CASE STUDY NO. 1
In the variation statement received for Civil Engg works, it was noted that
for some items like ceramic tiles and structural steel wide variations take
place. A scrutiny of the Standard Schedule of Rates 1990 of Central Railway
revealed that for the following items the basic rate provided in the schedule
itself is on the higher side.
(i) SOR ITEMS 07413(a to d)- (Printed self design tiles)
BASIC RATE- Rs.468.40/sq.metre
VALUE IF 100% OR ABOVE SOR IS APPLIED - Rs.936.80/sq.metre
(ii)SOR ITEMS 12101 & 12102 (Structural Steel)
BASIC RATE- Rs.13647/MT & Rs.27294/ MT
VALUE IF 100% OR ABOVE SOR IS APPLIED - Rs.13603.80/MT & Rs.27207.60/MT
If the contractor quotes a flat percentage rate for a Civil Engg work involving
the above items alongwith other SOR items, he gets unintended benefit in the
event of an excess variation taking place in these items as the basic rate
in the SOR itself is very high. This also leaves a scope to give undesirable
benefit to the contractors.
On one of the Divisions the Divisional Accounts Office raised the issue of
segregating the Steel items for the first time in October 1999 which was
unfortunately ignored by the executives.
The matter was again raised in May 2001 in which the executives concerned
were asked to bifurcate the estimates and tender schedules by providing all
SOR items(except Tiles/Steel) in one part of the schedule/estimate and the
SOR items of Tiles/Steel (referred to above) in two other separate parts.
This issue was bitterly resisted against by the executives under the shelter
of Railway Boards letter No.87/W1/CT/65 of 13/01/1998 as per which Board
desired that, 'the practice of calling item wise rates to be quoted by the
tenderer should be avoided as far as possible.' After much persuasion the
executives were made to agree to this office's contention about providing
the tender schedule in three parts.
This has yielded handsome results in terms of saving. While the SOR rates now
being quoted are still in the range of 90% to 140% above the Schedule rates,
the percentage being quoted for the items of Ceramic Tiles in some of the
recent tenders are as under :-
(i) SOR ITEMS 07413(a to d)- (Printed self design tiles)
BASIC RATE- Rs.468.40/sq.metre
RATES RECEIVED - 10% & 18% above in Oct. 2001 and 32% above in Dec. 2001
The savings per square meter comes to Rs.421.56 which is 45% lower than the
rates received earlier.
Similarly for Structural Steel items also the rates have come down as under :-
(ii)SOR ITEMS 12101 & 12102 (Structural Steel)
BASIC RATE- Rs.13647/MT & Rs.27294/ MT
RATES RECEIVED - 76% above (Nov-2001) & 49% above (Oct-2001)
The savings per tonne is Rs.3264/- which is 12% lower than the rates accepted earlier.
In fact now reduced rates in all tenders opened before are also being insisted upon.
the bifurcation of the schedule was implemented for all variation proposals in which these
items have varied in excess of 25%. It can be concluded with a fair degree of optimism that
there will fewer cases of excess variation in these two items at the work execution stage
since the rates of these items are no longer unduly beneficial.
Conclusions
(a) These instructions can be implemented on other Divisions also and
there may be many more such items in the existing SOR whose basic rate when
escalated at prevailing percentages (above) is much higher than the market
rates. There is therefore a pressing need for immediate revision of the
existing SOR which is now more than ten years old.
(b) It is no doubt desirable to have a single percentage rate for all
schedule items since it avoids vitiation, but for implementing these instructions,
the basic rates should be realistic and based on a rigorous, reliable and joint
market survey of Executive and Accounts.
(c) There is an urgent need to fix a basic rate for NS items also which
are frequently used and amalgamate them as SOR items.
The bifurcation of the tender Schedule has already led to substantial savings
which in monetary terms is more than Rs 5 Lakhs till date and this would be a
recurring gain to railways in all future tenders.
CASE STUDY NO. 2 - In a scrutiny of a brief note on one of the Divisions of Central Railway the following serious irregularities came to light.
1)The briefing note was for the work of nightlighting arrangement of 550 units
of generating sets for execution of Civil Engg track works in night block. The
tender was floated by charging the work to an estimate sanctioned for 720 units. CASE STUDY NO. 3 - Tender for supply, installation, testing and commissioning of digital
electronic exchanges at 3 different locations.
Since meticulous records of tenders floated against a particular estimate are being
maintained by associate finance, it was discovered that two tenders against the
same estimate for a quantity of 400 units each ( i.e.net excess of 80 units
over the estimated quantity) have already been floated in the past. In all
the 3 cases the photocopy of the same sanctioned estimate was placed in the
Tender File. The third tender was therefore floated in an irregular manner
as the estimated quantity had already been exceeded in the first two tenders
itself.
2)The rate/unit in the two tenders floated earlier was for Rs.1250/unit
whereas the lowest offer in the third tender was Rs.1350/unit. On detecting
this irregularity the third tender was got cancelled at the behest of advice
issued by Sr.DAO's office.
3)In view of this serious irregularity having come to light, all cases of
night lighting in the Sub-Division of the Engineer concerned were reviewed.
The review revealed that a proposal for change of location was being processed
simultaneously from the second tender of Rs.1250/unit to another section where
one more work @ Rs.750/unit was already in progress. This also revealed that
the estimated quantity in the second tender was exceeded inspite of the fact
that there was no requirement for the excess quantity in the section concerned
as otherwise the need for change of location to exhaust the tendered quantity
would not have arisen.
Sr.DAO's office therefore did not agree for the change in location as a lower
rate of Rs.750/unit was already available in the section to which change of
location was proposed. It was further stated by us that if at all the work
has to be executed at the changed location, it has to be at Rs.750/unit. The
executive concerned had no choice but to accept our contention. On a parallel
front, enquiries were also made from the Operating Dept for the exact number of
night blocks allowed by them during the said period on the said sub division.
Based on the facts provided by the section controller, the Executive was further
asked to reduce the quantity of the total units to be executed at the changed
location which was promptly agreed to by them. Thus a saving of more than
Rs.9 Lakhs was effected due to :-
a)the cancellation of the third tender of 550 units @ Rs.1350/unit.
b)ensuring that the rate for the change of location was @ Rs.750/unit
instead of the contracted rate of Rs.1250/unit and
c)reduction in the quantity executed in the changed location.
This case has enabled the division to reinforce the following safeguards :
i)To avoid multiple invitation of tenders being charged to the same estimate, copy of the original vetted/sanctioned estimate is being insisted upon with every brief note and an endorsement about the total quantity tendered for is made on the body of the same duly signed by the Section Officer.
ii)Creation of a comprehensive and exhaustive computerised database of accepted rates has enabled prompt availability of LOWEST Last Accepted Rates(LAR) in the Accounts Office for any particular work/item which is then highlighted in the accounts check sheet of the brief note thereby helping the
Tender Committee in deciding about negotiation/counter offer on the rates quoted by the lowest tenderer. This is very vital and has led to substantial savings since more often than not it is seen that the rates section of the executive dept. have not furnished the lowest LAR in the briefing note
but instead LARs which are slightly lower/higher than the rate quoted by L1 are indicated so as to make the L1's rate appear reasonable.
Similar case has also been detected in another section where variations have been proposed in contracts for Provision of signage boards at
higher rates when contracts at lower rates are already available in the same section. The variation case has not been resubmitted.
This experience is being shared for the benefit of other accounting units..
Central Railway invited open tender for the above work with an approximate
cost of Rs.2.5crores with a stipulation that in order to qualify for this work
tenderers quoting for this tender should have completed atleast 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 L 1 from M/s. A being
less than Rs.2 crores ( Rs.1.86crs.), 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.
CONCLUSIONS FROM THIS CASE