Performance Audit - ULBs

Transcription

1 Performance Audit - ULBs CHAPTER- 5 Urban Development Department 5.1 Implementation of Solid Waste Management project by Ranchi Municipal Corporation via PPP mode Introduction Solid Waste Management (SWM) refers to a systematic process of waste disposal and comprises waste segregation and storage at source, primary collection, secondary storage, transportation, secondary segregation, resource recovery, processing, treatment, and final disposal of solid waste. Municipal Solid Wastes (Management & Handling) Rules, 2000 formulated by the Ministry of Environment and Forest (MoEF), Government of India (GoI) made it mandatory for every municipal authority to implement a scientific solid waste management system by Accordingly Ranchi Municipal Corporation (RMC), with the objective of providing SWM services 1 under Jawahar Lal Nehru National Urban Renewal Mission (JnNURM), prepared a Detailed Project Report (DPR) which was approved in the 69 meeting of Central Sanctioning and Monitoring Committee 2 (CSMC) in February RMC decided 3 to execute the project on Public Private Partnership (PPP) basis on Design, Build, Finance, Operate and Transfer (DBFOT) method. Tetra Tech India Limited, New Delhi was selected (June 2010) as the Project Management Consultant-cum-Transaction Advisor (PMC-cum-TA) by RMC to facilitate smooth implementation and operation of the project. The work of providing SWM services including collection, transportation, processing, and disposal of waste generated in the city (Integrated Solid Waste Management) was awarded (January 2011) to M/S A2Z Infrastructure Limited, New Delhi, through a competitive bid process. The successful bidder incorporated a Special Purpose Vehicle (SPV) viz. A2Z Waste Management (Ranchi) Limited 4 and subsequently a Concession Agreement between RMC and the SPV was executed on 3 June 2011 with 1 Under Urban Infrastructure and Governance (UIG), one of the four components of JNNURM, the other three being Basic Services to Urban Poor (BSUP), Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) & Integrated Housing and Slum Development Programme(IHSDP) 2 Constituted within the Ministry of Urban development for sanctioning projects under JNNURM with Secretary (Urban Development) as its Chairman and eight other members 3 Decision of RMC to implement the project on PPP mode was not made available. 4 Referred to as Concessionaire 69

2 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 retrospective effect from 1 April The Concession period was thirty years from the date of the agreement. As per negotiations (January 2011) held by RMC after acceptance of the financial proposal of the Concessionaire, Capital Grant amounting to ` crore 5 and Tipping Fee ` 585 per tonne of Municipal Solid Waste (MSW), payable on a monthly basis 7, were payable to the Concessionaire. The remaining balance of the Project Cost 8 was to be borne by the Concessionaire. The Scheduled Project Completion Date (SPCD) was 12 months from the date of the agreement. The scope of work included door-to-door collection of MSW; primary storage of collected door-to-door MSW; secondary collection and transportation of waste, street sweeping and desilting of drains, spraying bleaching powder in drains; collection of user charges on behalf of RMC; construction and operation & maintenance of the waste processing facility and sanitary engineered landfill; assist RMC in public education/awareness related to MSW; and develop and implement a public complaint system operational for at least eight hours a day in consultation with RMC Audit objectives The main objectives of this Performance Audit were to assess whether: DPR was prepared as per guidelines of JNNURM and the project was being implemented as envisaged under Municipal Solid Wastes (Management & Handling) Rules, 2000; funds were utilised economically, efficiently and effectively; the benefits of SWM were achieved as envisaged under Municipal Solid Wastes (Management & Handling) Rules, 2000; and Monitoring mechanism was effective Audit criteria The audit criteria adopted for arriving at the audit conclusions were taken from the following sources: Municipal Solid Wastes (Management & Handling) Rules, 2000; 5 For collection and Transportation vehicles/equipments- ` 25 crore, For site development- ` 7.99 crore, For Sanitary Landfill Development- ` 7 crore 6 Tipping Fee = {TP (WS NCW RW)}, where TP = Tipping fee rate per tonne as applicable, WS is the quantity of waste collected in tonnes, NCW is the quantity of non-conforming waste rejected by the Concessionaire in excess of 10 per cent of total MSW supplied, RW is the quantity of waste other than NCW rejected by PMCcum-TA/Project Engineer, each for the respective months. 7 Rupee 585 per tonne for the first year, to be increased yearly at mutually agreed/fixed rates for the entire Concession period of 30 years 8 Project Costs: (i) As approved under JNNURM- ` crore, (ii) As per Technical sanction accorded to the revised DPR-` crore, (iii) As per RDP- ` crore. 70

3 Chapter-5: Performance Audit - ULBs Concession agreement executed between RMC and the Concessionaire; Jharkhand Public Works Accounts Code; Instructions/circulars/orders issued by Govt. of Jharkhand; SWM Toolkit for JNNURM; Income Tax Act; and Minutes of the meetings of the Central Sanctioning and Monitoring Committee (CSMC) Audit scope and methodology We conducted a Performance audit of Solid Waste Management in Ranchi via PPP mode in Ranchi Municipal Corporation for the period April 2011 to September 2013 from September to November It involved scrutiny of documents at the RMC and Greater Ranchi Development Agency (GRDA) Limited 9 as well as physical verification of the construction site at Jhiri Constraints in Audit The following records/documents were not provided to audit for scrutiny:- 1. Request For Qualification(RFQ)/Technical/Financial proposals of all the nine bidders (except A2Z Waste Infrastructure Limited); 2. Technical /Financial proposals of all the bidders for selection of PMC-cum-TA; 3. Collection receipts and Daily Collection Registers in support of collection of user charges; 4. Log Books of the all vehicles procured by the Concessionaire; 5. All the monthly progress reports submitted by the PMC-cum- TA/Project Engineer(PE); 6. Management Information System(MIS) reports for management and monitoring of SWM system; 7. Reports in respect of audit of the weighbridge data conducted by the PMC-cum-TA/PE/RMC; 8. Quotations/comparative statement/purchase order in support of procurement of one street sweeper; Quotations/comparative statement in support of procurement of 396 nos. 1.1 CuM steel bins; Purchase Order in support of procurement of out of 4,70,740 bins; Proof of payment made by the Concessionaire to the 9 Nominated as the State Level Nodal Agency (SLNA) by the State Government for prioritising and implementing the projects under JNNURM, management of State and Central grants, release of funds to the executing agencies etc. 71

4 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 vendor (M/s TPS Infrastructure Limited, Ghaziabad) for fabrication of one Bin Washer; 9. Daily reports submitted by the Jamaadars deputed in the Wards; and 10. Documents relating to constitution of the expert committee for monitoring and reports of the expert committee. Audit findings Planning Deficiencies in preparation of DPR The work of preparation of DPR on SWM for Ranchi Municipal Area was awarded (August 2006) to MSV International Inc., USA, Gurgaon at a quoted fee of ` 9.79 lakh including Service Tax. The time period for submission of DPR was three months (11 December 2006) from the date of signing (12 September 2006) of Memorandum of Agreement (MoA). The DPR was finally submitted in September 2009 after incorporating the observations made by the Committee constituted (January 2007) for the purpose by Urban Development Department (UDD), Government of Jharkhand (GoJ). Scrutiny revealed the following deficiencies in the preparation of DPR: Non-acquisition of Land prior to approval of DPR As per DPR Preparation Toolkit issued by Ministry of Urban Development (MoUD), the DPR needed to provide a confirmation that the required land was owned or already purchased by the Urban Local Body (ULB). In other words, the title of land was to be clear and unencumbered. Jharkhand Public Works Accounts (JPWA) Code also provides that tender process should be initiated only after acquisition of land required for the purpose. We noticed during scrutiny that the DPR approved (February 2009) by CSMC, instead of confirming ownership of land by RMC, only stated about selecting land measuring acres at Bero for the Landfill site. The appraisal note 10 (February 2009) of the DPR by Central Public Health and Engineering Environmental Organisation (CPHEEO) to CSMC, MoUD also mentioned that the land identified for location of the proposed Landfill site would be transferred to RMC. Thus, it is clear that the requisite sites had only been selected/identified and not transferred/acquired during the DPR approval stage. It was further noticed that the land identified for land fill site in the DPR was ultimately not utilised for the purpose. Instead, another land adjacent to 10 Note No.Q-12045/12/1/JNNURM/

5 Chapter-5: Performance Audit - ULBs the one being used since long by RMC as its dumping site was selected for the project. On this being pointed out, RMC replied that transfer of land by one department to another is a time-taking process and at the time of approval of the DPR it was mentioned that the landfill site would be transferred to RMC. The reply was not acceptable as neither did the DPR provide the confirmation that required land was owned or already purchased by the ULB nor the tender process was initiated after acquisition of land required for the purpose Submission of Deficient DPR After the DPR had been approved (February 2009) under JNNURM, several deficiencies 11 were pointed out by the UDD in course of technical evaluation of the same for facilitating accord of technical sanction to it. The Consultant after meeting the queries raised by UDD submitted the DPR in September However, it refused to meet further queries raised by the UDD. This indicates that deficient DPR had been prepared/submitted for approval under JNNURM. Thus, even after taking 37 months 12 for preparing the DPR, the Consultant, to whom ` 8.33 lakh was paid, could not submit satisfactory DPR. Consequently, RMC got the revised DPR prepared by PMC-cum-TA which was accorded technical sanction by UDD in March RMC denied any unjustified payment as there was no change in the basic concept of the DPR except for certain modifications in availability of land, type of sanitation vehicles, dust-bins etc., which were made in the DPR by the PMC-cum-TA. The reply was contradictory and was not acceptable as several deficiencies had been pointed out subsequently by UDD in the DPR prepared/approved under JNNURM Appointment of PMC-cum-TA The PMC-cum-TA was expected to facilitate smooth implementation and operation of the project. It was required to independently review, monitor and approve activities associated with design, construction, operation of the project facilities, to certify on a daily basis the quantity of MSW collected, processed, landfilled and returned from the project facility as non-conforming waste and to report to RMC on the various physical, technical and financial aspects of the project. 11 Soil Bearing Capacity Report, Masonry/RCC structural design and drawings of all related components of Building, Steel structural design of different components of trussed roof to be used in Workshop/Compost plant/brick manufacturing unit, Detail drawing based on designs, Construction of permanent Dumping sites prepared without analysis of Rate and Schedule of Rates etc. 12 September 2006 to September

6 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 As per directions of the UDD, GoJ (September 2009) Tetra Tech India Ltd., New Delhi was selected (June 2010) as the PMC-cum-TA for Integrated Municipal Solid Waste Management Project for RMC. The Consultant (viz., PMC-cum-TA) was to perform the agreed services 13 for 24 months 14 starting from the date of signing (23 June 2010) the agreement for a remuneration of ` 1.25 crore Irregularities in Selection of PMC-cum-TA: Scrutiny of the comparative statement prepared for evaluation of technical bids submitted by the firms 15 revealed that the comparative statement, on the basis of which the eligibility for the award of work was decided, was not signed by any of the members of the Committee 16 constituted(january 2010) by RMC initially for the purpose of selection of the PMC-cum-TA. It was also noticed that recommendations of three 17 out of eight members of the Committee were not available. Further scrutiny revealed that the Committee constituted by RMC for selection of the PMC-cum-TA was not in accordance with the instructions 18 of the UDD. Therefore, decision of the Committee, constituted by RMC, was directed (May 2010) by UDD to be ratified by the Committee 19 prescribed by UDD. It was however noticed that the decision of the previous Committee was ratified (June 2010) by only eight out of ten members 20 of the Committee prescribed by UDD. This raises doubts on the credibility of the overall selection process itself. 13 Monitoring the entire project in coordination with the selected bidder for execution of work, obtaining the requisite approvals related to the entrusted work, handing over the completed works to the Govt. of Jharkhand, conducting IEC on SWM preparation of Technical report, drawings, designs, estimates, BoQ etc for the all the civil works, finalization of complete tender documents, day to day supervision of collection, transportation and construction works, quality control, finalising the bill of contract, attend to enquiry/audit queries and all arbitration/litigation cases with respect to the project till their conclusion. 14 The project was likely to be completed in 24 months but if the same continued beyond 24 months, the PMC-cum-TA was required to provide the services and no extra amount was to be paid for the extended period. 15 Tandon & Associates, Mumbai, Tetra Tech India Ltd., New Delhi, SENES Consultants India Pvt. Ltd, Mumbai, and Tapasya, Bhubaneshwar 16 Chief Engineer, Technical Cell, UDD, Chief Engineer, Drinking Water and Sanitation Department, Chief Engineer, Building Construction Department, Dy. Secretary, Finance Department, Representative of Technical Cell, Vigilance Department, Environment Specialist from BIT, Mesra. 17 Chief Engineer, Technical Cell, UDD and Representative of Technical Cell, Vigilance Department, Ranchi, A.E. Water Board, RMC 18 O.O.No. 52/1969 dated and Letter No dated Environmental experts nominated by ISM Dhanbad, Central Institute of Mining and Fuel Research(CMRI), Dhanbad, BIT Mesra, Ranchi, CMPDI, Ranchi and Jharkhand State Pollution Control Board, Ranchi, alongwith CEO, RMC 20 Not ratified by the Deputy Commissioner, Ranchi/Deputy Development Commissioner, Ranchi and Chief Engineer, Ranchi Regional Development Authority. 74

7 Chapter-5: Performance Audit - ULBs Further, as required under RFP, Income Tax Return for the last three years were not enclosed in its bid by Tetra Tech India Ltd rendering it ineligible for selection. It is evident from above that the selection of Tetra Tech India Ltd as the PMC-cum-TA was inappropriate. On this being pointed out RMC replied that the technical evaluation sheet and the financial bid were signed by all the Committee members. Further as per direction of the Government, the decision of the previous Committee was ratified (June 2010) by the new committee. However as per the records produced to us, the technical evaluation was done by five out of eight committee members, the comparative statement had not been signed by any of the Committee members, the financial bid was signed by only four out of the eight members and the decision of the previous Committee was ratified by only eight out of the ten members of the new Committee prescribed by the UDD. Further the Income Tax Returns for the last three years were not submitted Violation of Agreement Conditions by PMC-cum-TA As per Clause 5(iii) of the agreement executed between RMC and PMCcum-TA, the project was to be completed in 24 months but if the same continued beyond 24 months, the PMC-cum-TA was required to provide the services and no extra amount was to be paid for the extended period. Scrutiny revealed that Tetra Tech India Ltd. stopped functioning as the PMC-cum-TA after 24 months despite non-completion of the project and submitted its Closure report in August We further noticed that, PMC-cum-TA verified payments to be made towards tipping fee up to June We could not find evidence for verification of payments by PMC-cum-TA after July Despite violation of agreed conditions, RMC failed to invoke the Penalty clause 21 by terminating the agreement on two months notice in writing and forfeiting the performance security 22 amounting to ` 6.25 lakh. Moreover due to reluctance of the PMC-cum-TA to perform beyond the stipulated period of 24 months even though the project had not been completed, Senes Consultants India Ltd were selected (December 2012) as PE by RMC for performing the duties of PMC. 21 Clause 8 of the agreement 22 BG No PG dated of Allahabad Bank, George Town, Chennai 75

8 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 In reply to the audit observation, RMC stated that no financial loss was sustained by RMC as payment to the PE was to be made out of the Tipping Fees payable to the Concessionaire. The reply was not acceptable as the clause of 24 months was a check to ensure adequate involvement of the PMC-cum-TA in project execution so as to make the project functional in time and moreover RMC failed to invoke the Penalty clause by terminating the agreement on two months notice in writing and forfeiting the performance security amounting to ` 6.25 lakh. Irregularities in award of tender for SWM Non disqualification of bidder in the RFQ stage despite not meeting the minimum technical and financial qualifying criteria Evaluation 23 of bids received 24 in the first phase of the bidding process (RFQ stage) was done in two stages by the Tender Committee constituted 25 (October 2010) by RMC:- a. Firstly bids were checked to assess as to whether they met the minimum technical and financial qualifying criteria; and b. Based on technical experience, bids were given technical score. Any bidder who secured 60 marks was deemed to have met the technical experience criterion for qualification. Scrutiny of the RFQ proposal submitted by the bidder (M/S A2Z Infrastructure Limited, Gurgaon) which was ultimately declared successful revealed that the documents submitted by A2Z Infrastructure Limited did not meet the requisite technical and financial qualification criteria, as detailed in Table 5.1 below, and it should not have been shortlisted by the PMC-cum-TA. Table-5.1: Statement showing non-meeting of requisite technical and financial qualification criteria by the selected bidder Parameters Experience in door to door collection in at least in one city in India Remarks Experience in door to door collection was not ascertainable in respect of the two projects (at Meerut and Varanasi) mentioned, on the basis of October Last date for submission of RFQ-9 October As per UDD s letter No. 12 dated 4 February 2009, the committee was to comprise of six members viz., CEO, RMC; Chief Engineer (CE), Technical Cell, UDD, GoJ; CE, Drinking Water & Sanitation Department (DW&SD), GoJ; CE, Building Construction Department (BCD), Jharkhand; Deputy Secretary, Department of Finance, GoJ; and Representative of Technical Evaluation Cell, Vigilance Department, GoJ. 76

9 Chapter-5: Performance Audit - ULBs Experience in Collection and Transportation documents submitted as against the requirement of three years experience in collection of MSW from households, invoices pertaining to the period May 2010 to August 2010 only were submitted. The quantity 26 of MSW collected and transported in any of the last three financial years could not be ascertained from the documents submitted in respect of the two projects (at Indore and Patna). Experience in Design, The capacity 27 of the Landfill constructed could not construction, operation be ascertained from the document submitted in and maintenance of respect of the project at Kanpur. sanitary landfill Experience in design, Found acceptable. construction, operation and maintenance of waste processing facilities Non-meeting of requisite financial qualification criteria by the selected bidder Parameters Remarks Average annual turnover of more than ` 15 crore over the past three financial years preceding the application due date Minimum average annual net worth of ` 60 crore at the close of the preceding financial year Net worth Certificate Turnover Certificate (Source: Tender documents) The Certificate in respect of Net worth and Turnover issued by the Chartered Accountants (VBR & Associates) indicated the financials of M/s A2Z Maintenance & Engineering Services Limited and not of M/s A2Z Infrastructure Limited (the successful bidder). As per the Certificate, M/s A2Z Infrastructure Limited was a subsidiary of M/s A2Z Maintenance & Engineering Services Limited. As, Annual turnover and net worth of M/s A2Z Infrastructure Limited was not submitted, the documents can not be accepted as valid qualification. Scrutiny revealed that not more than 44 marks should have been awarded for technical experience, to A2Z Infrastructure Limited which would have disqualified it for the RFP stage (Appendix-5.1). Instead, 94 marks (highest) were awarded declaring it eligible for qualifying to the next stage. On being pointed out RMC replied that the requirement of two years for door to door collection and collection and transportation had been done away with in Corrigendum to the RFQ issued 28 in October From 150 TPD to 300 TPD-15 marks, Above 300 TPD-25 marks 27 Upto cum-5 marks, Above marks. 28 Vide letter No dated

10 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 The reply was contradictory because even after the corrigendum Clause 3 of the RFQ required marks to be allotted for experience in door to door collection and collection and transportation of at least one city in India during last three financial years 29. Moreover, the marks were also allotted in the technical qualification, on this basis. Further, the invoices submitted against door to door collection (Meerut and Varanasi) and collection and transportation (Patna and Indore) of MSW did not support the minimum quantity (50 and 150 TPD respectively) of eligibility as required under the RFQ. No reply was submitted by the ULB to the audit query in respect of experience in design, construction, operation and maintenance of sanitary landfill. With regard to meeting of financial criteria, provisions contained in Clauses (C) and of the RFQ were quoted by RMC. However, as per the clauses quoted, M/s A 2 Z Infrastructure Limited being a subsidiary of M/s A 2 Z Maintenance & Engineering Services Limited, the financials of the former only were to be submitted and evaluated for qualification for RFP and those of the latter should not have sufficed. The reply was therefore not acceptable Evaluation/recommendation of RFQ/Technical/Financial proposals by committee(s) where key members were not posted For approval of the RFQ proposals shortlisted by the PMC-cum-TA for implementation of projects sanctioned under JNNURM, the Tender Committee 30 was to comprise six members viz., CEO, RMC; CE, Technical Cell, UDD, GoJ; CE, Drinking Water & Sanitation Department (DW&SD), GoJ; CE, Building Construction Department (BCD), Jharkhand; Deputy Secretary, Department of Finance, GoJ; and Representative of Technical Evaluation Cell, Vigilance Department, GoJ. Scrutiny revealed that even though the CE, (DW&SD) and representative of Technical Evaluation Cell, Vigilance Department, GoJ, Ranchi were not present and the Technical Secretary, BCD was present in place of the Chief Engineer, BCD the Committee comprising only four out of prescribed six members (of which one member was ineligible) went ahead and recommended eight firms for the RFP stage. It was further noticed that for publication and finalisation of tenders for implementation of projects sanctioned under JNNURM, the Tender Committee 31 was to comprise nine members viz., DC, Ranchi; CEO, RMC; Mayor, RMC; Dy. Mayor, RMC; CE, Technical Cell, UDD, GoJ; CE, DW&SD, GoJ; CE, BCD, Jharkhand; Deputy Secretary, Department of Finance, GoJ; 29 Five to 10 marks 30 As per UDD s letter no. 12 dated 4 February As per UDD s Letter No dated 6 December

11 Chapter-5: Performance Audit - ULBs and Representative of Technical Evaluation Cell, Vigilance Department, GoJ. However, scrutiny revealed that even though the DC, Ranchi; CE, DW &SD, CE, BCD and representative of Technical Evaluation Cell, Vigilance Department, GoJ, Ranchi were not present and the Nodal Officer, JNNURM and the Technical Secretary, RCE, Ranchi were present for which necessary authority was not available, the Committee opened and finalised the technical and financial proposals received from five out of the eight firms who had been recommended earlier for the RFP stage. Thus, it is evident that the RFQ, technical and financial proposals were evaluated by Committee(s) where key members were not present. RMC, in reply stated that, the point was irrelevant now as the Concessionaire had stopped functioning. The reply does not absolve RMC from their responsibility and therefore could not be accepted. Further no reply was furnished regarding evaluation/recommendation of technical and financial proposals by inappropriate committees Non-submission of requisite information/documents in the RFP stage As per RFP document, the criteria for evaluation of the technical proposals were technical approach and methodology (including project experience), project plan till Commercial Operations Date (COD), organisation and staffing, assessment of risks, risk mitigation plan and change management plan and presentation. Scrutiny revealed that information/documents with respect to project experience and organisation & staffing had not been submitted by the successful bidder (i.e., A2Z Infrastructure Ltd.), vide details indicated in Table 5. 2 below:- Table-5.2: Statement showing non-submission of documents/information with respect to project experience and organisation & staffing Project Experience (indicating Client, Date of award, Start date of commercial operations and Present status) Above information not furnished for: Organisation and Staffing Above information not furnished for: 79

12 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 i. Primary Collection ii. Secondary storage and transportation iii. Treatment and Disposal iv. Sanitary Land-filling (Source: Tender documents) i. Staff deployment plan 32 ii. Roles and responsibilities of management staff iii. Number of shifts per day of operations iv. Training and education plans for personnel v. Uniform and safety gear provisions for staff Project experience and organisation & staffing pattern are two vital components for successful implementation of any project. Even though the requisite information had not been furnished the technical proposal was evaluated and 42.1points 33 (out of total marks) were allotted to A2Z Infrastructure Limited in technical evaluation by the Committee members 34 inter alia for the said two criteria. Considering the inadequacies of M/S A2Z Infrastructure Limited in the RFQ and RFP stages, it was evident that the tender was finalised in favour of a party which did not meet the stipulated criteria. RMC in its reply stated that as per clause of the RFP document, submissions made at the time of submitting RFQ was to be considered as part of the proposal and as the requisite documents had already been submitted by M/s A2Z during RFQ stage, points were awarded to it for the relevant criteria. The reply was not acceptable as documents of project experience and organisation & staffing had not been submitted by M/s A2Z as prescribed, either in the RFQ or in RFP stages Weightage for evaluation of Technical and Financial proposals As per RFP, the technical proposals of the eligible bidders were to be given marks on the basis of their understanding of the project plan for which the maximum marks was 20. The financial proposal of all the eligible bidders was to be evaluated on the basis of financial support required by the bidders from RMC (i.e., Capital Grant plus overall Tipping Fees), for which the maximum marks was 80. The weightage for technical proposal and financial proposal was 20 per cent and 80 per cent respectively. 32 Only key manpower available and the position proposed was indicated for Project experience and 5.7 for organisation and staffing 34 Total 7 members; each member allotted marks as kept for different items, out of maximum 20 marks stipulated for the Technical evaluation. Thus, average points scored by A 2 Z Infrastructure Limited was (109.65/7) 80

13 Chapter-5: Performance Audit - ULBs As noticed in audit (paragraph ) neither the Collection & Transportation System nor the Treatment & Disposal facility could be completed by the successful bidder even after passage of more than 18 months from SPCD even though space for these facilities 35 had been made available (July 2011/June 2011) to the Concessionaire. That insufficient technical understanding of the project by the successful bidder could be one of the reasons for non-completion of the project within the SPCD cannot be denied. On being queried about the rationale behind giving 20 per cent weightage to technical proposals (which were to provide the basic understanding of the project, staffing pattern and the plans for its successful implementation) and for retaining 80 per cent weightage to the financial proposal, RMC replied that in the RFP stage the technical liability was not as important as the financial bids since Central/State/RMC funds were involved. It was therefore important to qualify that bidder who quoted the lowest Capital Grant. The reply was not convincing as technical understanding of any project is equally, if not more important than the financial eligibility/suitability of the firm for successful implementation of any project by it Land acquisition/transfer to the Concessionaire As per Clause 3.1 of the Concession Agreement, RMC was required to hand over to the Concessionaire vacant and peaceful physical possession of the identified Project Site within 20 days from the date of agreement (1 April 2011) for the purpose of (i) Construction, operation and maintenance of Transfer Stations 36, (ii) Workshop facility for vehicle maintenance, (iii) ISWM facility site for development of Compost Plant, Brick Making Plant and Sanitary Landfill facility, and (iv) Secondary storage depot for all wards. The sites identified for setting up Transfer Stations, Workshops and ISWM facility by RMC are indicated in Table 5.3 below:- 35 Vehicle Depot and ISWM facility 36 A transfer station is a facility where municipal solid waste would be unloaded from Collection vehicles such as Tractor Trolleys & Mini Tippers and briefly held while it is reloaded into larger vehicle for transportation to integrated solid waste treatment and disposal facility. 81

14 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 Sl. No Table-5.3: Statement showing sites identified for setting up Transfer Stations, Workshops and ISWM facility Sl. No Description Location 1 Transfer Stations i. Madhukam ii. Old Jail iii. Bus Stand iv. Jagannathpur 2 Workshop Bakri Bazaar 3 ISWM facility Jhiri (Source: Tender documents) Although the RFP 37 provided for setting up of Transfer stations at four places as above, the Revised Development Plan(RDP) proposed by the Concessionaire (March 2012) and approved by the SLSC (October 2012) provided for setting up of only one Transfer station. The status with respect to acquisition/transfer of land required for the project as a whole is indicated in Table 5.4 below:- Description 1 Transfer Station Table-5.4: Statement showing status with respect to acquisition/transfer of land required for the project as a whole 82 Location Land belonging to Jharkhand State Housing Board identified (January 2012) for the Transfer station at Harmu Colony was yet to be acquired as on September 2013, as the UDD had not allotted the requisite sum of ` 2.82 crore for payment to the said Board. 2 Workshop Space in Naga Baba Khataal and Khadgarha (near Bus Stand) were temporarily made available (July 2011) for being used as Vehicle Depot. 3 ISWM facility (Compost Plant/ Brick Making Plant/ Landfill site) Land situated adjacent to the land at Jhiri which was being used by the RMC since long as its Dumping site was informally 38 handed over to the Concessionaire in June It is evident from the above that the land identified for the Transfer station(s) during the RFP stage was different from that which was finally selected while the space for the Workshop as identified earlier could not be acquired and temporary arrangements had been made for the purpose. Thus, the lands required for the total project was yet to be acquired/transferred. 37 Formed part of the Concession agreement 38 Lease Deed was executed in February 2012

15 Chapter-5: Performance Audit - ULBs Further scrutiny revealed that the PMC-cum-TA had advised (December 2010) identification of an alternative site for setting up of ISWM facility as the identified area at Jhiri was hilly, containing hard rock and was at a higher elevation with respect to the surrounding area and to get the volume for landfilling waste huge amount of cutting and clearing of rocky hills was required. This was confirmed during physical verification of the site by the audit team (October 2013). Photograph showing rocky nature of land provided for the project As the land made available at Jhiri is a rocky site, the pace of the civil construction works had been affected as blasting was being carried out for levelling the land provided and the project which should have been completed by March is still in a nascent stage. On being queried about reasons for selection of a rocky site despite being advised against it by the PMC-cum-TA, RMC replied that it was necessary to establish the Processing plant over there as no other alternative was available. The reply of RMC was not acceptable as proper land should have been acquired prior to award of work and should have been transferred to the Concessionaire as per provisions of the agreement Environmental Clearance from State Level Environment Impact Assessment Authority (SEIAA)/Authorisation and NOC from concerned State Board The status with respect to procurement of environment clearance from the SEIAA and Authorisation/NOC from the Jharkhand State Pollution Control Board (JSPCB) is indicated in Table-5.5 below:- 39 SPCD as per Concessionaire Agreement-31 March

16 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 Sl. No Table-5.5: Statement showing status with respect to procurement of environment clearance from the SEIAA and Authorisation/NOC from JSPCB Requirement Provision Status 1 Environmental clearance from SEIAA before embarking on construction activities at landfill site 2 Authorisation for setting up waste processing and disposal facility including landfill site 3 NOC for setting up a secured Landfill site Environment Impact Assessment (EIA) Notification 2006 MSW (Management & Handling) Rules 2000 Water (Prevention and Control of Pollution) Act, 1974 and Air (Prevention and Control of Pollution) Act, 1981 Could not be ascertained. Validity of the Authorisation issued (May 2012) by JSPCB for a period of one year had expired (March 2013) and fresh Authorisation had not been obtained till August Validity of the NOC issued by JSPCB (May 2012) had expired (November 2012). RMC accepted the audit observation and stated that it was now irrelevant as M/s A2Z had left the assignment. The reply was evasive as necessary steps should have been taken for obtaining requisite clearances/revalidation of requisite NOCs Financial management Funding pattern The funding pattern applicable to the SWM project under JNNURM is indicated in Table 5.6 below:- Table-5.6: Statement showing funding pattern applicable to the SWM project Total Project Cost Contribution as per ratio prescribed under JNNURM GoI State Government ULB (` in crore) (80 per cent) 5.14 (10 per cent) 5.14 (10 per cent) (Source: Government sanction letter) Delay/ Short release of Central share Year-wise details of total funds received by the ULB from Central and State Government for execution of the scheme under the Mission and the expenditure incurred there against, as on September 2013, are given in Table 5.7 below:- 84

17 Chapter-5: Performance Audit - ULBs Year Opening Balance Table-5.7: Statement showing allotment and expenditure (to/of RMC) in respect of SWM project (` in crore) Grant (Central share) Grant (State share) Receipts Grant (ULB share) Interest from Bank Total Expenditure Closing Balance NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL (Source: Data furnished by RMC) As per JNNURM guidelines, the first installment of Central share (25 per cent) was to be released on signing of Memorandum of Agreement (MoA) by the State Government/ULB with GoI. The MoA was to be submitted along with DPRs for release of Central Assistance. The balance amount of assistance was to be released in three installments upon receipt of Utilisation Certificates (UCs) to the extent of 70 per cent of the grants (Central & State) and subject to achievement of milestones agreed for implementation of mandatory and optional reforms at the State and ULB/Parastatal level as envisaged in the MoA. We during audit noticed that though the MoA was signed in December 2007, the first instalment of Central share amounting to ` crore was released by the Central Government in May 2009 i.e. after the approval of DPR in February Thus, due to delay in preparation of DPR, release of first instalment of Central share was delayed. It was further ascertained that against the admissible amount of ` crore, a sum of ` 6.17 crore only was released by the GoI (July 2013) as the second instalment of Central share since the CSMC 41 observed that the implementation of the project was very slow (35 per cent) and the committed reforms 42 (Appendix-5.2) were yet to be achieved. Thus, due to slow progress of work and non-achievement of milestones agreed for implementation of mandatory and optional reforms, RMC was deprived of the full admissible amount of second installment 43. It was further noticed that even the grants made available ( ) could not be fully utilised till September 2013 and the Closing Balance (excluding the amount of ` 2.25 crore earned as interest over the years) of RMC as on 30 September 2013 was ` 1.97 crore. 40 Till September meeting held on 30 May For achieving the objectives of improving urban governance, the State Government and ULBs were required under the JNNURM scheme to accept implementation of an agenda of reforms and to execute a MOA with the GoI, indicating their commitment to implement identified reforms within the Mission period ( ). 43 The amount was made available to the SLNA in November 2013 by the GoJ and had not reached RMC till conclusion of Audit. 85

18 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 RMC attributed delay in utilisation of the funds to time consumed in finalisation of DPR, selection of Concessionaire and procurement of vehicles required for the project by the Concessionaire Diversion of Government Grants Out of total grants amounting to ` crore received for implementation of the SWM project, a sum of ` lakh was noticed to be diverted towards payment of Consultancy Fees to the PMC-cum-TA. Orders of the competent authority under which the amount was diverted were not shown to audit. On being pointed out, RMC stated that the amount had to be diverted in emergency as funds were not available under the Consultancy head. It was further stated that a sum of ` 2 crore was available under Consultancy head and when required, the amount would be recouped. The reply was not acceptable as funds received for project implementation should not have been diverted without orders of competent authority Execution Revised Development Plan (RDP) Deviation in Implementation from approved DPR As per RFP document, bidders could submit an Alternative Plan alongwith a separate financial proposal and upon selection as the successful plan, it was to be implemented subject to approval by the RMC and the requisite Government agencies. Deviations on account of the Alternative Plan were to be funded by the Bidder. Scrutiny revealed that no such plan was submitted by the successful bidder at the time of submission of technical and financial proposals but due to actual conditions of the Landfill site, use of modern technology, latest equipments etc., RDP 44 was submitted (March 2012) by the Concessionaire which after being approved by the Municipal Board (July 2012) and the SLSC (October 2012), was forwarded to the GoI by the SLNA 45 (February 2013) for approval. Although the approval had not yet been accorded by the GoI, the project was being executed as per the RDP, as per GoJ s directions (November 2012). 44 Project Costs: (i) As approved under JNNURM- ` crore, (ii) As per Technical sanction accorded to the revised DPR-` crore, (iii) As per RDP- ` crore. The difference between the Project Cost and the Capital Grant payable to the Concessionaire was to be borne by the Concessionaire. 45 GRDA Limited, nominated as the nodal agency for implementation of JNNURM in Jharkhand by the State Govt. 86

19 Chapter-5: Performance Audit - ULBs It is worth mentioning here that no change in the scope/design/nature of the project was to be effected without prior approval from CPHEEO. However, the project was implemented initially not on the basis of the approved DPR but on the basis of the revised DPR prepared by the PMCcum-TA and later on as per the RDP without the approval, to neither of the two, by the CPHEEO. It was noticed that the release of next instalment (third) of Central share has been subjected to approval of the revised DPR by CSMC. RMC, in its reply stated that reimbursements to the Concessionaire towards purchase of equipments/vehicles had been made after obtaining confirmation from it to the effect that in the event of receipt of contrary comments on the RDP from the Central Government, adjustment of such reimbursements would be made from payments to be made in future. The reply was not convincing as no change in the scope/design/nature of the project was to be effected without prior approval from CPHEEO Remarkable alteration in Capital Expenditure components Although the amount of Capital Grant agreed/payable to the Concessionaire was not to be affected on the whole, the RDP entailed change in the cost of different components of the Project comprising the Capital Grant, as indicated in Table 5.8 below:- Table-5.8: Statement showing break up of Capital Grants payable to Concessionaire (` in crore) Project Item Break-up of the Capital Grant as proposed by the Concessionaire in its Financial Bid Break-up of the Capital Grant as per the RDP Collection and Transportation System Site Development Landfill Development Total (Source: Minutes of meeting of SLSC) The above changes broadly indicated a reduction (21 per cent) in capital expenditure (CE) on C&T system and an increase (69 per cent) in CE on Site development. This was indicative of the fact that the cost of construction of civil works had escalated which was intended to be met through the RDP by curtailing the expenditure on the collection and transportation system. The delay in completion of the project due to delay in handing over of selected land (which was a rocky one and required blasting for levelling) 87

20 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 for the ISWM facility and also due to tardy implementation by the Concessionaire, was telling upon the cost of civil works. On being pointed out, RMC replied that the RDP was prepared as per present situation and changes were made in the cost of different project components on the basis of ground realities but without affecting the overall amount of Capital Grant agreed/payable to the Concessionaire. The reply by RMC was self explanatory that ground realities were not taken into account at the time of conceptualising the project/preparation of DPR which necessitated the framing of RDP Non-completion of Project within SPCD As per provisions of the agreement, the COD was the date on which the PMC-cum-TA issued the Provisional Completion Certificate or the Completion Certificate for the Project facility. The COD was for two parts:- a) Collection and Transportation(C&T) system: 270 days from the date of the agreement (1 April 2011) i.e., 1 January 2012 b) Treatment and Disposal (T&D) facility: 365 days from the date of the agreement i.e., 1 April Thus, the SPCD was 12 months from the appointed date 46 or such period extended by RMC. Audit scrutiny revealed that despite lapse of more than one and a half years of the SPCD neither all the vehicles/equipments proposed to be utilised as per RDP for the Collection and Transportation system had been procured 47 (September 2013) nor the civil works for the Treatment and Disposal facility were completed. Presently (September 2013), the Concessionaire was simply collecting the waste from the corporation area and dumping it at Jhiri without any systematic processing of waste disposal, while full tipping fee was being paid by the RMC. 46 Date of agreement Uniforms for workers, 1010 Dust Pans, 1130 Safety Masks, 104 nos. 1.1 CuM steel Bins, 240 Lt bins for hotels/apartments, 3 Surveillance Cameras, 40 Handheld Devices, 7 Tractors, one Back hoe loader had not been procured 88

21 Chapter-5: Performance Audit - ULBs Photograph showing open dumping of MSW at Jhiri As per Monthly Progress Report for the month of August 2013 submitted by the PE, except the site office (temporary) and one weighbridge (out of two), none of the other components had been completed. Further, civil works relating to Meter Room, Power room & DG platform, Primary shed, Refinery shed, Finishing shed, Compost Storage shed, Leachate Collection Tank and Sanitary landfill were not even initiated. The status of Construction activities for processing and disposal is indicated in Appendix-5.3. Moreover, the T & D site construction activity was reported to be stalled by the Concessionaire. Photograph showing construction works stalled at the Project facility It was intimated by the RMC that Provisional Completion Certificate or the Completion Certificate for the Project facility had not been issued by the PMC-cum-TA. On being queried about reasons for delay in completion of the project/stalling of construction works by the Concessionaire, it was replied by RMC, that execution of a project is delayed due to various 89

22 Annual Technical Inspection Report on Local Bodies for the year ended 31 March 2013 administrative and technical reasons. The reply was evasive and was therefore not acceptable Expenditure out of Capital Grant Capital Grant was admissible to the Concessionaire towards the expenditure incurred by it on procurement of vehicles/equipments for collection and transportation of MSW and for site & Landfill development. The Capital support was to be released on reimbursement basis only when the Concessionaire submitted to RMC respective Bill (Invoice), duly certified by the PMC-cum-TA, for the actual value of works executed and the Project Assets procured. The following irregularities were noticed in the reimbursement of expenditure towards procurement of vehicles/equipments and site development: Irregularities in procurement of vehicles and equipments for collection and transportation of MSW The Concessionaire was required to procure the project vehicles and equipments as per technical specifications laid down in Project Information Memorandum as part of RFP by adopting transparent competitive bidding and RMC/PMC-cum-TA/PE was required to monitor and certify that procurement of project assets has been made accordingly. RMC was also supposed to inspect the project vehicles and equipments, certified by the PMC-cum-TA, procured by the Concessionaire. The vehicles and equipments were stated by the Concessionaire to have been purchased adopting transparent and competitive bidding process. The Medical Officer for Health (MOH) and Chief Accounts Officer (both of RMC) were nominated 48 for supervision of the procurement by the Concessionaire. Further, a Procurement Officer and one Junior Engineer were nominated 49 by the RMC for physical verification of the vehicles and equipments procured by the Concessionaire. A total sum of ` crore was paid as Capital Grant to the Concessionaire against procurement of vehicles and equipments for Collection and Transportation of MSW (Appendix-5.4). Scrutiny of the purchase documents revealed the following irregularities in the procurement process: Reimbursements were made to the Concessionaire by RMC upon recommendations of PMC-cum-TA even though improper/ incomplete 50 documents had been submitted by the Concessionaire against the procurement; 48 RMC s order No dated 26 November RMC s order No.205 dated 12 January Quotations/Comparative Statements/Purchase Orders were not available in support of the procurements made. 90