VIGILANCE DEPARTMENT OIL INDIA LIMITED€¦ · For instance, some of the advanced countries have...

OIL INDIA LIMITEDVIGILANCE DEPARTMENT

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Contents

From CVO’s Desk 03

Editorial 04

Corruption – A Social Evil 05

– B.N. Sahoo, S&E Department

Vigilance as a Management Function– Leveraging Technology 07

– Balwinder Singh, Addl. Secretary, CVC

New Initiatives taken by 09

Vigilance Department During 2010

Seminar on Tendering/Contracts and Purchase Procedures for 12

OIL executives at Guwahati by CTE,CVC

– Compiled by: Sri Debashis Thakur, Manager, (Vigilance)

OIL INDIA LIMITED VIGILANCE DEPARTMENT

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From CVO’s Desk

Wish you a Happy and Prosperous New Year 2011.

Couple of months back, the Vigilance Journal Annual Issue – “Intouch” was published which many of you might have gone through. The basic purpose of the journal is to come back to you for an interaction on various vigilance issues. Together, we have to work for a common goal to have clean organization in. By “interaction” I mean that I need feedback from you without which it will be diffi cult to progress.

You must be aware from the media, a plethora of corrupt practices surfacing every now and then in our country. You must also be aware that CVC has come out with a draft “National Anti-Corruption Strategy” which speaks about strategy to deal with petty corruptions, strategy to deal with grand corruptions, strategy to deal with political corruption, strategy to deal with administrative corruption, strategy to discourage private sector participation corruption, strategy to encourage citizens to resist corruption. The draft NACS, which is available on the CVC’s website also prescribes many things for the PSUs, for example, under the strategy to address administrative corruption, it speaks about simplifi cation of rules, regulations and procedures, improve service delivery, reduce human interface, transparency etc. These are measures to prevent any corruption to take place.

“Prevention is better than cure”. I don’t think there is anybody who doesn’t know this age old proverb passed on from generations. We are now giving much more stress on preventive vigilance rather than punitive vigilance. Many new initiatives are being taken up to institutionalize preventive vigilance like E-tendering / procurement, E-payment, Operating and Procedure manual for contracts and purchases, Implementation of Integrity pact, increasing transparency though publishing contracts and procurement data on the website, bill watch system, continuous interactive programs like “Keep-in-touch(KIT) and Catch-them-young (CTY).

I am sure you will be a part of our eff orts aimed at the organization’s well being and everybody’s participation is needed for this. This will be possible if we all have regular interactions. The Keep-in-touch program is directed towards that. This journal “Intouch” as a part of “Keep-in-touch” will come to you every month from January 2011 issue onwards, which will be a platform for exchange of information, ideas, and suggestions between us.

V.K.ThakralCVO


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Editorial

W e have been publishing our special journal “INTOUCH” once every year during the “Vigilance

Awareness Week“. This, we are sure has gone a long way in informing & educating every reader on various areas related to punitive / preventive/proactive vigilance, various CVC guidelines in areas like, contracts purchase etc on Company rules / regulations CDA rules etc. and on disciplinary procedure and many more. The eff ect of once a year eff ort for the vigilance function withers away from the minds of people. Therefore, to keep a regular touch with all company personnel we thought it prudent to come back to you every month. In January 2011, This will be part of our keep-in-touch” (KIT) program. As everybody is by now aware that we launched the KIT program meant for regular interaction with all sections and levels of executives through seminars, workshops, e-mails and journals.

As a pioneering eff ort in line with above, this January 2011 issue is being brought to you for your reading and interaction. We have tried to bring out the journal which include informative articles, CVC circulars, information from seminars, case studies to make it interesting. As it is a maiden eff ort from our side, there might be errors and omissions, scope for improvements. Our endeavor will be to continuously explore ways to improve and enrich

the journal and make it interesting with help of our readers.

We request all our readers to suggest, in what way we can make our “Intouch” better and better and more and more interesting and make it an indispensable vehicle to promote awareness on vigilance matters, company’s rules, regulations, guidelines on contracts, purchase, CDA rules etc. We also invite articles, essays, poems, case studies, jokes etc on vigilance matters, corporate governance and ethics etc. to enrich the “ Intouch”.

The Editorial Board profusely thanks Sri VK Thakral, CVO, whose continuous guidance has helped the various initiatives of vigilance function, to come to the present shape, which includes “ Intouch” .

Your readership will encourage us to grow. We thank you in anticipation.

We solicit your continuous contribution and feedback. Please send them at [email protected].

Sri Manas N. NathDr. AK Pattanaik


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Corruption – A Social Evil B.N. Sahoo

S&E Department

Introduction

Corruption is not a new thing in human society. It is an age-old menace which can cause tremendous societal harm. The recent call against corruption by the Prime Minister is defi nitely very much welcome. It is not only the Prime Minister who should be concerned with it, but the whole society should be wary about it so that we could create a clean and honest society.

Corruption- a common man’s understanding

Generally speaking, corruption exists when a person in power has the right to make decisions that concern others whose interests are at stake. The interested party will try to fi nd ways and means of getting what they want. One of the common ways is to off er the person in power certain favours so that the decision is made according to his requirement. This could happen only if the decision maker is willing to accept the favour off ered to him.

On the other hand, if the person in power is not willing to accept such favours, then the process stops there. Unfortunately, it is not as simple. The interested parties are not going to stop there either. If he thinks that the stake is too big to loose, he is willing to give more until it becomes too much to refuse. Once we become obliged, we tend to fi nd it diffi cult to refuse the next time around.

It is also true that the disease can start from the person in power. By making things diffi cult the interested party will start to entertain the idea that there is way of doing things. He will try to search for the best way of getting what he wants. It can also be started by those with vested interest. These individuals who have something they really want from those in authority will try their best to reach those

powers and suggest some form of kickbacks. Of course, it will not be so easy at fi rst, but eventually, with a lot of persuasion and perseverance, they get their way.

Of course, at the early stages, most of the corrupt practices are carried out very discretely so that the integrity of the person is never questioned.

One can appear to be super clean in public, but in actual fact, those involved are the only people who know what goes on behind those innocent faces.

The problem becomes gigantic when corruption is practiced openly. Those in power starts demanding what they want and those who give are very open about it too. Both parties have regarded it as a norm because everybody else is doing it anyway. Those who do not do it are considered as either stupid or a thorn in the group. These are the people who will have to make the choice to join them or leave the group.

Corruption in Various Forms

Corruption too has diff erent defi nitions. What is considered corruption for some may not be so for others. It depends entirely on the norm that is accepted by certain societies. For instance, some of the advanced countries have allowed huge bribes paid out by multinationals to high ranking offi cials in other countries as tax deductible which is regarded as an expense.

The implication cuts both ways. The countries where these multinationals reside will loose in the form of corporate tax. The countries whose high ranking offi cials accept the huge bribes will end up paying much more than the real price of the service or product. In the end, the people who gain are the high ranking offi cials, while both the countries involved, loose out.


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What is even worse is when decisions tend to be made based on the amount of bribe or commission they could get. It is no longer the price and quality of service or product that is being purchased is the important criteria. When this happens, the user of the service or product will become the victim.

Corruption is also said to be highly related to materialistic tendencies, which can be due to real needs caused by income or greed and desire to live well beyond one’s means. When this happens, it can easily lead to gross ineffi ciencies both fi nancially and productivity wise. Those involved will fi nd ways and means of applying pressure on others whom they can prey upon, instead of providing genuine service to such victims. It is quite common for those intending to receive bribes to delay approval of payment process so that they can expedite the service in return for some bribes.

Conclusion

Apart from the obvious damages that we cause to society through bribery and corruption, it has a divine angle too from religion point of view.

Every religious book, be it Geeta or Koran or any other, all tell us to shun corruption in any form. It states that every action we do on earth during our life has its ramifi cation after death.

Therefore, for achieving a peaceful life during one’s lifespan or even after death, it is needed that we prevent corruption and save our society.


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Vigilance as a Management Function–

Leveraging TechnologyBalwinder Singh,

Addl. Secretary, CVC

V igilance is not a stand-alone activity. It has to be seen as part of the overall risk management strategy of an

organization wherein the structures, systems and processes are built in such a manner so as to prevent leakages which adversely aff ect productivity and profi tability. A number of organizations both in public and private sector are re-engineering their processes by leveraging information technology. It will be in the organizational interest that when they are reorganizing business processes they should identify the likely risks like fraud, corruption, other malpractices and build in the required risk management tools in the new processes. Recently a write-up has appeared in the Economic Times under the heading “Fuel for e-commerce at HPCL”. This article explains how HPCL has networked all its petrol pumps in and around Mumbai for the purposes of inventory control and supply chain management. The same process also indirectly helps in curbing adulteration and under measurement. These malpractices are in turn connected with corruption. The system automatically detects any tampering with the fuel dispensers. It enables the company to monitor every outlet. Similarly providing global positioning system on the tankers for transporting fuel, the management can detect diversion of tankers to dubious destinations. This technology while providing solution for effi cient supply chain management also helps in risk management thus strengthening the internal vigilance. There is need to integrate vigilance activity as a part of overall risk management strategy which in turn has to be integrated in the main stream operations of organizations.

The Central Vigilance Commission has been wrestling with the idea of identifying areas where generic solutions to the problems of vigilance administration can be applied across wide spectrum of government organizations. A number

of areas have been identifi ed where use of information technology can bring effi ciency, economy as well as transparency thus curbing corruption. Some of these ideas are as follows:-

E-Procurement

It has been the experience of a large number of organizations worldwide both in public and private sectors that e-procurement can bring in economy and effi ciency in the procurement of goods, works and services. Apart from these benefi ts, the process also brings in greater transparency, thus reducing opportunities for corruption. Some of the State Governments like Andhra Pradesh, Karnataka as well as some Public Sector Undertakings like SAIL are already making use of e-procurement systems. The Central Vigilance Commission has issued a directive that all Govt. organizations over which the Commission has jurisdiction should publish their tenders and complete bid documents along with the application forms on the website. This is the fi rst step towards e-procurement and would help in curbing mal-practices prevailing in various Govt. organizations where competition is sought to be restricted.

E-Payment

Another directive of the Central Vigilance Commission regarding levarging technology pertains to introducing e-payment. Here again, the intention is to bring economy and effi ciency, while at the same time, reducing corruption. The banking industry in the last one decade has made rapid technological advances in India. The directive of the Central Vigilance Commission for introducing e-payment is to leverage these technological advances in banking sector for the benefi t of rest of the governmental set up.


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This system will help in signifi cantly reducing transaction costs involved in making payments by way of cheques and sending the payment through couriers. It will also curb corruption which accompanies handing over cheques to contractors, suppliers and others like persons receiving refunds from income tax and other departments.

Apart from the above mentioned two specifi c directives which the Central Vigilance Commission has already issued there are very many other areas where technology can be leveraged simultaneously for effi ciency, economy and corruption control. The key idea being that risk management tools are made integral part of the main business processes. For example, there are frequent cases of frauds in availing various employee benefi ts like medical expenses, LTC, TA/DA etc. The accounting softwares can be built in such a manner that the computer system generates ‘exception report’ and gives alerts wherever there are signifi cant deviations from certain benchmarks and norms. Similarly, the same accounting software system can make inter unit/inter location comparisons of expenditure on these items. Similarly, softwares can be developed with regard to procurement with in built features for making inter unit/inter offi ce comparisons of rates and consumption patterns.

Extensive use of website can be made both as a tool for communication with the stake holders as well as for curbing corruption. Right to information and transparency

are the biggest tools for fi ghting corruption and website as a tool for such communication can have very extensive application across the entire spectrum of Govt. activity. Contractors and suppliers can know where their bills are held up, applicants for passport can know where their passport application is held up or whether police is taking abnormally long time in issuing NOC, benefi ciaries of public distribution system can know whether wheat, rice and sugar is being diverted by the ration shop owner. Municipal corporations and other civic agencies can get feedback from public whether repairs to roads or drainage pipes is actually being carried out or only fake bills are being prepared without actually undertaking the works. Some Govt. organizations have already taken initiatives in this direction but the complete potential of website/portal as a tool for fi ghting corruption is yet to be made.

In addition to generic issues pointed out above, there can be a large number of organisation specifi c solutions where risk management tools can be integrated in the business processes. Customs & Central Excise, Income Tax, Employee Provident Fund Organisation and certain other organizations are learnt to have already undertaken such exercises in their computerization projects and business process re-engineering eff orts. The aim is to gradually integrate preventive vigilance in the business processes and reduce our dependence on a complaint driven vigilance administration which is the present scenario.


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New Initiatives taken by

Vigilance Department During 2010Addl. Secretary, CVC

Continuous Awareness Program

1.0 We have seen from our past experience through diff erent cases / interactive sessions that, knowledge / awareness of our executives regarding company’s various policies and procedures specifi cally purchase and contract procedures & policies, delegation of powers, CDA rules is inadequate. This ignorance leads to committing avoidable mistakes and it becomes diffi cult to identify them as bona-fi de or mala-fi de.

2.0 Secondly the Executive Trainees and those executives who have been just confi rmed as executives within last one year or so may also not be thoroughly aware of company rules regulations, policies and practices and are liable to commit mistakes while carrying out their day to day work. They are in the formative years and need to be nurtured to grow as responsible and eff ective executives of the company.

3.0 Therefore, to overcome such inadequacy we took initiative to organize training / awareness programs for all Executives and Executive Trainees in the areas of Purchase Procedures and Policies, Contract Policies and Procedures, Delegation of Powers, CDA rules. We proposed as follows:

a. Awareness Program for Executives,

Keep – In – Touch (KIT)

i) Identify experts from concerned departments like Contracts, Purchase etc, who will prepare and deliver modules for the training / awareness programs for Executives and Executive Trainees

ii) Number of participants in each batch should not exceed 40.

iii) All executives need to be trained. First preference to be given to those who are already dealing or likely to deal in near future with Purchase and Contracts.

iv) Duration of each program will be for 1 day.

v) Two or three executives from each department m a y b e r e l e a s e d fo r e a c h program till all executives of their department are trained.

vi) One representative of vigilance department will be present in each program to support the expert / faculty with some case studies / CVC guidelines.

Two programs have been already conducted on 26.11.10 and 03.12.10 by our functional experts from Materials, Contracts and HR functions. This will be a continuous process till all executives are covered.

Under the KIT program our eff ort shall be to keep in continuous touch with all through weekly e-mails, monthly journal “Intouch” regular updating of our site on Oilweb, interactive meetings, Programs like Vigilance Awareness Week etc. One can get in touch with us through the on-line complain booking at our web site. We shall continuously dis-seminate information through special program with offi cials from CVC and training programs through external faculties.


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b. Awareness Program For Executive

Trainees, Catch – Them – Young (CTY):

i) ETs will normally be trained along with other executives in diff erent batches through nomination from their respective departments.

ii) However, the Executive Trainees Development Program (ETDP) module should also include a one-day program in the same line as above, which should also include CDA rules and DOP.

iii) ETs should spend half day in the vigilance department during the induction visit to various departments on joining the company.

iv) Apart from the above, interactive sessions with ETs on the above areas will be organized on regular basis where CVO and / or senior offi cials from Vigilance department will be present.

The fi rst initiative will start with the ensuing ETDP Program to be held shortly.

Seminar for Senior Executives on contracts and Purchase Procedures by CTE, CVC

A Seminar was hosted on 04.10.10 by OIL INDIA LIMITED through the initiative of CVO for OIL & NRL executives at Hotel Nakshatra, Guwahati on “Tendering/Contract Procedures and Other Vigilance Related Matters” which was conducted by Sri V. Ramachandran, Chief Technical Examiner, CVC. Sri V.K. Thakral, CVO, OIL, Sri N.K.Bharali, Director(HR & BD), OIL and Sri Bhakt, Director(Finance), NRL also addressed in the Seminar. Amongst the participants, various senior executives of OIL and NRL like GM(E), GM(S), GM(Finance), GM(PLS) etc. of OIL were present in the seminar.

At the beginning, CTE Sri V. Ramachandran delivered a presentation on Tendering/Contract procedures. He emphasized on various points which are to be kept in mind while processing for procurement of public goods. He mentioned that purchaser must have to take utmost care

in following the guidelines issued by the organization and Central Vigilance Commission during procurement. He also very much emphasized on the documentation/recording of all the reasons of the decisions taken in deviation in respect to prescribed contracts and procurement procedure / policy.

Leveraging Technology:

Leveraging Technology is a thrust area of CVC and as such CVO is continuously following-up with OIL management to achieve more results in these areas. Some of the achievements are highlighted below.

E-Tendering, E-Payment / Receipt and

E-Transaction

1. All tenders issued/ fl oated are put on OIL web site.

2. All contracts awarded above Rs 5 lakhs are put on OIL web site.

3. Threshold value for e-procurement above Rs 1.00 crore is as follows:

Period Percentage

achieved

01.01.2008 to 31.12.2008 19.85%

01.01.2009 to 31.12.2009 45.36%

01.01.2010 to 31.12.2010 00.00%

The trend shows that there is a slow but steady progress in overall coverage e- procurement. The percentage coverage is likely to improve further.

4. All salary payments, which includes claims viz- tour, medical; transport, are being directly credited to the respective accounts of the employees (both executives and unionized employees) through bank advice.

5. Bills of contractors & suppliers are paid through e- payment, to the maximum extent possible.

6. Percentage of Receipts electronically received toward sale of Products


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Crude oil: About 95% received from 3 customers of the 5 customers

Natural gas: About 90% received from major customers of the 22 customers

LPG: Received manually from 1 customer (IOC-AOD)

7. Physical transactions are done electronically through ERP for:

Crude oil: 95% to the 4 customers (Except from Digboi tank fi rm). Here the data entry is automated from the tank dip. Only few environmental parameters are manually entered

Natural Gas: Data entry is done after reconciling with 22 customers. Most of the data is collected through SCADA and fed to the ERP system.

LPG: 100% through ERP

Integrity Pact:

Integrity Pact is a tool developed during the 1990s by Transparency International (TI) to help Governments, Business and Civil Society, which are prepared to fi ght corruption in the fi eld of public contracting and procurement. It consists of a process pf signing an

agreement between a government or a Govt. Department and all bidders for a Public Sector contract. It contains rights and obligations to the eff ect that neither side will pay, off er, demand or accept bribe, or collude with competitors to obtain the contract, or while carrying it out. Also bidders will disclose all commissions or similar expenses paid by them to anybody in connection with the contract; and that sanctions will apply when violations occur. These sanctions range from loss or denial of contract, forfeiture of bid or performance bond and liability for damages, blacklisting for future contracts and criminal and disciplinary action against employees of the Government / PSU. IP also introduces a monitoring system that provides for independent oversight and accountability.

Through the initiative of CVO, the integrity Pact was implemented in OIL. As a fi rst step MOU was signed between OIL and Transparency International. The second step was to appoint 2 Independent External Monitors to over-see the implementation of the IP. The third step was the signing of the IP between OIL and the bidders. OIL has adopted IP with eff ect from 01.01.10 for all tenders of and above Rs. 1.0 Cr. About 75% of all contracts in terms of value have been covered under the IP initiative. We have now proposed to reduce the threshold amount to Rs 50.0 Lakh to cover 90% of contracts in terms of values.


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Seminar on Tendering/Contracts and Purchase

Procedures for OIL executives at Guwahati by

CTE, CVC Compiled by: Sri Debashis Thakur,

Manager, (Vigilance)

ASeminar was hosted on 04.10.10 by OIL INDIA LIMITED through the initiative of CVO for OIL & NRL executives

at Hotel Nakshatra, Guwahati on “Tendering/Contract Procedures and Other Vigilance Related Matters” which was conducted by Sri V. Ramachandran, Chief Technical Examiner, CVC. Sri V.K.Thakral, CVO,OIL, Sri N.K. Bharali, Director(HR & BD), OIL and Director(Finance), NRL also addressed in the Seminar. Amongst the participants, various senior executives of OIL and NRL like GM(E), GM(S), GM(Finance), GM(PLS) etc. of OIL were present in the seminar.

At the beginning, CTE Sri V. Ramachandran delivered a presentation on Tendering/Contract procedures. He emphasized on various points which are to be kept in mind while processing for procurement of public goods. He mentioned that purchaser must have to take utmost care in following the guidelines issued by the organization and Central Vigilance Commission during procurement. He also very much emphasized on the documentation/recording of all the reasons of the decisions taken in deviation in respect to prescribed contracts and procurement procedure / policy.

Some of the points highlighted by Sri Ramachandran were as under:

General points on Contracts and Purchase

� Public buying should be conducted in a transparent manner to bring competition, fairness and elimination of arbitrariness in the system. This will enable the prospective tenderers to formulate competitive tenders with confi dence.

� It is imperative that these purchases are made

following a uniform, systematic, effi cient and cost eff ective procedure, in accordance with the relevant rules and regulations of the Government.

� The text of the tender document should be user-friendly, self contained, comprehensive, unambiguous, and relevant to the objective of the purchase. The use of terminology used in common parlance in the industry should be preferred.

� The specifi cations of the required goods should be framed giving suffi cient details in such a manner that it is neither too elaborately restrictive as to deter potential tenderers or increase the cost of purchase nor too sketchy to leave scope for sub-standard supply.

� The specifi cations must meet the essential requirements of the user department.

� Eff orts should also be made to use standard specifi cations, which are widely known to the industry.

� The tender document should clearly mention the eligibility criteria to be met by the tenderers such as minimum level of experience, past performance, technical capability, manufacturing facilities, fi nancial position, ownership or any legal restriction etc.

� Restrictions on who is qualifi ed to tender should conform to extant Government policies and be judiciously chosen so as not to stifl e competition amongst potential tenderers.

� The procedure for preparing and submitting tenders; deadline for submission of tenders; date, time & place of public opening of tenders; requirement of earnest money and performance security; parameters for determining responsiveness of tenders; evaluating and ranking of tenders and criteria for full or partial


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acceptance of tender and conclusion of contract should be incorporated in the tender enquiry in clear terms.

� Tenders should be evaluated in terms of the criteria already incorporated in the tender document, based on which bids have been received.

� Any new condition, which was not incorporated in the tender document, should not be brought into consideration while evaluating the tenders.

� Suffi cient time should be allowed to the tenderers to prepare and submit their tenders.

� Suitable provisions should be kept in the tender document for the settlement of disputes, if any, emanating from the resultant contract.

� It should be made clear in the tender document that tenderers are not permitted to alter or modify their tenders after expiry of the deadline for receipt of tender till the date of validity of tenders and if they do so, their earnest money will be forfeited.

� Negotiations with the tenderers must be severely discouraged.

� However, only in exceptional circumstances, where price negotiations are considered unavoidable, the same may be resorted to, but only with the lowest evaluated responsive tenderer, and that too with the approval of the competent authority, after duly recording the reasons for such action.

� The name of the successful tenderer to whom the supply contract is awarded should be appropriately notifi ed by the purchase organization for the information of general public, including display at notice board, periodical bulletins, website etc.

� Public procurement procedures must conform to exemplary norms of best practices to ensure effi ciency, economy and accountability in the system.

� To reduce delays, each Ministry / Department should prescribe appropriate time frame for each stage of procurement; delineate the responsibility of diff erent offi cials and agencies involved in the purchase process

and delegate, wherever necessary, appropriate purchase powers to the lower functionaries with due approval of the competent authority.

� Each Ministry / Department should ensure conclusion of contract within the original validity of the tenders. Extension of tender validity must be discouraged and resorted to, only in absolutely unavoidable, exceptional circumstances with the approval of the competent authority after duly recording the reasons for such extension.

� The legal framework governing public procurement is Article 299 of the Constitution, which stipulates that contracts legally binding on the Government have to be executed in writing by offi cers specifi cally authorized to do so.

� Further, the Indian Contract Act, 1872 and the Sale of Goods Act, 1930 are major legislations governing contracts of sale/ purchase of goods in general.

� There is no law exclusively governing public procurement of goods. However, comprehensive rules and directives in this regard are available in the General Financial Rules (GFR), 2005, especially chapter 6; Delegation of Financial Powers Rules (DFPR); Government orders regarding price or purchase preference or other facilities to sellers in the Handloom Sector, Cottage and Small Scale Industries and to Central Public Sector Undertakings etc. and CVC guidelines.

� The guidelines issued by the (CVC)- Central Vigilance Commission are to increase transparency and objectivity in public procurement. These provide the regulatory framework for the public procurement system

Some Problem Areas and Preventive

Measures

� Problem Areas:

– No Purchase Manual/Guidelines – Purchase Manual Not Updated For Years

� Preventive Measures:

– Prepare Codifi ed purchase manual with detailed purchase procedures, guidelines and proper delegation of powers.


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� Problem Areas:

– No Proper Filing System

– Part Files Opened For Initiating New Action But Not Merged With Main File, Thereafter

– Decisions / Deliberations Of Individuals / Tender Committees Not Properly Documented Or Recorded


– Maintain single fi le system with proper page numbering.

– Merge part fi les with main fi le to avoid break in continuity.

– Properly record the decisions/deliberations of individuals / tender committees.

� Problem Areas

– Excessive / Fraudulent / Infructuous Purchases Without Any Actual Requirement

– Available Stock / Pending Supplies / Past Consumption Pattern And Average Life Of Equipment / Items Not Considered.

– Obsolescence Factor Not Taken Into Account.


– Consider present stock / consumption pattern and shelf life of item.

– No splitting / bifurcation of requirement to avoid approval of higher authorities.

– Club requirements received from diff erent units.

– Equipment should conform to latest specifi cations & technology.

� Specifi cations should meet only the actual and essential needs of the user.

� Specifi cations should aim at -- the latest technology and avoid procurement of obsolete goods.

� Specifi cations should not be too restrictive -- the aim should be to attract reasonable number of competitive tenders.

� Indian Standards should be adopted wherever exists

� Preference to BIS (Bureau of Indian Standards) mark goods

� Where no Indian Standards or, decided to try foreign market also, International Standards (like ISO etc.) may be adopted

� Where no widely known standards exist, specifi cation be drawn in a generalized and broad-based manner.

� No brand name, make or catalogue no. of a particular manufacturer except in case of proprietary item

� If same is unavoidable, it should be followed by the words “or equivalent”.

Estimated Rates (Defi ciencies):

� Sketchy estimates or incorrect estimation based on outdated data of similar projects executed long ago.

� Estimate prepared without indicating detailed calculations for arriving at the prices of various items / components.

� Latest technological developments in materials, equipments, working methods and the prevailing market prices not taken into account.

� Unrealistic assumptions and lack of market survey have been found to be major reasons for this defi ciency.

Estimated Rates:

� Estimated rate should be worked out in a realistic and objective manner on the basis of purchases made by other organizations, prevailing market rates, the market trend, last purchase price, economic indices for raw materials, intrinsic value etc.

Consultants

� Basic methodology for Selection of Consultants:

Following main considerations would guide the need and the selection process:-

– Absence of required expertise in-house;

– The need for high quality services;

– The need for economy and effi ciency;

– The need to have qualifi ed Consultants for providing the specifi c services;


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– The importance of transparency in the selection process;

– The identifi cation of scope of work and the time frame for which services are to be availed of.

� Fundamental Principles In Engaging Consultants:

– Identifi cation of scope of Work / Services to be performed

– Estimating reasonable expenditure

– Identifi cation of likely sources (of consultants)

– Short listing of the consultants through EOI route

– Preparation and Issue of Request for Proposal (RFP including Terms of Reference (TOR)

– Pre-bid meeting

– Receipt and opening of proposals

– Evaluation of Technical Bids

– Evaluation of Financial Bids of the technically qualifi ed consultants

� The Selection of Consultant shall follow any of the following methods; as may be considered appropriate:

– Cost Based Selection (CBS)

– Quality and Cost Based Selection (QCBS)

– Combined Quality-Cum-Cost Based System (CQCCBS) Quality Based Selection (QBS)

– The consultant may also be selected by direct negotiations/nomination under exceptional circumstances.

� Pre-Qualifi cation Criteria:

Problem Areas:

– Criteria Not Clearly Specifi ed

– Criteria Made Very Stringent To Restrict Entry Of Bidders

– Sometimes Criteria Very Lax To Facilitate Entry Of A Particular Bidder

– Cut Off Dates For Work Experience Not Clearly Indicated

Preventive Measures:

– Consider following factors while framing Pre- Qualifi cation criteria:

– Experience and past performance on similar contracts for the last 2-3 years.

– Capabilities with respect to personnel, equipment and manufacturing facilities.

– Financial standing through annual reports, balance sheets, profi t & loss accounts.

– Quantity and delivery requirements.

Mode of Purchase:

– Advertised/ Open Tender Enquiry – most preferred mode of purchase

– Limited Tender Enquiry- for small value tenders (upto Rs.25 lakhs as per GFR)

– Single Tender Enquiry- for proprietary purchases.

� Advertised Tender Enquiry :

– Tender Notice to be published in widely circulated newspapers.

– Tender Notice also to be published on the website. Complete tender document to be posted on the website in a downloadable format.

– For global tender, send NIT to all Indian Embassies abroad and Foreign Embassies in India.

– Minimum of three weeks to be allowed for submission of bids.

– For global tender 4 weeks time to be given.

� Limited Tender Enquiry :

– For small value tenders.

– To be issued to all the approved / empanelled fi rms.

– The number of supplier fi rms in LTI should normally be more than three.

– Eff orts be made to identify a higher number of approved suppliers for more competition.

– Web site publicity could be given for LTIs limiting access of tender documents to only selected prospective suppliers by issuing them user ID / password.


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� Purchase Through LTI where estimated value is more than the prescribed limit permitted in the following circumstances:

– Demand is urgent

– The sources of supply are defi nitely known and possibility of fresh source(s) beyond those being tapped is remote.

– Item is such that pre-verifi cation of competence of fi rm is essential, hence requires pre-qualifi cation /empanelment of fi rms.

� Single Tender Enquiry:

– When only a particular fi rm is the manufacturer

– In a case of emergency

– For standardisation of machinery or components or spare parts to be compatible to the existing sets of machinery/equipment

– Proprietary Article Certifi cate

On The Tender

� Tender / Bid Document:

Problem Areas:

– Terms And Conditions Insuffi cient / Sketchy

– Obsolete / Unwanted Matter And Confl icting / Vague Provisions

– Important Clauses Like Earnest Money, Delivery Schedule, Payment Terms, Peformance Bank Guarantee, Inspection, Liquidated Damages, Risk Purchase, Arbitration Etc Not Incorporated.

� Earnest Money Deposit

– EMD or Bid Security is to safeguard against a bidder’s withdrawing / altering its bid during the bid validity period

– Primary objective is to establish the earnestness of the bidder

– Amount of EMD ordinarily be between 2% to 5 % of the estimated value

� Performance Security

– To be obtained from successful bidder to ensure due performance of the contract.

– Amount of performance Security should be for an amount of 5% to 10% of contract value

� Terms of Delivery:

– Terms of delivery is delivery point of the ordered goods from where the purchaser is to receive / collect the goods.

– Time for completion of contract --Should also be clearly indicated in the tender

� Delivery Period:

– Time is essence of a contract

– Delivery period to be properly specifi ed in the contract with defi nite dates

– Time for completion of installation, commissioning, training etc should also be specifi ed

– Expressions such as ‘immediate’, ‘ex-stock’, “as early as possible’, ‘off the shelf’, etc. must not be used to indicate contractual delivery period.

� Insurance:

– The goods should be fully insured against loss or damage during transportation, storage, delivery, installation and commissioning.

– For supplies on CIF basis, supplier to arrange and pay for marine/air insurance

– For supplies on FOB basis, marine/air insurance is the responsibility of the purchaser.

� Extension of Tender Opening Date:

– Sometimes, modifi cation to tender documents is necessary.

– A tenderer may point out some genuine mistakes necessitating amendment to the tender documents.

– In such situations, it is necessary to amend/modify the tender documents suitably prior to the date of submission of bids.

� When amendment/modifi cation changes the requirement signifi cantly and /or when there is not much time left for the tenderers to respond to such amendments, time and date of submission of tenders should also be extended suitably.


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Depending on the situation, such an amendment may also need fresh publication adopting the same procedure as for publication of the original tender enquiry.

� Opening of Tender:

Preventive Measures:

– Scrupulously follow public opening of tenders.

– Alterations in tender, cuttings, overwriting should be encircled and initialled by tender opening offi cer / committee.

– Prepare spot comparative statement.

– Covers containing price bids should be signed by tender opening offi cer / committee and two trade representatives.

� Evaluation of Tenders:

– All the tenders are to be evaluated strictly only on the basis of the terms & conditions incorporated in the tender document.

– No new conditions should be brought in while evaluating the tenders and no tender condition should be over looked while evaluating the tenders.

– Aim should be to ensure that no tenderer gets undue advantage at the cost of other tenderers and/or at the cost of the purchaser.

The following are the basic requirements, for which a tender may be declared as unresponsive and can be ignored, during the initial scrutiny:

(i) The tender is unsigned or not signed by the authorized person.

(ii) The tenderer is not eligible.

(iii) Required EMD has not been submitted.

(iv) The bidder has quoted for goods manufactured by a fi rm without the required authority letter from the proposed manufacturer.

(v) Tenderer has not agreed to give the required performance security.

(vi) The goods quoted are sub-standard, not meeting the required specifi cation etc.

(vii) The tenderer has not quoted for the entire scope as specifi ed in that schedule.

(viii) The tenderer has not agreed to some essential condition(s) incorporated in the tender enquiry.

� Post Tender Negotiations:

– Post tender negotiations are to be severely discouraged.

– There should be no post tender negotiations even with L-1 bidder except in certain exceptional circumstances.

– If L-1 backs out, re-tender.

– If the quantity is much more than L1 alone can supply, the quantity may be distributed in such a manner that purchase is done in a fair transparent and equitable manner.

– Counter off er to L-1, in order to arrive at an acceptable price, shall amount to negotiation.

– However, any counter off er thereafter to L-2, L-3, etc. (at the rates accepted by L-1) in case of splitting of quantities as disclosed in tender enquiry, shall not be deemed to be a negotiation.

� Advance Payment:

Preventive Measures

– Mobilization advance should essentially be need based and be given in select cases of civil and other works against equivalent bank guarantee. Decision to provide advance should rest at the level of Board.

– If the advance is to be given, it should be expressly stated in the bid documents, indicating amount, rate of interest and submission of BG of equivalent amount.

– Advance to be released in stages depending upon progress of work and mobilization of required equipments.

– Recovery of interest free advance should be time based and not linked with the progress of work.

– Utilization certifi cate from the contractor for mobilization advance should be obtained.

After the presentation, interactive session was started and Sri Ramachandran answered to the various questions and clarifi cations raised by the participants regarding procurement of Public Goods and services and he clarifi ed all the questions/confusions of the participants.

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