Department of Urban Development inclusion of the price of Rs. 10.22 crore.

Inclusion of a price variation clause in a lump sum contract without specific approval of competent authority resulted in avoidable payment of Rs. 10.22 crore.

Sub-rules (ii) (iii) and (x) of Rule 204 of General Financial Rules stipulate that:
(i) Standard forms of contract should be adopted wherever possible, with such modifications as are considered necessary in respect of individual contracts. The modifications should be carried out only after obtaining financial and legal advice.

(ii) In cases where standard forms of contracts are not used, legal and financial advice should be taken in drafting the clauses of the contract.

(iii) Lump sum contract should not be entered into except in case of absolute necessity. Where lump sum contracts become unavoidable, full justification should be recorded. The contracting authority should ensure that conditions in the lump sum contract adequately safeguard and protect the interests of the government.

Further, as per item 30 of Appendix I of the CPWD Works Manual, the Director-General (Works) is competent to accept the tender conditions which are not in line with the standard conditions. Apart from these norms, the CPWD code (Para 11.1.1 and 11.1.2) and CPWD Manual, require that lump sum contracts should be executed in Form 1229 and the standard conditions prescribed in Form 12 do not contain any clause or provision for payment for price variation.

Scrutiny of records of the work of ‘Construction of 45 Million Gallons per Day (MGD) Sewage Treatment Plant and other related associated/allied appurtenant works on Design, Build and Operate basis at Kondli, Delhi’ revealed that Delhi Jal Board (DJB) awarded a lump sum contract at a tendered cost of Rs. 190.71 crores for Civil, Electrical & Mechanical, and Operation & Maintenance Works. As per the Agreement, the time for completion of the work was 24 months with a defect liability period of 12 months after successful commissioning and completion of the trial and run period. The stipulated date of start and completion of the work was 19 June 2008 and 18 June 2010 respectively. The civil work was completed on 28 November 2013 and the plant was commissioned on 3 December 2013.

Audit noticed that DJB did not use the standard form of contract prescribed for lump sum contract i.e. CPWD Form 12 and included a price variation clause in the tender form prepared by the consultant without the approval of the competent authority viz. the Chief Executive Officer of DJB and without seeking advice from legal and finance departments. Inclusion of price variation clause without obtaining approvals of the competent authority following due process as stipulated in the extant rules was irregular and resulted in a payment of Rs. 10.22 crore ( Rs. 8.97 crores for civil work and Rs. 1.25 crore for Electrical & Mechanical work) on account of price variation.

The Executive Engineer (C) DR-IX stated (June 2016) that the estimate was approved by Resolution No. 856 dated 13 February 2001 and the award of work by Resolution No.1597 dated 15 April 2008 by DJB. It was added that since the work was awarded as per the CPWD manual, no legal advice was required, and before approval by DJB, the case was concurred by the Finance Wing of DJB.

The reply is not tenable as Resolutions No. 856 and 1597 were regarding administrative approval and award of the work to lowest bidder respectively and did not cover the matter regarding approval for use of non-prescript Form for awarding lump sum contract. For such deviation, specific approval of the competent authority after obtaining financial and legal advice was required to be taken.

The matter was referred to the Government in July 2016 their reply was awaited (December 2016).