Mumbai Mirror ( 21 Nov
2016 ) , carries a news report , titled :
" State
to drop cost escalation clause from govt contracts "
Parts of this report
read :
-----------------------------------------------------------------------------------------
The state will soon
remove cost escalation as a clause from all government contracts to curb corruption and prevent wastage of taxpayers’ money.
Contractors are notorious for submitting a lower cost estimate for an infrastructure project and later demanding additional funds to complete the work. They misuse the clause and bribe government officials to get the extra payments cleared, activists allege.
Chief secretary Swadheen Kshatriya told Mirror the proposal to strike off the cost escalation provision would be discussed at a meeting this week.
“ We will be taking two decisions. One is to do away with the cost escalation clause and second is to have fixed fees for architects in projects and not let them correlate percentage wise,” he said. “ The escalation clause is the root cause of many problems.”
Some officials are
concerned that if the provision is dropped, it may lead to higher initial
quotes from contractors.
But Kshatriya said: “Let them be higher at one point, but later there should not be a problem. There has to be a concept of total cost.
Nearly four decades of
experience has shown that escalated
prices do not give an idea of how much a project will
eventually cost. The final quote must give the government a fair idea about the
cost.”
Currently, the architect’s fee also goes up if a contractor revises the project budget. The Devendra Fadnavis government wants to delink the two and fix the architect’s charges.
“We are looking to get
this cleared soon. The ideas have been discussed in coordination committee of
senior secretaries,” Kshatriya
said.
Additional chief
secretary (finance) DK
Jain said the plan was being formalised.
Former IPS officer YP Singh, who has unearthed many scams, welcomed the step.
“The Bandra-Worli
Sea Link is a classic case of cost escalation. It was
estimated to cost Rs 400 crore, but the MSRDC ended up paying Rs 1,600 crore, including interest. The public is also charged a toll,” he said.
“To finalise an agreement at a certain amount and disburse another amount to the contractor is against the tendering principles.”
The costs of many of the state’s dams also ballooned in what is now known as the irrigation scam.
“The cost escalation policy is a major driver of
corruption. Every
single contractor delays projects and then jacks up prices, making a farce of
the entire the tender process,”
Preeti Sharma, national spokesperson of the Aam Admi Party.
Activist Anjali Damania also welcomed the government’s decision, but said it may not be enough as contractors and corrupt bureaucrats would eventually come up with a workaround.
“A third-party
audit by a reputable company or an institute should
be mandatory [ for every government contract ],” she said.
-----------------------------------------------------------------------------------------
Dear Shri Devendra Fadnavisji ,
Although my following
suggestion ( email ) was sent to Chief Ministers of all the States , you are the only one to have acted upon it !
While congratulating you
- and your team of Secretaries - on this excellent initiative , I request you
to also
amend the other "
Clauses " ( other than escalation clause ) , listed in my email -
especially those pertaining to ( willful
? ) delays on part of the concerned
officers of the government in granting various
permissions / clearances / NOCs ..etc
-----------------------------------------------------------------------------------------
Sunday, 6 July 2014
WHY INVISIBLE ?
Because it is cleverly camouflaged in the " Terms of Contract " that companies sign with
Central Government / State Governments / Municipal Corporations / umpteen
Government Agencies
This invisible corruption is rampant in Infrastructure Projects that get spread over months / years
And every possible trick / excuse ( officially called " Reasons " ) is used to ensure that these Projects get
delayed as much as possible !
Examine carefully and you will find that the more a Project
gets delayed , the more that Contractor stands to gain ! Anyone believing
otherwise , has got to be naive !
HOW ?
These contracts contain " Cost Escalation Clauses " which decide the
extra / additional amounts payable to the Contractor , over and above the ( so
called ) " Fixed Price " quoted at
the time of tendering
Under these clauses , the Contractor is eligible to claim /
demand extra payments , whenever ,
* SOMETHINGS THAT
HAPPEN
# costs of certain " Inputs " go up above
a certain agreed level , eg :
* Prices of Raw Materials
* Prices of Water / Gas / Electricity
* Cost of Labor
* Foreign Exchange Rate
* Consumer Price Index
*
Interest Rate
If any of these go up above certain agreed
levels , the quoted price to go up by X / Y / Z amount , as per the Formula
which determines the % age contribution of these elements , in the quoted price
* SOMETHINGS THAT DO NOT HAPPEN
* Environment Clearance
for the Project
*
Land acquisition and Handover to Contractor
*
Hundreds of permissions from dozens of Govt Depts/Muni Corporations
*
Issue of Import Licenses
* Release of Foreign Exchange
*
Issue of NOC from umpteen departments
*
Issue of Compliance Certificates from various departments
* Approval of Designs / Design Change
Requests ( from Govt as well )
If any of these are NOT issued / given by certain " Dates " (
very easily managed ! ) , then the quoted price to go up by X / Y /
Z amount
Invariably , these clauses are heavily tilted in favor of
the Contractor
And equally invariably , colluding Government officers /
bureaucrats / politicians , responsible for drafting / approving these "
Clauses " , leave them vague !
This is apart from framing the Tender
Specifications in such a manner that only a certain preferred bidder will
qualify !
If you doubt what I have said , then just file a RTI application
, asking for a copy of,
* Original Tender Document
* Final Contract
* Number of Price Revision Requests received / granted
for any project of your choice !
If Shri Narendra Modi is keen to reduce corruption , he should
start by instituting
MODEL
INFRASTRUCTURE PROJECT CONTRACT ,
which clearly spells out what price / time revisions can be
granted and when
At the same time ,
internally , there must be a provision for DEMOTION / PENALTY for those officers
who fail to give permissions / approvals / NOC etc, by specified dates ( milestones for the project )
-----------------------------------------------------------------------------------------
01 Dec
2016
www.hemenparekh.in
/ blogs