35 th Review Meeting of State Finance Controllers GOA Monitoring of Procurement Technical Support...

35th Review Meeting of State Finance Controllers

GOA

Monitoring of Procurement

Technical Support Group, SSA

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Why is Procurement Important?Why is Procurement Important?

• In procurement terms inputs are generally grouped into three categories:

(i) Civil Works – School Infrastructure and facilities like New PS, UPS, Residential Schools, Hostel, ACR, HM Room, BRC/URC, CRC, Drinking water, Toilets, Girls Toilet, Ramps, Handrail, Electrification, Retro-fitting, Boundary wall/ fencing, Major Repairs, etc.

(ii) Goods - Typically equipment, computers, furniture, textbooks, library books, uniforms, TLE, TLM, other materials, supplies, commodities, etc.

(iii) Services – Hiring of services including academic, technical and resource support provided by institutions/organizations in all areas, research studies, third party quality evaluation of civil works, auditors etc.

• The quality, timeliness, local appropriateness and affordability of those procured inputs can largely determine whether the public investments will succeed or fail.

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Effective ProcurementEffective Procurement

ObjectivesObjectivesObjectivesObjectives

Right Quality product

Right Quality product

Right quantities

Right quantities

Lowest possible

price

Lowest possible

price

Meeting recognized standards

Meeting recognized standards

Timely Delivery as per

schedule

Timely Delivery as per

schedule

Reliable suppliersReliable

suppliers

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PROCUREMENT IN SSA

• Strictly follow procurement procedure prescribed in Chapter IX of the Manual on Financial Management and Procurement (FM&P).

• Mandatory to follow the Manual provisions for all procurements under SSA.

• Follow States’ financial ceilings except when not prescribed by MHRD.

• Strictly follow MHRD’s financial ceilings whenever prescribed for various method of procurement which shall prevail on States’ ceilings.

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• Identification of Needs.

• Ensure availability of specific budget provision.

• Assessment of bulk requirement at the beginning of the financial year.

• Computer, equipment, furniture, books etc in economic lots as per

annual need.

• Procure miscellaneous items of stores not covered by bulk requirement

as per actual need.

• Make all purchases to the best advantage after comparison of

competitive prices.

• Strictly follow the level of procurement prescribed in the Manual

• Encourage decentralized procurement

• Avoid centralized procurement of items prescribed at lower level

Points to be kept in view Points to be kept in view

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PROCUREMENTPROCUREMENT

Strictly follow the levels of procurement provided in Para 112 of the Manual on FM&P

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Method of ProcurementMethod of Procurement

Method of Method of ProcurementProcurementMethod of Method of

ProcurementProcurement

Open Tender Open Tender

Limited TenderLimited Tender

Single TenderSingle Tender

Procurement without tender /

quotation

Procurement without tender /

quotation

Procurement through

communities

Procurement through

communities

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Monitoring of Procurement Monitoring of Procurement

• Monitoring of Procurement under SSA is carried out as under:

Preparation of Annual Procurement Plan

Monitoring the progress of procurement of open tender contracts of above Rs. 10 lakh through software

Post Review by IPAI Team, Development Partners and TSG Consultants

Post Audit by Internal Auditors, Statutory Auditors and AG concerned.

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Monitoring of ProcurementMonitoring of Procurement

Annual Procurement Plan

• Prepare the Procurement Plan every year and upload on SSA’s website as envisaged in Para 113 of the Manual.

• Strictly follow financial ceiling prescribed for each method.

• MHRD requested the States on 3rd April 2012 to prepare the annual procurement plan for 2012-13 and upload the same on the web site.

• Uploaded by 13 States of Andhra Pradesh, Chandigarh, Dadra & Nagar Haveli, Gujarat, HP, Karnataka, MP, Maharashtra, Rajasthan, Tripura, UP, Uttarakhand and West Bengal.

• Not prepared by 22 States, despite the issue of reminders on 29th August 2012 and 19th October 2012.

• These States are requested to prepare the same and upload on their websites.

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Common errors noticed:

• Footnotes of the Performa prescribe various stages of contracts, which are not being followed correctly.

• While six stages are prescribed for goods, nine stages are prescribed for civil works as indicated below:

Goods Civil Works

1. Preparation of specifications and bids document.

2. Issue of Invitation to bid.3. Open bids4. Evaluation 5. Award Contracts 6. Delivery

1. Preparation of specifications and bids document.

2. Issue of Invitation to bid.3. Open bids4. Evaluation of bids5. Award of contracts6. Construction 25% complete7. Construction 50% complete8. Construction 75% complete9. Construction 100% complete

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Common errors noticed:

• Some States have prepared Procurement Plan partially and not covering the entire outlay approved by the PAB for the State Component and all the Districts.

• The Procurement Plan needs to be complete in all respects taking into account the outlay approved by the PAB for each activity.

• Various methods of Procurement proposed to be followed during the year need to be indicated in the plan.

• Civil Works either through community or through contractors have not been provided in the plan by some States.

• The complete stages for each contract have not been indicated in the plan by some States.

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On-line Software to monitor progress of Procurement

• MHRD developed an on-line software to monitor progress of procurement of open tender contracts above Rs. 10 lakh and hosted through an internet service provider.

• The dedicated web-site is available at http://www.rte-ssaprocurement.com

• The User’s Manual developed by MHRD for the guidance of User’s at State and District level is also uploaded on the same web-site and available in the first screen of the website.

• The login-id and password for the User’s at State and District level were also shared with the State.

• States are requested to use this software extensively and monitor the progress of procurement.

Common Observations of Procurement

Procedural lapses

• Non-issue of written requests to the vendors for obtaining quotations.

• Obtained Quotations by hand by visiting the premises of the vendors or request made through telephone.

• Three Quotations obtained from one vendor instead of obtaining it from different vendors.

• Notice inviting quotations were put on the notice boards of SSA offices instead of seeking it in writing.

• Documents relating to seeking quotations, comparative statement of quotations etc. are not available on record.

• Engagement of contractors for construction of civil works without obtaining the prior approval of PAB.

• Non-observance of the time limit of 30 days for submission of bids.

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Procedural lapses

• Entire procurement processes under limited tender completed within 2 days.

• Invoice date is prior to the purchase order date.• Cheques drawn prior to the issue of purchase order.• Cheques/DD drawn on 31st March but not delivered to

the supplier for a considerable period resulting in loss of interest in the case of DD.

• Splitting of orders to bring it within the financial ceiling.

• Contract amount exceeded without issue of repeat orders or revision of contract agreement.

• Not indicated Bid validity period in the bid documents.

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Procedural lapses• Procured goods not taken in the fixed asset register.• Procured goods not found at site during visit.• Followed single tender instead of limited tender.• Followed limited tender instead of open tender.• Not taken Earnest money deposit from prospective

bidder. Not indicated validity period of the earnest money

deposit in the tender documents. Delay in delivery period stipulated in the PAB. Made payment based on provisional bill. The date issued for work order and the

delivery/invoice/payment dates on the same day.

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Procedural lapses Not obtained Security deposit/performance guarantee

from selected bidders even though provided in the bid documents.

Not included clauses for liquidated damages, security deposits, retention money, delivery schedule and payment schedule in Work Orders .

Not charged Liquidated damages though stipulated in the purchase order.

Open tender valuing more than Rs. 20 lakh not advertised in national news paper.

Not clearly specified Technical specifications, delivery period, payment terms etc in the tender documents.


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Irregularities in Procurement

Andaman & Nicobar Islands• Procurement of 123 computers with 45 Laser jet Printers at

DGS & D rate contract from one local vendor having no DGS & D rate contract.

Andhra Pradesh Computer procurement through APTS needs review in

view of delays in supplies, non-receipt of accounts, non-functioning of equipment etc.

Not followed transparent procedure for the appointment of internal auditors and statutory auditors

IPAI 3rd Phase - Observations on Procurement

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Arunachal Pradesh Not followed the procurement procedure of SSA Manual for

procurement of materials and services. Government decision was not conducive to financial

interest of SSA. Not followed open tender method for procurement of

materials of high financial magnitude (Rs.20 crore and above for purchase of radio sets, goods and services)

Assam Violation of established procurement procedures resulted

in extra and avoidable expenditure of Rs.85.45 lakh to SSA.


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Assam (Cont’d/-)• Construction material for civil works like ACR, repair and

renovation, toilets etc., were being purchased by the SMC without obtaining any quotation to judge competitive and reasonable price.

• The materials so purchased had not been recorded in any site account and or in any stock register.

• Utilization of materials purchased for the works concerned was not monitored.

• Large payments for construction materials were in cash instead of cheques.

• Final payments were made without any completion certificate.


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Bihar• Schools purchased science and math kits at exceedingly

high rates of Rs 11000 and Rs 10000 per kit (science and math kits) against the price of Rs 5,720 per kit prescribed by the NCERT.

Schools purchased fire extinguishers, involving several crores of Rupees at high rates without observing codal formalities and norms of economy.


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Chandigarh• Not levied penalty of Rs.2.91 lakh for delayed supply of

uniforms in 2009-10. • Late distribution of Jerseys for the winter season of 2009-

10 and 2010-11 to the children.• 752 under and oversize pairs of shoes were lying in the

store without any use for the children.• Issued Books to the schools in excess of their

requirements which were later returned by the schools resulting in payment of carriage charges twice.

• Purchased 8,000 books in 2009-10 for AIE Centres out of which only 1658 books were issued.


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Irregularities in ProcurementDadra & Nagar Haveli• Under Computer Aided Programme, 39 schools were

supplied 196 computers. • However, they are lying idle for want of computer trained

teachers, non-installation and procurement of computer furniture etc.

• This intervention was a total failure.Daman & Diu• Procurement procedures in the districts did not follow the

Manual procedures and norms. • Procured Work books worth Rs 7.62 lakh in 2011-12

without approval of the competent Authority


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Irregularities in ProcurementDaman & Diu (Cont’d/-)• Appointed a Chartered Accountant firm as statutory auditor

for the fifth consecutive year in contravention of provision in the Manual though the IPAI Team had earlier pointed out erroneous appointment for the fourth year in its earlier report.

• Procured Work books valued at Rs 4.92 lakh in October 2009 without inviting limited tenders as required under the provisions of the Manual.


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Goa• Expensive equipments (LCD TV/ Monitor) were repeatedly

procured by the SPD in non-transparent manner as the technical members of the Purchase Committee were not associated with the purchase.

• Procurement of text books involved significant amounts of recurrent nature need better insight and coordination in SSA.

• CAL was a nonstarter due to delay in supply of computers, shortages of class rooms, non-availability of trained teachers.

• Record related to number of students/teachers to whom training was given is not maintained.


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Irregularities in ProcurementGujarat• Noticed fradulent purchases amounting to Rs. 32.06 lakh

during 2008-09 in purchase of charts, booklets, CDs etc., in DPO, Surendranagar for which a FIR was filed on 02-03-2010.

• 168 out of 264 computers purchased under Computer Aided Learning Programme, 15 under NPEGEL and 30 under BRCs/CRCs were non-functional.

• A BRC Bhavan constructed at Palsana (Surat district) in 2009-10 at a cost of Rs. 6 lakh was handed over to judiciary for use as a civil court on a request received from Legal Department


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Haryana• Not observed procurement procedure laid down in the

Manual for purchase of material.• Purchased Colour pencils worth Rs.507.61 lakh without

inviting open tenders. • The Society suffered a direct loss of Rs.50.76 lakh on

account of discount. • Delay in supply of computers and other related equipment

by HARTRON resulted in loss of interest of Rs.119 lakh.• Implementation of CAL programme also received a

setback due to this delay


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Himachal Pradesh• Made Payments to the suppliers without proper scrutiny

and recording pass order on the bills.• Assessment of textbooks/workbooks was on the high side

as compared to actual requirements.• Incurred overpayment of Rs. 432 lakh to the Printers on

procurement of workbooks under “Aadhar” Programme.

J&K• Procurement procedure followed did not comply with the

provisions of the SSA Manual.• Not followed competitive bidding for procurement of

computers and accessories and orders were placed on DGS&D instead of in house procurement at economical rates.


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Irregularities in ProcurementJharkhand• Major procurement actions with regard to goods and

services are consistently disregarding the SSA procedures. • Award of work for printing, purchase of ladies bicycles and

furniture and computers were made without inviting tenders.

• The distribution of books in the schools at the beginning of the academic year was repeatedly delayed.

• Equipments procured for handicapped children were not put to use.

• The ladies bicycles procured by SIS remained unused as these were not distributed among the girls enrolled in NPEGEL.


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Karnataka• One case of misappropriation of Rs.10.39 lakhs sanctioned

for construction in a school by its Head Master was reported; the irregularity could be perpetrated due to laxity in following established procedures / oversight by those responsible.

Kerala• The quantity of items purchased and debited to MIS and LEP

was not documented. • Disregarding the SSA procedures on major procurements

consistently resulted in excess expenditure.• Noticed unauthorized purchases, purchase from second

lowest tenderer, surrender of funds due to indecision, non utilization of items purchased, etc.


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Madhya Pradesh• Major procurement actions in MP are disregarding the SSA

procedures and causing loss and excess expenditure for the programme.

• Rs. 13.26 crore was unjustifiably advanced to the editor for subscription to Devputra magazine for 15 years without following due process.

• SSA programe itself is yet to be approved for such a long period. • Rs. 1 crore in interest was lost due to hasty drawl of funds to pay

the advance. • Purchase of computers and UPS without following the

prescribed procedures resulted in avoidable expenditure of Rs. 28.68 lakh and loss of interest of Rs. 9.63 lakh.

• Computers and UPS valuing Rs. 63.89 lakh are lying unutilised in Morena district since June 2010.


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Maharashtra• SPO made large procurements (such as purchase of text

books, teachers’ handbooks, self learning cards, computers and accessories) in violation of SSA rules and best practices.

• Discounts were not obtained in procurements made from RC firms selected without tender.

• SPO made no efforts to reconcile, regulate and verify supply of huge quantity of text books purchased each year.

• Large excess payments on this account cannot be ruled out. • SSA funds of Rs 30 lakh meant for girls and SC/ST students

were irregularly spent for purchase of books and book cases for BRCs under the orders of the State Government. This amount should be refunded to SSA by the State Government.


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Manipur• SSA is resorting to centralized procurement in disregard of

GOI directions for decentralized planning and procurement and involvement of communities in procurement process so as to achieve transparency in procurement procedure.

• Procurement of ECEE-kits and educational-kits to girls for very large amounts were purchased centrally.

• Due to lack of planning substantial quantity of items like computer, Solar Power Plants valuing crores are presently left unsecured while funds were drawn far in advance of requirement to consume the budget.

• School uniforms, school bags worth several crores were procured centrally for distribution causing discontentment among the students and poor quality of the stitched uniforms.


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Manipur (cont’d/-)• Rs. 54.51 lakh was unnecessary drawn for payment of

VAT, though it was not payable in Manipur for interstate trade.

• As the amount is payable to none, holding of such large amount is fraught with risk of embezzlement and misappropriation.

Meghalaya• CAL programme was implemented in an ill planned manner

and one third of the computers were lying idle for 3 years due to shortage of classrooms, unavailability of trained teachers, lack of electricity.


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Mizoram• Not produced important records and documents for

procurement of computers.• SPD consistently made selection of vendors without

following due process and followed arbitrary procedures in payment of their bills.

• The Finance and Accounts Officer was bypassed in processing the payment of bills in SPO.

• Concerned section directly put up bills to Addl. SPD/SPD for payment.


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Mizoram (cont’d/-)• The possibility of collusion and other malpractice in

payment of bills cannot be ruled out in these cases. • CAL was entrusted to ACES Info Tech (Pvt.) Ltd. Kolkata

and its performance is very poor. • The same firm has been allotted order repeatedly in

disregard of its poor performance and SSA failed to initiate any penal action against the firm in terms of agreement.

• Proper investigation is needed in this connection.


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Nagaland• No transparency in major procurement cases in SMA.• Noticed ample evidence of arbitrary award of contract to

sole source vendors based on their unsolicited offers , uneconomic rates, unsubstantiated reimbursement of payment of VAT and centralized procurement in the HQ for decentralized items that facilitated the arbitrary selection of a vendor to procure the items from a preferred firm.

• As a result, SSA funds were not properly utilised in these purchases.

• Irregularities in the following cases would call for investigation by competent authority:


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Nagaland (cont’d/-)(i) Contract of Rs.205.67lakhs (TLE goods) was awarded to

M/s N.R.Enterprise based on firm’s own request as well as at the behest and influence of Minister, school education without observance of procurement formalities laid down in Para-115.3 of MOFM&P.

(ii) VAT of Rs.7.91 lakhs and Rs.1.49 lakhs were reimbursed without production of payment certificate from VAT Authority.

(iii)Disregarding Purchase Committee’s recommendations and subsequent recorded approval from higher authority, Rs.12.72 lakh was paid as excess freight charge to the supplier.


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Nagaland (cont’d/-)(iv) CAL programme with a contract value of Rs 966.47 lakh +

Rs. 642.25 lakh was finalized based on limited tenders of some selected firms at the suggestion of Vice Chairman, Executive Committee instead of open tenders as prescribed in FM&P Manual.

(v) Procured reading and writing materials for Rs 307.51 lakh from two firms on the basis of quotation without floating of tender in violation of procurement procedures and formalities.

(vi)Made Payment of VAT of Rs12.17 lakh to them without production of Certificate of Payment from tax authority.

(vii)Diverted Rs.74.80 lakh from the approved budget for child tracking towards procurement of sport goods without approval of PAB.


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Nagaland (cont’d/-)(viii) Supply order for approximately Rs 1.5 crore was awarded

to a supplier at the instance of high officials disregarding the procurement procedures laid down in the Manual.

(ix) Reimbursed VAT amounting to Rs. 5.88 lakh to the supplier without having any proof of payment actually made to VAT Authority.

(x) Incurred excess expenditure of Rs. 8.21 lakh due to excess procurement of class mate pencils and non-dust aspire.

• The cases revealed other serious irregularities like non invitation of tenders, acceptance of rates offered by single /lone supplier on unsolicited offer, utilization of budget to avoid surrender/ lapse etc.


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Irregularities in ProcurementOdisha• Not followed prescribed procedures of calling of

tenders/quotations.• Undue financial favour to Odisha Computer Application

Centre (OCAC) in purchasing computers by placing huge funds of Rs. 5.92 Crore

• Rs. 33.82 lakh was deposited with NCERT on 25-9-2010 for the supply of 316 upper primary science kits (UPSK) and 316 upper primary mathematics kits (UPMK) during 2010-11 but the supply has not yet been made.

Puducherry• Not followed the prescribed tendering procedure for the

procurement of play systems valued at Rs. 28.50 lakh.


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Irregularities in ProcurementSikkim• Significant amounts are spent on procurement of

materials/stores by SPO and DPOs without following the norms prescribed in SSA Manual or in State Finance Rule.

• Open tenders were not invited for purchases and Annual purchase plan and list of contractors /suppliers approved by the State Government was not prepared.

• Transparency and economy in procurement need be improved by strict compliance with SSA norms.

• CAL Programme is a non-starter. Though 826 computers were installed in the Upper Primary Schools, the programme is non-functional for want of trainers and instructors and the apathy of the computer trained teacher.


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Sikkim (Cont’d/-)• SPO procured books valued Rs.10.64 lakh for higher classes

students (IX, X, XI, XII) though SSA programe was meant for students of elementary level students (class I to VIII).

• Delayed Payment of Cost of School uniforms resulted in loss of cash discount of Rs.3.35 lakh.

• Printing and publication of inappropriate books for class-I students led to unfruitful expenditure of Rs.12.41 lakh besides non-utilization of the same.

• Preparation of useless Vision Documents by a NGO led to wasteful expenditure of Rs.17.32 lakh.


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Irregularities in ProcurementTamil Nadu• Lack of transparency in Civil Works at VECs Level –

Purchases and execution need to be systematized. Instructions issued should be regularly followed up. Maintenance of Works Card not being done in spite of instructions.

• Purchase of computers 2008-09 Settlement of account with ELCOT by districts to be followed up by HQs.

• Purchase of computers 2009-10 Anomalies to be looked into • Payment of Value Added Tax on books, educational charts

exempted - not payable under Value Added Tax Act but paid - Rs. 4.3 crores

• Reduction in CST Rate from 4% to 2% not applied to the purchases made in 2009-10, resulting in excess payment of Rs. 17517/-.


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Irregularities in ProcurementTripura• Procurement procedures prescribed in the Manual were

subverted for printing of text books.• Two ineligible firms were given orders for huge printing

work. • Printing of text books in excess of requirements during

2009-11 resulted in an extra expenditure of Rs 53.50 lakh.• For printing of text books, an undue favour was extended

to two firms one of whose tender was rejected and the other did not participate in the tender.

• SSA fund of Rs 127.40 lakh earmarked for construction of 7 additional hostel buildings of KGBV for accommodation of 50 girl students in each of such hostel was being utilized improperly since each such hostel would accommodate only 20 to 25 girl students.


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Uttar Pradesh • Free text books were not given to all eligible children.

There was delay in distribution of books.• Computers were lying uninstalled, in the absence of

required infrastructure. • The computer teachers were imparted only 10 days

training which was inadequate to enable them to teach the students.


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Uttarakhand Actual requirement of free text books was not properly

assessed nor supplied timely. The books purchased from NCERT for the library in April

2009 are yet to be distributed to schools. Noticed several deficiencies in the procurement of

Computers. The computers which were procured could not be put to

use in large number of cases as training of teachers in computers did not take place.


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Irregularities in ProcurementUttarakhand (Cont’d/-)• The NIT and Bid documents contained serious omissions,

like quantity for each item of work/supplies to be executed; period of contract and approximate value, thereby depriving the benefits of competitive bids in a high value contract.

• The delay in finalization of tender has not only blocked Rs.169.72 lakh spent on furnishing of school rooms for CAL during 2009-10 for over one year but also deprived large number of students from the benefits of the programme consecutively for two years ie. 2009-10 and 2010-11.

• Due to delay in procurement of computers in 2008-09, children were deprived of the benefits for one year.


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West Bengal• Procurement plans for purchases in bulk quantities were

not prepared at SPO or district level. • Tender Committees for bulk procurement was constituted

as and when required without having any procedural guidelines.


35 th Review Meeting of State Finance Controllers GOA Monitoring of Procurement Technical Support...

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