CONTENTS

Page

EXECUTIVE SUMMARY i

SUMMARY OF REVIEW RESULTS ii

I. OVERVIEW 1

II. RESULTS 2

III. ACKNOWLEDGEMENTS 7

CURRENCY EQUIVALENTS

(as of 31 October 2017)

Currency unit ̶ Indian Rupee (INR)

INR1.00 = $0.0154176 $1.00 = INR64.86

NOTES

(i) The currency equivalents used in reviewing the sample contracts were as of the PPRR cut-off date of 31 October 2017.

(ii) In this report, $ refers to US dollars.

ABBREVIATIONS

ADB - Asian Development Bank BER CQS

- -

bid evaluation report consultants’ qualifications selection

DMRC EOI ICB JMRC NCB

- - - -

Delhi Metro Rail Corporation expressions of interest international competitive bidding Jaipur Metro Rail Corporation national competitive bidding

OAI - Office of Anticorruption and Integrity PPRR QCBS TEC

- - -

project procurement-related review quality and cost-based selection tender evaluation committee

Project Procurement-Related Reviews Mandate: ADB’s Anticorruption Policy requires all parties, including borrowers, beneficiaries, bidders, consultants, suppliers, contractors, and ADB staff to observe the highest ethical standards when participating in ADB-related activities. The Policy supports ADB’s obligation, in accordance with Article 14 (xi) of the Agreement Establishing the Asian Development Bank, to ensure that the proceeds of ADB financing are used only for intended purposes. As mandated by ADB’s Anticorruption Policy, the Office of Anticorruption and Integrity (OAI) conducts project procurement-related reviews (PPRRs) or proactive project integrity risk reviews to help prevent and detect integrity violations (i.e., fraud, corruption, collusion, coercion, abuse, conflict of interest, and obstruction). Objective: A PPRR assesses project integrity risks by identifying any red flags of integrity violations through (i) examination of processes, procedures, and documentation related to procurement, financial management, and contract implementation/management, and (ii) inspection of project outputs. OAI recommends enhancements to mitigate or eliminate opportunities for integrity violations. OAI conducts follow-up reviews on selected PPRRs to (i) assess the implementation progress of the PPRR recommendations, and (ii) assist the executing/implementing agencies and ADB in implementing any remaining recommendations A PPRR is neither an investigation of fraud and corruption nor an evaluation to assess development effectiveness of ADB-funded projects. It does not review project outcomes or development impact, which can only be assessed after the completion of a project.

EXECUTIVE SUMMARY

1. In November 2017, the Office of Anticorruption and Integrity (OAI) of the Asian Development Bank (ADB) conducted a follow-up review on a 2016 project procurement-related review (PPRR) of Loan 3062-IND: Jaipur Metro Rail Line 1 – Phase B (the Project). The 2016 review identified gaps in the internal controls over procurement, disbursements and asset management processes. This report presents the follow-up review results and the actions taken by Jaipur Metro Rail Corporation (JMRC), an executing agency of the Project in implementing the 2016 PPRR recommendations. 2. The follow-up review covered all contracts awarded between September 2016 and October 2017. OAI determined that JMRC has taken significant steps in implementing the PPRR recommendations. Specifically, 8 out of the 11 recommendations have been fully implemented. One of the recommendations is no longer implementable because all relevant contracts have been awarded. Of the two recommendations that were not fully implemented:

(i) one is still in the process of being implemented as JMRC still needs to take additional

steps to ensure adequate documentation is submitted to support consultants’ claims and

(ii) one was not implemented because progress reports were not submitted in a timely manner by JMRC.

3. The status of the recommendations is presented in the Summary of Review Results section on page ii. Chart 1 provides a snapshot of the overall status of implementation of recommendations.

Chart 1. Snapshot of Implementation of Recommendations

4. OAI commends JMRC for the steps they have taken to implement the recommendations. JMRC’s dedication to continue improving their controls are acknowledged. OAI values the cooperation and assistance extended by JMRC, the ADB South Asia Department, and India Resident Mission.

Procurement FinancialManagement

AssetManagement

1 11

5

3Implemented

In Progress

Not Implemented

Not Applicable

Implemented = JMRC fully implemented the recommendations in a manner that resolved the underlying issues; In Progress = JMRC has taken substantial action to implement, and intends to fullyimplement the recommendation; Not Implemented = JMRC has not addressed the underlying issue.

ii

SUMMARY OF REVIEW RESULTS

2016 PPRR RECOMMENDATION ACTION TAKEN

IMPLEMENTED

PR

OC

UR

EM

EN

T

1. Provide reasons to bidders for non-

extension of bid submission deadline and document in the BER

2. Review bid forms thoroughly and seek clarifications from bidders for any discrepancies

3. Contracts should be negotiated and

signed only by the authorized representative of the bidder

Adequately communicated reasons disallowing requests for extension to bidders

Properly reviewed information in bid forms and sought clarifications for bid deficiencies

Properly established the authority of persons authorized to negotiate and sign contracts on behalf of the bidder

AS

SE

T M

AN

AG

EM

EN

T

4. Timely approve all major

subcontracting works

5. Establish proper authority of DMRC official in reviewing measurement books

6. Timely approve extension request for

project schedule 7. Monitor contractor’s improvements to

warehousing procedures on site 8. Oversee contractor’s enhancement to

safety practices on site

Properly approved request for subcontracting of works

DMRC properly signed-off the measurement books

Approved request for extension of time completion for works

Observed that the contractor used cement bulker, patched gap in separator wall, and covered reinforcement bars

Identified that the contractor constructed handrails, removed hanging debris, covered excavated soil, and implemented safety procedures

IN PROGRESS

FIN

AN

CIA

L

MA

NA

GE

ME

NT

9. Substantiate consultant claims with

appropriate supporting documents

Adequately submitted boarding passes and invoice showing reimbursement of per diems inadvertently paid to consultant but did not provide detailed individual timesheets

Notes:

Implemented = JMRC fully implemented the recommendations in a manner that resolved the underlying issues In Progress = JMRC has taken substantial action to implement, and intends to fully implement the recommendation Not Implemented = JMRC has not addressed the underlying issue

2016 PPRR RECOMMENDATION RISK IMPLICATION

NOT IMPLEMENTED A

SS

ET

M

AN

AG

EM

EN

T

10. Timely submit project monitoring reports

Non-timely preparation and submission to ADB of project monitoring reports could affect resolution of implementation issues

1

I. OVERVIEW

1. In 2016, the Office of Anticorruption and Integrity (OAI) of the Asian Development Bank (ADB) conducted a project procurement-related review (PPRR) of Loan 3062-IND: Jaipur Metro Rail Line 1 – Phase B (the Project). Figure 1 highlights the project background.

Figure 1. Project at a Glance

2. OAI’s 2016 PPRR report issued in January 2017 provided recommendations to address the following findings:1

(i) Lack of adequate disclosure of bidders’ requests for extension of bid submission deadline;

(ii) Weakness in the evaluation process and documentation by the executing agency (EA);

(iii) Incomplete supporting documents to substantiate claims submitted by the consulting firm;

(iv) Lack of project control and documentation by the EA; (v) Lapses in project monitoring by the EA; and (vi) Lack of warehousing procedures and site safety issues by the contractor.

3. OAI conducted a follow-up review with fieldwork from 20 November to 1 December 2017 to:

1 The redacted version of the report is available on ADB’s website: https://www.adb.org/sites/default/files/project-

docment/225766/46417-001-pprr.pdf

(i) Assess the implementation status of the PPRR’s recommendations; (ii) Validate actions taken by the JMRC, one of the main executing agencies of the

Project, in implementing the recommendations; and (iii) Assist JMRC to resolve pending issues affecting the implementation of OAI’s

recommendations.

4. To accomplish the above follow-up review objectives, OAI examined the procurement, financial management, and asset management processes of all contracts awarded between September 2016 and October 2017. The review covered one international competitive bidding (ICB), two national competitive bidding (NCB), one consultants’ qualification selection (CQS), and one quality- and cost-based selection (QCBS) contracts.2

II. RESULTS

5. JMRC has made significant progress in implementing the recommendations. Of the 11 recommendations, eight were fully implemented, one recommendation is no longer implementable because all relevant contracts have been awarded, and two recommendations were not fully implemented. A. Implemented Recommendations 6. JMRC fully implemented the eight recommendations, either as described in the PPRR report or in a manner that resolved the underlying issues. Procurement 7. Adequately communicated reasons disallowing requests for extension to bidders. In the review of all relevant emails and letter correspondence, the PPRR team established that JMRC provided appropriate feedback to potential bidders3 disallowing requests for extension of bid submission deadlines. The bid evaluation report (BER) suitably incorporated the information regarding extension of bid submission deadlines along with other key information about the bidding. 8. Proper review of information in bid forms. In all NCB contracts covered, the PPRR team noted that the JMRC tender evaluation committee (TEC) properly reviewed bid submissions against the supporting documents, correctly identified deficiencies in bidders’ financial resources, current contract commitments, construction experience, personnel, and properly documented the evaluation results in the BERs.4 9. Established authority to negotiate and sign contracts. In all contracts reviewed, the PPRR team established that the contracts were negotiated and signed only by the authorized representatives. In the review of a CQS contract, the consulting firm submitted a post-facto notarized letter authorizing the designated representative to sign on behalf of the Joint Venture. In two NCB and one QCBS contracts, the bidders submitted notarized powers of attorney authorizing the designated representative to sign and submit bidding and contract documents.

2 The review focused on the physical progress of the ICB contract. Specifically, the PPRR team inspected two stations

of the Jaipur Metro Rail Line 1, respective portions of the underground tunnels, contractor’s warehouse, and batching plant.

3 For NCB Contract No. 1, out of the 8 bidders who purchased the bidding document 6 bidders requested bid

submission deadline extensions. For NCB Contract No. 2, 6 requests from 5 bidders were received by JMRC. 4 This applies to two contracts: (i) NCB Contract No. 1 where 6 bidders submitted bids and (ii) NCB Contract No. 2

where 3 bidders submitted bids.

3

Asset Management 10. In the follow-up review, OAI verified the actions taken by JMRC to address the asset management findings. OAI only reviewed one ICB contract because the other two NCB contracts awarded had no physical progress at the time of inspection. 11. Proper approval of major subcontracting works.5 JMRC adhered to the contract provisions by approving the request6 for subcontracting of works to be executed by the major subcontractor, in the amount of approximately $155,740.

12. Adequate documentation of relevant information in the measurement books. A Delhi Metro Rail Corporation (DMRC) official reviewed and signed the measurement books and the summaries of received materials.7 The same DMRC official also reviewed and approved materials quality check reports by affixing his signature, name, and designation to the reports. 13. Approved request for extension of time for completion for works. JMRC enhanced its monitoring of project completion through the timely approval of the contractor’s request for extension of time to complete the works. JMRC agreed to a request, submitted by the contractor, for an extension of 103 days due to a delay in the right of access to the project site caused by the relocation of Shiv Temple at Badi Chaupar station.

14. Improved warehousing and other procedures on site. During the project site visits, the PPRR Engineer observed that the contractor improved its warehousing procedures by:

(i) using cement bulker instead of stacking cement bags in the storeroom; (ii) properly storing and covering reinforcement metal bars and other exposed

construction materials; and (iii) fixing gaps in the separator wall.

15. Figures 2 to 5 show among others the improvements made by the contractor on the site.

Before

Figure 2. Reinforcement bars were lying in the open and not covered.

After

Figure 3. Properly covered reinforcement bars

5 Section 8 – Particular Conditions of Contract, Sub-Clause 4.4. “However, for major sub-contracts (each costing over

INR Five Million or equivalent in other currency), it will be obligatory on the part of the Contractor to obtain consent of the Employer. The Employer will give his consent after assessing and satisfying himself of the capability, experience and equipment resources of the sub-contractor.”

6 The letter dated 17 August 2016 to the Director (Projects), JMRC included a comparative statement of quotations showing the major subcontractor as the lowest bidder.

7 DMRC is the general Consultant for the Project.

Before

Figure 4. Broken separator wall at casting yard

After

Figure 5. Patched separator wall

16. Improved safety practices on site. In the inspection of Choti Chaupar and Badi Chaupar stations, the PPRR team observed that the contractor, in close coordination with JMRC, rectified the previous safety issues on site as shown in Figures 6 and 7. Specifically, the contractor:

(i) properly constructed handrails and installed horizontal mid support bars; (ii) removed hanging debris on the ceiling and covered excavated soil with new

tarpaulins; (iii) provided complete site safety gear, fire extinguishers and sufficient safety signage in

the area; and (iv) deployed medical personnel with complete safety aid kits.

Figure 6. Personnel with complete safety gear Figure 7. Sufficient safety signage and warning

signs

B. Recommendation that is in the Process of Being Implemented Financial Management 17. In the follow-up review, JMRC had taken substantial action to implement the PPRR recommendation. However, further action is necessary to fully implement the outstanding recommendation in the financial management area as shown in Table 1.

5

Table 1. 2016 PPRR Finding and the Implementation Progress

18. Partial Substantiation of Consultants’ Claim. In the review of available documents for the CQS contract, the PPRR team observed that the consultant submitted boarding passes to substantiate claims for air travel as recommended in the PPRR. However, no timesheets to justify per diem claims on work done on ordinary days and on public holidays was submitted by the consultant. In the absence of detailed timesheets to support days worked, the PPRR team could not validate remuneration and reimbursable expenses claimed against corresponding dates based only on remuneration sheets and certification letters.8 19. JMRC acknowledged the need to take additional steps to ensure sufficient documentation of consultants’ claims. In the review of the QCBS contract, JMRC presented copies of detailed individual timesheets, attendance register, individual certification sheets for reimbursement signed by the expert, and other monitoring sheets demonstrating ongoing attempts to improve their compliance in this area. C. Recommendation that is Not Implemented Asset Management 20. In the follow-up review, JMRC has not made progress to implement the recommendation to improve project monitoring as shown in Table 2.

Table 2. 2016 PPRR Finding Not Addressed by JMRC

21. Need to timely submit project monitoring reports. In the follow-up review, OAI noted that there were significant delays in the submission of the 2017 Q1 and Q2, and partial delays in

8 JMRC indicated that the work done by the experts was personally monitored by JMRC staff, hence, the approval of

the per diem claims. Although a breakdown of remuneration, out of pocket expenses, and reimbursable expenses was attached to the invoice as well as a letter of confirmed days worked, JMRC did not provide individual timesheets signed by each expert for each month worked to support the per diem claims. The breakdown of remuneration sheet showed details of each expert’s remuneration rate, time input in person months, site visit dates, and total remuneration. A letter was also submitted confirming days worked by the experts for December 2015 and January 2016. The letter states “In the period of 14th December 2015 to 14th January 2016 they worked full time on the JMRC project work on all days barring Saturday, Sundays and 25th December, 1st and 2nd and 3rd January.”

2016 PPRR Finding Actions Taken

Consultants' claims were not substantiated with supporting documents

Adequately submitted boarding passes and invoice showing reimbursement of per diems inadvertently paid to consultant but did not provide detailed individual timesheets

2016 PPRR Finding Risk Implication

Project monitoring reports were not timely submitted

Non-timely preparation and submission to ADB of project monitoring reports could affect resolution of implementation issues

the submission of the 2016 Q4 and 2017 Q3 progress reports.9 These reports did not include an analysis of the physical progress against the financial progress of the project. Figure 8 below shows the delays in the submission of the quarterly progress reports.

Figure 8. Summary of Delays in Submission of Progress Reports

22. JMRC indicated that relevant reimbursement and claim information was not timely submitted by JMRC finance staff.10 This resulted in the delayed submission of the 2017 Q1 to Q3 progress reports. Supplementary information showing physical and financial progress of the project was subsequently submitted. However, JMRC did not provide underlying reasons for the discrepancy. JMRC acknowledged the observations and noted that this will be implemented for the next submission of quarterly progress reports. D. Additional Observation and Recommendation 23. In the follow-up review, OAI noted that in the CQS contract, reimbursable travel expenses of the experts were paid based on the budgeted unit costs (e.g. lump-sum) indicated in Appendix C of the contract and not paid based on the actual amounts incurred.11 Paragraph 17.2 (ii) of the General Conditions of Contract12 is unclear on whether reimbursable expenses will be based on actual expenses incurred, with submission of appropriate supporting documentation or on a fixed lump-sum rate as set forth in the appendix. 24. JMRC indicated that claims for reimbursable travel expenses were paid based on quoted prices in Appendix C and not on actual costs. This is to adhere to the method by which bid prices were evaluated, based on quoted prices and to avoid the submission of voluminous documents to support claims.

9 Project Administration Manual requires the executing agency to submit quarterly progress report not more than 45

days form the end of the quarter. 10 This refers to information for amounts disbursed by ADB. 11 Appendix C sets the unit rates for respective reimbursable expenses. Boarding passes, airline tickets, and flight

itineraries were submitted to substantiate claims for reimbursable travel expenses of the expert. Although cost of airline tickets purchased by the consultant vary (some were lower and some were higher than the budgeted cost), consultants were still paid based on budgeted unit cost.

12 Paragraph 17.2 (ii) of the General Conditions of Contract indicated that “The Client shall pay to the Consultant… (ii) reimbursable expenses that are actually and reasonably incurred by the Consultant in the performance of the Services. All payments shall be at the rates set forth in Appendix C.”

Submission Deadline

No. of Days Delayed

Date Submitted

2016 Q4

2017 Q1

Project Monitoring Reports

2017

Q3

2017

Q2

14-Feb-17

14-Nov-17

14-Aug-17

15-May-17

28-Feb-17 14 days

24-Nov-17

193 days

102 days

10 days

7

25. To ensure that consultants are paid per contract terms, OAI recommends that the contract clause should explicitly state whether reimbursable expenses will be paid on lump-sum basis or actual expenses incurred. If these reimbursable expenses are to be paid based on actual costs incurred, supporting documentation should be presented to substantiate the claims.

26. Moving forward, JMRC ensured to clearly indicate in the contract whether reimbursable expenses will be paid based on lump-sum basis or on actual costs, which will require supporting documentation.

III. ACKNOWLEDGEMENTS

27. OAI acknowledges the significant improvements made by JMRC and credits this success to JMRC’s dedication and strong commitment in taking significant steps to implement the PPRR recommendations. JMRC has been proactive and cooperative with OAI’s review by promptly providing the requirements and documents essential for the review. OAI commends JMRC’s efforts in improving its financial management controls in processing of consultants’ claims and project progress monitoring. JMRC expressed their firm commitment to fully implement the remaining recommendations and to continue to implement PPRR recommendations throughout the remainder of the Project. 28. OAI also thanks ADB South Asia Department and India Resident Mission for the support and assistance during the follow-up review. OAI remains available for consultation on any matters in this report.