMITED TENDERS 2.4.4.1 2.4.4.2 Limited Tender should be invited from the contractors borne on the Approved List only. Notice for inviting Limited Tenders shall be published in local newspapers and displayed on the Notice Boards kept in the concerned Railway Office and also put on the Internet wherever possible. It will be the duty of the prospective Tenderers to keep track of the tender notice issued through any one of these media. Individual Railways may decide the category of works for which list of approved contractors should be maintained for each monetary slab. APPROVED LIST OF CONTRACTORS. 2.5.4.2 The Approved List will be in four monetary slabs only as below: (i) (i) (ii) (iii) 2.5.4.3 Class D- Upto Rs.10 lakhs. Class C- More than Rs.10 lakhs and upto Rs.25 lakhs. Class B- More than Rs.25 lakhs and upto Rs.50 lakhs. Class A- More than Rs.50 lakhs and upto Rs.1 crore.

2.4.4.3

The approved List as a whole will be valid for a period of 3 years. The list will be reviewed every year for deletion which will be effective from 1st July and additions if any will be done once in six months and which will be effective from 1st January and 1st July.

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2.5.4.5 Once the contractor is borne on the Approved List, it will be valid for 3 years, unless already deleted during the Annual Review or the expiry of the validity of the Approved List as a whole, whichever is earlier. There will be separate Approved Lists for Open Line and Construction Organisations for each identified category of work. In Open Line, Approved List for classes B, C and D will be maintained Division-wise and for Class A, there will be one common list or the Railway as a whole. In Construction Organisations, Approved List for classes B, C and D, will be for a particular pre-determined geographical area or Dy.C.E.(Con)-wise and for Class A, it will be CAO(C)/GM(C)-wise. Selection of contractors for enlistment in the Approved List should be done by a Committee to be nominated by the authority not below the Accepting authority as given below. The composition of the Committee will be as follows: Class of Select Committee Accepting Authority Contractors Composition Class A One SAG Officer each of Executive Department and Finance Department One JAG Officer each of Executive Department and Finance Department. One Senior Scale Officer each of Executive Department and Finance Department Executive Department PHOD DRM in the Division/SAG Officer of the Executive Department.

2.5.4.6 2.5.4.7

2.5.4.8

Class B and C

Class D

Sr.DEN(Coordination) in Division and Dy.CE(Construction) in Construction. Note: Normally, in Construction, no contract below Rs.10 lakhs value should be called.

For registration in Approved List the contractor will have to furnish non-refundable fee of Rs.5,000/- for Class D, Rs.7,500/- for Class C, Rs.10,000/for Class B and Rs.15,000/- for Class A. This will over the entire period of 3 years or part thereof. Contractors desiring registration should submit the application in the proforma prepared on the Railway with the prescribed fee for each category of work in that slab. 2.5.4.11 Contractors having Standing Earnest Money (SEM) may avail this opportunity in that organization only.

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SPECIAL LIMITED TENDERS 2.6.4.2 2.6.4.3 Special Limited Tenders may be invited from specialized and reputed contractors/organizations/agencies. Tenderers from whom Special Limited Tenders are to be invited should preferably be more than six but not less than four.

TWO PACKET SYSTEM OF TENDERING 2.8.5.1 Two Packet System of tendering may be adopted in specifically identified situations for obtaining consultancy services for highly technical works where parameters cannot be precisely pre-defined or for execution of works, which are technically complicated and specialized in nature and/or which are executed very rarely. The qualifying criteria in the tender documents for selecting a tender should be precisely defined duly concurred by FA&CAO/FA&CAO(C) and approved by GM/CAO.

2.8.5.2

NEGOTIATIONS 3.4.1 L-1 should be defined as the lowest, valid, eligible and technically acceptable tenderer who would have been otherwise considered for award of contract directly, if the rates were not unreasonably high. Negotiations should be held with L-1 only as specified above. In tenders, providing for Purchase Preference in favour of PSUs, if quoted rates of L-1 are considered high and negotiations are resorted to, such negotiations may be held with the original L-1 as also the L-2. PSU whose original offer is not higher by more than 10% of the offer of L-1. Further, if after such negotiations the revised offer of the PSU is higher by more than 10% of the negotiated offer of the original L-1, offer of PSU may not be considered for award of contract. If it is less than 10% the existing procedure for awarding the contract to the PSU may be followed.

3.4.2 3.4.3

VARIATION IN CONTRACT QUANTITIES

5.3.1 Tender schedules are to be prepared with utmost care, following all the existing provisions in the Code as also Administrative instructions without fail, after detailed site inspection and soil investigation wherever necessary, eliminating, as far as possible, the need for bringing any new items during execution of works. These tender schedules may be approved by JAG/SAG Officers. Vetting of tender schedules should be necessary only in the rare urgent cases where tenders are called without sanction of detailed estimate. Pre-

5.3.2

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vetting will also not be necessary in case of Zonal works and revenue works in Open-Line for which detailed estimates are not required to be framed. 5.3.3 A system of indicating rates for individual items in the schedules(s) and asking the Tenderers to quote a common percentage for all items in a schedule/all schedules may be preferred where possible. For controlling payment in case the agreemental value goes beyond +25%, a regulatory mechanism as part of the contract itself should be built in. For the first 15% increase in the value beyond 25% of the agreemental value, the rates will have a reduction of 2% in the incremental value of the agreement and for the next 10% increase in the value, rates will have an additional reduction of 2% in the further incremental value of the agreement. Execution of quantities beyond (+) 50% of the overall agreemental value should not be permitted and, if found necessary, should be through fresh tenders or by negotiating fresh rates with existing contractor as per procedure laid down by Railway Board in their letter No.94/CE-1/CT/37 dated 5.5.1995 for variation beyond 25%. To decide whether the agreemental value will go beyond 50%, as and when 75% of the agreemental value of contract has been executed, the contract should be subjected to a detailed review and administrative decision by an appropriate authority (agreement signing authority) should be recorded in writing and quantities monitored carefully and from this stage onwards, execution of further quantities will have to be monitored at least at the level of JAG Officers.

5.3.6

5.3.7

5.3.9

5.3.10

For variation in value beyond 25% of the agreemental value, the present instructions for holding discussion with the contractor may be dispensed with. ***********

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ANNEXURE - 18
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS RAILWAY BOARD No.F(X) II-2000/Exp/4(Austerity) New Delhi, Dt. 27/7/2000.

Sub: Implementation of austerity measures

1. The Indian Railways face a difficult financial situation, with a severe scarcity of investible resources. The decline of budgetary support has also led to considerable strain on the funds available for replacement and expansion activities. In this background, it has become more important than ever that expenditure is incurred judiciously to avoid wastage/unproductive deployment of precious resources. More than at any other time in our past, we must recall the Standards of Financial Propriety while finalizing investment decisions. 2. Economy in design : Economy in construction should start from the very beginning, i.e. from the design and planning stage itself. The barest minimum required facilities should be planned for, without any additional input unless needed for a clearly identifiable future purpose. Consultancy contracts should be resorted to selectively only if the requirement cannot be undertaken in-house. 3. Provision for essential items only : Railways should avoid the provision of items like telephones, vehicles, personal computers, photocopiers and even buildings, staff quarters etc. in estimates for works as a matter of routine. All facilities at stations should be commensurate with the traffic anticipated. The use of granite and expensive stone material should be severely restricted, while costly and garish light and fan fittings, extravagant furniture etc. in rest houses and other buildings may be eschewed. Service buildings and staff quarters should be provided only where inescapable after taking a full inventory of existing surplus buildings and their usage. The procurement of M&P should be strictly through the M&P Programme and not the Works Programme. Aspects like timely installation, availability of spares, technical knowledge etc. must receive due attention to prevent infructuous expenditure. 4. Standards of Construction : Often there is a mismatch between the standards of signalling and track proposed in the Project Report and the detailed estimate not in accordance with the nature and density of traffic expected. In order to ensure the realisation of projected benefits, provision of appropriate track and signalling standards, without such mismatch, would be necessary.

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5. T&P and Contingency Charges : The provision of uniform percentages for Tools & Plant in all estimates should be reviewed. T&P surplus from a work should be re-deployed and estimates should be charged with pro-rata utilisation. Contingency charges should be utilised in terms of Para 727-E and with the specific approval of the appropriate authority. The provision of off line items such as road vehicles, VCR/TV, PCs, telephones etc. cannot be charged to contingencies. 6. Establishment Charges : The impact of the recommendations of the Fifth Central Pay Commission has been addressed through the recent revision of various D&G charges vide Boards letter No.2000/ER/400/2 dated 26/6/2000. However, the need to provide establishment on a strictly minimal basis bears reiteration and must be rigidly followed, particularly where works are being out-sourced. Detailed planning and regular review of financial/physical progress of various works should be made to ensure that there are no delays in execution, and that the provision for establishment is not prematurely exhausted. In case of a slow down in the progress of some works, staff chargeable to those estimates may be redeployed so that upon resumption of work, the establishment provision in respect of these works still remains. Recovery of dues : Liquidated damages, wherever due in contracts must be recovered. The recovery of mobilisation advances, interest thereon, and hire charges wherever applicable should be closely watched and ensured. 8. Disposal of released material : Prompt disposal of released materials should be undertaken to avoid deterioration in quality. 9. Deposit Works : In the case of deposit works, no excess should be allowed and the deposit of funds in advanced should be insisted upon. Departmental charges, wherever recovered, should be credited to earning, and not utilised for the purchase of miscellaneous items like vehicles, PCs, etc. Board desire that these instructions be scrupulously followed. Receipt of this letter may please be acknowledged. Sd/(Amit Kaushik) JT. DIRECTOR FINANCE(EXP) RAILWAY BOARD ********** 7.

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ANNEXURE - 19
Copy of Boards letter No. 78-W6/TK/O dated 02-09-1978 addressed to General Managers,All Indian Railways etc. Sub: Report of the Task Force on Vigilance. 1. As a result of discussions held in the parliament and an assurance given by the Minister for Railways to review the implementation of Kripalani Committee Report on 14.06.1977 Task Force was setup by the Railway Minister to make a comprehensive study of the subject of corruption on the Railway in the current context covering additional facets of Railway working and operation which have come up due to developments in the intervening quarter century after the Kripalani Committee made deliberation on these issues. 2. The Task Force has since submitted its report making certain recommendation. In this connection recommendation No 209 which has been accepted by the board is reproduced below for compliance. Recommendation No 209: There should be much greater stress on proper estimation of quantities provided in tender schedule by insisting on sample bores, trail pits and soil survey for accurate and realistic assessment so as to bring better management control and to avoid guess work in rates and subsequent manipulation by contractors and engineering officials. (Para XII.4.3 enclosed as annexure A) The Board while accepting this recommendation have desired that great stress should be laid on this aspect by the officers at the highest level i.e. GMs, Chief Engineers and D.S.s etc., in order to achieve the desired result. The Receipt of this letter may please be acknowledged.

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ANNEXURE 20
Addl Dir.(CE), Rly.Bd. vide his L.no.76/W1/CT/53 of 22.4.77
It has come to the notice of the Bd. that on certain divisions on Railways approx quantities/value itemwise are not indicated in the tender papers while calling for the tender for works. Non-inclusion of approx quantities/value itemwise has a definite vigilance potential in as much as the interse position of the tender can be altered by making adjustments in the quantities in case of item rate tenders. Even in the case of tenders called on percentage basis over the schedule of rates, it would be desirable to indicate the quantities/values of various items of works at least in respect of broad major bldg activity, earth activity, sanitary work, water supply etc., so as to give a better assessment of work to the contractor and to enable him to furnish reasonable and competitive rates. Board, therefore, desire that the Railways should strictly follow the extant instructions in this regard and avoid recurrence of such incidents. In this connection attention is invited to para 339 & 416 of I.R.Stores Code, which is also applicable to works contracts

********

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ANNEXURE 21
Copy of Railway Boards letter No. 58-B3072 dated 15-05-58 addressed to General Managers,All Indian Railways. Sub: Audit Para included in the Railway Audit Report 1958Extra expenditure owing to a defective agreement. The Audit have brought to notice a case in which an urgent indent was placed by one Railway Administration on the Director General, Supplies and Disposals, New Delhi for the procurement of underground cables required for the execution a work for which staff had already been appointed by the Railway Administration. The form with whom the Director General, supplies and Disposals signed the contract for the supply of these cables stipulated the delivery period as two months after receipt of import license.; The following clauses also which appeared in the tender of the firm was inserted in the contract entered in The delivery date quoted by the firm was contingent on the firm not being delayed as a result of non-delivery of raw material or by any other clause beyond their control. Later on the firm did not supply the material even after the import license has actually being issued to them. On being served with a risk purchase notice, the firm requested for the cancellation of the order on the ground that they could not arrange supply due to difficult in the matter was to the effect that it would not be possible to enforce risk purchase against the firm in view of the protective clause, referred to above, included in the contract. The contract had therefore to be cancelled without financial repercussions on either side, and the railway administration concerned had to purchase stores from the open market resulting in an additional expenditure to the extent of Rs.45000/- over and above the loss incurred on the salaries of the idle staff. The Audit has recommended that the insertion of the protective clause in the contract was not warranted for the following reasons. (1) The firm had made no mention of the scarcity of the material or any other difficulty in their tender, but had on the contrary , certified in the schedule to the tender that they had sufficient raw material in stock for the manufacture of the stores quoted. (2) The clause was inconsistent with general conditions of contract governing the purchase of stores and the purchase officer who inserted it was not competent to do so without the sanction of the Ministry. (3) An escape clause in such wide terms was inconsistent with the urgency of the demand. The Board agree with the Audit comment and desired that all Railway Administrations while entering into such contract, should see that protective clause of this nature do not find their way into the contracts. This may please be brought to the notice of all concerned. ********

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ANNEXURE 22
Copy of Railway Boards letter No.58-B(C)2498/II/7th Report dated 12th September, 1956 addressed to General Managers, All Indian Railways. Sub: Recommendation of the Public Accounts Committee made in their Seventh Report (2nd Lok Sabha) regarding inclusion of penalty and liquidated damages clauses in their agreements entered into with the private firms.

The Public Accounts Committee in recommendation No.23 of their Seventh Report (2nd Lok Sabha) on the Appropriation Accounts (Civil) 1953-54 and 1954-55 etc. have observed as under :With a view to preventing recurrence of such cases involving advance payments to private firms the Committee would suggest that the agreement should invariably contain a penalty clause and payment of liquidated damages by the defaulting firm by way of interest on the money advanced to it. A copy of the relevant paragraphs of the report which gives briefly the background of this recommendation is also enclosed for your information. The Board desire that these observations of the Committee should be carefully noted and steps taken to ensure that the conditions laid down in them are fulfilled before making advance payments to private parties etc.

**************

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ANNEXURE 23
Copy of Railway Boards letter No.59-B(C)/PAC/11/15th Report/23 dated 29th June, 1959, from Director, Railway Board(Finance), New Delhi, addressed to General Managers, All Indian Railways. Sub: Ensuring effective attention to the interests of the Government in connection with renewal of execution of agreements involving payments by Railway Authorities to outside parties.

A case has come to notice of the Public Accounts Committee through an audit paragraph, in which payments to an outside party, which were being made at a certain rate specified in an original agreement, continued to be made at the rate even after the expiry of the currency of the agreement, pending the execution of a fresh agreement for a further period. This was obligatory under the contractual provision stipulating that the earlier agreement would operate even after its expiry, unless the prescribed notice of termination was issued by either party to the other. In the particular case, the outside party had submitted to the Railway Administration, before the expiry of the earlier agreement, the draft of a fresh agreement on terms which prima facie were somewhat more favourable to the Railway Administration than those contained in the earlier agreement. While the Railway Administrations continued to press for still more favourable terms, it was not appreciated that, in the meantime, payment at the less favourable terms applicable under the earlier agreement had to be made, as the mere submission of a fresh draft agreement by the outside party to the Railway did not constitute the requisite notice under law. The Railway Administration, without checking up the contractual provisions of the earlier agreement, acted in the belief that the new agreement when finalised after negotiations, would apply retrospectively from the date of expiry of the original agreement. The outside party eventually refuted this understanding; in the absence of requisite notice, such retrospective application could not be enforced, with the result that there was some avoidable additional expenditure over a certain period. 2. In view of the lapse in this case, the Railway Board desire that Railway Project and other Administrations should review all agreements involving payments to outside agencies with a view to see that whatever action is necessary either to renew the agreement in terms more favourable to the Railway Administration than those operating earlier or to terminate it, is initiated sufficiently in advance and completed effectively and speedily keeping in view of the date of expiry of the earlier agreement. 3. These instructions may be conveyed to all authorities subordinate to you. ************

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ANNEXURE 24
Copy of letter No.59-B(C)/PAC/11/15th Report/32 dated 27th May, 1959 from Shri C.T.Venugopal, Director(Finance), Railway Board, New Delhi, addressed to General Managers, All Indian Railways etc. Sub: Recommendation No.32 contained in Appendix II of the 15th Report of the Public Accounts Committee (Second Lok Sabha)

In a certain agreement entered into with a firm for making supplies to the Railways, a reference to Commercial price was used in a particular clause without fully verifying the precise financial implications thereof according to the exact circumstances then obtaining in respect of contemporaneous contracts for similar supplies to other Government departments. In the result an unintended benefit was conferred on the firm of somewhat largest payments over a period than would have been admissible under other Government contracts, but no recovery was possible as there was no excess payment with reference to the terms of the agreement. This formed a subject matter of a Para in the Railway Audit Report, 1955. The Public Accounts Committee, on reviewing the case recommended as follows :The Committee trust that steps will be taken to ensure in future that when substantial sums of money are involved, the terms of the agreement are always negotiated with legal guidance. The Railway Administrations are aware of the already existing provisions of Para 402(ii) of the Indian Railways Stores Code and also Para 2049 of the Indian Railway General Code, Volume I, which provide that, as far as possible, legal and financial advice should be taken in the drafting of contracts before they are finally entered into. The Railway Board, in drawing attention to the aforesaid rules, desire that legal guidance is taken as a rule in executing agreements more particularly when substantial sums of money are involved. This may kindly be brought to the notice of all your subordinate authorities concerned. **********

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ANNEXURE - 25
FA&CAOs L.No.AC/FX/1402/CE/BB dt.17-5-2000, Sub:Scrutiny of Briefing Note Ref : L.No.FX/Tender/0001 dtd.10-05-2000 Reference above cited letter it is clarified that for works tenders SO(A/Cs) signs the comparative statement after factual verification and the comments, if any, has to be forwarded to executive under a covering letter signed by the Accounts Officer. This issues with the approval of Dy.FA&CAO(F&B) Sd/S.V.Chary /FA&CAO

..

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ANNEXURE 26
GOVERNMENT OF INDIA ( BHARAT SARKAR) Ministry of Railways (Rail Mantralaya) (Railway Board) ------------No.90/CE-I/CT/1 New Delhi, the 23-10-98

Reg: Facilitating submission of tenders. ----------------------------------In some cases it has been observed that some anti-social elements obstruct the tenders in dropping the tenders in the tender box at nominated place. Enquiries have been made with various Railway and it has been ascertained that on Northeast Frontier Railway and in some cases even on Eastern Railway, under such circumstances a methodology has been adopted whereby tender boxes are kept at more than one place. In case a tender is to be dropped in the Division/Construction Division, the tender box is also kept at Headquarters in Open Line/Construction. The sealed tender boxes are then carried under escort at the location where tender opening is scheduled. This arrangement involves delay of one day in the tender opening and submission of tender. But this has not posed any problem on these Railways. Therefore, it is recommended that this practice may be adopted wherever such problems are being faced on your Railway. This has the approval of Board ( M.E). Sd/( V.K.Bahmani ) Executive Director, Civil Engg. (G) Railway Board Copy for information to:(1) The General Manager, all Indian Railways except N.E Railway. (2) AM (Vig.)/ Railway Board.

********

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ANNEXURE - 27
Copy of letter No.71/RS(G)/777 dated 01.08.1981. from Shivendra Kumar, Jt. Director, Railway Stores (IC), Railway Board, New Delhi, addressed to G.Ms, All Indian Railways and others. SUB: Non acceptance of late/delayed/post tender offers. 1. Reference Ministry of Railways letter No.59/77/RS(G) dated 04.05.60 wherein the General Managers were authorized to accept Late Tenders subject to certain conditions. These powers was also delegated to HODs vide Boards No F(X)IX/62-PW 4/3 dated 09.03.64 and No 71/RS(G)/777 dt 01.09.71. The matter has been reviewed and it has been decided that late tenders/ delayed tenders/post tender offers should be totally rejected.

2.

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ANNEXURE - 28
Copy of letter No.71/RS(G)/777 dated 19.04.84 addressed to General Managers, All Indian Railways etc. SUB: Non acceptance of late/ delayed/ post tender offers. 1. In terms of Ministry of Railways letter of even number dated 01.08.81, late /
delayed / post tender offers have to be totally rejected. 2. Instances have come to the notice of the Board where on a strict application of the above instructions, even late tenders submitted by Public Sector firms for highly specialised equipments have been rejected. The matter has, therefore, been reconsidered by the Board and it has been decided that where late tenders from established/ reliable suppliers and conferring a substantial financial advantage is to be considered, notwithstanding the general ban, it will be open to the railways to seek the Boards approval for the consideration of such tenders. Since, this should be a very exceptional situation, such cases should be recommended for consideration of the Board with the personal approval of the GM, duly concurred in by the FA & CAO. The Railways should not enter into any dialogue with the agency submitting a delayed tender without obtaining Boards prior clearance. These instructions apply uniformly to all tenders irrespective of the department floating tenders. This issues with the concurrence of the Finance Directorate of the Ministry of Railways. Please acknowledge receipt. Hindi version will follow. Sd/(Joginder Singh) Dy. Director, Railway Stores (G) Railway Board.

3.

4. 5. 6. 7. 8.

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ANNEXURE 29
Copy of Railway Boards letter No.83/WI/CT/17 dt.30.07.84 addressed to General Managers, All Indian Railways and others. SUB: Non acceptance of late/ delayed/ post tender offers. 1.Para 1251 of the Indian Railways Code for the Engineering Department (Revised Edition 1982) stipulates that for dealing with Delayed and Late tenders, separate instructions as issued by the Railway Board from time to time should be followed. 2.In the Boards letter No.71/RS(G)/777 dated 01.08.81 (copy enclosed), it was clarified that late tender/ delayed/ post tender offer are not to be considered and are to be totally rejected. These instructions apply equally to works tenders also. 3.Recently Board have reconsidered the matter and have further clarified in their letter No.71/RS(G)777 dt 19.04.84 ( copy enclosed) that notwithstanding the general ban, late tenders received from established/ reliable suppliers conferring a substantial financial advantage be considered by the Railway after obtaining Boards approval in each case. 4.Receipt of this letter may please be acknowledged.

Sd/(M.M.GOYAL) Addl. Director, Civil, Engg., Railway Board.

*********

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ANNEXURE 30
Model Check Sheet on Brief Note
Sub: Ref: 1) 2) 3) 4) 5) 6) 7) Accounts Check Note on Briefing Note for : Your Letter No. Validity of the Offer : Is Upto Completion Period (Quoted vis--vis Advertised) : Months EMD / SEM : Reference to Sanctioned Estimate (Date of Sanction to Detailed Estimate) : Details of sanctioned Estimate like Pink Book Item No. & FWP Item No. Date of Publication in the Newspaper: Dates of Publication of Corrigenda if any: N.A. Date of Opening of the Tender (to be calculated from the original date of publication at Sr.No.6 above including the closing date if any mentioned in the corrigendum) : No. of Days between Publication in the newspaper and Opening of the Tender (should not be less than 30 days or 21 days for which Finance concurrence for short tender notice is necessary) : Whether Tender has been invited before sanction to the Detailed Estimate: YES / NO If YES, whether sanction for invitation of tender before sanction to the Detailed Estimate has been obtained. (As per Rly.Boards letter No.94/CE.I/CT/4 dated 17.9.97 where tenders have to be invited in view of urgency before sanction to the detailed estimate, it should be done with the personal approval of DRM upto tender value of Rs.50 lakhs, PHOD upto Rs.1 crore and GM above Rs.1 crore, with prior concurrence of associate Finance. However, award of contract will only be after sanction to the detailed Estimate and specific allotment of funds). : Special Conditions if any : (a) (b) 11) Having financial implications (like contractor should provide mobile communication facility to the Engineer-in-Charge etc.): Not having financial implications :

8)

9)

10)

Discrepancies in offer :

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12) 13) 14) 15) 16)

Item invited for the First Time or Reinvited : LAR particulars : Items for which rates analysis required due to non-availability of LAR : Variations in Rates between the lowest & other Tenderers : Lowest Offer vis--vis Estimated Cost (% variation) : Excess : Savings:

Sanctioned Estimate (Payment to Contractor portion only) : 17) 18) Particulars of total value of works on hand of valid Tenderers vis--vis value of present offer (whether competent to execute the work or otherwise) : Lowest Offer : Total Cost : Rates : 19) Other Observations : Sd/SO[Finance(X)] 20) Remarks by Accounts Officer (Accounts Member) :

Sd/(Officer nominated as Finance Member in the TC)

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ANNEXURE 31
Copy of Office Memorandum No.F.No/9/7/75 B.O.III dated 20th July.1982 of Ministry Of Finance, Department of Economic Affairs (Banking Division) New Delhi. Sub : Bank Guarantee Scheme Model Bank Guarantee Form. The undersigned is directed to refer to para 3 of this Ministrys Office Memorandum No.9(7)-B.O.III/75 dated 2nd November, 1977 (copy enclosed) on the above subject, and to say that the question of amending the Model Form of the Bank Guarantee Bond has been considered in consultation with the Ministry of Law, Reserve Bank of India and Indian Banks Association. It has been decided to specifically provide in the Bank Guarantee Form that the liability or obligation of the banks under the guarantee bonds shall not be affected or suspended by any dispute(s) between the government and the contractor(s)/ suppliers and the payments under the guarantee bonds need not wait till the disputes are decided by the competent court or tribunal and that any payments made by the banks to the Government Departments etc. under the guarantee bond shall be deemed to have been rightfully and lawfully made. It has also been decided to provide in the guarantee bond that the guarantee bond will not be discharged due to supplier(s). The enclosed Model form of the Bank Guarantee has been revised accordingly, which has also been approved by Department of Expenditure and the Comptroller and Auditor General of India. The Central Government Departments, Railways as well as State Governments, Public Sector Undertakings and Autonomous bodies freely accept bank guarantees from all scheduled commercial banks, in lieu of security of deposits by contractor(s)/ supplier(s) for due fulfilment of the contracts for supply of stores or execution of any work. if introduction of any additional clause or alterations in the clause of the Model Form of the Guarantee are considered necessary owing to the peculiarities of certain contracts, it may be ensured that these additions/ alterations are not one-sided and are in agreement with the guaranteeing bank. While it is obligatory on the bank to honour the guarantee without delay and hesitation, wherever they are booked in accordance with the terms and conditions of the guarantee deed, unless there is a Court order restraining them in this regard, it will be appreciated that invoking of a guarantee on insufficient grounds will cause discontentment and avoidable disputes and litigation. It is, therefore, requested that it may be impressed on all concerned that the bank guarantee should be invoked only when there is a specific breach on the part of the contractor of the terms and conditions of the relevant agreement and the Bank Guarantee Bond, and that the decision to invoke the guarantee should be taken as far as possible by an officer higher in rank than the officer who accepted the guarantee. In this connection it may be stressed that all claims under the guarantee bond should be made and lodged with the bank within the period specified in the relevant guarantee bond. It will not be legally possible for the banks to admit a claim which is not made within the period specified in the guarantee bond or which it is not strictly in accordance with terms and conditions of the bond. It may also be clarified that a guarantee bond is issued by the bank at the request of the contractor(s)/ supplier(s) and it can be renewed or its period of validity extended only at the request of the contractor(s)/supplier(s) concerned. It is, therefore, not possible for

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the Banks to renew or extend the period of validity of a Bank Guarantee bond at the request of the beneficiary. Government Department/ Public Sector Undertakings etc. should therefore, be advised to take appropriate action to protect their interests well in advance of the date of the expiry of the Bank Guarantee Bond. As already suggested in this Departments Office Memorandum dated 2nd November, 1977, the Government Departments/ Public Sector Undertakings, etc. should refrain from asking the banks to give guarantees for indefinite periods or unduly long periods and return the expired guarantee within a reasonable period (viz. 3 months) after the fulfilment of the contracts or expiry of the guarantee period. As the guarantee given by the banks are their contingent liabilities, it may kindly be ensured that the guarantee bonds are returned to the banks concerned soon after the relevant contracts are fulfilled or/ on expiry of the guarantee periods and in any case within a period of three months of expiry. Sd/(N D Batra) Under Secretary to the Government of India. Revised Model Form of Bank Guarantee Bond GUARANTEE BOND 1 In consideration of the President Of India (hereinafter called the Government) having agreed to exempt _____________ (hereinafter called then said Contractor(s)) from the demand , under the terms and conditions of as Agreement dated ____________ made between _______________ and _______________ for ________________ (herein after called the said Agreement), or security deposit for the due fulfillment by the said Contractor(s) of the terms and conditions contained in the said Agreement, on production of Bank Guarantee for Rs. ___________ (Rupees ______________________________ only). We, ______________________(herein after referred to as The Bank). (Indicate the name of the Bank) at the request of __________(contractor(s)) do hereby undertake to pay to the Government an amount not exceeding Rs._______ against any loss or damage caused to or suffered or would be caused to or suffered by the Government by reason of any breach of the said Contractor(s) of any of the terms or conditions contained in the said Agreement.

2. We _________________________________do hereby undertake to pay the (indicate the name of the bank) amounts due and payable under this guarantee without any demur, merely on a demand from the Government stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the Government by reason of breach by the said contractor(s) of any of the terms or conditions contain in the said agreement or by reason of the contractor(s) failure to perform the said agreement .Any such demand made on the bank shall be conclusive as regards the

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amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs.____________. 3. We undertake to pay to the Government any money so demanded notwithstanding any dispute or disputes raised by the contractor(s)/Supplier(s) in any suit or proceeding before any court of tribunal relating thereto our liability under this present being absolute and unequivocal .The payment so made by us under this bond shall be a valid discharge of our liability for payment thereunder and the contractor(s)/supplier(s) shall have no claim against us for making such payment. 4. We_____________________ further agree that the guarantee herein contained shall (Indicate the name of bank) remain in full force and effect during the period that would be taken for the performance of the said agreement and that it shall continue to be enforceable till all the dues of the Government under or by virtue of the said agreement have been fully paid and its claim satisfied or discharged or till__________ office/Department Ministry of _______________ certifies that the terms and conditions of the said Agreement have been fully and properly carried out by the said contractor(s) and accordingly discharges this guarantee. Unless a demand or claim under this guarantee is made on us in writing on or before the ____________ we shall be discharged from all liability under this guarantee thereafter. 5. We, ____________________ further agree with the Government that the (indicate the name of the bank) government shall have the fullest liberty without our consent and without affecting in any manner our obligations hereunder to vary any of the terms and conditions of the said agreement or to extend time of performance by the said contractor(s) from time to time or to postpone for any time or from time to time any of the powers exercisable by the Government against the said contractor(s) and to forebear or enforce any of the terms and conditions relating to the said agreement and we shall not be relieved from our liability by reason of any such variation, or extension being granted to the said contractor(s) or by any forbearance, act or omission on the part of the Government or any indulgence by the Government to the said contractor(s) or by any such matter or thing whatsoever which under the law relating to sureties would, but for this provision, have effect of so relieving us. 6. This guarantee will not be discharged due to the change in the Constitution of the bank or the contractor(s)/ supplier(s). 7. We, _______________________ lastly undertake not to revoke this guarantee during (indicate the name of the bank) its currency except with the previous consent of the Government in writing. Dated the ___________ day of ____20 For ________________________ (indicate the name of the bank) **************

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ANNEXURE 32
Copy of Office Memorandum No.F.9(7)-B.O.III/75 dated 2ndNov. 77 from Shri Baldev Singh, Joint Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs, Banking Division, New Delhi addressed to all Ministries/ departments of Govt. of India, Bureau of Public Enterprises, Chief Secretaries of the State Govt. and Union Territories and Reserve Bank of India, IBOD, Bombay. Sub : Bank Guarantee Scheme complaints regarding.

1. The undersigned is directed to say that this Department had circulated a model

form for bank guarantee in the Government Departments, were advised that they may freely accept guarantee from all schedule commercial banks. Of late, a number of complaints have been received from the user Departments/Public sector undertakings that the banks do not honour the guarantee, when invoked; and from the banks that the user Departments/Public sector undertakings invoke the guarantees on insufficient grounds and in a manner detrimental to the interest of guarantor bank, ask for changes in the prescribed form of the guarantee which may jeopardise the interest of the banks vis--vis the principal debtor insists on guarantees being given for indefinite period of unduly long periods and do not return the expired guarantee bonds after fulfilment of the contract or after the expiry of the period of guarantees .

2. To safeguard the interest of the Government Departments/Public sector

undertakings and to ensure that there is no discontentment in regard to the working of the Bank Guarantee Scheme the Reserve Bank have issued instructions to all scheduled commercial banks to honour the guarantees without delay and hesitation, wherever they are invoked in accordance with the terms and conditions of the guarantee deed , unless there is a court order restraining them in this regard. Any decision not to honour the obligation under a guarantee should be taken after careful consideration, at a fairly senior level, and only in circumstances where the bank is satisfied that any such payment to the beneficiary would not be deemed rightful payment with in the meaning of section 145 of the contract act.

It is requested that all user Departments/Public sector undertakings may also issue instruction to the concerned officers under them that bank guarantee should be invoked only when there is a specific breach on the part of contractors and strictly in terms and condition of the relative agreement, and that the decision to invoke the guarantee should be taken, as far as possible, by an officer higher in rank than the officer who accepted the guarantee. The question whether any amendment is necessary to the form of the guarantee bond, to minimise the disputes of the types referred to above is being considered in consultation with the Ministry of Law. If any changes are found necessary in the revised model form, these will be circulated to all concerned in due course.

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3. Guarantees given by the banks are their contingent liabilities. Therefore, if

guarantees are asked for and given for indefinite periods (or are not returned to the bank after the relative contracts are fulfilled or on the expiry of the guarantee periods) they give an unreal picture of the contingent liabilities of the banks in their balance sheets. Secondly, the banks secure their own position by obtaining counter guarantees from acceptable sureties. If guarantees for unlimited period /long period are insisted upon, no acceptable sureties will be forthcoming and banks will be unable to give guarantees on behalf of their constituents. Thirdly, Banks are permitted to give unsecured guarantees only up to a particular limit. Guarantees for unduly long or indefinite period would exhaust this limit fairly quickly. Lastly as banks charge commission for giving guarantees for as long a period as they are in vogue, contractors will have to pay guarantee commission for indefinite/ long period, not warranted by the nature of the contract, and this will indirectly raise the cost of the Government contracts.

4. In view of this, it is suggested that the Government Department/Public sector

institutions should refrain from asking the banks to give guarantees for indefinite periods or unduly long periods and return the expired guarantees with in a reasonable period (say three months) after the fulfilment of the contracts or on expiry of the guarantee period.

As regards introduction of additional clause or changes in the clauses of the Model Form of the Guarantee while such changes may be found necessary to fit the Model Forms of Guarantee Bond to the peculiarities of certain contracts, it may be ensured that these changes are not one sided and are made in agreement with the guaranteeing bank.

*******

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ANNEXURE 33
Copy of Office Memorandum No G 191 G I,0/II dated 17.5.80 issued by GM C.Rly addressed to all HODs and DRMs. Ref : Guarantee Bonds offered by Banks to Railways. 1. A case had come to the notice of the Railway Board, in which due to failure of the Railway administration to renew the Banks Guarantee in time, the Guarantee lapsed and the Railway was put to loss for want of sufficient security to cover the liquidated damages and general losses due from the contractors. To prevent recurrence of such cases, the Board, vide their letter No F(X)I-69-BN/1 dated 31.12.1969, had directed that the procedure, in regard to receipt, disposal, custody and renewal etc. of the securities should be reviewed and streamlined so that a proper machinery exists in the executive as well as Accounts wings in this regard. In order to give effect to the Boards order, certain instructions were enumerated in this office letter of even number dated 25.9.1970. These instructions have now been reviewed and updated in the light of directives received from the Board from time to time. The revised instructions detailed below which supersedes the instructions issued earlier vide this office letter of 25.9.1970 should be followed with immediate effect. 2. The guarantee Bonds offered by Banks to Railways in connection with execution of contracts, etc. will be first received in the Executive office, where it will be seen that i. it is in the appropriate form prescribed by the Railway Board from time to time. ii. iii. It has been correctly drawn up and stamped before it is accepted as security. The Bond covers security for such period as might be necessary with reference to the relevant work and any subsequent maintenance/ period/ relevant supply order as may be provided for in the contract concerned so that the need for extension of a bond is not felt. The bonafide of every guarantee bond accepted should be ascertained by addressing the concerned banks by registered post (which can be followed by a telephone call) and written conformation from the bank obtained under the seal of the agent.

iv.

3. After carrying out checks as prescribed above, the guarantee bond should be sent to the contract signing authority for acceptance. where such an authority is higher than the GM, the GM may accept the Guarantee Bond. Particulars of the guarantee bond should be noted in a register as the following forms :

127

REGISTER OF GUARANTEE BONDS

_____________________________________________________________ Sr no Contract No./ Name of the Due date of Name of the Order No. and Contractor/ Completion of Banker Date Name of the work/completion furnishing the Firm of delivery as G.B per contract. 1 2 3 4 5 Amount for the Date of expiry Initial of the Remarks Which guarantee of guarantee Officer in charge Is offered bond 6 7 8 9 The Guarantee Bond along with the confirmation of the Bank mentioned in para 2(iv) above, should thereafter be forwarded to the Accounts Officers of the Internal Check Section concerned, indicating clearly that the checks mentioned in para 2 above have been carried out. 4. Action to be taken in Accounts office

REGISTER OF GUARANTEE BONDS

On receipt in the concerned internal check section of the accounts office, particulars of the guarantee bonds should be noted in a register as in the following form

_____________________________________________________________ Sr no Contract No./ Name of the Due date of Name of the Order No. and Contractor/ Completion of Banker Date Name of the work/completion furnishing the Firm of delivery as G.B Per contract. _______________________________________________________________________ 1 2 3 4 5 _______________________________________________________________________ Conformation amount date of month of initials Remarks Advice No & for which expiry of reviews of the Date from the guarantee guarantee (3 months A/cs Schedule Bank is offered bond prior to the officer In token of date of in charge Verification of (Col.8) of section Genuineness Of the Guarantee Bond _______________________________________________________________________ 6 7 8 9 10 11

A separate page of the register should be allotted for each month for entering in it the Bank Guarantee expiring in the particular month.

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5. In the Accounts Office, the Bank Guarantee Bond should thereafter be sent by the Internal Check Section to the Booking section for safe custody in a sealed cover. The details of the bond should be indicated on the cover. On receipt of the guarantee bond in the Books section, the details of the Guarantee Bond should be recorded in a register as per following proforma : REGISTER OF GUARANTEE BOND. 1. Date 2. Sr.No. 3. Name of the party 4. Name of the Bank 5. Guarantee Bond No. and date 6. Date of validity 7. Amount Rs. Ps. 8. AO(B)s initials 9. Accounts Unit 10. Reference to release letter No. and date 11. Date of return 12. Signature of the staff of the dealing section 13. AO(B)s initials. 6. Periodical Review of the register of Guarantee Bond by executive office 6.1 The register of guarantee bond referred to in para 3 above, should be reviewed every month in respect of guarantees likely to expire in the third subsequent month and the result of the review should be put up to the executive officer to ensure that a close track is kept of the currency of the guarantee bonds and that they are extended from time to time, wherever necessary, and for such period as might be necessary with reference to completion of the relevant contract and subsequent maintenance periods as may be provide for in the particular contract, or obtaining security deposit in one of the acceptable forms for a like amount from the contractor/vendor concerned. It should, however, be ensured that the banks are not asked to give guarantee for indefinite periods or for unduly long periods. As and when a guarantee bond is extended or security deposit in one of the acceptable forms is obtained form the contractor/vendor in lieu of guarantee, particulars thereof should be intimated to the accounts officer concerned. Likewise, where a guarantee bond is cancelled or validity period has expired and the bond is not required to be renewed, necessary advice should be given to the concerned accounts officer. The Executive Officers should every month, exchange with accounts officer a monthly statements of bank guarantees, so that the position is reconciled with the record maintained by the internal check section of the accounts department and variations, if any, brought to light are rectified. The results of the reconciliation should be put up to the Executive Officer and the Accounts officer concerned.

6.2

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7. In case a guarantee bond is required to be encashed, the Executive Officer concerned will advise the Associate Accounts Officer under clear acknowledgement sufficiently in advance (say 3 weeks) before expiry and it should then be the responsibility of the latter to take immediate action for its encashment by the Bank concerned. The decision to invoke the Bank Guarantee should be taken by and Executive Authority higher in rank than the officer who accepted the contract or the guarantee, where however, the aforesaid authority is higher than the GM, such a decision may be taken at GMs level. 8. Periodical review of the register of guarantee bonds and the consequent action by the internal check section of the accounts department. 8.1. The register of guarantee bonds should be reviewed by the internal check section every month in respect of guarantees likely to expire in the third subsequent month and the results of the review should be put up to the Sr DAO, DAO, Accounts office in charge. The executive officer concerned shall then be addressed to initiate action to get the bank guarantee extended where necessary as long as may be required with regard to the date of completion of the contract and subsequent maintenance period as may be provided for in the relevant contract, date of completion of delivery or obtain security deposit in one of the acceptable forms for a like amount from the contractor/vendor concerned. Irrespective of whether action has been taken for renewal/extension of the time of the existing guarantee bond, if Accounts Officer, considers that the action taken by the executive for renewal, extension is not likely to materialise before the actual date of expiry and that there may be some delay as a result of which the Accounts Officer may not be left with adequate time to advise the concerned bank to deposit the amount due under the guarantee, he will advise the bank concerned to deposit the amount due under the guarantee. The contingency of the Railway having inadequate security deposit after expiry of the Guarantee Bond will not therefore arise. The action, if any, taken by the Accounts Officer under this clause cannot be questioned because in the event of any delay in getting the bond extended or any dispute arising with the contractor, the Railway will lose the security in terms of the guarantee bond. In any case, if the bank guarantee is not renewed, bills should not be passed for payment and the position should be brought to the special notice of the Executive Officer concerned demi - officially. In the case of works contracts, the Accounts Officer concerned should ensure that, where bank guarantee bonds are nearing the expiry period, payments still due to the contractors are examined so that sufficient amounts are retained with the Railway in case the Bank guarantee bonds are not renewed in time.

8.2.

8.3.

8.4.

130
9 As and when a guarantee bond is cancelled or its date of validity has expired and the bond is not required to be renewed by the Executive officer, the same should be called back from the Books Section by the Internal Check Section on receipt of an advice from the Executive and returned to the Executive for being sent to the Bank concerned executing the same. It should be noted that the date expired guarantees are returned to the Bank concerned within a reasonable period ( say 3 months) after fulfilment of the contract or on expiry of the guarantee period. Sd/( H. A. N. Subha Rao) for General Manager

***********

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ANNEXURE 34
Copy of letter No.66/B-PAC/III/53(10) dated 7th December, 1966 from Director Accounts, Railway Board, New Delhi, addressed to General Managers, All Indian Railways., Sub : Delay in finalisation of tenders. 1. Recently a case of delay in finalisation of tenders for the construction of quarters of a Railway was reported in the Railway Audit Report and subsequently commented upon adversely by the Public Accounts Committee. The delay was explained by the Railway Administration as due to the following reasons : a) At the initial stage between June,1962 and September,1962 the Tender Committee was trying to negotiate with the lowest tenderer to reduce his rates as the tendered rates exceeded the then ceiling cost of Type I quarters. Subsequently in early October, 1962 the Tender Committee on reconsideration decided to recommend the lowest tenderer as in the meanwhile the building cost index had been revised upwards. But its Final acceptance by the Competent Authority was delayed until November, owing to various circumstances including the intervention of the emergency. Meanwhile the lowest tenderer had withdrawn his offer. b) Later when the lowest tenderer evinced renewed interest for executing the work and suggested additional payment the Railway took another three months to accept the new rates by which time the tenderer had again with drawn his offer. c) When ultimately the Railway, finding no alternative, resorted to fresh open tenders they had accepted an offer in October 1963, nearly sixteen months after the initial tender was opened, at a rate of higher than that initially received. Though there were certain extenuating factors to account for the abnormal delay, the Public Accounts Committee have observed that if the matter had been dealt with, with a greater sense of urgency, the delays could have been avoided or at least minimised and urged that while observing all procedural requirement, the processing and consideration of tenders should be streamlined in such a systematic manner (particularly in respect of timely revision of building cost indices and not holding up decisions till return of Officers from long tours or leave) that no undue delay occurs at any stage. The board while commenting the Committees observations would draw attention to their letter No.65-B(C)-PAC III/32 (29-30) dated 2nd June, 1965 and suggest that instructions contained therein should be strictly followed.

*******

132

ANNEXURE 35
Copy of Railway Boards letter No.60/777/RS(G) dated 13th February60, addressed to GMs ,All Indian Railway etc. Sub: Finalization of tenders within the period of validity of the offers. A case has come to the notice wherein a contract could not be concluded within the period for which the tenders offer was open for acceptance. In the result, the contract had to be finalised at a higher price, as the tenderer when extending the period of validity of his offer enhanced his quotation. It is very essential that contracts are placed with the period of validity of the offers. Extension of the validity period should be asked for from the Tenderers only when it is considered that for inescapable reasons the contract can not be finalised within the validity period and extension should be asked for well ahead of the expiry of the subsisting offers. In the case of tenders issued by the Board or for which the Boards approval is required but in respect of which the detailed examination is done by the Railway Administration, the Board should be addressed sufficiently in advance. In respect of tenders issued by the Railways, Projects or Production Units, the approval of the authority next above should be obtained by the officer in whose powers, the purchase lies. In respect of cases falling within the powers of the General Manager of the Railway, the personal approval of the Controller of Stores should be obtained. To ensure that every effort is made to place contract within the period of validity offer, the date of expiry of the offer should be indicated prominently at every stage in all notings on the purchase file. The last sentence of purchase proposal for instance should always is in (in capital) OFFERS EXPIRE ON ____________ and there should be on immediate priority slip where necessary indication OFFERS EXPIRE ON __________ when purchase files have to be sent to other branches such as Finance, Law Technical Departments etc. the date of expiry of the offers should also be brought out or stamped prominently at the end of nothings and letters, so that they are not lost sight of. In certain cases, it may happen that tenders when extending the validity of their offers at the request of the purchaser, quality the extension by price increase or other stipulation regarding delayed delivery or completion etc. Such qualified extensions should also be highlighted alongwith the date of expiry of the offers in all notings on the purchase file, so that action on the file is processed at every state by all concerned with due regard to the urgency called for.

***********

133

ANNEXURE - 36
Copy of Rly Bds letter No 6-B PAC/III/7216-17 DTD 29th / 31st July 1967. SUB: Recommendation No 16 and 17 of 72nd Report of the PAC needed for finalization of tenders within the validity period. Commenting on para 14 of Audit report (Railways) 1966 in their 72nd Report , the PAC have inter alia, observed (i) that it should be ensured that tenders are processed expeditiously and within the prescribed time limit to avoid the possibility of loss due to the expiry of the validity period of the tender and (ii) that clarifications should piecemeal from Tenderers. The Board desire that the above observations of the Committee should be carefully noted and would draw the Railways attention to the letters (1) 66/112/RS (G) dated 13th Feb.1960 (2) 61-B E/43 dated 19th March 1962, (3) 65-PAC/III/32/(29-30) dated 14.05.1965 and (4) 65-B/PAC/III(22-30) dated 02.06.1965 issued from time to time in which the need for avoiding delay in the finalization of tenders had been stressed. The Board particularly desire that as recommended by the PAC, even in cases where the period of validity quoted is less than the period notified by the Railway in the Tender documents, every effort should be made to persuade the tenderer to extend the validity period suitable and also decide on the cases within the limited validity period itself. Further, the scrutiny of the terms and conditions offered by all the tenders should be done in all details at the initial stage itself so that all the information necessary for the consideration of offers is called at one time and leaving no occasion for seeking further extensions in regard to any one of the offers at the later stage on this account.

*********

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ANNEXURE 37
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS RAILWAY BOARD No.98/V-I/CVC/1/9 The General Manager(Vig) All Indian Railways, Production Units, Sub: Improving Vigilance Administration Tenders Please refer to this office letter of even No. dated 29.12.98, forwarding CVCs letter No.8(1)(h)/98(I) dated 18.11.1998. CVC has brought out that a lot of queries have been raised regarding the above orders and have furnished certain clarifications vide letter No.98/ORD/1 dated 21.8.2000 which is enclosed for information and necessary action please. Sd/(R.R.Jaruhar) Executive Director Vigilance(E) Railway Board DA: As above. New Delhi, Dated 15.9.2000

135
No.98/ORD/1 Government of India Central Vigilance Commission ******** Satarkta Bhawan, Block A GPO Complex, INA, New Delhi- 110023 Dated 24th August, 2000 Sub: Improving Vigilance Administration Tenders . Please refer to the instructions issued by Commission vide its communication No.8(1)(h)98(I) dated 18.11.98, banning post tender negotiations except with L-1. 2. The Commission has been getting a number of queries on how to handle the matter if the quantity to be ordered is more than L-1 can supply or about placement of orders on Public Sector Undertakings. It is requested that such matters may be dealt with in accordance with the clarifications issued by the Commission vide its letter of even number dated 15.3.99 (copy enclosed). 3. Some of the organisations have sought clarification as to whether they can consider the L-2 offer or negotiate with that firm if L-1 withdraws his offer before the work order is placed, or before the supply or execution of work order takes place. In this regard, it is clarified that such a situation may be avoided if a two-bid system is followed (techno-commercial) so that proper assessment of the offers is made before the award of work order. Therefore, if L-1 party backs out, there should be retendering in a transparent and fair manner. The authority may in such a situation call for limited or short notice tender if so justified in the interest of work and take a decision on the basis of lowest tender. 4. The Commission has also been getting references for its advice on the procedures being followed in individual cases of tenders. The Commission would not involve itself in the decision making process of individual organisations. It, however, would expect the organisations to implement its instructions dated 18.11.98, in its spirit and to ensure that the decisions of administrative authorities are transparent. Yours faithfully, Sd/( K.L.Ahuja ) Officer on Special Duty

136
No.98/ORD/1 Government of India Central Vigilance Commission ****** Satarkta Bhawan, Block-A, GPO Complex, INA New Delhi 110023 Dated the 15th March, 1999. Sub: Improving Vigilance Administration Tenders Sir, Please referrer to CVCs instructions issued under letter No.8(1)(h)/98(I) dated 18/11/98 banning post tender negotiations except with L-1 i.e. the lowest tender. Some of the organisations have sought clarifications from the Commission as they are facing problems in implementing these instructions. The following clarifications are, therefore, issued with the approval of Central Vigilance Commissioner. (i) The Government of India has a purchase preference policy so far as the public sector enterprises are concerned. It is clarified that the ban on the post tender negotiation does not mean that the policy of the Government of India for purchase preference for public sector should not be implemented. Incidentally, some organisations have been using the public sector as a shield or a conduit for getting costly inputs or for improper purchases. This also should be avoided. Another issue that has been raised is that many a time the quantity to be ordered is much more than L1 alone can supply. In such cases the quantity order may be distributed in such a manner that the purchase is done in a fair, transparent and equitable manner. Yours faithfully, Sd/(P.S.Fatehullah) Director

(ii)

(iii)

137
GOVERNMENT OF INDIA/BHARAT SARKAR MINISTRY OF RAILWAY/RAIL MANTRALAYA (RAILWAY BOARD) Engineering Standard Order no.9 (Nine) Sub: Negotiations in Works Tender Ref: CVCs letter No.8(1)(h)98(I) dated 18.11.1998

In the light of instructions from CVC, Board desire that the guidelines issued by CVC be implemented for works contracts. These are contained in para 2.4 of the above referred letter, which are reproduced below : 2.4 Tenders :

Tenders are generally a major source of corruption. In order to avoid corruption, a more transparent and effective system must be introduced. As post tender negotiations are the main source of corruption, post tender negotiations are banned with immediate effect except in the case of negotiations with L-1 (i.e. Lowest Tenderer). 2. Board desire that the above instructions should be strictly adhered to with immediate effect. Receipt of this letter may please be acknowledged. Sd/(V.K.Agnihotri) Member Engineering Railway Board. No.99/CE-1/CT/1 Dated: 15.1.1999.

*********************

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ANNEXURE 38
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD) No.2000/CE.I/CT/1 Pt. Addressed to: As per list attached. Sub: Timely settlement of Tenders. .. An extract of directions received from Honble Minister of Railways in regard to timely settlement of tenders is reproduced below for necessary compliance : Despite repeated instructions on the file, I am observing that tender files are getting considerably delayed before it is put up to the competent authority, after bids are opened. I would like all the tender files to be put up to the appropriate authority for final decision within 3 months of the receipt of offers. All concerned may be advised to adhere to this time limit strictly. Sd/(MR) 18.6.2000 Please acknowledge receipt. Sd/(Madan Lal) for Exec.Director, Civil Engg.(G) Railway Board Copy to: 1) FA&CAO(C), All Indian Railways. 2) FA&CAO, All Indian Railways. *************** New Delhi, dated 24-8-2000.

139

ANNEXURE - 39
GOVERNMENT OF INDIA (BHARAT SARKAR) Ministry of Railways (Rail Mantralaya) (Railway Board) No.97/CE-I/CT/32 New Delhi, the 27-08-97 Sub: Procedure with regard to Single Tenders/ Awards of Contracts on Zonal Railways. Ref: Boards letter No.93/W2/PQR/SC/4/Pt. Dt.27-09-96. Further to Boards letter No.93/W2/PR/SC/4/Pt. Dated 27-09-96 wherein Board had sought to streamline the procedure for award of works on Single tender basis by the Zonal Railways, the following clarifications are issued:i) While the Circular of 27-09-96 stressed the need for restraint on calling of single tenders for routine works, withdrawal of the financial powers of GM (presently up to Rs.3 Crores) to call for single tenders in emergent situations was not the intention. ii) Emergent situation would covera) accidents, breaches involving dislocation to traffic. b) Works of specialized nature to be personally approved by the GM/CAO(C) with prior concurrence of the FA&CAO. This power is not to be delegated to any other authority. c) Any other situation where General Manager personally considers it inescapable to call for single tenders subject to the following provision:1) This cannot be delegated further even if the CAO(C) enjoys all powers of GMs as in the case of certain Railways. 2) Prior concurrence of FA&CAO is obtained. 3) No post-facto sanction/ratification will be allowed. 4) Single Tender should be resorted to only after exhausting the Open Tender/Special Limited Tender routes. 5) Tight targets and urgency cannot be accepted as a reason for calling Single tenders. In these cases, Limited Tenders/Special Limited Tenders should invariably be called for from the approved list and not from non-registered contractors. iii) In view of the commitment to the Rajya Sabha Committee on Govt. Assurances, the number of cases finalised on Single tender in each of the abovementioned three categories, (ii) (a), (b) and (c), should be reported to the Board through the GMs Monthly PCDO to CRB. This would ensure a close monitoring of the number of cases of single tender over the various Zonal Railways. iv) All other instructions contained in Boards letter No.93/W2/PQR/SC/4/Pt dated 27-09-96 should be strictly followed. v) This issues with the concurrence of the Finance Directorate of Boards office. Please acknowledge receipt. Sd/( V.K.Bahmani ) E.D, CE. (G) Railway Board. *****************

140

ANNEXURE - 40
Copy of Boards Letter No.66/W1/CT/22/A, dated 20th May,1967 addressed to GMs All Indian Railways and others. Sub : Earnest Money for Works and Stores Contracts. 1. It has been observed by the Railway Board that though the tender conditions for works contracts stipulates that tenders unaccompanied by earnest money will not be considered, there have been cases where such tenders have been considered by the tender committees at their discretion by giving another chance to the tenders to deposit the earnest money and thereafter tenders have been accepted by the competent authority. The Railway Board desires that hereafter tenders unaccompanied by the requisite earnest money should be summarily rejected. If this has not been made sufficiently clear in the existing tender papers, the same should be redrafted suitably to emphasise this aspect. 2. As regard stores contracts, however, the relaxations already allowed in Boards letter No. 56/148/1/RE dated, 17th. December, 1956 and No. 57/155/1/RS( G ) dated 12th. April, 1961 may be allowed to continue but the re-delegations of the powers to other purchase officers permitted should be withdrawn with immediate effect. These relaxations would apply equally to the sale of materials by tenders in terms of 2310-S and 2321-S. ****************

141

ANNEXURE - 41
Railway Boards letter No.66/WI/CT-22A of 20.5.67 Sub: Earnest Money for Works and Stores Contracts

It has been observed by the Railway Board that though the tender conditions for works contracts stipulate that tenders unaccompanied by earnest money will not be considered, there have been cases where such tenders have been considered by the tender committees at their discretion by giving another chance to the Tenderers to deposit the earnest money and thereafter tenders have been accepted by the competent authority. The Railway Board desire that hereafter tenders unaccompanied by the requisite earnest money should, under no circumstances, be entertained and should be summarily rejected. If this has not been made sufficiently clear in the existing tender papers, the same should be redrafted suitably to emphasise this aspect. 2. As regards Stores contracts, however, the relaxations already allowed in Boards letters No.56/143/1/RE dated 17.12.56 and No.57/155/1/RS(G) dated 13.4.61 may be allowed to continue but the redelegations of the powers to other purchase officers permitted in the concluding portion of para 3 of Boards letter of 13.4.61 should be withdrawn with immediate effect. These relaxations would apply equally to the sale of materials by tenders in terms of 2310-S, 2320-S and 2321-S. 3. Receipt of this letter may please be acknowledged.

Sd/Jt.Director, Civil Engg., Railway Board.

*********************

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ANNEXURE - 42
Copy of letter NO.50/145/3/S dated 1st/4th August, 1951 from Railway Liaison Officer, Ministry of Railways, Railway Board, New Delhi, addressed to General Manager, G.I.P. Railway, Bombay.

SUB: Suggestion that fresh tenders should be invited whenever only one
approved contractor tenders for a work. REF: Rly Bds circular L.No.40/145/I/S dtd 10th/12th January, 1950 and your letter No 5331/K 11- 112 dated 25th October 1950.

Railway Boards orders that when in response to the call for Limited tenders (as distinct from single and open tenders under the rules in force) only one tender is received, fresh tenders should be invited except in urgent cases of purchases as contained in their letter No 46/145/1/S dated 12th June, 1950 to General Manager, east Indian Railway, copy endorsed to you under the same number and date, are applicable to works contracts also. As regards the discretion allowed to certain officers to classify a work or purchase as Very Urgent, each case will have to be decided on its merits.

******************

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ANNEXURE - 43
Copy of Letter No.52/W/229 dtd.9th May 1952 from Shri. D.C.Baijal, Jt.Director (Civil Engineering),Railway Board, New Delhi, addressed to General Managers, All Indian Railways. Sub: Acceptance of Tenders In inviting attention to para 1106 of the Indian Railway code for Engineering Department ,the Railway Board desires that in the case of open tenders if the lowest tenderer is not on the approved list of the Railway but his tender is otherwise satisfactory, he should be asked to produce evidence of his capacity to carry out the work under consideration efficiently and of his sound financial position. If he is unable to produce the evidence and it is proposed to pass over his tender and consider the next higher one, the fact of the lowest tenderer having failed to produce the necessary evidence of his capacity etc. should invariably be placed on record before the next higher quotation is taken up for consideration. ***********

144

ANNEXURE - 44
Copy of Railway Boards letter No.68/WI/CT/15 dated 15th July 1968 from Jt.Director (Civil Engineering), addressed to General Managers, All Indian Railways and others. SUB : Tender Rejection of lowest offer. An instance has come to the notice of the Board where a Tender Committee rejected the lowest quotation on the recorded ground that the contractor did not submit either the credentials or the income tax clearance certificate. On further examination was found that the actual reason for the rejection of this tender was that the Tender Committee did not consider the lowest tender suitable for the award of this contract, and the contract was correctly awarded to the next higher tenderer, whom the Tender Committee considered suitable. The Board desire that suitable instructions should be issued so that in future, the Tender Committee should give reasons in greater details while rejecting the lowest tenderer, for proper appraisal of the case later, if necessary. ==============

145

ANNEXURE - 45
Copy of letter No.68-B(C)-PAC/IV/23/20 dated 25th October, 1968 from Director (Civil Engineering), Railway Board, New Delhi, addressed to General Managers, All Indian Railways, etc. Sub: Recommendation No.20 of the 23rd Report (Fourth Lok Sabha) of the Public Accounts Committee on para of the Audit Report (Railways) 1967 Western Railway Extra expenditure due to failure of a contractor. In a case reported in para 33 of the Audit Report (Railways) 1967, a Railway Administration awarded a contract for supply of ballast at a cost of Rs.5.46 lakhs to a contractor, who was not on the approved list, without formally verifying his credentials before accepting his offer. As a result of subsequent failure of the contractor, the Railway Administration had to make alternative arrangements, resulting in an extra expenditure of about Rs.1.86 lakhs. The Public Accounts Committee in their comments on this para have criticized the award of such a big contract to a contractor whose credentials were not properly verified. Para 1104 of the Indian Railway Code for the Engineering Department as well as Para 2 of the Standard regulations for tenders and contracts require that no work or supply should be entrusted for execution to a contractor whose capabilities and financial status have not been investigated before hand and found satisfactory. The instructions laid down are sufficiently elaborate and there should be no occasion for any lapse or failure to follow the prescribed procedure. The attention of all concerned should be drawn to these standing orders in order to ensure that such instances do not occur in future.

*****************

146

ANNEXURE - 46
Copy of Railway Boards letter No.60/WI/DMF/10 dated 4TH Nov.1960 from Jt.Director (Civil Engineering), addressed to General Managers, All Indian Railways. A case has come to the notice of the Board in which a Tender Committee recommended the acceptance of the lowest tender but when the authority competent to accept the same asked the committee to reconsider their recommendation in view of the fact that the lowest tenderer had a large number of works in hand and may not, therefore, be able to complete the work in time, the committee reversed their earlier recommendation and recommended the second lowest tender. It has been considered that the Tender Committee while making their earlier recommendation, did not take into account the tenderers capacity to execute the work, bearing in mind the load of work which he had already in hand. The Board desire that Tender Committees should examine, while making their recommendations, all relevant factors such as the existing work load on the lowest two of three Tenderers, their capacity to execute further work, and also whether the rates quoted are reasonable and workable. The above instructions may kindly be brought to the notice of all concerned.

******************

147

ANNEXURE 47
Copy of letter No.72/WI/CT/32 dated 14th May,1974 addressed to the General Managers, All Indian Railways, issued by the Ministry of Railways (Railway Board) New Delhi. Imposing restrictions on submission of separate tenders by two or more firms owned or controlled by one or same group of persons. --------------------------------------------The question of imposing restrictions on submission of separate tenders by contractors/firms in different names but owned and controlled by one or same group of persons had been under consideration of the Board in consultation with the Legal Advisor as in one case, two firms in different names but under the same management enjoyed undue advantage in the absence of any other valid tender. The Board is of the view that it may not be appreciated to impose restrictions on such firms having different names, but under the same management in the matter of submission of tender for the same work. However, if for any work, a group of persons/firms with different names, but controlled by same management were to the only valid Tenderers, they do get an undue advantage in the absence of any other Tenderers in the field. The extant instructions do envisage that credentials, partnership deeds, etc. of the Tenderers/firms should be examined by the Tender Committee prior to consideration of their tenders. Such an examination, if carried out, will no doubt, reveal whether the various Tenderers are different persons or though different in names, controlled/managed by the same group or individuals. In other words, the tender committee should ensure that real fair competition exists in response to the tender notice before they recommend acceptance of one of the tenders. In view of the above, it should be ensured that no undue advantage accrues to a group of persons/firms controlled by the same management, should they alone be in the field of competition in response to open tender. Receipt of this letter may please be acknowledged.

**********************

148

Copy of letter no.63-TGII/6 dated 13th September,1968 from DY.Director, CTCI, Rly Bd, New Delhi, addressed to General Managers, All Indian Railways.

ANNEXURE - 48

Sub: Scrutiny and evaluation of goods handling rates quoted by the

contractors at the time of tender. In continuation of Boards letter No.61-BN/27 dated 1st March ,1962 the Board desire to elucidate further the background against which the need for vigilance in scrutinizing the tender documents evaluating the reasonableness of the rates quoted by handling contractors against each of the items of work was emphasised. As Railways are aware it is not usual feature that abnormally high rates are quoted occasionally by tenders for specific items of handling work, where the quantities of work either nil or normal. Such items of abnormal rates probably get ignored in assessment because the quantum of work estimated on the specific items involved comparatively small or negligible quantities of work or because an overall review is taken of the contract as a whole on the basis of the total financial evaluation. It may be mentioned in this connection that in a recent case brought to the notice of the Public accounts committee through an audit paragraph it was noticed that the rates quoted by a handling contractor which were adjudged to be the lowest inter-alia included a rate of Rs.75/- per Meter gauge wagon for an item( where the quantum of work was omitted to be indicated in the schedule to the tender notice) as against the rate of Rs.6.75 and Rs.8 quoted by two other tenderer. The contractor who had knowledge of the work involved by virtue of his having held the contract in the past, evidently took advantage of this lacuna and quoted this abnormally higher rate. In the particular case ,the contract was awarded on the basis of overall financial evaluation on the estimated quantities in terms of Broad gauge wagons only, for which a lower rate of Rs.5 was quoted. Since the quantum of Meter gauge work had been included under Broad gauge the rate of Rs.75 per MG wagon did not separately figure in the evaluation of tenders. When the actual work handled turned out to be in terms of MG wagons, the contractor had naturally to be allowed the unintended benefit of the higher of the higher rate. It should be appreciated that in respect of tenders such as for transhipment work the quantum of estimated work is liable to vary due to factors such as change in pattern of traffic ,diversions due to operational reasons, accidents ,breaches etc. In such contingencies the abnormally high rate might become operative to a great extent than originally foreseen with the result that Railways run a considerable risk of unintended payments on the basis of such rates. It is ,therefore ,necessary that Railway administrations should scrutinise the rates of individual items at the time of examining the tenders and be satisfied on their reasonableness, irrespective of the quantum of traffic at the time. The Board therefore desire to reiterate the instructions already issued in their earlier letter dated 1st March ,1962 that in the matter of evaluation and consideration of tender documents, particular care should be taken to ensure that the rates quoted for individual items are realistic and are not abnormal and unreasonable in respect of any items of work. ********

149

ANNEXURE 49
Copy of Railway Boards letter No.72/WI/CT/42 dated 17/11/72 addressed to General Managers, All Indian Railways etc. Sub: Scrutiny and evaluation of tenders by the Tender committee. A case has come to the Boards notice in which the Tender committee constituted by the Zonal Railway considered and evaluated the tenders based on the overall value and recommended the lowest tenderer. This tenderer had actually quoted an abnormally high rate for one item of work but the tender committee failed to detect the same as they evaluated the tenders on the overall value. The high rate for the specific item of work in question subsequently came to the notice of the administration during execution of the work when the Railway administration asked the contractor not to execute this item of work the contractor sought for arbitration and the administration had to defend its stand before the arbitration. This situation would not have arisen ,had the Tender committee scrutinised the individual rates carefully at the time of recommending the tenders. With a view to avoid recurrence of cases of this nature, Board desire to reiterate that while evaluating tenders the tender documents should be carefully scrutinised particularly to ensure that the rates quoted for individual items are realistic and are not unreasonable in respect of any item of work. It is the responsibility of the Tender committee to scrutinise carefully the tendered rates. The attention of the Railway Administration is drawn once again to the need for checking units, rates and quantities of all the individual items in the tenders carefully ,while evaluating the tenders. In this connection attention is invited to Boards circular letters No.61-B--N/27 dated 01/03/62 and No.63-TG-II/6 dated 13/09/63 and recommendation no.21 of the Report of study team on elimination of lacunae and improvement in procedure construction and supplies circulated under Boards letter no.65-Vig 1/1/102 dated 19/03/71. It also come to the notice of the Board that in this particular case, no briefing note was submitted to the Tender committee indicating the last rates for similar works. In this connection attention is invited to Boards letter No.61/W5/LCT/41 dated 23/10/61 and 21/12/61 and recommendation No.19 of the Report of the study team on elimination of lacunae and improvement in procedure construction and supplies circulated under Boards letter No.65Vig.I/I/102 dated 19/03/71, wherein it has been enjoined that along with the tabular statement of tenders for the consideration of the tender committee, a short briefing note should furnished for their information indicating the last accepted rates for similar work in that area, analysis of financial standing, technical competence and capacity of contractor etc. The Board desire that these

150 instructions should be rigidly complied with. Receipt of this letter may please be acknowledged.
*********************

151

ANNEXURE 50
Copy of letter No.63/747/29/Track dated 5th July, 1968, from D.C.E., Railway Board, addressed to G.Ms, All Indian Railways. Sub: Incorrect assessment of time for transport, assembly and erection of girders.

A case has come to the notice of the Board where a Tender Committee at the time of dealing with tenders for imported bridge girders, did not assess correctly the time likely to be taken in the transport to the site, assembly and erection of the girders after their shipment from a foreign port. Allowing a very short time schedule for these, the Tender Committee accepted an earlier delivery date from a contractor who quoted a higher rate. On account of the longer time taken in transporting the bridge girders to the site and its erection, the advantage of the earlier delivery date could not be fully realised. This led the Audit to question the wisdom of the Tender Committee in accepting a higher rate when the original time schedule for opening of the bridge could not be adhered to in actual practice. The Board desire that in accepting conditions particularly in cases involving extra payment, a realistic and practical assessment of the full utilisation of the benefit should be worked out and adhered to.

*************

152

ANNEXURE 51
Copy of Railway Boards letter No.57-B(C)-3024 dated 28th May, 1959, from Director Finance, addressed to G.Ms, All Indian Railways. Sub: Handling contracts General and Policy matters Tender Committee.

A case has come to the Boards notice, through an audit para, in which a clause in the standard Form of Agreement for handling contracts applicable to a Goods Transhipment Shed was applied on a certain Railway to the case of transhipment Dump Shed without an adequate appreciation of the somewhat different circumstances prevailing in a Dump Shed. Also, the Tender Committee, who considered the various offers, failed to bring out in their recommendations that due allowance would be necessary for the implications of the particular clause in the context of the conditions likely to operate in a Dump Shed. The Board desires that Railway and Project Administrations should notify the Tender Committees, that in addition to their generally known responsibilities, they have a special responsibility to carefully scrutinise the rates tendered with reference to the scope of the various provisions in the Agreement governing the contracts. Such a scrutiny should be done with the object of ensuring that no unintended benefit accrues to the contractor on the basis of certain clauses in the Agreement, which may be appropriate for one kind of contract but may not be so for another category. This may kindly be brought to the notice of all concerned.

**********************

153

ANNEXURE 52
Copy of letter no.69/W1/CT/38 dated 18th September, 1969 form Joint Director (Civil Engg), Railway Board, New Delhi. Addressed to General Managers, All Indian Railways and others. Acceptance of Tenders unaccompanied by a Valid Income Tax Clearance Certificate. The question of acceptance of tenders unaccompanied by valid IncomeTax clearance certificate submitted by contractors borne on the approved list of contractors on Railways has been under consideration of the Board. It has now been decided by the Board that the Tender Committee may use their discretion for considering tenders without the valid Income tax clearance certificate, subject to the condition that in the event of such a tender being accepted, no payment shall be made to the contractor for the work carried out or the materials supplied under the contract, nor shall the contractor make a claim for any such payment until and unless a valid Income Tax Clearance certificate is produced. In such cases, it should be ensured that this aspect is clearly brought out in the letter of acceptance and the agreement. Sd/Joint Director (Civil Engg), Railway Board, New Delhi.

******************

154

ANNEXURE 53
Copy of Railway Boards letter No.61/WII/CT/24 dated 31st October, 1965 addressed to General Managers, All Indian Railways etc.

Sub: Negotiations with Tenderers Acceptance of original offers in cases where revised quotations are higher.
1. The Board have had under consideration certain aspects of cases when the rates submitted by the Tenderers are considered high or conditions stipulated by them are considered unacceptable and it is decided to negotiate with the tenders. In such cases, there is the possibility that a tenderer may resile from his offer on the plea that the negotiations amount to a counter offer in law, and, therefore, amount to a rejection of an original offer. It has been considered that under the law, the original offer does not ordinarily survive, the moment a counter-offer is made. 2. This matter has been examined in consultation with the Ministry of Law and they have advised that although the legal position stated above is correct, it is possible for a tenderer to revive his original offer after the negotiations fail and in that case the original tender becomes available again for acceptance. Such would be the case if a tenderer before commencement of negotiations intimates that his original offer would be open for acceptance if the negotiations fail. The Ministry of Law have therefore, suggested that when Tenderers are called for negotiations, they should be addressed as follows: The rates quoted in your tender are considered high. You are, therefore, requested to come for negotiations of rates on (date). (or) It is proposed to discuss with you certain conditions of your tender. You are, therefore, requested to come for negotiations only in case you are prepared to furnish before such date the declaration appended herewith. FORM OF DECLARATION I .. do declare that in the event of failure of the contemplated negotiations relating to Tender No opened on my original tender shall remain open for acceptance on its original terms and conditions. The kind of procedure and communication to the tenderer mentioned above, cannot, however, be included in the General Conditions of Contracts, as a positive action has to be taken in each individual case. 3. The Ministry of Law has further advised that it must be understood that if the period of validity of the original offer expires before the close of the negotiations, the original offer will not be available for acceptance. The period of validity of the original offer must, therefore, be got extended wherever necessary.

155
4. A copy of form in which the contractors might submit their offers after negotiations in use on one Railway is enclosed for adoption with suitable changes that may be considered necessary. From . Full address . To: The President of India, Through the Chief Engineer (Con) .. Railway. Sir, Tender for .. 1. On further discussion with your representative on in response to your Letter No.. dated .. I/ We am/are not prepared to reduced the rates already quoted I the original tender, which remain valid upto Or I/We reduce my/our rates as shown in the enclosed Schedule of items. 2. I/ We am/are aware that the instructions to Tenderers, special and General Conditions of Contract and appendices to the original tender remain valid and binding on me/us. 3. I/We may agree to undertake the work or complete the supply and complete in all respects by.. 4. I/We agree to abide by this tender on the revised rate quoted by me/us. It is open for acceptance form period of 60/120 days from date i.e. upto .. and in default of my/our doing so, I/We will forfeit the earnest money deposited with the Chief Cashier.. Railway under receipt No dated already attached with the original tender/ attached herewith. Eligibility as valid tender shall be deemed to be the consideration for the said forfeiture. Yours faithfully, Signature of Tenderer(s) Signature of Witness to the Date______ Signature of tenderer(s) 1. 2. *************

156

ANNEXURE 54
Copy of Railway Boards letter No.77/W1/CT/20 dated 29.4.77 addressed to All Indian Railways (General Managers), RDSO and MTPs Delhi, Calcutta, Bombay and Madras etc.
Sub: Ref: Award of Contracts conduct of negotiations for Boards letter No.67/W1/CT/32 dated 25.5.68 and No.73/W1/8/60(CT) dated 5.12.73.

1. A case has come to the notice of the Board where a Tender Committee considered the offers received in response to an open tender for removal of coal ashes as low and accordingly recommended negotiations. The course of action was approved by the accepting authority and, as a result of negotiations, better rates became available. The highest negotiated rate received was conditional and was not recommended by the Tender Committee. Instead, the Tender Committee recommended the second highest negotiated offer for acceptance. Before these recommendations were made, the party who had offered the second highest rate gave a letter raising his offer by Rs.5000/-. The Tender Committee in their minutes of meeting mentioned about this revised offer, but did not recommend it for acceptance, on the ground that it was not received either in response to the tender or at the time of negotiations. The tender approving authority accepted the recommendations of the Tender Committee and awarded the contract to the party at the negotiated rate. 2. It is true that the Tender Committee and the accepting authority should be guided by the offers received at the time of negotiations and the offer subsequently received should not vitiate the consideration of the tender. In this case, however, whether the subsequent increase by Rs.5000/- was taken into account or not, the party to whom the tender was being awarded should have remained the same. Even if the more advantageous revised offer received after negotiations was accepted, the consideration of the tender would not have been vitiated. There is also no directive of the Board for bidding such a course of action. 3. The Board, therefore, observe that in this case the fundamental requirements of safeguarding Railways financial interests have not been observed. This is being brought to the notice of the Railways for future guidance. 4. Please acknowledge receipt. ********************

157

ANNEXURE 55
Copy of Railway Boards letter No.78/W1/CT/47(Task Force)dated 03/03/79 addressed to General Managers ,All Indian Railways and others Sub : Report of the task force on Vigilance recommendation no 212. 1. As a result of discussion held in the Parliament and an assurance given by the Minister for Railways to review the implementation of Kripalani Committee Report, on 14.6.77 a task force was set up by the Railway Minister to make comprehensive study of the subject of corruption on the Railways in the current context covering additional facts of Railway working and operation which have come up due to developments in the intervening quarter century after the Kripalani Committee made deliberation on these issues. 2. The task force has submitted its report making certain recommendations. Recommendation No.212 which has been accepted by the board is reproduced below for strict compliance. Recommendation no. 212 : Formal guidelines to specify responsibility of staff of Drawing Office/ Accounts Office vis--vis members of Tender Committee be laid in respect of preparation and evaluation of comparative statement/ Briefing Notes for Tenders. Joint notes by Tender Committee to bring out specifically and deviation of the procedures, special conditions influencing the decision etc. may be prescribed so as to facilitate the approving authority to take it into consideration and become responsible for them while according approval. (Para XII.4.6 enclosed as Annexure A) 2.1 The Board while accepting this recommendation have desired that the Railway administration should issue necessary instructions in respect of the responsibility statement of preparation and checking of the comparative statement and briefing note, as such instructions have not been issued so far. The comparative statement should be prepared by the departmental office from where the tenders are invited and checked in the Accounts office. The departmental officers and the accounts officers who are associated with the opening of the tenders should check the comparative statement and sign it in token of having done so. It may be ensured that hereafter each and every page of the comparative statement is signed by the staff preparing it and also by the officers checking the same before it is put up to the tender committee. Regarding the brief note that level at which it would be prepared and checked is left to the Railways discretion. But the officials who prepare and check the briefing note should sign each page of the briefing note and their responsibilities in this respect should be clearly laid down.

158

The Tender Committee should go through the comparative statement, briefing note and the tender papers carefully in order to see that all special conditions quoted by the Tenderers, deviations from standard specifications and procedures etc. have been taken into account and their recommendations should bring out clearly all such aspects so as to facilitate the approving authority to take them into considerations while according his decision on the tender. The receipt of this letter may please be acknowledged. Annexure A Extracts of Para XII.4.6 of the Report of the Task Force on Vigilance. XII.6 Evaluation of Tenders: Though the system having a comparative statement/s briefing note from the Drawing Office/Works Accountant exists on all the Railways in some form or the other, the specific responsibility of the individuals (Head Estimators, Head Draftsmen, Works Accountants, Members of the Tender Committee, etc.) have not been clearly brought out in regard to its compilation/use. It has been noticed that these documents sometimes remain unsigned by any person and responsibility for these omissions are not clearly established in absence of which unscrupulous persons take advantage of the situation. It is considered wise that formal guidelines in this regard are issued by each railway so that the responsibility of the Members of the Tender Committee are clearly defined vis--vis the responsibilities of the staff of Drawing Office/Accounts Office etc. in preparation of these documents based on which necessary decisions are ultimately taken. It is also considered that the joint note put up by the Tender Committee should specifically bring out any deviations of the procedures, Special Conditions influencing the decision etc. so that the approving authority takes cognisance of the same and becomes responsible for them while according approval.

**************

159

ANNEXURE 56
Copy of C.E. Central Rlys Circular letter No. W.187.R.VII dated 31.10.1979 addressed to DRM(W)s and DS(W)s. Sub: Procedure for finalisation of Tenders. The Railway Board while accepting the recommendation no. 212 made by the Task Force set up by the Railway Minister to make comprehensive study on the subject of corruption in the Railways have desired that the Railway Administration should issue necessary instructions in respect of the responsibility for preparation and checking the comparative statements and briefing notes. In this connection, a copy of Railway Boards letter No.78/WI/CT/47 (Task Force) dated 3.3.79 is enclosed. The issue has been examined in consultation with the FA&CAO and the following procedure should be adopted henceforth: 1. Opening of Tenders : Tenders should be opened at the specified time, date and place by an Officer, nominated for this purpose, in the presence of an Accounts representative and the contractor and/or their representative who may choose to be present at the opening of tenders. The names of the Tenderers and the rates quoted by each Tenderer should be read out to the Tenderers or their representative who are present. The tenders should be serially numbered. The cover containing the tender and every page of the tender, on which the rates/and /or special conditions are quoted should be initialed with the date by both the Accounts and Executive representatives. The rates quoted by the Tenderers should be circled. If there are any corrections overwriting, omissions etc., these should be specifically noted and circled and initialed with date by both the representatives. The total number of offers and the names of the Tenderers, from whom the offers are received should be entered in the tender register and initialed by both the representatives. Both the Accounts and Executive representatives who witness opening of tenders shall individually be responsible for following the above procedure. 2. Briefing Note & Comparative statements: (a) Preparation and check: Briefing note on tenders and comparative statement of the various offers received should be prepared and checked in concerned section of the executive office and each page thereof should be signed by the staff and the officer preparing and checking them. The departmental officer, who associated with the opening of tenders should also check the comparative statement and sign each page of it in token of having done so. The comparative statement shall also be checked by the SO(A/Cs) wherever attached to the Executive Office and sign in token of having done so.

160

The comparative statement in addition to the rates quoted by the various Tenderers should also indicate the total cost of work covered by each tender, particulars of earnest money of each tenderer, period of validity of offers, financial implications of special conditions, relative position of each tenderer starting from lowest etc. etc. The evaluation of technical conditions should be personally examined by the technical officer concerned. Briefing note on tenders should give full details of the offers received, the previous accepted rates, remarks on the special conditions, if any quoted by the Tenderers, the credentials of the Tenderers, the estimated provision for the work etc.etc. Briefing note and the comparative statement, after being prepared and checked in the executive office should than be send invariably in duplicate to the associate accounts office. In the accounts office, the briefing note and the comparative statement shall be checked by the Section Officer(Accounts) with a view to ensure that the information given therein is factually and arithmetically correct. The Accounts Officer/ Section Officer(Accounts) who is associated with the opening of the tenders, shall also check the comparative statement and sign each page thereof in token of having done so. One copy of the comparative statement and briefing note duly checked and signed by the aforesaid officer shall be returned to the Executive Officer with comments, if any, under a covering letter signed by the Accounts Officer. (b) Specific Responsibility: The primary responsibility for correct preparation and verification of comparative statement and briefing note shall be on the staff and the officers who are associated in the preparation and checking of the statement and the briefing note in the Executive offices. The Section Officer(A/Cs) in the Executive office and the Section officer (A/Cs) in accounts office shall be responsible for factual verification and for arithmetic accuracy. In case, where technical conditions have been evaluated in the financial terms, the responsibility for such evaluation shall rest solely on the technical officer who signs the comparative statement and the briefing note. The staff of the accounts department shall not be responsible for technical evaluations, their responsibility being limited to checking the arithmetical accuracy of such evaluations, as furnished by he technical departments. The technical officers who examines the technical appreciation and prepares and signs the briefing note for the tender committee and briefs, Tender committee in person, whenever called upon to do so, shall also be responsible for briefing the Tender committee regarding the other aspects, such as rates, conditions, delivery etc. etc. to ensure that in such cases, an integrated view if taken by the briefing officer, about the relationship between the technical conditions, rates, delivery etc. etc.

161

Due to complexity of the Tenders now being received it is necessary to ensure that the technical briefing is done at sufficiently higher level. It is therefore, decided that the technical briefing of tenders for works should be done by an officer/subordinate at one step below the rank of the officers empowered to sit in the tender committee. However, in case of tenders costing Rs 30 Lakhs and above the technical briefing need to be done only by Junior Administrative Officer. 3. Tender committee proceedings Tender committee members should go through the comparative statement briefing note and the tender papers carefully in order to ensure that all the special conditions, quoted by the Tenderers, deviations from standard specifications, and procedures etc. have been taken into account. Their recommendations should bring out clearly all such aspects, including reasons for rejection of various offers, so as to facilitate the approving authority to take them into consideration, while according his decision on the tender. The members of the tender committee shall be individually and severally responsible for the contents of the proceedings/ recommendations made by them. The responsibility of the accounts Members shall, however be restricted only to the advice rendered by him in respect of financial matters. In respect of technical matters, such as specifications, unsuitability of the contractors due to lack of practical experience, acceptability or other wise of samples, etc. the entire responsibility shall be of the members of the Technical Department. 3.1 The proceedings of the Tender committee should be signed by all the members of Tender Committee on each and every page. 4. Acceptance of tender by the Accepting Authority Under the existing orders, it is open to the Accepting Authority either to accept or reject the recommendation of the Tender committee. Therefore, Accepting Authority shall also be responsible in the cases where he accepts the Tender Committees recommendations. In the cases, where he disagrees with the recommendations of Tender Committee, he alone shall be responsible for his decisions. Please acknowledge receipt. Sd/(P S Marathe) For General Manager (W) ******************

162

ANNEXURE 57
Copy of letter No.59-8-3129 dated26th/27th December 1960 from Shri C T Venugopal, Additional Member, Finance (B), Railway Board addressed to General Managers, All Indian Railways etc. Sub : Importance of dealing with Tenders correctly. 1. A case has come to the notice of Railway Board in which the officers of the Finance Branch, whose advice was sought in regard to the draft tender notice and tender conditions, couched their advice in far too general terms to be readily appreciated, with the result that the importance of the point sought to be made was lost sight of. The Tender Committee finalised the tender, on the basis of which the agreement was executed, ignoring in effect the advice of Finance. It appears that the Finance Branch did not also properly brief the Finance Officer concerned, before he went to attend the Tender Committee Meeting, or show hi, the point that was raised in the advice tendered by Finance. 2. Even though there may have been justification for not readily accepting the advice of Finance, on the ground that it was not readily intelligible, it was at least necessary for the officers of the Department concerned who received the letter from Finance, to clear up with the higher level Finance Officers what exactly the Finance advice sought to convey. An advice from Finance, which had been issued over signature of the Dy Financial Adviser, should have been given the fullest consideration and the matters should have been resolved in discussion with him, or, if necessary, even with the Financial Advisers and Chief Accounts Officer, sufficiently in advance of the Tender Committee Meeting, instead of proceeding without modifying the Tender Conditions. The lapse in the matter led to the contractor making a claim for payment which was not intended and which it proved difficult to result. The duty of the Officers comprising the Tender Committee in the matter of appreciating the scope of the Tender conditions, in relation to the rates offered, has already been stressed in Boards letter No. 57-B-3024 dated 28th May, 1959. It is also necessary for Railway Administration to ensure that any advice given by the Finance Branch in regard to draft tender notice and draft tender conditions is given the fullest consideration, so that clarification in all matters as necessary is obtained before the Tender Committee meets. The Finance Brach is also to ensure follow up action and check up position immediately on receipt of Tender Committees Proceedings or immediately on receipt of a copy of the agreement. Non adoption of Finance advice if noticed could then be taken up promptly and mattes remedied at the earlier opportunity, instead of acquainting in an agreement which may give an unintended advantage to the contractor.

*******************

163

ANNEXURE 58
Copy of Railway Boards letter No.74.AC.III/30/6 dated 11.3.77 addressed to General Managers. All Indian Railways and copy to the FA&CAO s All Indian Railways and others. Sub: Tender Committee Proceedings. 1. One of the Railways had sought Boards decision on the following points: 1) Since the decisions with regard to tenders involve financial consideration, is the accepting authority competent to decide the tender against the advice of the Finance Member without consulting the higher Finance office and : 2) Can such a decision involving financial commitments and payment be admitted in the internal check by the internal check authority? 2. The Board have considered the matter and have decided as under: (1) As the tender accepting authority has t take final decision on the Tender Committees recommendations after considering the viewpoints of all members of the committee including the Finance Member. The accepting authority should invariably record his reasons in writing for not accepting the recommendations of any Member. (2) If the Finance Member as and internal check authority feels that some gross financial impropriety is involved in the award of the work, he can report the matter to FA&CAO and seek his further instructions. 3. Kindly acknowledge receipt of this letter. (This dispose off FA&CAO, Central Railway (Constn)S letter No. AC/711/Cont(x)ii DATED 1.3.1974). sd/(J.K. Mathur) Addl. Director, Civil Engg., Railway Board. ******************

164

ANNEXURE - 59
Copy of Railway Boards letter No.93/RS(G)/645/1/PAC 165 DT 11.03.1993 SUB: Procedure for dealing with tenders by the Tender Committee. The independent Committee of Experts set up by Railway Board in February 1991, as recommended by the PAC (8th Lok Sabha), for investigating inconsistencies and irregularities committed in two cases of purchases in 1979 by Boards office have observed that while evaluating offers received against the tenders floated by Railway Board through a number of clarifications on technical and commercial conditions given by the firm were asked from the firm and in certain cases deviations as stipulated by the firm were accepted but one of the most important technical deviations from the specifications quoted by the form was lost sight of during the examination of the offer and also at the time of issuing advance acceptance of the offer. The said lapse on the part of the tender Committee has resulted in great inconvenience, as the firm was reluctant in accepting the stipulation mentioned in specifications which was incorporated in the formal order placed on the tenderer. In view of the above the said committee has recommended that evaluation of tender, preparation of briefing notes, technical notes etc, need to be done with greater care and attention. The committee has also recommended that the Tender Committee Members recommended should carefully scrutinise the offer of at least the bidder recommended for award of contract. It should further be ensured that utmost care is taken to examine all technical as well as commercial aspects especially technical deviations quoted by the tenderer. The procedure for dealing with the tenders by the tender committee has already been laid down vide Railway Boards letter No.87/RS(G)/777/3 DATED 06.11.87. Tender Committee has a vital role to play in deciding the action on tenders received for procurement of material and execution of works. In accordance with the extant procedure, after the tenders are opened, a detailed comparative statement and a briefing note (in the case of works tenders) are to be prepared by the Stores/Technical Department and vetted by the Accounts Department. The convenor of the tender committee (who has to be from the Department that called the tenders) has to fix date(s) in consultation with other members for holding meeting(s) for a joint and thorough discussion of the offers received, and framing recommendations for the accepting authority. The recommendations of the tender committee are to be put up direct to the accepting authority without further recommendations or comments from anyone. It has come to the notice of the Board that, in some cases, the above mentioned procedure is not being followed. The tender committee members do not meet to deliberate on the offers and to arrive at common recommendations. Instead, the minutes are framed by the convenor or some other member (or even by some officer or staff under them) without any meeting and mutual consultations. These are then sent to the other members of the tender Committee, who frequently record their views on the files, which are different from the drafted minutes.

165

Also in some cases, when the minutes drafted after the holding of the tender committee meeting are sent to other members for approval/ signatures, they, in turn, refer the entire case for scrutiny to their junior officers/ staff who given their own comments on the tender file or on a separate check note. Needless to add that such procedures adopted by the member of the tender committees are violative of the instructions of the Board and defeat the very purpose of formation of tender committee. This also leads, at times, to loss of tender files, manipulation therein, loss of confidentiality and excessive delay in dealing with the tender. The delay in some cases has led to the validity of the offers having expired and the Railways being compelled to purchase stores or execute works at much higher rates. 3. In view of the foregoing, Board desire that after opening of the tenders, their tabulation, preparation of detailed comparative statement and briefing note in case of works tender (which must be vetted by the Finance Branch). The convenor should take immediate steps to hold tender committee meetings in consultation with the other members. The tender committee members must hold meeting(s) to examine the various offers, deliberate upon them and arrive at their recommendations. The minutes should be drafted by the convenor at the earliest thereafter and sent to other members for the approval and signature. Under no circumstances any of the members of the tender committee should refer the tender case to any officers/staff under him or to anyone else for scrutiny and /or comments. The members of the tender committee are expected to have adequate knowledge and confidence to deal with the tenders on their own instead of referring it to others. Any significant changes in the minutes should be done jointly in consultation with other members. Noting on the tender file by the members of the tender committee as a substitute for a meetings and airing of views should be strictly avoided. Dates on which tender committee meetings are held should be displayed/prominently in the minutes of the tender committee,. All concerned must also ensure that the tender are dealt with expeditiously and within the time schedule laid down by the Railway. 4. Board desire that the above instructions should be followed strictly.

5. This issues with the concurrence of the Finance Directorate of the Railway Board. Please acknowledge receipt.

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166

ANNEXURE 60
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD)

XXIII. No. 94/CE-I/CT/37

New Delhi, dated 5.5.1995

Reg: Enhancement of original Tender Value. Investigations by Vigilance have revealed that after finalisation of the tenders, especially for zonal works, massive enhancement of contract value has been made to the existing contracts. In some cases, the value of Zonal contracts has been enhanced by 300% to 600%, which is not acceptable considering that as the Zonal contracts are entered into for a specific period of one year. It has also come to light that no convincing reasons were given for each enhancement at the time of making the proposal or forwarding the proposal by various officials or by Accepting Authority. To achieve financial discipline and control of expenditure, it has been decided that enhancement of contract value beyond 25% of the Original contract value should be resorted to scarcely. In cases where enhancement beyond 25% is unavoidable and has to be resorted to, reasons for doing so are to be recorded on file by officers making the proposal or officers forwarding the proposal with Finance concurrence and accepted by competent authority as specified in the Annexure-I. It has been decided that the procedure, as brought out in Annexure-I of this letter should be followed for introducing any new items or while approving variation of quantities. This should be incorporated in the Schedule of Powers issued by the Railways. This has the Concurrence of Finance directorate of the Ministry of Railways. Receipt of this letter may please be acknowledged. Sd/( Ved Prakash ) Executive Director, Civil Engg. (G) Railway Board

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Annexure I Introduction of any new scheduled/non-schedule items irrespective of the value shall be included in addendum with finance concurrence. However, if new item has been sanctioned with finance concurrence, addenda may be issued without finance concurrence. While executing the corrigenda or addenda it should also be seen that after inclusion of the variation, the revised face value of the agreement does not exceed the powers of the tender accepting authority which accepted the original tender otherwise the case should be put upto the next higher authority in case of contracts awarded by General Manger and Railway Board, CE(C) can approve the variations upto 25% of accepted tender value or Rs.25 Lakhs, whichever is less. While preparing the agreement/corrigenda/addenda incorporating the increased quantities the same should be accompanied by variation statement indicating the quantity/value in respect of different items of works as provided for in the Tender Documents and revised quantities/value as provided for in the contract agreement/corrigenda/addenda. The reason for variation should be indicated in detail so that the agreement/addenda/corrigenda may be verified and accepted in internal check. As per extant order, it is necessary to see that the variation does not vitiate acceptance of the tender. For this purpose, it will also be necessary for the executive units to prepare statement showing the comparative cost of the work with reference to the three lowest valid Tenderers, taking into account, the variated quantities as provided for in the contract agreement. Execution of addenda and corrigenda where quantities are increased by more than 25% of accepted tender cost. In case where it is anticipated that initial quantities are expected to vary substantially i.e. more than 25% of the overall accepted tender cost, the following action should immediately be initiated in terms of Para-1268-E. (i) it should be immediately examined whether it is practicable to bring into a new agency to carry out the extra quantity of work keeping in view the progress of the work on the original contract and the nature and layout of the work. If such a course is not practicable the reasons for the same may be recorded and approved by the competent authority and negotiations should be carried out with the existing contractor with a view to reduce the rates for the additional quantity of work. If it is found that there will be no serious practical difficulty in getting the additional quantity of work done by another agency, are of the following two alternatives, as found feasible may be adopted. i) Inviting the fresh tenders for the extra quantity,

(ii)

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ii) Negotiating the rates for the extra quantities not only with the existing contractors but also with all the valid Tenderers who had initially quoted for the work.

The proposals will have to be got vetted by finance in both the cases of above. Finance concurrence will however not be necessary if fresh tenders are invited for extra quantity. In the above case where total implications in quantities and variations due to introduction of new items in a contract exceeds 25% of the total value of the tender accepted cost, approval of the following authority should be obtained before the corrigenda/addenda is issued:(a) In case where work is proposed to be awarded to the existing contractor after negotiating with him: i) If original contract was approved by GM GM, provided the enhanced value of the or Lower authority contract lies within his competency. ii) In other cases i.e. if original contract Railway Board was approved by Rly.Board or enhanced value of the contract is not within GMs competency, (b) In case the work is proposed to be awarded to an agency after negotiating all original tender along with existing contractor or by inviting fresh tenders for extra quantity, necessary sanction will be accorded as per normal delegation prevailing on the Railway for the extra quantity only. (c) In case where decrease is involved upto 25% or above 25% of the accepted cost, i) The contracting authority can decrease the items upto 25% of individual item without Finance concurrence, ii) For decrease in items beyond 25% of individual item or 25% of contract agreement, the contracting authority can do so after obtaining No claim certificate form the contractor and with finance concurrence giving detailed reasons for such decrease in the quantities. It should be certified that the work proposed to be reduced will not be required in the same work.

iii) iv)

It should also be ensure that due to decreased quantities tender is not vitiated. In case of vitiation of the tender, sanction of the competent authority as per Single tender should be obtained. ***************

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ANNEXURE 61
Copy of FA&CAO/CRs D.O. letter No.AC/1516-193/I.Au/2000 dated 28.08.2000 to CE Central Railway Sub: Non-levy of penalty/levy of token penalty on account of delay in Completion of contracts on Solapur Division. ****

On the inspection of XYZ Division by Dy.CAO(G) it was seen that there is a practice of giving extensions to the contractors either without levy of any penalty, or if at all, by levy of only token penalty. Please find enclosed a list of 45 different track-related works wherein extensions have been granted, showing the quantum of penalty levied. As per SOPGEN Item 1.23, an extension can be granted by Executive without Accounts concurrence only (i) if there is no loss to the Administration and (ii) when the contract was not awarded on grounds of earlier completion period. And quantum of token penalty is governed by Para 1267-E which says that maximum penalty can be upto the amount stipulated in the contract and can be equal to the loss incurred by the Railways. Other than that the penalty also serves to act as a disincentive to contractor to go in for unnecessary extensions. However, in most of the 45 cases shown here, no penalty has been levied, implying that no loss/inconvenience to the administration has occurred. At the very least, the safety of the track would have been avoidably compromised during the period of extension. You would also appreciate that routinely giving extensions to the contractors without applying the prescribed penalty, creates a doubt as to whether the tender schedules are at all drawn with due deliberations. If contracts relating to track works are allowed to linger on without adequate controls, it may not only compromise the safety, of the tracks but can also attract Vigilance action. It may also be emphasized to the units that any delay in executing the works will inevitably mean loss to the administration. It is a different matter that quantification of the same in monetary terms is difficult. Non-levy of penalty tantamounts to admitting that there is no loss/inconvenience to the Railways which would be very difficult to substantiate if Vigilance or any other agency starts looking into the case. Therefore, I request you to kindly look into the matter immediately and direct your officers to give extensions under item 1.23 of SOPGEN with due circumspection and keeping the canons of financial propriety in mind. Encl: As above. **************

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ANNEXURE 62
Copy of Boards letter No.78/W1/CT/37 (Rev.Comm.) dated 19th Jan., 1979, addressed to GMs/All Indian Railways etc. Sub: Review Committee on arbitration Recommendation of *** In pursuance of Public Accounts Committees recommendation No.41(Para 7.37) of the 126th Report (Vth Lok Sabha), the Ministry of Railways (Railway Board) constituted the Review Committee under the chairmanship of Shri N.K.Mehra, exadditional Member, Works, Railway Board, with two other Members, in order to improve the existing procedure on Railways in regard to settlement of contractors claims so as to avoid litigation/arbitration. The Committees report, since received, contains certain recommendations. One of the recommendations which deals with termination of contract and accepted by the Board is reproduced below for compliance. Termination of Contract 4.81 It is seen that a large number of contracts have been terminated when the progress of the work was in an advanced stage. We were shown cases where the contracts have been terminated when the work was more than 90% complete. In fact these contracts are terminated not because of the incapacity of the contractor to do the work but because of certain disputes having arisen during the progress of the contract which ultimately led to stoppage of work. To avoid such cases we recommend that whenever it is proposed to terminate a contract which has sufficiently advanced or whenever a contract is running into trouble a departmental committee may be appointed to discuss the progress of the contract with the contractor with a view to ascertaining as to what his problems are and recommend measures to solve these problems to the extent possible even on a temporary basis pending arbitration. It may be possible to avoid termination of contract in some cases by this method. The receipt of this letter may please be acknowledged.

4.82

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ANNEXURE 63
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS RAILWAY BOARD No.99/CE-1/CT/28. The General Manager, Central Railway & Others. Sub: General Conditions of Contract Termination of contract under Clause 62 & procedure for revival.. One of the Railways had sought certain clarifications regarding the operation of Clause 62 of GCC for termination of contract and the revival. The clarifications are as under: i) REVIVAL OF THE CONTRACT WITHIN 48 HOURS New Delhi, Date: 24-5-2001.

In this context, it is clarified that the contract is alive till the Notice of termination is issued. As such, there is no need of its revival during this period. Notice may be withdrawn if the contractor is able to demonstrate his earnest intention to restart the work to the satisfaction of the competent authority ii) REVIVAL OF THE CONTRACT AFTER EXPIRY OF 48 HOURS AND ISSUE OF TERMINATION NOTICE

Once the formal notice of termination has been issued, revival of the contract, over if on the same terms and conditions, is possible only as a single tender and would require the observance of all relevant orders relating to such tenders. This issue with the approval of the approval of the Finance Directorate of this Ministry. Sd/(PRAMOD KUMAR) Executive Director, Civil Engg.(G) Railway Board
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ANNEXURE 64
No.W.187.R.A.Policy Dated: 18.8.1999

CEs Circular No.176

Sr.DENs(CO) MB BSL JHS NGP SUR & PA Sub: Ref: Operation of Non-Scheduled Items. Railway Boards letter No.87/W-I/CT/65 dated 13.1.1988 circulated vide this office letter No.W.187.R.A./II dated 16.3.1988.

Instruction were issued vide letters under reference above that the practice of calling itemwise rates to be quoted by the tenderer should be avoided as far as possible. It is however observed that large number of non-schedule items are being operated for various types of works. Absence of a suitable item in the Master Schedule is cited as the main reason for adopting non-schedule items. It is further noticed that proper care and attention is not being given to the operation of NS items in respect of description, specification, mode of measurement, rates etc. causing ambiguity and vagueness in NS items which, at times, may result in over payment to the contractors. With a view to safeguarding against the above inadequacies, it has been decided that introduction of NS items will henceforth be subject to the following : i) ii) NS item shall be included in the tender with the specific approval of Sr.DEN(CO)/Dy.CE(C) NS item shall be operated only when it is unavoidable and should satisfy the following criteria :a) No item with similar description is available in the Master Schedule which can serve the purpose b) The description of NS item is not prepared by combining more than one SSR item. c) The descriptions of NS items are not prepared by splitting the existing SSR item into more than one NS item. NOTE: Where it is expedient, the NS item can be formed by combining/splitting the existing SSR items with the specific approval of HQ. The description and the specifications of NS items should be complete and unambiguous. No component of NS item should be overlapping with the description of any of the existing SSR items included in the tender, since such overlapping may lead to double payment for that particular component of NS item.

iii)

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iv) v) vi) Special conditions specific to the NS items should be included in the tender agreement. Mode of measurement of NS items should be clearly spelt out. Proper rate analysis should be prepared for the NS items taking into account the prevailing market rates as well as the past accepted rates for identical NS items duly modified for geographical and other conditions which may influence the rates. Basic rates for NS item shall be prepared at par with Standard Schedule of Rates in terms of Boards letter cited under reference. For this purpose, the market rate or the analysis rate of the NS item shall be discounted in accordance with the percentage above/below accepted recently for SSR items of concerned chapter. For example, if the market rate or the analysed rate for a new NS item of RCC work (chapter II of SSR) works out to 3,000 M3 and if Rs.3,000 X 100 = 2,000 M3. 150 The basic rate thus worked out shall be vetted by Associate Finance. In all the new tenders, the tenderer should be advised to quote common percentage below/above for SSR items as well as for NS ITEMS. Such a common percentage of rate will facilitate quicker evaluation of tender and its finalisation. Besides the possibility of vitiation of tender as a result of variations in quantities of different items will also be eliminated.

vii)

viii)

These instructions should be followed with immediate effect. All concerned should be suitably apprised. Sd/(A.K.MEHROTRA) CHIEF ENGINEER Copy to: CAO(C), CAO(SI), FA&CAO CTE, CBE, CEG, CE(TP), CE(W), CE(TM), CE/WC Rly. DRM(W)CSTMs Office No.CSTM/W/2000/Circular/WR dt. 1.9.99. C/- Sr.DEN(S), Sr.DEN(NE), Sr.DEN(E), DEN(CTL) (HQ) (S/W) for n/action on All AEN on Mumbai Division for n/action. All OS/WR, SDO I to V for n/action. DRM(W)CSTM

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ANNEXURE 65
GOVERNMENT OF INDIA (BHARAT SARKAR) MINISTRY OF RAILWAYS (RAIL MANTRALAYA) (RAILWAY BOARD) No. 88/CE-I/CT/31 New Delhi, the 27.1.1996

Sub:- Loss on account of failure to observe the provisions for enforcement of risk action. Ref:- Boards letter No.88/CE-I/CT/31 dated 1-6-88. Instructions were issued by the Board Vide above referred letter for observing the provisions for enforcement of risk action. A case has come to the notice of the Board where a risk and cost tender was floated and awarded to other contractor. The tenders were called by accepting adopting open tender system and the tender notice was not sent to the original contractor at whose risk and cost the tenders were invited, as per legal advice obtained from the Legal Directorate of Railway Board, notice of risk tender irrespective of whether it was open or limited tender should have been served on the defaulting contractor so that it would have been in his knowledge that it was a tender at his risk and cost against the contract rescinded earlier. It is also required to be ascertained that there should not be any change in the scope of the work and the quantities of leftover work and the conditions for risk tender should be identical with that of original tender. Board desires that there should not be any recurrence of such due to procedural lapses as highlighted above. In such cases, legal opinion, if necessary, may be taken before deciding that risk contract. Please acknowledge receipt. Sd/( Ved Prakash ) Executive Director, Civil Engg. (G) Railway Board

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ANNEXURE 66
GOVERNMENT OF INDIA MINISTRY OF RAILWAYS (RAILWAY BOARD) No: 88/CE-I/CT/31.pt. New Delhi, dt.23.5.2001 Sub: Loss on account of failure to observe Provisions for enforcement of risk action. Ref: 1. Boards letter No.88/CE-I/CT/31 dt.1.6.88 2. Boards letter No.88/CE-I/CT/31 dt.29.1.96. *** Instructions have been issued to the Railways regarding risk and cost tenders and participation in the same by the defaulting contractor vide the letters referred above. Some of the Railways have represented that in case a contractor, whose contract was terminated, participates again in a risk and cost tender and his tender happens to be the lowest, award of tender in favour of such a contractor may not serve any purpose. The matter has been carefully considered by the Railway Board and it has been decided as under : The defaulting contractor has to be given an opportunity for participating in a risk and cost tender in order to enable him to mitigate his losses keeping in view the spirit of natural justice. It is, however, for the Tender Committee to consider all aspects of the case such as the contractors capacity, credentials, financial status and changes in the relevant circumstances which might have taken place in the intervening period of award/termination of the earlier contract and opening of risk and cost tender, which deciding the award of the contract. \In this connection, reference is also invited to the relevant provision of the Engineering code wherein it is specified that no work or supply should be entrusted for execution to a contractor whose capacity, credential and financial status have been investigated before hand and found satisfactory. This issues in consultation with the Finance Directorate of Railways. This dispenses of General Manager/South Eastern Railways DO letter No. A/7/W/44/pt..XVI/000269 dated 23.1.2001. Sd/(Parmod Kumar) Executive Director Civil Engineering(G) Railway Board *********

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ANNEXURE 67
Exerpts Of An analysis done by CVC on Railway contracts available on Web link http://cvc.nic.in/vscvc/railanal.pdf Analytical Study [Trends/Features Noted In Cases Relating to Railways] In terms of the sheer size of the Organization, the total work force on its pay rolls etc, the Indian Railway is unquestionably the largest Public Sector Enterprise in the Country. Naturally, therefore, Railways also accout for quite a large number of complaints, allegations and vigilance cases. In fact, as a single unit, the Railways continue to be the Organization/Sector which gives rise to the maximum no. of vigilance cases and, in that sense, the Railways, as a single entity, is the biggest client of the Commission. This, in fact, has been the fact always. [Although the Banking Sector as a whole may account for the largest number in terms of intake of vigilance cases fact is that each Bank is a separate/independent entity with its own individual vigilance set up, its own CVO etc]. 2. This study is based on a critical and intensive scrutiny of all the first stage advice cases (totalling about 340) handled by the Commission during the year 2000, including cases investigated by the CBI. Out of the said 341 cases, no individual names (of the accused/defaulting officials) figured in about 40 cases where the allegations were of general/sweeping nature. In the remaining cases (i.e. about 300), the number of officials (accused) involved was around 800. The action advised by the Commission against these officials is as under: Prosecution 19 Major pp 142 Minor pp 192 Administrative Action 243 Closure 207 3. The common allegations/irregularities observed in the cases relating to award of contracts for execution of works, for procurement of materials etc. were as follows: Award of contracts at exorbitant rates. Execution of substandard works. Acceptance of substandard supplies. Over payments i.e. payments made for works not executed. Failure to carry out quality checks. Misappropriation of materials by contractors and/or officials, in conspiracy with each other. Manipulations at the tender processing stage with a view to favour a particular contractor and/or to eliminate a more deserving/eligible one.

(i) (ii) (iii) (iv) (v) (vi) (vii)

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4. Irregularities & manipulations/manoeuvrings in the Award of contracts is the most commonplace allegation involving Engg. officials. Such allegations are targeted, naturally, against the Tender Committee Members and, at times, against the Tender Accepting Authorities (TAA). Railways have, broadly speaking, three systems of tenders. These are: i) the open tender system ii) the limited tender system and iii) the single tender system. In the open tender system, the tender notice is given due publicity through prescribed channels/media and anyone (any individual or firm) who is desirous of taking up the contract is eligible to bid for the work. Under the limited tender system, tender notices are issued only to select-firms/entities which are short-listed in advance on the basis of their credentials, expertise and specialization vis--vis the kind of work in question. In other words, such agencies are those who are supposed to be borne on the approved list being maintained by the Deptt. Single tender system, on the other hand, is taken recourse to only in emergencies and exceptional cases where the other tender-routes cannot be followed an account of exigencies of the given situation. 5. The procedures governing the open tender and limited tender system are, no doubt, well defined. At the same time, it is still possible to manipulate the system to benefit/favour a particular tenderer at the cost of a more deserving one and, thus, at the cost of the Deptt. itself. In fact, if the Tender Committee is bent upon patronizing a particular bidder, things can be twisted, manipulated and managed to project the said bidder as the most suitable one. The TAA is, many a time, left with no option but to endorse the TCs recommendations, more so when the subject matter (i.e. the kind of work/project in question) does not fall within his own discipline/specialization: and when the recommendations of the TC are unanimous. In fact, only in very rare instances a TAA may reject, reverse or modify the TC recommendations. 6. From a critical study of the cases involving allegations about irregularities in the processing & award of tenders/contracts, it has been observed that it is the TC, which turn out (predictably) to be the villain of the piece i.e. when the allegations are proved to be correct. By the very nature/scheme of things, a TC can resort to twistings, suppressions, exaggerations, manipulations and half-truths with the object of projecting a particular bidder as the most suitable and depicting a better-placed bidder as unsuitable or less suitable. The various modus operandi adopted by the TC in this regard are commonly as under as noted from the history of the cases under review: (a) Exaggerating the track record of the favourite bidder. (b) Suppressing and/or downplaying his past failures. (c) Exaggerating the past failures of his main rival. (d) Ignoring/suppressing the otherwise satisfactory credentials of the main rival. (e) Projecting, falsely, that the lower rates offered by the main rival are unworkable on the basis of the estimated cost which, in the first place, was exaggerated deliberately. (f) Projecting undue/artificial urgency and then by-passing the lower offer on the ground that the party already has some works on hand and that, therefore, it

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(g) may not to be trusted to complete the subject-work within the stipulated timeframe. [In reality, it has been observed, once the tender is awarded to the other party on these premises, the party is merrily granted extension after extension (of time) either with token penalties or with no penalties even]. (h) Certifying, falsely, that the quality of the product/material offered by the favourite contractor is okay (vis--vis the specifications) (i) Painting, deliberately, the quality of the product offered by the better-placed bidder (who has quoted lower rates) as unsatisfactory/unsuitable. (j) Exaggerating the capacity/resources of a favourite contractor and downplaying that of his rival (lower bidder). 7. Normally, a TC consists of three Members. The first of these who is designated as the Convenor Member is an officer from what could be called the user-Department. He is also expected to be an expert in the given subject. The 2nd Member is the representative of the Finance Deptt. and the 3rd Member is an officer drawn from any other discipline. 8. Cartel formation amongst the bidders is another feature which has been noted in many cases relating to award of contracts - whether it is for execution of works or supply/procurement of machineries and stores. Technically, one might say that the officers/engineers concerned cannot be blamed for the ring formation of the contractors. This might be true at times: but fact of the matter, it has been noted, is also that in a majority of cases this ring formation is done by contractors in active collusion with the concerned engineers/officers. Needless to say that such ring formations lead to elimination of competition and award of the works/procurement orders at exorbitant rates at the cost of the deptt. Of course, it is next to impossible to prove the unholy nexus between the officials and the contractors, which, therefore, has to be inferred from the totality of circumstances of the given case. 9. It has also been found that irregularities are resorted to, deliberately, in the disposal of costly items like scrap items, old wagons and the like. In such cases, the minimum price is fixed, very often, at unreasonably low rates. Instances have also been noted where the bidders join hands together and form cartels in connivance with the officials concerned, leading to disposal of the items at throw away prices. 10. The common irregularities noted in the processing & finalization of tender cases and contracts are as follows: High-pitching of estimates (i) It is imperative to mention, in the tender notice (called the NIT- i.e. Notice Inviting Tender) the estimated cost of the given work/project. And this is supposed to be arrived at by collecting all relevant data and information carefully and intelligently. Normally, this is the responsibility of the Convenor-Member (to be) of the TC. However, many a time the estimates turn out to be high-pitched. In most of the cases, this is done deliberately (for obvious reasons) by : (a) picking up comparable works selectively, (b) by picking up, for comparison, incomparable works, (c) by wilfully over-looking really comparable works i.e. works awarded at competitive rates in the immediate past within or adjoining the particular area,

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(d) by assuming unreasonable rates towards labour cost, transportation, local taxes and such other variables etc. In some cases, the high pitching of estimated cost could also be because of sheer apathy/callousness (i.e. not necessarily on account of motives) on the part of the official(s) entrusted with the job. At the same time, since such callousness and apathy eventually result in the award of the given work at unreasonably high rates, the concerned official(s) cannot be let off scot-free simply on the ground that there was no malafide behind his/their act of omission or commission. After all, when the act of omission/commission of a public servant, though bereft of malafides, cannot be condoned if it has resulted in monetary loss to the Organization. Doctored Briefing Notes & Comparative Statements (ii) Briefing Notes and Comparative Statements are prepared for the perusal, guidance and benefit of the TC Members (i.e. to facilitate the TCs job) by an officer of the userDeptt. who is normally a subordinate of the Convenor-Member (to be) of the TC. This is also an area, which is prone to manipulations, if the officer concerned (who prepares these) has his own axes to grind and/or is under pressure from the higher-ups. It has been observed, for example, that these documents are doctored and tailor-made with a view to projecting a particular party/contractor as the most suitable one by resorting to twistings, suppressions, exaggerations and half-truths: and for depicting a more deserving party as inferior or less suitable. Manoeuvrings in TC minutes (iii) It goes without saying that it is the TC which decides, practically speaking, the outcome of a tender, because as noted earlier, many a time the TAA is guided and carried away by the TCs recommendations right or wrong. And even amongst the TC members, it is the first Member (i.e. the Convenor-Member) whose role is most pivotal. If the TC Members have no hidden agenda, they may differ in their views/assessment and recommendations. This is NOT TO SAY that when the recommendations are unanimous it is an indication of any unholy nexus amongst the TC members & contractors. All the same, in majority of the cases the TCs recommendations turn out, invariably, to be unanimous. This unanimity may not always be on account of a genuine consensus amongst the Members. On the other hand, the same is attributable, many a time, to : (a) either a meeting of minds amongst the TC members or (b) sheer absence of application of mind, independently, by the Finance-Member and 3rd Member of the TC who have a tendency, very often, to sign blindly on the dotted lines as drawn by the Convenor-member. In fact, when irregularities/manoeuvrings are detected subsequently in the processing of the tenders, the common refrain of the 2nd and 3rd members (of the TC) is that their own accountability in the matter is nil since they have only endorsed the views of the Convenor Member who was the authority on the subject. Sometimes, the Deptt. also tend to support this view more so in the case of the 3rd member. The Commission had occasions to point out, in this regard, that this argument (which in effect amounts to saying that the 3rd Member is only a rubber stamp) is an unacceptable proposition even if his own culpability may not to be equated with that of the Convenor-Member and the Finance Member. In fact, if the so-called 3rd Members role is wholly peripheral, it will be totally redundant to associate him with the

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TC proceedings. Surely, the 3rd Member also is expected to apply his mind carefully, independently and dispassionately into the merits of the case and to bring own record his own considered views, regardless of the recommendations of the other two. If, on the other hand, the 3rd well say that there is simply no need for a 3rd member in a TC. Non-application of mind by Tender Accepting Authorities (TAA) (iv) As mentioned earlier, the recommendations of the TC members are almost always unanimous. Dissenting notes are, in fact, exceptions. As such, a TAA is almost often presented with a fait-accompli where he is induced to okay the TC proposals: more so when he is himself not an expert/authority on the work/product/project/equipments in question. Whenever irregularities are detected in the award of a tender, the common defence of a TAA is that he had only approved, in good faith, the unanimous recommendation of the TC. This is, in the Commissions view, an untenable argument. Even if the TC recommendations are unanimous, a TAA is certainly expected to apply his mind carefully and independently and take decisions prudently and in the best interest of the Deptt. In fact, if the TAAs job is merely to endorse, mechanically, whatever the TC has suggested, there is no need for a TAA. Even where the TAA may not be an expert in the given subject (which may pertain to another discipline), he can as well obtain, in his own way, opinion and views of other authorities on the subject with a view to satisfying himself about the fairness of the TCs recommendations. 11. These are, as mentioned already, only illustrative modus operandi adopted [of manoeuvrings resorted to by the TC which goes about its job with a pre-determined agenda] with a view to ensuring award of the tender to a less deserving bidder at the cost of a more deserving one. Fact of the matter, quite simply, is that the TC is in a very commanding position, many a time, to doctor everything the way it wants i.e. when it processes the tenders with a hidden agenda. 11.1 Instances have been noted in several cases where the TAA had also acted with malafides, i.e. with a view to favouring a particular bidder at the cost of a more deserving one, by reversing/modifying the TCs recommendations, by applying pressure overtly or covertly on the TC members to modify their proposals and so forth. 12. Local Purchases is another area, which has generated quite a few cases. An analysis of such cases has shown that rampant irregularities are resorted to, many a time, in local purchases. The most common type of irregularities noted in this area are as under: i) Generating artificial demand for materials to justify purchases. ii) Splitting up of demands/quantities with a view to bringing each case under the financial powers of the local purchase officer like the ACOS, DCOS etc. iii) Projecting artificial urgency to the purchase although no such urgency actually exists. iv) Obtaining supporting quotations from fictitious/non existent entities where the quoted rates are invariably higher vis--vis the rates of the pre-determined supplier. v) Effecting redundant purchases at exorbitant rates.

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13. In purchase/procurement cases, the quantum of items proposed to be procured is invariably to be specified in the NIT. True, at times it may not be possible to assess with accuracy the exact requirement: and in such cases the quantity is indicated as approximate. It has been observed in many cases that when the requirement is huge, the idea/intention is to split the quantity amongst several eligible bidders at the rate quoted by the L-1 bidder (by making counter-offers to the other bidders at the rate quoted by the L-1) provided, of course, the L-1 bidders rate is acceptable to them. While this is okay, this intention of the Deptt. (of splitting the quantity amongst all valid bidders) is many a time not indicated in the NIT. This leads to a situation where every bidder quotes his rates under the presumption that the entire order is meant to be given to the lowest valid tenderer and he quotes his rates accordingly. It is a matter of common knowledge that the rate quoted is, many a time, w.r.t. the quantity involved : i.e. the higher the quantity, the lower the rates and vice-versa. When a successful bidder is told, subsequently, that he will be given order for only a certain percentage (of the total quantity), disputes arise about the rates and sometimes he may even withdraw his offer. Needless to say that such difficulties/problems can easily be avoided if it is clearly mentioned in the NIT itself that the order is proposed to be split amongst all valid/eligible bidders and, accordingly, rates are solicited w.r.t. slabs of quantities.

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