During 2011-2016 UP State government incurred 40,854.63 cores on construction and maintenance of various types of roads in the State.

According to the Comptroller and Auditor General of India, Government of Report No. 04 of 2017,

Audit observed serious irregularities in all the stages of the tendering process and contract management. The basic norms for road design and cost estimation were not adhered to. The tendering process lacked transparency and competition. Large numbers of contractors not meeting the minimum technical requirements were qualified in technical evaluation. There were clear indications of collusive bidding in major contracts in most districts. Government instructions to check the use of construction material from illegal mining were not complied with. Grant of concessions and undue benefits to contractors was rampant, and there was complete neglect of the need to ensure road quality and protect government interests.

Cost Estimation and Sanction of Works

Large scale violations of Indian Road Congress (IRC) specifications and norms were noticed in designing roads and their construction. In 78 works (88 per cent) costing 2,350.32 crores, soil testing was not carried out, pavement conditions were not assessed, and no deflection tests were conducted. Further, in 51 works (81 per cent) costing ` 970.95 crores, road designs were prepared and widening planned without conducting traffic census in violation of IRC norms. IRC norms were not adhered to, making the entire process of road design and cost estimation non-transparent with the inherent risk of construction of sub-standard roads, incorrect cost estimation, loss to the government and undue favour to the contractors. In test-check districts, the audit noticed various deficiencies in the execution of works.

Road safety audits were not conducted in any of the 49 road works; test checked by audit. This implied that government instructions and rules regarding road safety requirements were completely ignored when preparing road designs and execution of works.

Inaccurate estimates

Cost estimates for road works are not being prepared properly and accurately as per IRC norms and government instructions discussed in paragraph 5.1 above. As a result, estimates contained serious deficiencies which led to avoidable excess expenditure, loss to the Government, execution of substandard works etc., amounting to ` 142.57 crores in 19 out of 170 works test-checked by audit. Some important issues are discussed below:

The excess provision in estimates: Test-check of estimates of 11 road works under 10 test-checked divisions revealed excess provision of crust thickness, crust design without traffic census, etc., in contravention of IRC.

Specifications and/ or departmental orders. This resulted in excess or avoidable expenditure of ` 58.33 crores.

Deficient/wrong provision in estimates: Scrutiny of records revealed that in eight cases, eight divisions included the provision of lesser or deficient quantity/wrong provision against what was required as per IRC specifications/departmental orders. This resulted in the execution of sub-standard works, infructuous expenditure/excess/avoidable expenditure or loss to the Government, etc., amounting to ` 84.24 crores.

Irregular technical sanction by Executive Engineers.

The Government delegated powers (June 1995) to EEs to accord technical sanction to the works costing up to ` 40 lakh. Audit observed that EEs exceeded their delegated powers and accorded technical sanction to 215 works costing ` 217.23 crores in 14 test-checked districts during 2011-16 with the individual cost of each work ranging between ` 40.22 lakh to ` 4.48 crore (Appendix-5.4). Thus, EEs were not competent to issue technical sanctions to these 215 works. EEs issued maximum irregular TS in Saharanpur, Unnao, Gorakhpur, and Mainpuri districts. This requires investigation for fixing responsibility.

4 Notices Inviting Tender (NIT) and bid document.

In Uttar Pradesh, after the issue of administrative and expenditure sanctions by the government and technical sanctions by the competent authorities, engineering authorities (EEs, SEs and CEs) have been delegated powers to issue tenders inviting bids for all road works irrespective of the financial value.

The government in 2007 notified Model Bid Documents (MBDs) for the issue of tenders by the public works authorities. There are three separate MBDs viz. T1 for works costing up to ` 40 lakh, T2 for works costing more than ` 40 lakh and T3 for the supply of material. The MBDs lay down detailed terms and conditions of the tender. The PWD, while notifying these MBDs in January 2007, directed all CEs/SEs/EEs and other concerned officers to strictly adhere to the MBDs so that developmental activities and construction work in the State are not adversely affected. Test-check of records in 17 selected districts disclosed many flaws in the tendering process.

4.4.1 Change in the conditions of NITs: NIT was approved by the Government in January 2007. It was ordered (November 2010) by E-in-C that conditions of NITs would not be changed in any case under any circumstances. E-in-C further directed that if any officer makes any changes in the clauses of the model bid document (MBD), it would be treated as financial misconduct, and the officer would be held personally liable for such financial indiscipline. Audit, however, observed that EEs/SEs changed the conditions of NITs/MBDs and violated financial rules giving undue advantage to certain bidders or categories of bidders.

4.4.2 Restrictive condition imposed: Audit noticed that in 62 NITs, a condition was included stating that the bidder should own a Hot Mix Plant (HMP). It was further noticed that five NITs out of the 62 included another condition also that HMP should have been installed within 50 km of the worksite. However, it was observed that no such condition was stipulated in the MBD regarding the location of the equipment or that the equipment should only be owned by the bidder. The MBD only prescribed that each bidder must demonstrate the availability of the owned/hired or leased key equipment. Thus, the NIT condition of owning a Hot Mix Plant in 62 cases and a further condition of having it installed within 50 km of the district implied that only local or nearby bidders could participate in these tenders. This restricted the scope of the competition and favored local/nearby contractors.

4.4.3 Ineligible contractors allowed to bid: NITs should include the correct category of contractors who were eligible to submit bids according to the cost of work. During test check of records in the selected districts, it was noticed that Superintending Engineers allowed ineligible contractors to participate in the NITs for 54 works amounting to ` 94.88 crores. For example, in NITs for eight works for which ‘A’ category contractors were eligible, in five NITs, both A and B category contractors were shown eligible, and for three works, A, B and C category contractors were shown eligible for bidding. Similar was the case with other works also. Thus, the deficient NITs made lower category contractors eligible for works of higher value.

4.4.4 Sale of bid documents: The government order of January 2007 issued in compliance with the Hon’ble High Court order to check/prevent Mafia activities in the tendering process had directed that sale of bid documents would be done at four places (offices of concerned EEs, SEs, CEs and DMs) in the district. Subsequently, E-in-C, PWD issued instructions in November 2009 directing that sale of bid documents should also be made from all branches of Punjab National Bank in the respective districts to enhance transparency and competitiveness and check the involvement of anti-social elements in tendering process. In the test-check of 331 contract bonds in selected districts, the audit noticed that in 65 cases (costing ` 1136.69 crores), the condition of sale of bid documents through bank branches was not included in NIT. This could have limited the sale/availability of bid documents to the potential bidders and thus could have defeated the objective of issue of instructions by E-in-C.

4.4.5 Work programme: Bidders in 171 cases costing ` 1,697.51 crore attached only bar charts while 63 bidders did not attach work programmer and methodology for works costing ` 801.62 crores. Hence, their planning for the timely completion of works was not assessed by the department.

4.4.6 Registration/Partnership deed: Out of 166 contracts which were awarded contracts costing ` 3,517.47 crores, certificate of registration was not attached by 38 bidders for works costing ` 636.09 crores, partnership deed was not attached by 45 bidders for works costing ` 918.18 crores and power of attorney was not attached by 67 bidders for works costing ` 1,353.78 crores.

4.4.7 Registration and PAN: Audit noticed that in 270 cases (82 per cent) costing ` 3,582.07 crores out of 331 cases, bidders did not attach their registration certificate with the labour department. Trade tax clearance certificate was not attached by 201 bidders (61 per cent) for works costing` 2,307.17 crores. TIN was not enclosed by 25 bidders for works costing` 188.83 crores, and PAN was not enclosed by 19 bidders for works costing` 258.98 crores. Such lapses in the technical evaluation of major tenders of the high value indicated that either the PWD officers dealing with technical evaluation and finalization of tenders were casual in discharging their responsibilities or had connived with the contractors to overlook these important qualifying requirements and declared them technically eligible.

4.5 Cartel formation

Scrutiny of contract bonds, agreement registers, and other related records in test-checked districts pertaining to 2011-16 revealed that the award of contract bonds by EEs/SEs was not carried out in a fair and transparent manner. There was an indication of large scale cartel formation in PWD works by bidders; thus, the whole tendering process was not transparent and seriously lacking in fairness and competition.

4.5.1 Scrutiny revealed that 482 contract bonds of five divisions worth ` 600.90 crores were finalised by SE, Gorakhpur circle, Gorakhpur during 2011-16. Out of these, in 128 (27 per cent) contract bonds worth ` 101.70 crores, there were only two bidders, and in all these 128 cases, the same rates were quoted by the two bidders. Negotiations were held with both bidders, and even after negotiation, their rates were equal. In all these cases, contract bonds were awarded to both the contractors by splitting the work equally. Submission of only two bids in all these 128 cases indicates the inability of departmental officers to generate sufficient competition. Further, submission of the same rate in 27 per cent works at the time of tender and after negotiation also indicates a possible nexus that needs to be investigated.

4.5.2 Superintending Engineer, Basti Circle, Basti constituted 62 contract bonds amounting to ` 22.41 crore by splitting 31 works during 2011-16. In these cases also, rates tendered by both the bidders were the same, and after negotiation, also same rates were quoted by the bidders.

4.5.3 In test-check of records in Provincial Division, Unnao, Audit observed that during 2011-16, EE awarded 18 and 20 contracts to Sri Kuldeep Singh and Sri Ram Dayal amounting to ` 5.44 crore10 and ` 4.02 crore11 respectively. Scrutiny revealed that for all these 38 NITs, bids from only these two bidders were received during 2011-16. Bids were submitted by these bidders between 0.10 per cent below the estimated rate to 12 per cent above estimated rates. It was interesting to note that in 12 cases, contract bonds were finalised at 0.10 per cent below estimated rates with both the bidders. This clearly showed that these two bidders had formed a cartel and were submitting bids in a pre-determined manner to circumvent the process of bidding in their favour.

4.5.4 Similarly, it was observed that in 22 cases costing ` 155.50 crores pertaining to seven districts12, all the bidders submitting bids for work were related with one another as a partner of a firm was also a partner in the other firm.

4.5.5 During scrutiny of records of Construction division, Mainpuri, it was noticed that during 2015-16, for 12 works costing ` 31.35 lakh, tenders were purchased by only two contractors-Girish Chandra Pandey and Bheekham Singh. Audit noticed that in all these 12 cases, bids of Girish Chandra Pandey were lower (rates quoted between 0.01 per cent to 0.25 per cent below the estimated rate in nine bids and at par in three bids), and all 12 contracts were awarded to Girish Chandra Pandey. This could be abnormal, indicating a cartel formation and needs investigation.

4.5.6 NITs for 33 works costing ` 7.39 crore were invited in August 2012 by EE, Provincial Division, Basti. Audit observed that only one bid was received for all these 33 NITs, and contract bonds were executed with single bidders in all cases without going for retendering. The rate quoted in all the bids was between 0.01 per cent and 1.11 per cent below the estimated rate except for one bid, which was at par with the estimated rate. Further, eight bidders quoted a rate of 0.01 per cent below the estimated rate, while 12 bidders quoted a rate of 0.10 per cent below the estimated rate. It was also noticed that in all these cases, none of the bidders quoted a rate for more than one work. All these circumstances indicate that the bidding system was not fair & transparent, and works were awarded for accommodating all the bidders instead of getting competitive rates for these works. These cases need investigation.

4.6 E-tendering

With a view to ensuring a fair and transparent bidding process, the Government decided (2014) that from August 2014, tenders for works costing more than ` one crore would be received only through e-tendering. Scrutiny of records in test-checked districts revealed the following irregularities in the process of e-tendering:

4.6.1 Scrutiny of records pertaining to e-tendering carried out from August 2014 to March 2016 revealed that single bids were received in 18 cases (15 per cent) against NITs in 124 test-checked contracts while two bids were received in 75 cases (60 per cent). Three or more bids were received in only 31 cases.

Thus, the number of bids received against NITs in 75 per cent cases was only one or two, clearly indicating that the tendering process was not fully competitive.

4.6.2 Scrutiny of records in CD-1, Moradabad disclosed that a tender summary report was generated, which contained the total number of bids uploaded by the contractors. Analysis of the number of bids received and the number of bids found technically eligible could indicate the number of bids that were not found technically eligible and also the probable reasons for disqualification, like failure to deposit proof of bid security or bid document. However, this report was not available in any other district. As such, the position of the number of bids originally received and the number of technically eligible bids could not be analysed. Audit asked (September 2016) UP Electronics Corporation, which manages the e-tendering system for PWD, whether this format was discontinued and reasons thereof which were awaited.

4.6.3 Audit observed while adopting e-tendering for the works costing more than ` one crore, the department limited the transparency by adopting the manual verification system of papers regarding the security deposit, solvency etc., at one place only, i.e. EE/SE/CE office. Thus, the ultimate goal of ensuring transparency in works through e-tendering was not achieved.

4.6.4 Audit noticed that minimum tender value limit was ` 10 lakh for procurement of goods, services and work contracts in all central ministries, departments, Central Public Sector Enterprises, and autonomous/statutory bodies like CPWD, NHAI, etc. which was lowered to ` five lakh from April 2015 and further lowered to ` two lakh from April 2016. However, the audit observed that the minimum tender value for e-tendering in UP PWD was ` one crore which was much higher in comparison to CPWD and NHAI.

4.7 Loss due to less stamp duty charged on Bank guarantee

According to Indian Stamp Act3, stamp duty at the rate of ` five per thousand amounts would be payable on the Bank Guarantee. During scrutiny of records in test-checked districts, the audit noticed that in eight districts, stamp duty was not taken as prescribed; in 29 cases, out of 331 test-checked contract bonds and instead stamped paper of only ` 100 was taken. This resulted in the loss of ` 2.09 lakh to the Government.

4.8 Contract bonds not signed

For a contract to be legally binding, it should be signed by both parties to the contract. During test check of records audit observed that in 32 contract bonds costing ` 239.78 crore, signatures of Superintending Engineers or contractors or both were missing on the agreement form. In 11 contract bonds (` 88.17 crores), SEs had not signed a form of agreement, and in 11 contract bonds (` 110.57 crores), contractors had not signed a form of agreement, while in ten contract bonds (` 41.03 crores), signatures of both SEs and contractors were not found on the agreement form. Thus, SEs did not perform their responsibilities with due care and did not ensure the signing of agreement form by both parties before awarding the work. In the absence of signatures in the specified format, the authenticity of the contract bond was doubtful. Also, the agreements would not be binding and legal in default by contractors, which could put Government interest at risk.

.9 Road signage works

For the execution of Road Signage and Raised Reflective Pavement Marker (RRPM) works, Engineer-in-Chief directed (July 2006) that road signage works costing more than ` two lakh would be executed through contractors registered for road signage works. Category and criteria for registration of contractors for supply and fixing of RRPM would be similar to road signage works. On scrutiny of records in test-checked districts, audit observed that in five works costing ` 187.93 crore, works relating to road signage and supply and fixing of RRPM amounting to ` 1.25 crore were executed during 2011-16, and these works were awarded to contractors who were registered for civil works and not for signage works in violation of E-in-C’s instructions. Further, the provision of road safety works was not included in the estimates of the other four works costing ` 84.06 crores. As such, the quality of works being compromised cannot be ruled out.

4.10 Insurance cover not provided by contractors

Clause 13 of General Conditions of the contract included in Model Bidding Document (T2) prescribed that the contractor at his cost shall provide, in the joint names of the Employer and the Contractor, insurance cover from the start date to the date of completion, in the amounts and deductibles stated in the Contract Data for the events which are due to the Contractor’s risk like loss of or damage to the Works, Plant and Materials; loss of or damage to Equipment; loss of or damage to property and personal injury or death. Insurance cover was also required to be provided from the date of completion to the end of the defect liability period for personal injury or death. Insurance policies and certificates were required to be delivered to the Engineer for approval before the completion/start date.

During scrutiny of records in test-checked districts, the audit noticed that contractors were required to provide insurance cover of ` 7535.78 crores for 2953 contract bonds executed during 2011-16. However, the audit observed that any contractor provided insurance cover in test-checked districts except M/S Manisha Projects Pvt. Ltd, Ghaziabad, provided insurance cover of ` 47.30 crores for one work11 in Provincial Division, Sambhal. Therefore, due to the failure of higher officers to ensure providing insurance cover to works executed in test-checked districts, contractors were benefitted to the tune of approximately ` 1.71 crore12 during 2011-16.

Thus, due to the failure of engineers to ensure insurance coverage for works, the Government’s interest was at risk during this period. Further, it also led to unauthorised aid to the contractors.

4.11 Unauthorised advance payment

Scrutiny of records in test-checked districts revealed that in addition to payment of mobilisation and equipment advance prescribed in MBD, divisions unauthorisedly paid ` 67.10 crores against 17 contract bonds during 2011-16 as advance payment in the name of the collection of material and work done but not measured. This resulted in undue aid to the contractors.

4.12 Certified copies of treasury challenges not submitted: To check the loss of revenue received from the sale of minor minerals, the Government ordered (February 2001) that suppliers submit a copy of treasury challan as proof of pre-payment of royalty while submitting their bills of payment. It was again reiterated by the Government in August 2002 and October 2015. Audit, however, observed that in gross violation of these repeated orders of the Government, none of the divisions in test-checked districts ensured receipt of certified copies of treasury challans from contractors for any work, in support of payment of royalty.

4.12  Use of road construction material from unapproved quarries: During scrutiny of records of PD, Mainpuri, it was noticed that Jhansi quarry was approved for bituminous works (BM, DBM, SDBC and BC) while Ghatari and Khera Thakur quarries of Rajasthan were approved for granular works of Mainpuri by Superintending Engineer, the Mainpuri circle. However, the Audit observed that instead of using material from approved quarries, the contractor used material from unapproved quarries (Bhind, Muraina, Teekamgarh and Gwalior of Madhya Pradesh) for test-checked LakhauraOchha road. Transit passes (Proforma-9) forms in support thereof were accepted by EE, and no royalty was deducted. This resulted in the loss to the

The government on account of royalty (` 35.61 lakh) and excess cartage.

4.13 Irregular payment of cartage: Rates of different items of work (GSB, WBM, WMM, BM, DBM, SDBC & BC) taken in estimates included the cost of material (stone ballast/grit, dust, etc.) and cost of cartage from approved quarries to the site of works. In cases where valid MM-11 forms were not furnished or were not valid, the possibility of using material from other nearby places cannot be ruled out. Audit observed that in 170 test-checked works costing ` 4,787.33 crores of 17 districts, irregular payment of cartage amounting to ` 673.91 crores (14.08 per cent of total cost) (Appendix 9.3 C) was made during 2011-16. Thus, illegal mining was promoted by not adhering to the rules

Financial Management and Revision of SoR.

An expenditure of ` 40,854.63 crores was incurred by the department on construction and maintenance of roads during 2011-16, and the amount of 2,075.92 crores was surrendered.

4.14 The divisions also released payments for test-checked 170 works of ` 3,031.91 crores to the contractors without insisting on the submission of test reports by the contractors

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