Chapter II Sports infrastructure

Chapter II

Sports infrastructure

2.1 Planning and financial management

2.1.1 Planning for creation of infrastructure

As stated earlier, the State Government constituted (May 2006) an Executive Committee (EC) under the chairmanship of the Divisional Commissioner, Pune for planning and development of infrastructure at the Shiv Chhatrapati Sports Complex. The EC was empowered to take decisions relating to day-to-day work undertaken for the events and for the planning and execution of the various facilities required to be developed. It was responsible for administrative and technical planning of the CYG events; approval of projects relating to construction and refurbishment of the CYG complex; floating and accepting tenders in accordance with Government rules; appointment of architects and contractors; approval of expenditure on earmarked facilities out of the grants received etc.

We found that the plan forwarded (July 2006) by the DSYS to the State Government, included refurbishment/renovation of the existing sports infrastructure for athletics, boxing, tennis and weightlifting and the hostels, construction of a new multipurpose indoor hall for badminton, a shooting range and a new hostel with 600 rooms (Appendix 1).

In June 2006, the EC decided to appoint a project management consultant for planning, designing and supervision of the proposed refurbishment and new construction of infrastructure at the sports complex and to get the work executed through a contractor. In August 2006, a project management consultant was appointed by the DSYS, whose main tasks were to carry out a pre-construction survey, prepare detailed estimates and drawings and obtain the approval of the technical authorities.

The initial project cost of ` 192.50 crore calculated by the consultant was enhanced (January 2007) to ` 285.09 crore and further increased (May 2007) to ` 355.40 crore. This increase was mainly due to requirement of additional rooms in the boxing venue; a swimming pool; a warm-up pool; temporary diesel generator (DG) sets in the boxing venue; additional equipment in the fitness centre; setting up of a sports science centre etc., as required by the GTCC and the OC.

The GTCC and the OC should have assessed all the requirements at the initial planning stage to enable the consultant to prepare a realistic estimate in the very beginning itself.

We also found that there was no proper assessment of the actual requirement of sports and electronic equipment for the event, which resulted in excess procurement of weightlifting and athletic equipment, a boxing scoring system, electronic video screens/scoreboards etc.

Infrastructure Development for CYG-2008

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2.1.2 Financial Management

2.1.2.1 Budget and Funding

As shown in the Table 1 of Chapter-I, the funds for sports infrastructure and equipment for CYG came to the DSYS from GOI and the State Government.

Out of the total grant of ` 425.50 crore, an amount of ` 424.77 crore was incurred on venue development and equipment (Appendix 2) by the DSYS till December 2010. In addition, an amount of ` 32.95 crore was released as overlays by the State Government which is discussed below:

2.1.2.2 Irregular retention of amounts from the Contingency Fund

In order to meet expenditure of temporary unforeseen nature for the Games, the OC demanded (August 2008) additional funds of ` 32.95 crore from the Government. This was in addition to the grant of ` 425.50 crore received on account of venue development and equipment.

The Government released an amount of ` 32.95 crore as overlays1 in three instalments from the State Contingency Fund between September 2008 and August 2009. Out of this amount, the DSYS transferred a sum of ` 25.12 crore to the OC and retained ` 7.83 crore. From this, the DSYS incurred expenditure of ` 4.36 crore2, leaving an unspent balance of ` 3.47 crore as of March 2011.

We noticed that ` 2.50 crore of this expenditure was incurred on three items for which money had already been provided for in the grants of ` 425.50 crore released by the Government on account of sports infrastructure development. Hence, we feel that the DSYS should not have asked for additional funds under overlays on these items.

The Finance Department had clearly specified (April 1983) the rules regarding expenditure out of the Contingency Fund. It was the responsibility of the administrative department to increase/decrease the demand of funds from the Contingency Fund. This was to be based on the progress reports of expenditure in the format specified in the Maharashtra Budget Manual. We found that though the DSYS was a recipient of amounts from the Contingency Fund, the progress of expenditure was not reported to the Finance Department as required under the manual. Scrutiny of receipts and payments of overlays furnished by the DSYS revealed a balance of ` 2.48 crore in the cash book as of 31 March 2011. We found that an amount of ` 99 lakh had been invested by the DSYS in the form of fixed deposits. The DSYS, thus, unauthorisedly retained money received from Contingency Fund instead of remitting the same into the treasury.

1 Expenditure of temporary unforeseen nature 2 Paid to Maharashtra State Electricity Distribution Corporation Ltd. for additional permanent load: ` 3.05 crore; M/s Shandar Interior Decorators, Pune for furniture: ` 56 lakh, M/s BGSCTPL for test events: ` 70 lakh; and M/s Silver Jubilee Pvt.Ltd.,Delhi for repairing of hockey ground : ` 5 lakh.

Chapter II – Sports Infrastructure

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2.2 Execution of Infrastructure Projects

2.2.1 Hiring of consultant

As stated earlier, the EC decided (June 2006) to appoint a consultant for planning, designing and supervision of the proposed refurbishment and new construction of units at the Shiv Chhatrapati Sports Complex. Accordingly, an NIT was issued (June 2006) and three tenders were received. The EC appointed (August 2006) the lowest bidder, M/s Shashi Prabhu and Associates (SPA) as consultant. We noticed that SPA, had been the consultant for the construction of the Shiv Chhatrapati Sports Complex, in 1994 for the National Games.

The consultant quoted 3.5 per cent of the estimated cost (` 192.50 crore) put to tender as consultancy charges. The consultancy contract was linked to the main work of refurbishment and new construction of sports infrastructure. The payment to the consultant was to be made in phases i.e., 15 per cent as pre-tender fees and 70 per cent for post-tender activities. The pre-tender activities would involve carrying out a pre-construction survey, preparation of detailed estimates and drawings, obtaining technical approval of the competent authorities etc. The post-tender activities would include certification of interim paid bills and supervision of the execution of work. The remaining 15 per cent was to be paid in equal instalments of five per cent each on submission of the final bill by the main contractor for the Games, during the defect liability period and at the end of the defect liability period.

2.2.2 Venue development

For CYG, the existing facilities at Shiv Chhatrapati Sports Complex were upgraded/ refurbished at a cost of ` 106.58 crore (Appendix 3). This included refurbishing of the athletics stadium, the centre tennis court, the table tennis hall, the swimming pool and the hostel buildings and conversion of the old wrestling hall into a boxing hall. Further, new facilities for shooting and badminton and a weapons store, a sports science centre and a fitness centre were created at a total cost of ` 102.03 crore (Appendix 3).

Old Athletic Stadium Renovated Athletic Stadium


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Old boxing hall Boxing hall after refurbishment

2.2.3 Engagement of contractor for the main work

The EC decided in its first meeting of June 2006, to appoint a contractor to execute the main work of refurbishment and new construction of sports infrastructure at the sports complex. A Notice Inviting Tender for the work was issued (13 November 2006) for ` 195 crore. Tender documents were to be sold from 25 November 2006 but the last date of submission of bids was not mentioned in the NIT. A total of five bids were received for the work.

A Technical Evaluation Committee (TEC) was set up (1 November 2006) to examine the technical bids. It comprised five members viz. a retired Secretary, Public Works Department (PWD), a retired Director, Town Planning, the Chief Engineer, PWD, Pune, the consultant and the DSYS. We noticed that only two (the consultant and the retired PWD Secretary) of the five members of the TEC attended (26 December 2006) the technical bid evaluation meeting and presented their bid assessment report to the EC. All five bids were found to be technically suitable. They mentioned in their report (December 2006) that the estimates for the works of renovation and new construction were prepared based on the Maharashtra State PWD District Schedule of Rates (DSR) of 2005-06 for the Pune region. Many items such as sports surfaces, air-conditioners, acoustics and public address system were specialized items, the rates for which were not available in the DSR. The report specified that the rates of these specialised items were based on current market rates.

The financial bids were opened (28 December 2006) and it was found that BGSCTPL had quoted the lowest offer of ` 263.44 crore.

The TEC recommended (December 2006) that nine3 specialised items should be excluded and got executed through specialised agencies in view of the high rates quoted by BGSCTPL for the same. The contractor was asked (2 January 2007) by the consultant, the reasons for quoting such high rates. BGSCTPL stated that this was mainly due to less time for finalisation of rates with specialised agencies. They later agreed to reduce the rates of these items.

3 Landscaping, high mast tower, synthetic track, wooden flooring, Deco turf for tennis, kalzip roofing system, sand blasting, sand filling and electrical and HVAC items


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Just like SPA, the consultant, BGSCTPL had also been involved in the construction of the Shiv Chhatrapati Sports Complex in 1994 and they had worked together on the project.

BGSCTPL finally agreed (6 January 2007) to execute the works at ` 191.74 crore giving one per cent discount. They also offered 23 per cent discount for execution of three items of specialised work. A Letter of Intent was issued (10 January 2007) to them. Thus the main contractor was selected on the basis of a report, which lacked the inputs of the majority of the members of the TEC, who stayed away from the meeting.

We specifically asked for documentary evidence in support of the rates of the specified items and the actual technical sanction accorded to the estimates by the EC, which was the competent authority for approving such proposals. It was the responsibility of the consultant to obtain the approval from the EC. The DSYS did not produce the copy of the technical sanction accorded to the estimates by the EC, as requested by us.

After negotiations between DSYS and BGSCTPL, a work order was issued (February 2007) to BGSCTPL for ` 191.74 crore. This included five (galvalume4 roofing instead of kalzip5 roofing, synthetic track, wooden flooring, deco turf and landscaping) of the nine specialized items which had earlier been proposed for exclusion.

Besides this, the EC approved six additional works costing ` 32.65 crore6 in December 2007 for execution through BGSCTPL, without any bidding.

The change in the scope of the work specified in the NIT after tender negotiations with only one contractor, vitiated the tendering process, as the other contractors who bid for the work were not aware of such changes, as a result of which, the advantage of competitive bidding could not be availed of.

We also noticed the following irregularities in relation to the main contract:

2.2.3.1 Payments to the main contractor

Non-recovery of royalty charges

Royalty charges at ` 17.35 per cu m for the sand and rubble used for the work were not recovered in respect of all the 23 Running Account Bills paid during 2007-09 nor were challans for payment of the royalty to the Government by the contractor produced by the DSYS. Consumption statements of these materials were also not attached to the Running Account bills. In the absence of these, the quantities of these materials consumed and the royalty charges leviable on the same could not be ascertained by us.

4 A mixture of metal of zinc and aluminium. 5 A high-quality standing seam system made from pre-fabricated aluminium profiled sheets, featuring sophisticated technology. 6 Athletic stadium (warm-up track) changing room complex : ` 4.112 crore; warm-up swimming tank and changing room : ` 6.749 crore; additional building for swimming pool : ` 3.457 crore; new hostel : ` 13.20 crore; shooting range : ` 3.64 crore and internal road : ` 1.50 crore

Technical sanction for the work of the main contract was not approved by the competent authority

Advantage of competitive bidding was not availed of as the scope of work changed after award of the contract


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In reply, the DSYS stated (March 2011) that the contractor had submitted documentary evidence of having paid royalty during submission of the final bill. However, this evidence was not produced to us for examination.

Tax deducted at source for value added tax and income tax

Tax deducted at source of ` 6.36 crore for value added tax and ` 13 lakh for income tax was not deducted/ short deducted from the bills paid to BGSCTPL.

Payment of price escalation without verification of basic rates

As per stipulation in the contract document, the amounts payable on account of price variations are worked out on the basis of increased price indices with reference to the basic indices at the time of tendering. Payment of ` 20.59 crore for price variations in cement and steel for differences between the approved purchase rates and basic rates (i.e. rates prevailing 28 days before the last date for tender receipt) was made to BGSCTPL by adopting basic rates of ` 4200/MT for cement, ` 30,000/MT for tor steel and ` 31,000/MT for structural steel. There was a risk that these payments could have been made without verifying the basic rates prevailing 28 days prior to acceptance of the tender, because details regarding the same were not provided by DSYS to us in spite of our requests.

2.2.3.2 Extra expenditure due to non-execution through a supplier

As stated earlier, nine specialized items were deleted from the scope of the work and five of these items were added on later. Of these, two items were the wooden flooring for the badminton hall, the weightlifting hall and the table tennis hall and deco turf for the tennis court. The rates of BGSCTPL were accepted by the EC at ` 9,291.59 per sq m and ` 2,530 per sq m respectively in January 2007.

We noticed that on an enquiry made by the consultant, M/s Free-will Infrastructure had agreed to supply wooden flooring and deco turf at much lesser rates of ` 6,825 per sq m and ` 1,800 per sq m respectively than that accepted by the EC. It is interesting to note that BGSCTPL engaged the same company i.e M/s Free-will Infrastructure for supply of wooden flooring. Execution of these two items through the main contractor instead of the supplier who had initially quoted the rates resulted in extra expenditure of ` 2.21crore.

The DSYS stated (December 2010) that these items were included in the scope of the main contract for better co-ordination and high quality sub-base as per international specifications. The reply is not acceptable as the consultant could have co-ordinated the work of M/s Free-will Infrastructure and the main contractor, considering the significant extra expenditure involved.

2.2.3.3 Excess payment due to incorrect rate analysis for passenger elevators

As per the main contract of construction and refurbishment of the sports complex, BGSCTPL had to provide seven elevators of 20-passenger capacity along with machine rooms at a tendered cost of ` 25.56 lakh each. Considering the fund constraint, the EC, in its meeting held on 8 May 2008,

Extra expenditure of ` 2.21 crore was incurred due to execution of wooden flooring and deco turf through the main contractor instead of the supplier


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decided to provide five elevators of eight-passenger capacity without machine rooms.

We found (January 2011) from the records of the DSYS that the consultant had applied an incorrect rate of payment for the five elevators.

On an enquiry from the consultant before the estimate for the eight-passenger lift was prepared, M/s Omega Elevators quoted (2 April 2008) ` 9.25 lakh per elevator of eight-passenger capacity without a machine room, for which the final rate was calculated (May 2008) by the consultant at ` 10.40 lakh, after adding taxes and contractor’s profit. In spite of this, the consultant worked out the rate payable to the main contractor as ` 20.34 lakh each.

The consultant did not bring to the notice of the EC that the price of a 20-passenger lift without machine room had been quoted (December 2006) by BGSCTPL at ` 11.70 lakh while initially submitting their tender. It was on the recommendation of the consultant that the rate of ` 20.34 lakh was approved by the EC in its meeting held on 16 June 2008.

BGSCTPL, which executed the work was paid ` 97.79 lakh for fixing the five elevators, resulting in excess payment of ` 45.79 lakh7.

The DSYS stated (January 2011) that the schedule of delivery from Omega Elevators was such that it was not possible to go for their quoted rates.

The reply is not acceptable as the DSYS purchased each elevator at a cost of `̀ 20.34 lakh, whereas an elevator of higher capacity was available for `̀ 11.79 lakh from the same contractor. Moreover, in this transaction, a lower capacity elevator was purchased at a higher price.

2.2.3.4 Power upgradation work through BGSCTPL

The EC decided (December 2006) to get the power upgradation work for CYG executed through the main contractor, namely BGSCTPL, at a total cost of ` 12.41 crore, which was later increased to ` 14.28 crore during the execution period due to some additional requirements. The details of approval for the deviation from the scope of work and reasons thereof were not made available to us. Out of the total expenditure, ` 2.32 crore was incurred on items (Appendix 4) that were not included in the tender and ` 1.70 crore was incurred on electrical equipment and other allied materials. The rates offered by the contractor for these items were accepted by the consultant without assessing the market rates. As such, the reasonableness of the rates of the new items could not be ascertained by us.

The DSYS stated (January 2011) that the OC had suggested the increase in the scope of work due to which, the revisions and modifications were made. However, no documentary proof was provided to us regarding the EC’s approval for execution of these non-tendered items.

7 `̀ 97.79 lakh ‐ `̀ 52 lakh (i.e., `̀ 10.40 lakh X 5) = `̀ 45.79 lakh


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Further, as per the agreement BGSCTPL was required to dismantle and remove the existing materials from the site at their own cost. They had offered ` 11.55 lakh as salvage value for these materials. However, we found that the contractor had not reduced the salvage value of ` 11.55 lakh as required under the agreement from the total claim of ` 14.28 crore for the power upgradation work. The consultant certified the bill without deducting the salvage value, which resulted in a loss to that extent. In reply, the DSYS stated (January 2011) that the salvage value had not been recovered from the contractor due to oversight.

It was noticed that components like two 1000 KVA transformers, 22 KV/433 V and one 2000 KVA transformer, 22 KV/433 V were already available in the existing system of the sports complex. However, the department had considered the equipment as unsuitable for the new system. No certificates of the competent authority i.e., the Electricity Department/Maharashtra State Electricity Board regarding non-functioning of the equipment or their non-suitability/non-compatibility with respect to the new system were available on record.

The department incurred expenditure of ` 91.97 lakh on the purchase of similar items i.e., two 1000 KVA/11 KV transformers at the rate of ` 23 lakh each and one 2000 KVA/22 KV transformer at the rate of ` 45.97 lakh.

Delivery challans of the three transformers were not furnished to us.

2.2.3.5 Provision of air-cooling system in boxing, table tennis and weightlifting halls

The Planning Commission had recommended an evaporative air-cooling system for CYG instead of air-conditioning, on economic considerations. Provision for installation of an evaporative cooling system in the boxing, table tennis and weightlifting halls was made in the original work of the construction of infrastructure for CYG under the item High Voltage AC. Accordingly, BGSCTPL executed the installation of evaporative coolers with ducting, cabling, grills, diffusers, piping etc., for units with various capacities in these halls, for which ` 81.30 lakh was paid to the firm between March and September 2008 (Appendix 5).

In June 2008, the OC demanded permanent installation of an air-conditioning system at these venues so as to maintain the temperature at 25 degrees Celsius and the humidity at 60 per cent. The consultant stated that this move would attract an additional capital cost of `̀ 2.91 crore along with additional electrical load of 850 KW with future liability of electricity consumption and suggested installation of the system on rental basis during the currency of the CYG through identified resourceful agencies. Due to persistence of the OC, the EC agreed (August 2008) to the permanent installation which necessitated removal of the air-cooling system provided at a cost of ` 81.30 lakh. Subsequently, an air-conditioning system was installed at a cost of ` 82.74 lakh.

Thus, the lack of proper planning on the part of the OC and EC in deciding on the provision of the cooling system resulted in unnecessary procurement of air-cooling units for ` 81.30 lakh, which were lying dismantled in the complex since October 2008.

An amount of ` 11.55 lakh as salvage value was not deducted from payments made to contractor

An expenditure of ` 91.97 lakh could have been saved had the DSYS utilised existing transformers

Air-cooling system procured for ` 81.30 lakh was lying idle in the sports complex since October 2008 as it was replaced by an air-conditioning system


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The DSYS stated (March 2011) that the air-cooling system which had become redundant was proposed to be installed in Government-owned indoor halls at Pune, Aurangabad and Amravati. The fact, however, remains that these air-cooling units were lying unused ever since they were removed in October 2008 and were subject to wear and tear.

2.2.3.6 Completion of the main work

On 23 May 2008, when the contract period was about to expire, the main contractor approached the consultant for extension of time up to 30 September 2008 for completion of the works due to delay in handing over of clear site, changes/ modifications to various items/services ordered, extra items, additional work of new buildings, delay in approval of a specialized manufacturer for wooden flooring and synthetic surface for tennis courts, delay in receipt of equipment for athletic and tennis courts, absence of labourers etc.

On 17 June 2008, EC approved extension of time for four8 items of works up to 31 July 2008 and for the remaining items up to 4 July 2008. The extension so granted was accepted by the contractor. The consultant gave the virtual completion certificate9 in respect of these works as of 30 September 2008 and the post facto approval up to 30 September 2008 was accorded by the EC in its 67th meeting held on 9 March 2009. The contractor was paid a total amount of ` 318.26 crore.

Thus, the changes in scope of work after awarding of the contract and award of additional work without bidding was irregular.

2.2.3.7 Quality of construction

We found that the quality of work executed in the sports complex was, prima facie, satisfactory except in the case of the badminton and tennis halls. Problems like cracks and leakages were noticed in the badminton hall, which were reported as having been attended to in March 2009. During our joint inspection with the DSYS in December 2010, we found that the cracks in the badminton hall were covered by a chemical solution. We asked for the structural consultant’s report regarding soundness of the structure in view of the various cracks in the badminton hall, but no such report was produced to us.

During heavy rains in July/August 2010, there was leakage of water in the badminton and table tennis halls, flooding the wooden flooring. The DSYS stated (December 2010) that these were minor leakages, which were rectified by the roofing contractor and did not damage the flooring. He further stated that the contractor had replaced a portion of the table tennis hall flooring but the quality of the work was not satisfactory.

8 Swimming pool except changing room; changing rooms in warm up track; final shooting range and D1 and D2 hostels.

9 Certificate given during a stage when almost all the works are completed except for some minor items.


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Damaged wooden flooring in TT hall

Badminton hall with cracks on the wall

Joint physical verification also showed that due to leakages in the warm-up pool, there was no water in it and it remained unutilized (as shown in the photograph below).

Warm-up pool without water due to leakages


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Broken diving platform

2.2.4 Construction of a three-star hotel on Public Private Partnership basis for accommodating CYG participants

2.2.4.1 Overview

As per the OC’s requirement, accommodation was to be arranged for 1700 athletes/officials for 15 days in a Games Village10 for CYG. Since the existing three hostels in the sports complex could accommodate only 500 participants, the EC decided (July 2006), to build a 600-room hostel with 1200 beds, to be converted later into a three-star hotel for commercial use, on PPP basis. Eventually, a three-star hotel with 400 rooms was built by Unity Infra Projects Ltd. Mumbai. The chronology of events is given below:

Dates Event 17 July 2006 EC decided to go in for the construction of a hostel to be

converted into a three-star hotel after CYG on PPP basis.

14 October 2006

NIT was issued, inviting bids for a three-star hotel on PPP basis. Tender documents were to be sold from 26 October 2006. Last date of submission of bids was 13 November 2006.

November - December 2006

Two pre-bid meetings were held on 1 November11 and 11 November 200612; Conditions in the tender documents were relaxed progressively by the EC based on discussions in pre-bid meetings and EC discussions; Last date of submission of bid documents was extended repeatedly due to non-receipt of bids. Last extension was

10 In international parlance, it implies that all athletes should stay at the same complex. It also facilitates security arrangements. 11 Participants at first pre-bid meeting: BGSCTPL, S.D.Dabade , DLF Ltd. Pune, Ashok Murkute, Ganpat Mhatu Balwadkar, Ranee Group of Hotels, Pune, White Crow Facilities, Hari Om Estates Pvt. Ltd., Panchsheel Hotel, Pune, Hiranandani Group, Mahindra Holidays, Nilesh Kakade Group, Pride Group Pune, Nilesh Group Pune and Hotel Sawan Garden Lodging and Boarding. 12 Participants at second pre-bid meeting: BGSCTPL, S.D. Dabade, Ranee Group of Hotels, Hiranandani Group, Nilesh Kakade Group


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given till 22 December 2006.

22 December 2006

Four13 bids were received and technical bids were opened.

26 December 2006

On the recommendation of the technical bid evaluation committee, only one financial bid was opened. The other three bidders were found non-responsive and their financial bids were not opened.

8 February 2007

Contract was awarded and work commenced.

12 April 2007 City Engineer, PMC refused permission for the project.

7 May 2007 Matter was referred to the State Government by the DSYS

16 July 2007 Concession agreement was entered into by the State Government with the concessionaire.

15 October 2007/ 1 November 2007

Change of land use was allowed by the State Government under clause 58 of the MRTP Act,1966.

29 September 2008

Part Completion Certificate was given by the Pune Municipal Corporation.

2.2.4.2 Change of land use and relaxation of building norms

The land on which the three -star hotel was proposed to be built was located in a public-semi-public (PSP) zone, as per the published draft extended plan of PMC limits. On such land, apart from sporting facilities, only schools, colleges and universities and other public purpose buildings like markets, social welfare/ cultural organisations, cinema halls and public entertainment could be built. The land could not be used to construct a commercial hotel.

The EC, in total disregard of the usage limitations attached to the plot, decided to permit construction of the hotel on a five acre plot14 with FSI (Floor Space Index) of 2, along with permission to construct shopping malls, an IT tower, office space etc., on the built-up area left after building 300 rooms. The issue of change of land use and violation of the applicable building laws came up only in April 2007 (after the contract had been awarded and work had commenced on the site) when the Municipal Engineer, PMC rejected the proposed building plan, since a hotel could not be constructed in a public-semi-public zone and also because the height of the proposed structure (shown as 39.5 metres in the proposed building plan) was more than the 30 metres allowed under the PMC Development Control Rules15. Moreover, the proposed/advertised FSI of two also exceeded the permissible FSI of one. Thereafter, the issue was referred (May 2007) to the Department of Urban Development of the State Government. Despite acknowledging that

13 Approach Land Developers-BVG Joint venture, DLF Ltd, Pranav Infra Private Ltd and Unity Infra Projects Ltd. 14 Increased to six acres post-bid, on the plea that the number of rooms had been increased to 400. 15 Published draft development control rules of extended plan of PMC limits


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commercial exploitation on the plot was not permissible under the existing zonal restrictions, a case for change was made on the following grounds:

Work had already commenced on the ground,

Lack of any alternative,

As per the original Government Resolution (of February 2003 issued by the Government in School Education and Sports), one third of the entire plot of 60.06 hectares allotted for developing the sports complex could be used for commercial purposes.

The change in land use for 6.1 acres was approved by the Chief Minister, Maharashtra, in October 2007 under clause 58 of the Maharashtra Regional and Town Planning Act, 1966.

We noted that there was negligence and oversight at all stages and levels, which permitted a prime piece of Government land designated for public purposes to be handed over to private agencies for commercial exploitation for 60 years and that too, without commensurate compensation accruing to the public exchequer. This is evidenced by the following series of events:

The Review Committee (headed by the CS with Additional CS Home and Finance, Principal Secretaries, Planning, Revenue and Urban Development and Public Health and Chief Architect, Mumbai as members and Secretary, School Education and Sports as Member Secretary), were apprised of the intended PPP project in September 2006, but chose not to question the land use issues. They also did not suggest referring the matter to the existing Infrastructure Committee (to which all Maharashtra PWD proposals to build infrastructure were to be mandatorily referred) or the Finance Department, but left it to the EC and the DC, Pune to pursue the project, subject to the condition that the ownership of the land remained with the State Government. Hence, the proposed PPP model remained unexamined and was introduced without appropriate vetting. Clearly, the Review Committee chose to abdicate its responsibility with regard to this project.

The Commissioner, PMC, a member of the EC, which frequently discussed the proposal in his presence, failed to bring to the notice of the members, the restrictions on the land use of the identified plot and the limitations on FSI and height of construction as per the applicable building laws.

The Department of Urban Development, despite acknowledging that the initial rejection of the plan was valid as per the PMC rules and permission for exploiting one-third of the total area of the sports complex for commercial purpose could be allowed only if the Development Control Rules permitted (which, in the instant case, did not) recommended change of land use on the grounds of no alternative, late stage, urgency and commitments to IOA/CGF.


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It is pertinent to mention here that the Shiv Chhatrapati Sports Complex fell largely under Mhalunge village, with a portion within PMC limits (refer map). The plot proposed for the hotel was a prime piece of land (corner plot), located on the Pune-Mumbai Highway, falling within PMC limits. Permitting its commercial exploitation by a private agency, without adequate compensation to the public exchequer begs explanations at all levels.

2.2.4.3 Choice of constructing a three-star hotel over residential accommodation to be disposed off later

For the Asian Games 1982 and also CWG, GOI had opted for constructing residential units (either directly as for the Asian Games 1982 or through PPP model as for CWG-2010) to accommodate participants for the duration of the event, to be subsequently sold to recover costs.

Contrarily, EC chose to construct a three-star hotel on PPP basis, without the matter being referred to the PPP cell headed by the Chief Minister for its


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opinion or input on the suitability of the model, the alternatives, and structuring of the arrangement to safeguard public interest.

In our opinion, construction of dwelling units and their subsequent sale in a developing city like Pune, with CYG linked infrastructure improvement in the vicinity, on 9.6 acres of public land (6.1 acres for hotel plus 3.5 acres for parking), would have been for the larger public good.

2.2.4.4 Gradual relaxation of tender conditions

The EC based its proposal on a Feasibility Report prepared by the consultant. The proposal and the tender documents were not vetted by the Finance Department of the State or the specialised Infrastructure Committee of the State. The EC followed a very ad-hoc approach in tendering and award of this contract.

The NIT was advertised on 14 October 2006, with the tender document to be made available from 26 October 2006. At this stage, the tender conditions had not been frozen and the exact location of the plot on which the hotel was planned was not decided. The tender conditions were progressively relaxed at various stages, as summarised below:

Identification of plot The proposed site for the hotel was not indicated in the NIT published on 14 October 2006. The process of plot identification and measurement of land area started on 1 November 2006.

Area The area was increased from the initial 5 acres to 6 acres in the EC’s meeting dated 4 December 2006. However, in the additional common set of deviations dated 11 December 2006, it was retained at 5 acres. Finally, 6.1 acres was allocated.

Parking Two acres - introduced in EC meeting of 4 December 2006. Finally, 3.5 acres was allotted for parking and gardening at a nominal rent of ` 1/- per sq m per year.

Three-star norm for rooms changed to one-star norm

The norm was changed in the EC meeting of 4 December 2006

Upfront fee to annual lease

NIT of 14 October 2006 indicated annual payments. Upfront fee was introduced in 6 November 2006 EC meeting, but was only retained as annual payments in the set of deviations to tender documents issued after two pre-bid meetings.

600 rooms to 300 rooms

The requirement of 600 rooms was reduced to 300 rooms (600 beds) in the EC meeting held on 4 December 2006.

Period as per the bid criteria to a 60 years concession

Initially, the period of concession was to be the bidding criterion with fixed annual payments. It was subsequently changed to a fixed concession period of 30 years and finally increased to 60 years in the EC meeting of 4 December 2006 from the 30 years mentioned in the initial tender document. The annual premium for leasing became the biddable criterion.


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Pre-qualification experience of construction of a three-star hotel

This criterion was removed, based on the pre-bid meeting of 11 November 2006.

Such frequent and significant variations in the tender conditions, though justified by the EC on grounds of lack of response to the NIT, are indicative of the ambiguity that marked the bidding process and would have naturally acted as a deterrent to bidders. The dwindling interest of the bidders is evident from the fact that

in the first pre-bid meeting, 15 agencies (including several prominent players in the construction/hospitality industry) participated;

in the second pre-bid, only five of the original 15 were present.

It is interesting to note that of the four that finally bid, only DLF Ltd had attended the pre-bid meetings and the remaining three, including Unity Infra Projects Pvt. Ltd., whose financial bid was the only bid to be opened and to whom the contract was awarded, never participated in any of the pre-bid meetings.

Further, it is strange that such experienced agencies in the construction field never raised the critical issue of change of land use16, since it would be a critical parameter in deciding whether to bid or not. It is possible that lack of clarity on this important issue deterred potential bidders and only bidders who were confident of getting post facto clearance from the State Government, would have gone ahead with the bidding process.

2.2.4.5 Post-bid negotiations and award of contract

After numerous extensions, four responses were finally received to the NIT on 22 December 2006. The technical evaluation committee (comprising four members of whom only two signed the report) disqualified three17 bids on 26 December 2006, citing that they were non-responsive. The financial bid of the only qualified bidder, Unity Infra Projects Pvt. Ltd, was opened on 26 December 2006.

The bidder quoted a fixed annual premium of ` 2.16 crore per annum for 60 years from 2008-09. Negotiations were held on 30 December 2006, which resulted in allotment of six acres of land against the originally envisaged five acres (to accommodate the increased demand for 400 rooms to accommodate three beds i.e. 1200 beds at one location) and the annual concession fee was revised to ` 1.56 crore per annum with a five per cent increase every three years.

In our opinion, opening of a single financial bid essentially means that the principle of competitive pricing is compromised. This is confirmed by the fact that the Finance Department, State Government (to which the case was referred by the CM’s office, after the contract had been concluded) also noted

16 or so it would appear from documents pertaining to EC meetings 17 Approach Land Developers-BVG Joint venture, DLF Ltd and Pranav Infra Private Ltd


23

that while the NPV of the original offer was ` 21.50 crore, the NPV of the revised offer was only ` 14.97 crore. It assessed the value of six acres of land with FSI of 2 at ` 48 crore (considering the conservative residential rate of ` 10,000 per sq m) and the value of 8,000 sq m of land for parking at ` 3.00 crore. It recommended that a fair NPV for the said piece of land would be ` 40.00 crore. Subsequently, EC renegotiated with the concessionaire and secured an enhanced fixed premium of ` 2.60 crore per annum for 60 years in August 2007 (NPV ` 25.87 crore) and reported to the Government that it was not possible to go any further. There was no further communication from the State Government in this regard. This delayed intervention of the Finance Department only confirms our opinion that at the initial stage itself, when it was brought to the notice of the Review Committee, the matter should have been looked into by the concerned department of the Government.

2.2.4.6 Defaults in payment of premium

We also noted defaults and delays in payment of annual premium by the concessionaire, right from the first premium due on 1 November 2008, as given below:

Due date Actual

1 November 2008 25 May 2009 (delay of 205 days)

1 November 2009 Only ` 50 lakh paid on 19 January 2011

1 November 2010 Not paid

No penal action was, however, taken by DSYS in this regard, as stipulated in the agreement.

Photographs of the hotel indicate that the facility constructed was primarily oriented towards a superior class hotel, rather than merely a functional hostel of international standard for accommodating athletes. While it is well appreciated that suitable accommodation had to be provided to the participants of CYG, evidently, under the guise of hosting the athletes and officials of CYG, a hotel was allowed to be constructed through change of land use with a minimal premium accruing to Government. If indeed the intent was to convert public/ semi-public land for commercial use, the Government chose to ignore an opportunity for unlocking the full market value of such land in a prime location.

Pictures of Vits hotel constructed on PPP at the Sports Complex Balewadi, Pune


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2.2.5 Contracts of ancillary works

We examined 33 major contracts for ` 42.02 crore for ancillary works and observed the following general deficiencies in the tendering and award procedures:

In 12 cases, less than the prescribed time was given for submitting tenders and advertisements were placed only in local Marathi newspapers. (Appendix 6)

In three cases, contracts for equipment were concluded with firms with no prior experience in the field. (Appendix 7)

Instances of lack of transparency in the tendering process were noticed in five cases. (Appendix 8)

Additional items were ordered from the same contractor without tendering in four cases.(Appendix 9)

Hire charges for facilities were paid for periods for which the facilities were not available in two cases. (Appendix 10)

Arrangements for technical inspection of equipment by third parties were not made or items were found defective on receipt in four cases. (Appendix 11)

Requirements of equipment were not assessed realistically and the quantity procured was in excess of the requirement in one case. (Appendix 12)

Our findings from the scrutiny of some of the major contracts for ancillary works are discussed in detail below:

2.2.5.1 Landscaping, hardscaping, sculptural and horticulture works

The work of landscaping was initially allotted (January 2007) to BGSCTPL for ` 2.00 crore, out of which the contractor executed work valuing ` 85 lakh as of September 2008. On a demand (May 2007) of the OC to increase the scope of work of landscaping, hardscaping and horticulture works, the EC, in its 36th meeting of 21 May 2007, decided to execute the work through a specialized agency and formed a committee of six members to decide the scope of work to be executed. However, no action was taken in this regard as noticed from the subsequent discussions of EC. On 18 September 2007, the EC decided to execute the additional landscaping work and directed the consultant to submit a detailed report in this regard. There was no discussion in the minutes of the EC’s meeting about the desired detailed report expected from the consultant. In spite of repeated requests, the detailed estimates showing the additional work to be executed, measurement of items and their rate analysis etc. were not produced to us. Clearly, the consultant and the EC had failed to undertake the work in an efficient and planned manner though the consultant claimed and was paid consultancy fees for pre-tender activities for the additional work.


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The EC approved (11 February 2008) the lowest bid (` 9.49 crore) of M/s Indage Development Construction Pvt. Ltd, Mumbai. The work was awarded at a negotiated cost of ` 7.50 crore. The work order was issued on 13 March 2008 with the stipulated date of completion as 30 September 2008. Our scrutiny revealed the following:-

(I) Irregular award of tender

In spite of a significant estimated cost of ` 5.86 crore involved in the works, the tender notice for the same was published in only one newspaper viz, ‘Sakal’, of Pune on 13 December 2007. It was not published in any national daily. This resulted in low response to the tender notice as only two bids18 were received.

Re-tendering was initiated on 16 January 2008, but in the second call too, the notice was published in the same newspaper on 17 January 2008 giving only seven days instead of the mandatory 15 days for submission of tenders. This time, only one contractor19 submitted a bid. In the approval note (February 2008), it was stated that three bids were received within the last date of submission. We found that two of the three bids stated as received on re-tendering were actually received during the first call and not in the second call. Later, as one of the bids was returned back on the request of BGSCTPL, comparison of two bids including one received against the cancelled tender was made for the purpose of selection. The work was awarded (13 March 2008) to M/s Indage Development Construction Pvt. Ltd. Mumbai whose bid had been received against the first tender process which had been cancelled. Thus, award of the work was irregular. The DSYS and the consultant failed to ensure proper and transparent tendering.

Apart from the above, additional work of landscaping, construction of a water pond in front of table tennis hall and other miscellaneous items20 aggregating ` 60.60 lakh were also allotted by the DSYS to the same contractor in the last week of September 2008, without obtaining approval of the EC and without recording the necessity for execution of these works.

The DSYS stated (December 2010) that the tender notice was published in the local popular newspaper but was silent about the irregular award of the contract.

(II) Irregular payment of mobilisation advance

The contractor was paid mobilisation advance of ` 75 lakh in March 2008 though provision for such payment was not included in the tender document and in the agreement executed with the contractor. On this being pointed out, the DSYS stated (December 2010) that the mobilization advance claim was paid in view of the decisions taken in the pre-bid meeting held on 27 December 2007. The reply of the DSYS is not acceptable as the pre-bid meeting held on 27 December 2007 for initial tendering (13 December 2007)

18 BGSCTPL and Indage Development Construction Pvt. Ltd, Navi Mumbai 19 Jain Irrigation Systems Ltd, Pune 20 Supply of palm pots, providing and laying of PCC, fixing chain link, providing and fixing pole light etc

Work of landscaping was awarded to a contractor by considering their bid received in respect of a cancelled tender


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of the work was cancelled and subsequently, the work was re-tendered on 16 January 2008. No provision for payment of mobilisation advance was made in the contract while re-tendering. Thus, the mobilisation advance paid to the contractor was irregular.

(III) Provision of sculptures and monuments without consulting the Department of Cultural Affairs

In the tender, a fixed amount of ` 75 lakh was provided for sculptures and monuments depicting the culture of the country and Maharashtra. The scope of the work was to be decided after consultation with the Department of Cultural Affairs. It was, however, noticed that design for five items viz., top, snakes and ladders, yoga sculpture, youth garden and ‘lagori’21 submitted by an agency named M/s Space Designers, Pune working for M/s Indage were approved by the DSYS at the rates quoted by the contractor instead of making a market study and obtaining competitive rates. The Department of Cultural Affairs was also not consulted. Moreover, there were no sign-boards near the sculptures indicating their names and their relevance to Indian culture.

The DSYS stated (March 2011) that the appreciation of sculptures was a subjective matter which varied from person to person and hence, this item was provided at a lump sum fixed amount.

The reply is not acceptable as the consultant and the DSYS did not consult the Department of Cultural Affairs and made no market survey for deciding the rates but instead, relied upon the contractor for the same.

Sculptures in the complex with no signboards

Yoga Garden

21 A traditional game

Sculptures/monuments costing ` 75 lakh were executed by the DSYS without consulting the Department of Cultural Affairs.


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Youth Garden

Lagori

Snakes and Ladders

(IV) Reduction in defect liability period of landscaping/ hardscaping contract

The DSYS reduced the defect liability period (DLP) of five years stipulated in the tender to one year while issuing the work order to the agency, without any recorded justification, thereby giving undue benefit to it. As noticed from the correspondence made with the contractor in June and July 2009 and after expiry of the DLP in October 2009, the firm did not maintain the site during the DLP. In the absence of any penalty clause in the agreement, the DSYS could not effect any recovery due to default of the contractor in maintenance. Besides, the DSYS did not hire any agency for maintenance of the landscaped site after expiry of the DLP. The site was in a state of neglect and the benefits of the effort largely lost, just two years after CYG, due to lack of maintenance.


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The DSYS admitted (March 2011) that the low response to the bids was due to the long DLP of five years and therefore, negotiations were entered into with the contractor for lowering the cost by reducing the DLP to one year. However, the DSYS failed to produce any document showing the financial effect due to reduction of the DLP.

Position of landscaped areas in a state of neglect as of December 2010

2.2.5.2 Hiring of diesel generator sets on rental basis

In a meeting of the EC held on 22 July 2008, it was discussed that there was a requirement of six to seven megawatt (MW) of electricity power for the CYG event. It was also discussed that this requirement would be fulfilled by 2 MW from their own DG sets and 1.5 MW from the Maharashtra State Electricity Board. The remaining 3.5 MW would be covered with wind energy supplied through the Kalyani Power Development Pvt. Ltd. The cost of the entire power supply was estimated at ` 1.25 crore. The consultant was directed to prepare a detailed report and submit it at the next meeting. We found that no action had been taken in this regard by the consultant nor did the EC ask for the required report from the consultant in its ensuing meetings. In the meantime, a tender for hiring of DG sets was also floated, which was published on 21 July 2007. The tender was approved by the EC in its meeting of 28 August 2008 in favour of M/s Jeram Shivji, the lowest bidder. A contract for supply of DG sets of total capacity of 12,130 KVA for 12 days on rental basis was awarded to M/s Jeram Shivji for ` 1.90 crore, excluding diesel cost. The work order was issued on 24 September 2008 and the DG sets were to be commissioned on 7 October 2008. Later, on a demand from the OC dated 2 October 2008, an order for additional requirement of 5,030 KVA at the same rate was issued on 3 October 2008. This increased the cost of hiring charges to ` 2.69 crore. The sequence of events showed that there was no co-ordination between the EC and the consultant. The total quantity of power which was ordered did not match the requirement discussed on 22 July 2008 by the EC.

Even though the requirement was very high, the tender notice was published only in local newspapers on 21 July 2008 with the last date of submission as 31 July 2008, without providing the mandatory 25 days’ time for submission of quotations. Tenders were not received up to the due date. In a noting of 29


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August 2008 approved by the DSYS, two tenders22 were shown as received up to the last date, whereas the actual date of receipt of both the bids was 4 August 2008 as noticed from the official seal affixed on the envelopes in which the tenders were received.

It was noticed that finally 15,975 KVA DG sets including four DG sets of 2000 KVA capacity in possession of the DSYS were utilized against the tendered quantity of 17,160 KVA for the CYG event. This proved that the order for the DG sets was not based on realistic requirements, resulting in avoidable expenditure of `̀ 49.89 lakh (Appendix 13).

As per a decision taken at a pre-bid meeting held on 27 July 2007, diesel cost was to be reimbursed on the actual basis on presentation of delivery notes and bills. It was, however, noticed that the contractor was paid `̀ 36.17 lakh in two installments on 19 October and 5 December 2008 on the basis of a theoretical consumption rate, already intimated by the contractor on 18 August 2008. In the absence of delivery notes and bills in proof of the diesel purchased, the authenticity of the payments made on account of diesel cost could not be verified. We noticed that of the total claim of `̀ 36.17 lakh on account of reimbursement of diesel made by the contractor, only log sheets in regard to diesel consumption of `̀ 1.55 lakh for DG sets utilized during 13 and 18 October 2008 at various venues were on record along with the bill. Moreover, these log sheets were not signed by the venue in-charges or other concerned authorities.

It was noticed that against the tendered cost of `̀ 2.69 crore on hiring of DG sets, a total expenditure of `̀ 3.60 crore, including diesel cost was approved on 5 December 2008. The total cost included a claim of `̀ 63.39 lakh for additional utilisation viz., (a) providing DG sets during the preparation period from 2 October 2008 (`̀ 6.53 lakh), (b) providing power supply for AC and other electrical items for participants (`̀ 44.80 lakh), (c) providing additional DG sets for inauguration on 12 October 2008 (`̀ 8.15 lakh) and (d) providing two DG sets upto 21 October 2008 (`̀ 3.92 lakh). No details such as venue-wise number of DG sets and their usage with supporting log sheets; the officials who demanded the additional requirement; approval of the EC etc. were available on record. In view of the fact that the DSYS had failed to utilise the entire 17,130 KVA requisioned for the Games as discussed above, the payment of `̀ 63.39 lakh for additional utilisation was not justified.

2.2.5.3 Fixing of Signages

A tender notice was published in the local newspaper ‘Sakal’ on 21 July 2008 for designing, providing and fixing of ground signages of various kinds with the last date of submission of tenders being 31 July 2008. Out of the five firms which purchased tender forms, only one bid from M/s. White Crow, Pune was received. Even though the firm had no past experience in this type of work, an essential requirement indicated in the tender documents, the EC, in its meeting held on 6 August 2008, accepted the single tender without resorting to re-tendering due to the time constraint. Accordingly, a Letter of Intent was issued

22 M/s Accurate Power System Pune and Jeram Shivji and Sons Mumbai

Excess order of DG sets resulted in avoidable expenditure of `̀ 49.89 lakh

An amount of `̀ 36.17 lakh was paid without any supporting documents like delivery notes and bills for purchase of diesel

The work of designing and fixing of ground signages was awarded to a contractor who had no previous experience of the work


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on 13 August 2008 followed by a work order on 27 August 2008 for ` 58.70 lakh, with the stipulated date of completion as 26 September 2008. The consultant recommended extension of the work up to 10 October 2008, but there was no documentary proof as to when these works were actually completed. Payments amounting to ` 56.26 lakh were made in December 2008.

M/s. White Crow was basically in the business of catering, event management and hospitality services and took part in the tendering for this work in joint venture/ consortium agreement with another firm M/s Wedha Communication dealing in the advertising/ signage business. All the previous experience certificates were in the name of M/s Wedha Communication. Though the tender forms did not contain any provision for joint ventures, a hand-written clause was found inserted in the ‘Eligibility Criteria’ at serial number 13 of the tender form which read ‘Joint Venture shall be allowed’. It was observed from the papers submitted with the tender that the joint venture agreement was entered into only on 31 July 2008 which was the last date for receipt of the tender and valid only for the work of CYG. The profit-sharing ratio between M/s White Crow and M/s. Wedha Communication was 80:20. As documents submitted by M/s White Crow were not in order, his bid should have been rejected.

The DSYS stated (December 2010) that the contractors attempted to go into joint ventures in areas where they felt the need of internal help and were not disqualified in the best interest of the project. However, the DSYS stated (March 2011) that M/s White Crow had informed that they had experience in preparation of banners and temporary works of exhibitions and had also done work for the State Government. The reply is not acceptable as all the previous experience certificates attached with the tender were in the name of M/s. Wedha Communication.

2.2.5.4 Procurement, installation, attendance and maintenance of temporary tents for TV broadcasting

The scope of the above work included hiring of temporary air-conditioned tents for media, chairs, fire-fighting devices, DG sets, etc. and construction of a temporary warehouse for the period 1 August to 25 October 2008 for CYG. Tender notices were published in newspapers on 20 June 2008 with the last date of submission of tenders being 3 July 2008. Six firms purchased tender documents, of which five submitted tenders. The work was awarded to M/s Wadhwa Designs and Exhibit, Pune, who quoted the lowest rate of ` 1.61 crore. A Letter of Intent was issued (31 July 2008), for completion by 15 August 2008. However, the work order was issued after two weeks, i.e. on 13 August 2008, indicating the stipulated date of completion as 25 August 2008. During audit, it was noticed that one of the bidders, M/s. Lallooji and Sons, informed (30 July 2008) the DSYS that they had quoted the rates considering the period of hiring from 1 August 2008 to 25 October 2008. As the work had not commenced, the hire charges of all the materials would considerably change and as the period of hiring stood reduced, there would be reduction in all the charges. The firm also requested that if fresh tenders were called for the reduced period of hiring, there would be significant savings for the Government. No action was, however, taken by the DSYS on this matter.

There was overpayment of ` 37.72 lakh on account of non-reduction of hire charges for facilities not rendered


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As the offer of M/s Wadhwa Designs and Exhibit, Pune was to provide these facilities for the period from 1 August 2008 to 25 October 2008 and the rates were quoted accordingly, the late issue of work order on 13 August 2008 gave undue benefit of 13 days to the contractor. As the completion period of the above work was 25 August 2008, the facilities would certainly not be available up to 25 August 2008. However, no deduction on this account was made and as a result, there was overpayment of ` 37.72 lakh23 to the contractor. The DSYS stated (December 2010) that since the tenders were floated prior to 1 August 2008, the hiring was kept as 1 August to 25 October 2008. The reasons for not deducting the hire charges for the period for which the facilities were not available for use were not given.

2.2.6 Contracts for purchase of electronics, sports and other equipment

We examined 30 major contracts for ` 39.53 crore for procurement of electronics and sports equipment and observed the following general deficiencies in the tendering and award procedures:

Orders were placed directly in 16 cases on a single source without tendering, in violation of the codal provisions.(Appendix 14)

Hire charges for facilities were paid for periods for which the facilities were not available in one case. (Appendix 15)

Penalty for delayed supply of equipment was not deducted in three cases.(Appendix 16)

Arrangements for technical inspection of equipment by third parties were not made and items were found defective on receipt in three cases. (Appendix 17)

Requirements of equipment were not assessed realistically and the quantity procured was in excess of the requirement in six cases. (Appendix 18)

Our findings from the scrutiny of some of the major contracts are discussed in detail below:

2.2.6.1 Purchase of electronic equipment

The OC furnished the requirements for various types of electronic equipment to the DSYS between November 2007 and March 2008, with instructions for purchase from specified manufacturers. Accordingly, the DSYS placed seven supply orders for ` 31.94 crore on Indian and foreign firms from February to September 2008 on single tender basis, as indicated in Table 2 below :

23 Total payment was ` 129.74 lakh for the period of 86 days (1 August to 25 October). Proportionate extra payment for 25 days = (` 129.74 lakh x 25) / 86 i.e. ` 37.72 lakh


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Table 2: Supply orders placed on single tender basis

Sr. No

Venue Nomenclature of the equipment

Name of the agency

Brand Amount (` in crore)

1 Shooting Electronic scoring target systems

Sius AG, Switzerland

Sius Ascor 16.25

2 Trap and Skeet Trap and skeet ranges Laporte, France Laporte 1.73

3 Athletics and Swimming

Starting block, electronic scoreboard, starting platforms, video matrix colour scoreboard etc.

Swiss Timing Omega, Switzerland

Omega 7.95

4 Table Tennis, Tennis, Weightlifting, Badminton and Wrestling

Electronic scoreboards (Opto-tech brand)

Shiv-Naresh, Delhi Opto-tech 4.10

5 Athletics and Boxing

Electronic scoreboards Gem International, Faridabad (Indian agent of Swiss Timing Omega)

Omega 0.85

6 Table Tennis, Tennis and Weightlifting

Electronic scoreboards (Opto-tech brand)

Shiv Naresh Sports Private Limited, Delhi

Opto-tech 0.37

7 Athletics and Boxing

Electronic scoreboards, tachometer etc.

Gem International, Faridabad

Omega 0.65

After placing five supply orders aggregating ` 30.88 crore on nomination basis as per the OC’s direction, the matter was referred to the Ministry of Youth Affairs and Sports through the State Government in June 2008 for guidance. In August 2008, GOI clarified that the procurement was to be made as per the General Financial Rules and from the approved list of official suppliers of the concerned international federations. However, even after receiving the clarifications, the EC placed another order for electronic scoreboards for ` 65 lakh in September 2008 on Gem International, Faridabad in contravention of these clarifications.

We also observed other deficiencies in procurement of equipment:

Athletics Starting Blocks (portable): Thirty Starting Blocks were procured from Swiss Timings Ltd. against the requirement of 17, resulting in avoidable expenditure of ` 20 lakh.

Rotatory Electronic-Scoreboard: Four scoreboards (portable) were procured for the main stadium basically for display purpose. A maximum of two field events were possible at a time in the main stadium owing to its size. The expenditure of ` 38 lakh on procurement of two additional scoreboards was avoidable.

Swimming Pool Starting Platforms: Sixteen starting platforms procured for ` 13 lakh for the warm-up pool were lying idle due to leakages in the warm-up pool.


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Shooting Target System in 50 M main range: Six scoreboards procured for ` 43 lakh, which were an integral part of the shooting target system, were not working.

Boxing Scoring System: In March 2008, the OC demanded one scoring system but the DSYS hired two systems, involving additional expenditure of ` 12 lakh.

Electronic Scoreboards : The OC reported on 24 September 2008 that the electronic scoreboards supplied by M/s Shiv Naresh Sports Private Limited (SNSPL) for ` 4.97 crore had very rudimentary screens, similar to electronic counters, without the inbuilt Olympic Result Information System (ORIS) compliant timing and scoring system and stated that the cost of providing and handling such a system should be borne by the supplier. However, the DSYS did not effect any deduction from the supplier’s bills for non-supply of the ORIS software.

Delay in supply and installation of equipments by Gem International, Faridabad and Shiv Naresh Sports Private Limited, Delhi: Despite a provision of penalty of one per cent per week of delay, the DSYS allowed extension of time to these suppliers without levy of penalty of ` 23.25 lakh. (Appendix 16)

Rentals paid for electronic scoreboard hired from M/s Gem International, Faridabad: The agency claimed hire charges from 1 September to 15 November 2008 for equipment that was despatched from Faridabad on 4 October 2008. The DSYS paid the full hire charges claimed by the firm, without making a deduction of ` 38 lakh (Appendix 15) for the period that the equipment was not available.

Cost escalation due to currency fluctuation: The DSYS bore cost escalation of ` 32 lakh (Appendix 19) due to foreign exchange variations during the period of delay of supplies by foreign suppliers, which should have contractually been borne by the suppliers. In addition, there was no contractual penalty leviable for the delay in supplies.

2.3 Irregularities in payment made to the consultant

2.3.1 Payment to the consultant

As per the consultancy contract concluded in August 2006, the consultant was to be paid total fees of ` 6.74 crore at 3.5 per cent of the estimated cost (` 192.50 crore) of the main work of construction and refurbishment of the sports complex. It was found that they were irregularly paid total fees of ` 11.27 crore (up to October 2010), against the eligible amount of ` 6.74 crore. The excess consultancy payment of ` 4.53 crore was largely on account of consultancy fees on price escalation, equipment procured and works executed beyond the contract value, which were not provided for in the consultancy contract.

There was excess payment of ` 4.53 crore on account of consultancy fees against the contractual obligation


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2.3.2 Non-incorporation of a suitable clause in the consultancy contract

We noticed that the EC, while finalising the consultancy contract in its meeting of 17 July 2006, had decided that in case of any increase in the estimated cost of a work, a provision was to be made to restrict the consultancy fees payable up to 25 per cent increase over the estimated cost. However, this decision was not taken into consideration, for which no reasons were on record. Even if this decision had been implemented, the consultancy fees would have been restricted to ` 8.42 crore.

2.3.3 Payment made to the consultant for preparation of detailed estimates without following basic requirements

We noticed that the consultant was paid (February 2007) fees of ` 1.01 crore as pre-tender fees24 which included ` 13.48 lakh for preparation of detailed estimates and obtaining technical approval of the competent authority. The competent authority for according approval to the estimate was the EC. It was noticed from the records presented to us that the detailed estimate did not comprise any measurement sheets, rate analysis and lead statement25 which were the basic requirements for any estimate. The estimate was also not accorded approval by the EC as noticed from the minutes of the EC meetings. Hence, the payment of ` 13.48 lakh made to the firm for the purpose of preparing detailed estimates and getting technical approval was not justified.

The consultancy contract clearly specified the estimated cost of the work as ` 192.50 crore. However, the cost of the work (including cost of ancillary works/ procurement of equipments) later increased to ` 355.40 crore as of April 2008. The consultant demanded that consultancy charges should be paid on the entire ` 355.40 crore. On approval (May 2008) of the EC, the DSYS released (27 June 2008) ` 73.23 lakh as pre-tender fees on a total cost of ` 139.49 crore for works executed by various contractors covering cost escalation and extra work executed by the main contractor. We observed the following:

The above payment included consultancy fees of ` 8.29 lakh on price escalation paid to BGSCTPL in contravention of the contract conditions, which clearly specified that the cost of work done by the agency would exclude the payment made towards price escalation, mobilization advance and machinery advance. Considering a total price escalation of ` 20.59 crore paid, there was an additional liability of ` 63.79 lakh26 to the consultant.

Further, the consultant’s scope of work covered planning, designing, interior decoration and supervision of proposed refurbishment and new construction of units at the Shiv Chhatrapati Sports Complex. We noticed that the scope

24 As per contract condition the consultant was required to be paid fees for pre-tender activities like preparation of estimates/designs, calling for tenders, printing the tender booklets. This fee was 15 per cent of the total emoluments to be paid to him, which in the current case was 3.5 per cent of estimated cost put to tender. 25 Lead statement showing distances of various materials required for construction to be brought at site. 26 ` 72.08 lakh minus ` 8.29 lakh

The decision of the EC of 17 July 2006 to restrict the consultancy fees payable up to 25 per cent increase over the estimated cost was not implemented


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pertained to construction works. Therefore, payment of fees for pre-tender activities amounting to ` 27.49 lakh for non-construction items, namely procurement of sports and electronic equipment costing ` 52.36 crore, was in contravention of the contract conditions. There was also a future avoidable liability of ` 1.56 crore27 on this account to be paid to the consultant.

In addition, the DSYS paid (October 2008) ` 1.40 crore, being 85 per cent of the consultancy fees at 3.5 per cent of the cost of 30 items of sports equipment imported on the OC’s direction from single suppliers. As these procurements did not involve preparation of estimates, processing tenders, post-tender activities, payment of the entire fees of ` 1.40 crore to the consultant on such procurements was totally unjustified.

2.4 Non-maintenance of power factor of the electrical system in the sports complex

The DSYS paid penalty charges of ` 17 lakh to the Maharashtra State Electricity Distribution Company Limited (MSEDCL) from October 2008 to March 2010 for not maintaining the required power factor (PF)28 up to 0.95. In November 2009, the consultant suggested installation of capacitors to maintain the required PF level. Subsequently, capacitors were installed (March 2010) by DSYS at a cost of ` 3.70 lakh through M/s Saptarshi Electricals and the PF level improved to almost 1.0. As a result, incentives of ` 9.50 lakh were allowed by MSEDCL from April to November 2010. Had the installation of the capacitor been proposed by the consultant at the initial stage of refurbishment and construction work, incentives of ` 20.19 lakh29 could have been availed on bills from 16 Oct 2008 to 20 March 2010. The delayed proposal by the consultant resulted in a loss of ` 37.19 lakh30 towards penalty and incentive.

DSYS stated that the sports venues were frequently occupied and hence, capacitors could be installed in the year 2010 only. The contention is not tenable as the first sports event was held in the sports complex on 17 November 2008, after a month of closing of the CYG events on 18 October 2008. Also, capacitors existed in the old electrical structure of the sports complex prior to the power upgradation work as revealed from the pre-bid document of the contract. Provision for the same had not been made by the consultant in the refurbishment work itself.

2.5 Monitoring and oversight

As stated earlier, a governance and oversight structure was put in place for monitoring and oversight of various activities relating to CYG through various committees like the Apex Committee (AC), the Review Committee (RC) and the Executive Committee (EC). Our study of the working of these committees yielded the following findings:

27 (` 183.267 lakh minus ` 27.49 lakh= ` 155.777 lakh) ` 183.267 lakh being calculated at 3.5 per cent of ` 52.362 crore. 28 PF = Defined as ratio of the real power flowing to the load to apparent power in the circuit. 29 17 months x ` 1.187 lakh avg. incentives per month (` 9.5 lakh/8months) 30 (` 17 lakh penalty + ` 20.19 lakh incentive).

The consultant delayed the proposal for installation of capacitor which resulted in loss of ` 37.19 lakh


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Apex Committee

The Apex Committee headed by the Chief Minister was constituted in September 2006 and was responsible for obtaining funds from GOI and providing guidance to the EC and the RC.

We asked (February 2011) for minutes of the meetings held by the AC to which the Under Secretary, School Education and Sports Department replied (April 2011) that no meeting of this committee had taken place. The constitution of the Apex Committee thus did not seem to serve any purpose and reflected the unenthusiastic attitude of the highest echelons of the State Government towards the holding of the Games.

Review Committee

A Review Committee was constituted in June 2006. It was headed by the Chief Secretary and comprised nine other members. The committee was responsible for overseeing the work of the EC and according expeditious sanctions at the Government level. The committee met only three times since its constitution and did not arrest the spate of irregularities committed by the EC in respect of awarding of contracts for various works and purchase of equipment for the Games.

Executive Committee

The Executive Committee constituted in May 2006 was headed by the Divisional Commissioner, Pune. The DSYS was its Member Secretary along with five other members. Its responsibilities included:

Overall administrative and technical planning of CYG;

Approval to works of renovation/ new construction required for the games;

Calling and opening of tenders and their final approval for works as per Government rules;

Appointment of architects/ contractors for construction as per Government rules;

Approval to the expenditure on approved items from the funds made available by the Government for the Games;

Implementation of decisions taken by the Review Committee at the State level.

The EC met regularly and held 68 meetings between June 2006 and June 2009.

We observed that the EC failed to address the following issues adequately:

The EC approved floating of an NIT for the main work for ` 195 crore without technical sanction. The Chief Engineer, PWD, Pune Region, a member of the EC, had the power to accord technical sanctions to all works executed by the Government departments in excess of ` 1.25 crore. Though the Chief Engineer regularly attended EC meetings, he did not point out the necessity and importance of according technical approval to the estimates.


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Though the EC formed committees for bid evaluation of the main work of new construction/ refurbishment and the BOT project, the quorum of attendance at the meetings of these committees was not specified. We noticed that meetings of bid evaluation committees were attended by only two out of five/six members. Their recommendations were accepted by the EC, ignoring non-attendance of the majority of members.

The EC was empowered to call for tenders as per Government rules. However, on the recommendations of the OC, the EC went in for purchases from single suppliers without tendering. Though it was discussed in the EC meetings that such purchases were against the rules, the EC did not bring the facts to the notice of the Government. It was only in July 2008 that the State Government referred the matter regarding single tender/ brand purchases to GOI and GOI directed (August 2008) that GFRs should be followed in this regard scrupulously. The EC chose to ignore these directions.

The EC did not ensure adherence to its decision to restrict consultancy fees in case of increase over estimated cost. The EC approved consultancy fees for procurement of equipment and price escalation in violation of the conditions in the agreement with the consultant.

Chapter II Sports infrastructure

Documents

Transcript of Chapter II Sports infrastructure