CAG's CWG Audit Report - Chapter - 23 (2011)

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c : : :wl-e..::I:uRoad S ignages

The Chief Minister of Delhi desired in February 2006 that the entire city of Delhi shouldhave state of the art road sign ages with appropriate structural system for the forthcomingCommonwealth Games 2010. A pilot project was taken up by PWD in May 2008 throughauthorised converters of 3MLimited and Avery Dennison (the two leading manufacturersof the retro reflective sheets).The department did not facilitate healthy competition, but merely ensured sharing ofsign age work between the two major sheet manufacturers, 3M and Avery-Dennison.Instead of calling a single tender for the complete work, the project work was dividedamong three PWD Zones for separate tendering and execution, with two restrictiveconditions: The Sheet manufacturer would necessarily be a part of the bidding party, and have an

exclusive MoUI and not more than two out of three works relating to the three PWD zones would be

awarded to anyone sheet manufacturer.This led to only two valid bidding parties in PWDI with work automatically gettingdistributed between them.The anti-competitive bidding conditions led to: Work of one zone being awarded at least Rs. 1.40 crore above the corresponding cost

in the other two zones. Higher overall costs of procurement in PWDI as compared with NDMC (where there

were no such restrictive conditions of the manufacturer to be apart of the bidder).Negotiation to the tune of Rs4.75 crore had to be done in case of the final bld, indicatinglack of competition in the bidding process.Subsequent to the award of work, the designs for the sign ages were substantially revised Ileading to large number of extra and substituted items of dubious utility. These wereapproved under the recommendation of the advisor to PWDI primarily based on thedesigns submitted by one of the contractors.We are of the view that the design modifications were of little utility; the manner ofimplementation was also uneconomical, leading to higher cost of execution. These extraand substituted items led to an additional avoidable expenditure of Rs14.88crore.

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Chapter 23 - Road Signages

23.1 IntroductionIn February 2006, the Chief Minister ofDelhi desired (February, 2006) that theentire city of Delhi should have state of theart road signages with appropriatestructural system for the forthcoming CWG2010. A presentation was made by 3M IndiaLimited before the CM on the signagesystem to be developed in Delhi. In keepingwith the CM's direction, a stretch of roadwas selected between Tilak Marg and RajGhat and a feeder road going up to DelhiSecretariat for a pilot project in April 2006at an estimated cost of Rs.1.77 crore. Thepilot project was taken up (May 2008) usingASTM1Type XI retro-reflective (RR)sheets

and was completed in December 2008 bythe authorised converters of 3M Limitedand Avery Dennison, the two leadingmanufacturers of retro reflective sheets oftype-IX and XI.GNCTD accorded in principle approval inMarch 2009 for the work of installation ofretro reflective signages using type-IX(based on pilot study of NDMC using TypeIX Retro-reflective sheet), though the pilotstudy by PWD was conducted using Type-XIsheeting. The type of support structure(M.S. Pipes/Tubes) and colour of signages(blue coloured sheet with white letters) wasalso decided.

Cantilever mounted signage

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Road name - double arrow signage

We acknowledge the improvementbrought to the look of Delhi by theconsistent implementation of the roadsignages project. The aesthetic andutilitarian upgrade by the use of thesesignages is commendable.

Instead of calling a single tender for thecomplete work, the project work wasdivided among three PWD Zones forseparate tendering and execution,purportedly on grounds of administrativeconvenience. In our opinion, a single tenderwould have facilitated greater competition.Though the pilot project was decided uponin April 2006, there were inexplicable delaysin executing it (2008), with the main worksfinally being awarded only in October 2009,with a stipulated period of completion of 6months, at a total contract amount of Rs.53.13 crores.As of December 2010, the works were inprogress and an amount of Rs. 25.06 crorewas paid which included provisionalpayment of Rs.2.83 crore for extra itemsunder two zones (M2 & M3), against theaccepted extra items of Rs.7.88 crore. Thedetails of execution and payment for extra

Chapter 23 - Road Sign ages

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Cautionary and directional shoulder

items in M1 were not available, but arelikely to be similar as the nature of work issimilar in all zones.

NOMe also undertook the work ofsignages of NOMe roads. The work wasexecuted in seven separate packagesbetween February 2009 and October2009 at a total contract cost of Rs 19.52crore.We found better competition and costsobtained by NOMe, and this has beenused as a benchmark in evaluating thesignage work undertaken by PWo.

23.2 Restrictive conditions intendering

The department was aware that there wereonly two manufacturers of retro reflectivesheets (RRsheet) and that the componentof RRsheet formed only about 33 per centof the total project cost. Yet the followingrestrictive eligibility conditions wereincluded in the notice inviting tender (NIT),finalised on the basis of discussion betweenProSecretary to Chief Minister, ProSecretary(PWD) and ProChief Engineer.



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The bidder shall either be a retro-reflective (RR) sheet manufacturer orshall have an exclusive MoU with themanufacturer of RRsheet in the case ofa firm or Joint Venture (JV).

Out of the three packages of roadsignage works, not more than twopackages shall be awarded to anyone RRsheet manufacturer.

The sequence of bid opening was stated,with the financial bid of Zone Ml to beopened after the other two zones (M2and M3).

Thus, inclusion of above conditions resultedin following: It was ensured that at least one zone

each would be awarded to both thesheet manufacturers, irrespective of thecompetitiveness of their bids.

It enabled the RRsheet manufacturerseither to collude to split the orderamong themselves, or to consistentlybid high in all the bids, knowing that noparty would take all the bids.

It presented a situation for both thesheet manufacturers to charge apremium for their association/exclusiveMoU as they were an indispensablecomponent of bidding process.

We found that the bidders backed by Avery-Dennison won the contracts in zones M2and M3. However, in zone Ml the financialbid of the Avery-Dennison backed vendor(Prakash Reflective Devices) was incorrectlyrejected by an extreme interpretation of theclause for turnover criteria. Consequently inzone Ml, the department was forced toaccept the sole technically qualified bid of

3M-Bajaj consortium, by negotiating downthe quoted rate by 15.95 percent of quotedamount, but still at higher rates than M2and M3. The estimated value of work of Mlwas similar to the sum of works for M2 andM3.The impact of the restrictive clauses wasthat the work in the three zones of PWDwere awarded at rates higher than thethree works of NDMC awarded in the sameperiod (October 2009). The cost of majorcomparable items of RRsheet and VHB2tape was higher by 21 to 73 percentrespectively, in PWD when compared withNDMe.

The lack of competition in PWD resultedin higher tender rates and consequentloss to government.

In zone Ml, although the bid of AveryDennison backed vendor was incorrectlyrejected, the bid was in any case not to beconsidered as the department had alreadystipulated that not more than two workwould be awarded to one sheetmanufacturer. This left 3M-Bajaj-CBMconsortium as the only technically qualifiedbidder. 3M-Bajaj-CBM consortium quoted 8per cent above estimated cost. In fact, in allthe three zones, the 3M consortium quotedvarying rates, and each time higher than itscompetitor.

Very High-strength Bond Tape, a proprietary productaf3M

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Chapter 23 - RoadSignages

As tenders for the work were invited on thebasis of the pilot project carried out by thePWD wherein both the sheet manufacturershad participated, it was expected that therequirements for execution of projectwould be well known leaving minimumpossibility for substitution of items orexecution of new items. This was not thecase. The expenditure on extra/substituteditems, estimated at Rs. 14.88 crore acrossthe three zones, was primarily on accountof the following items:

Table 23.3 - Expenditure on majorextra/ substituted items(In Rs. Crare)

Nature of Extra/Substituted itemSubstitution of MS Angle withSquare Hollow Section formaking Signage frame

0.93

2.85

Covering back face of signageswith ACM3 as extra item

3.51

Use of Aluminium channel/Trim as extra item

3.85

Payment for precast bend,bolts and anchor plates asextra item

Inclusion of a large number ofextra/substituted items after award ofwork, without documented technicalreasons, raises doubt on their actualutility, especially when the designsfinalised by Shri. D.S Sachdeva, Advisor(without specific authority) was basedon the methodology submitted byFibrefill, one of the executors of thesignage work.

In reply to our observations on extra andsubstituted items, PWD stated thatdecisions on execution of these were takensolely in the interest of work, for improvedaesthetics or on technical grounds, afterdue deliberation under the guidance ofAdvisor (PWD) - a retired DGW/ CPWD.As explained in the following sections, weare not convinced of the need for theseextra and substituted items, which hassubstantially inflated the cost of the project.In an item wise scrutiny of impact ofsubstituted items on overall cost of varioustypes of signages, we found the cost perunit increased from 21.5 per cent to 71.9per cent as tabulated below:

Table 23.4 - Increase in cost on account oj substituted items(Per unit cost in Rs.)

Type of SignageGantry mounted

Agreement Cost ExecutedCost5,52,399 8,87,2011,95,272 2,37,06754,623 87,32815,482 26,59740,092 48,69023,479 28,98523,479 37,85127,259 45,082

Cantilever mountedDSM (Directional Shoulder Mounted)Cautionary SignboardPlace Identification signboardRoad name Signboard: Double sidedRoad name Signboard: Single sidedRoad name Signboard: Double arrow, Single sided

3 Aluminium Composite Materia l

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The details of the extra/substituted itemsleading to the stark increase in cost aregiven below. The avoidable expenditureincludes estimates for zone M1 for whichfinal payments are yet to be made.

23.4.1 Substitution of MS Angle withSquare Hollow Section (SHS)

Square Hollow Shape Mild Steel (MS) Angle(SHS)During the pilot project for signages in PWD,the frame for fixing of retro reflective sheetwas constructed using MS Angle, and thesame was specified at the time oftendering. No questions regarding theframe were raised by any of the biddersduring the pre bid conference.We found that during issue of detaileddrawing by PWD, which was donesubsequent to the award of work, the itemof MS frame using MS angle wassubstituted by SHSand contractor was paidfor the difference in the rates between MSangle and SHSas extra item.The use of costlier SHShas actuallybenefitted the contractor by way ofreducing his fabrication cost, whileincreasing the cost of the project. Thissubstitution of item has led to avoidableexpenditure of Rs. 2.85 crore, of whichRs.0.75 crore has already been paid in twozones.


This has also led to increase in weight oflarger signage structures like gantry andcantilever, which runs counter to the reasongiven by the department in support of useof SHS.

23.4.2 Needless sanction of work forcovering back face of signages withACM as extra item

The scope of work under agreement did notprovide for covering the back face of someof the signboards. However, duringexecution, the back of signages werecovered using 4mm thick ACM. Coveringthe back of the signboard served nofunctional purpose, and was done for thestated purpose of improved aesthetics. Theexecution of this extra item enhanced thecost of signage by Rs.4926 per sqm leadingto avoidable expenditure of Rs. 3.51 croreas of November 2010.We are of the opinion that since only thefront portion of the signboard hadinformation to be seen by the citizen/user,any expenditure on improving theaesthetics of the back surface was wasteful.

Riveting of ACM to frame



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Analysis of the cost components of Rs.4926per sqm for assessed value of work ofcovering the back face with ACM, donebased on single quotation, revealed that thecost of VHB tape used for fixing ACM wasRs. 1666 per sqm (34 per cent) whileRs.1259 per sqm (26 per cent) was for itsrouting, bending, making tray, fixing of VHBtape etc. In fact, the VHB tape used forbonding ACM with the MS frame ismanufactured by 3M, one of the sheetmanufacturers.

Even if the sheets had to be used, thewhole cost of fixing ACM with VHB alongwith its routing and bending could havebeen dispensed with, by simply rivetingthe ACM sheets. In this process, theextra cost of covering the back facecould have been reduced by Rs. 2.03crore.

During computation of cost for extra item ofcovering back face of the signages withACM, excess area (than required) wasconsidered, causing a further loss ofRs.0.25 crores to the government.

23.4.3 Wasteful expenditure on inclusionof aluminium channel/trim asextra item

The guidelines issued for execution afterawarding works included an item ofproviding 2 mm thick Aluminium channel!trim around the sides of RRboards foragain, purportedly, aesthetic reasons.Consequently this item of trim wasexecuted as an extra item. We found that: The aluminium trim was to be fixed by

using VHB tape (an expensive

Aluminium Trim peeling off from frame

proprietary product of 3M), therebyexposing the trim to inevitable theft bypeeling it off. It has been removed insome places, and in some other places,they are in the process of beingremoved.

As the ACM sheet used in the boardalready had an aluminium layer as anintegral part, the overlay by anotheraluminium layer as trim was wasteful.

The actual aesthetic utility of aluminiumtrim on signboards mounted on gantriesand cantilevers fixed at a height ofabove 6m, meant for vehicles running atsubstantial speed is also questionable.

Thus the decision to use aluminium trimswas unwarranted and has resulted inwasteful expenditure of Rs. 3.85 crore.Further, an expenditure of Rs.0.42 crore forthis item was incurred without approval ofrates by the competent authority.23.4.4 Inadmissible payment for precast

bend, bolts and anchor plates asextra item

The contract provided for welded bends forthe tubular support structure. Thedepartment replaced welded bends with

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precast bend as an extra item, despite theclarification given in the pre-bid meetingthat nothing extra would be payable on thisaccount. This replacement on the groundsof improved aesthetics without anyfunctional purpose led to an additional costof Rs. 0.40 crore.Further, as per the description of work, rateanalysis of the item, drawings appendedwith agreement, and CPWD specificationsfor steel works, the component of anchorbolts and anchor plates were to be paidunder the relevant item of steel work itself.However, we noted that the same wasseparately paid as extra item at the rate ofRs. 116.73 per kg instead of the agreementrate for steel work of Rs. 65 per kg, leadingto inadmissible expenditure of Rs.0.56crore.

23.5 Undue financial benefit tocontractor for barricadingwork

During the pre-bid meeting, the departmentclarified that the barricade can be retainedby the contractor after completion of work.


We found that the executed quantity of thisitem increased by 159 per cent, resulting inundue financial benefit of Rs.0.24 crore tocontractors, as of November 2010.

23.6 Non imposition of penaltyWe noted that all the three works executedby PWD were delayed by 198 days as on 30November 2010, but penalty of Rs.5.26crore for the delay was not levied oncontractors.

23.7 Payment for work notrecorded

In M3 zone, an amount of Rs.4.50 crorewas paid (July 2010) to the contractorwithout any measurement (progressive/detailed) since the start of work (November2009).We consider this to be a serious financialirregularity, especially when the contractorwas responsible for recordingmeasurements.



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CAG's CWG Audit Report - Chapter - 23 (2011)