CVC angle with updates from recent circulars & the Contract Labour Act

Jyothy S

@ ZTC, Chennai

Vigilance

Vigilance

The word meaning as per Oxford dictionary: The action or state of keeping careful watch for possible danger or difficulties.

Why do you need to be vigilant?

You are procurement specialist. In the process of procurement (work, material, services, etc.), you need to ensure: • Efficiency, Value for Money (Economy),

Transparency • Fair & Equitable treatment • Promotion of Competition • Quality • On time

Procurement

Involves 3Ps

People at sensitive posts to be rotated

Ref: Cir. No. 03/09/13 dated Sep 11, 2013

• Identify sensitive posts and staff to be rotated after every 2/3 years.

Submission of Quarterly progress report

Ref: Cir. No. 15/07/12 dated Jul 30, 2012

Revised Threshold

• Civil work – Rs 5 cr. & above

• MEP / Electrical – Rs 1 cr. & above

• Horticulture – Rs 0.1 cr. & above

• Consultancy – Rs 1 cr. & above

Process: Game Changers

The following are game changers towards greater transparency:

• RTI Act 2005

• IT Act 2000

E-procurement & its safety

• E-procurement to be adopted for greater transparency, efficiency and economy. However, security of system for e-procurement should be ensured and the same has to be got certified (ref. CVC cir. No. 01/01/2012 dated Jan 12, 2012).

Procurement Process: Stages

• Tendering

• Contract

• Contract Administration

Tendering : milestones Budget Provision. Administrative approval. Estimation, tender preparation, Technical sanction of competent authority. Tendering (open / limited). Empanelment of Contractor. Eligibility criteria. Adequate and wide publicity given. Advertisement on newspaper, website, trade

journals, etc. tender document on website available for downloading. Convenient tender receiving/opening time and address of the tender receiving

officials/tender box are properly notified. Tenders/bids are opened in the presence of bidders/their authorised

representative. Corrections/omissions/additions etc., in price bid are properly numbered and

attested and accounted page –wise. Tender opening register is scrupulously maintained.

Conditions tenders are dealt before opening of the price bids. Tender evaluation in accordance with criteria. Determination of L-1, L-2, L-3, …… Determining Reasonableness of the L-1 Rates, ABC Analysis, HQR, LOR, etc.

– Whether the tenderer / crucial documents have been submitted & duly signed ? – Whether the requisite EMD (Earnest Money Deposit) has been furnished ?

Tender is sealed Two types of Bids: Technical & Financial Validity of tender Vetting by the Standing Committee Financial Sanction

Integrity Pact

Ref: Cir. No. 10/05/09 dated May 18, 2009

Voluntary agreement ( the officials of the purchaser will not demand or accept bribe, gift etc. and the contractor / bidder will not pay bribe. )

• A clause to be inserted in the tender

• IEMs (Independent External Monitors) to be appointed

Commonly observed deficiencies while tendering

• Deviations from PD manual / extant instructions

• Non-adherence to the pre-qualification / eligibility

criteria

• Lapses in the appointment of consultants

• Equivocal clauses in GCC, lack of required clauses in

GCC, non-clarity in specifications

• Lapses in estimate, rate analysis, market rate

justifications

• Lapses in the procurement process

Eligibility criteria Ref: Cir. No. No. 12-02-1-CTE-6 dated Dec 17, 2002 • Average Annual financial turnover during the last 3

years, ending 31st March of the previous financial year, should be at least 30% of the estimated cost.

• Experience of having successfully completed similar works during last 7 years ending last day of month previous to the one in which applications are invited should be either of the following: - – Three similar completed works costing not less than the

amount equal to 40% of the estimated cost. – Or; Two similar completed works costing not less than the

amount equal to 50% of the estimated cost. – Or; One similar completed work costing not less than the

amount equal to 80% of the estimated cost.

• Definition of “similar work” should be clearly defined.

Eligibility Criteria

Ref: Cir. No. 01/04/14 dated Apr 14, 2014

• Whatever pre-qualification, evaluation / exclusion criteria, etc. to be adopted should be made explicit at the time of inviting tenders so that the basic concept of transparency and interests of equity and fairness are satisfied.

• The acceptance / rejection should be on justified grounds, evaluation / exclusion criteria.

Transparency in Tendering system

Ref: Cir. No. 01/02/11 dated Feb 11, 2011

• When technical specifications need to be iterated more than once, invite EOI and proceed to finalise specifications based on technical discussions / presentations with the experienced manufactures / suppliers in a transparent manner.

• Two stage tendering process may be useful and preferred.

• Eg: DB contracts

Standard Bid / Tender Document

It should contain: Part I - • NIT • Instruction to bidder / tenderer • GCC, SCC • Schedule of Requirement • Tech. Specifications • Form for tender submission • Form for agreement • Form for BG, Other Standard Forms Part II - BoQ / Price Schedule

Mobilization Advance

Ref: Cir. No. 02/02/11 dated Feb 17, 2011

• Bank Guarantee should be at least 110%

• It should not be paid in less than two installments except in special circumstances.

• A clause in tender stating advance (if, interest free) would be interest bearing (compounding quarterly) if the contract is terminated due to the default of the contractor.

Negotiation

Ref: Cir. No. 01/01/10 dated Jan 20, 2010

• There should normally no post tender negotiations. Under exceptional circumstances (reasons to be recorded), it can be with L1 (work / supply) only. For sale of materials, it can be with H1 only.

Contract • Definition: In common law legal systems, a

contract (or informally known as an agreement in some jurisdictions) is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them. The elements of a contract are "offer" and "acceptance" by "competent persons" having legal capacity who exchange "consideration" to create "mutuality of obligation”. Legally enforceable.

• Types : Re-measurable, Lump-sum, Package-deal, DB, AMC, Supply, etc.

Contract

• Whether LOI is sufficient to proceed?

• Whether LOA is sufficient to proceed?

• Whether agreement is to be executed?

• What is the value of stamp paper?

Contract Document A set of documents containing:

• The Contract Agreement

• LOA

• Addendums, Minutes of Pre-bid meeting

• NIT, Instructions to the bidders

• SCC & GCC

• Technical Specifications, drawings, etc.

• BoQ / Bid

Up on Award of work

• Once the bids are opened, don’t alter the scope, specification and the conditions of the contract.

• Sign the agreement. Execute the contract as defined in the bid / tender, sign and seal

• Obtain Security Deposit / BG. Verify the BG and monitor the validity.

• Refund of EMD

• Award of work to be published on website

• Obtain Insurance & Labour License

• Handover possession of site

Some of the clauses overlooked

While administering contracts, some provisions often overlooked. This often appear on CVC observations: • Signing contract agreement • Insurance • Labour License, Labour Act • Programme of work • Dealing delays • EOT • LD

Recoveries / Reduced rates

Ref: Cir. No. 01/04/14 dated Apr 14, 2014

• The observations / advice are required to be considered in terms of the contract and recoveries are to be enforced as admissible as per the conditions of the contract. There should not be any mention in the bill that the recoveries are being at the instance of third party (CVC). This is to avoid any chance of weakening of the case during arbitration or court proceedings.

Compliance with Labour Act

Contract Labour Act 1970 applies to every:

• Establishment in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour.

• Contractor who employees or who employed on any day of the preceding twelve months 20 or more workmen.

• It shall not apply to establishments in which work only of an intermittent or casual nature is performed. If a question arises whether work performed in an establishment is of an intermittent or casual nature, the appropriate Government shall decide.

Principal employer needs to ensure: • Labour License • Minimum labour wages, other compliances, • Ensure welfare & health of contract labour, Other facilities: viz. canteen,

rest rooms, first aid facilities, etc. • Safety

Closure

• Whether the contract is closed once the time for completion of work is crossed?

• What are the important steps in the closure?

• When does the DLP start?

Anonymous / pseudonymous complaints

Ref: Cir. No. 07/11/2014 dated Nov 25, 2014

• No action should be taken on anonymous / pseudonymous complaints and such complaints should be filed.

THANK YOU