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TRANSPARENCY

INTERNATIONAL INDIA
the coalition against corruption

PARTNERSHIP FOR TRANSPARENCY FUND

Process
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Rights

Obligations

Monitoring

Sanctions

A TRANSPARENCY INTERNATIONAL INDIA REPORT

Transparency International India (TII) is the accredited India chapter of Transparency International, an international civil society organisation based at Berlin that has turned the fight against corruption into a worldwide movement. Transparency International challenges the inevitability of corruption, and offers hope to its victims. Since its founding in 1993, TI has played a lead role in improving the lives of millions around the world by building momentum for the anti-corruption movement. TI raises awareness and diminishes apathy and tolerance of corruption, and devises and implements practical actions to address it. Transparency International India is part of global network including more than 100 locally established national chapters and chapters-in-formation. TII is a non-government, non-party and not-for-profit organisation of Indian citizens with professional, social, industrial or academic experience seeking to promote transparent and ethical governance and to eradicate corruption.

Publisher : Transparency International India First Edition: January, 2012 Authors : Ashutosh Kr. Mishra and Nakul Gupta Editor : Dr. S. K. Agarwal ISBN : 978-81-909418-4-6
ISBN 819094184-4

9 788190 941846

2012 Transparency International India. All rights reserved.


Reproduction in whole or in parts is permitted, providing that full credit is given to Transparency International India and provided that any such reproduction, whether in whole or in parts, is not sold unless incorporated in other works. Disclaimer Every effort has been made to verify the accuracy of the information contained in this Report as of October 2011, including comments made by different stakeholders. Nevertheless, Transparency International India or authors of the Report are not responsible for its correctness or in other contexts. Policy recommendations reflect only Transparency International India's opinion. They should not be taken to represent the views of those quoted or interviewed unless specifically stated. All legal issues are subject to Delhi Courts' Jurisdiction.

TABLE OF CONTENTS

ACKNOWLEDGEMENTS FOREWORD MESSAGE

EXECUTIVE SUMMARY INTRODUCTION

ABBREVIATIONS AND ACRONYMS 01

ABOUT THE AUTHORS

WHAT IS INTEGRITY PACT?

INTEGRITY PACT

WHY SHOULD A COMPANY SIGN INTEGRITY PACT? EXPERIENCES OF INTEGRITY PACT IMPLEMENTATION ROLE OF CENTRAL VIGILANCE COMMISSION INTEGRITY PACTS RELEVANCE IN INDIA

02 03

IMPLEMENTATION OF INTEGRITY PACT IN INDIA FEATURES OF INTEGRITY PACT

FACTS, FIGURES AND ANALYSIS QUANTITATIVE ANALYSIS CONCEPTUAL FRAMEWORK

METHODOLOGY AND SCOPE OF THIS STUDY

WORKING OF INTEGRITY PACT

04 06

FEEDBACK FROM STAKEHOLDERS

GENERAL OBSERVATIONS AND SUGGESTIONS INTEGRITY PACT IN DEFENCE PROCUREMENT CASE STUDIES FROM IP COMPLIANT PSUs Case Study I Case Study II : : ACTION POINT FOR STAKEHOLDERS

07

16

15 18

INTRODUCTION OF INTEGRITY PACT IN PRIVATE SECTOR GAS AUTHORITY OF INDIA LIMITED : SAVINGS

19

20

CENTRAL COALFIELDS LIMITED: ROLE OF IEM IN GRIEVANCE REDRESSAL

Case Study VI

Case Study V

Case Study IV

Case Study III

Case Study VII :

SHIPPING CORPORATION OF INDIA : GRIEVANCE REDRESSAL COLLUSION BETWEEN PRIVATE & PUBLIC SECTOR UNDERTAKING (PSU)

NATIONAL MINERAL DEVELOPMENT CORPORATION: GRIEVANCE REDRESSAL SOUTH EASTERN COAL FIELDS LIMITED : GRIEVANCE REDRESSAL

BHARAT PETROLEUM CORPORATION LIMITED : GRIEVANCE REDRESSAL

Annexure 1 Annexure 2 Annexure 3 Annexure 4 Annexure 5

: : : : :

INFORMATION ABOUT IP AND E PROCUREMENT ON IP COMPLIANT PSUs WEBSITE STANDARD OPERATING PROCEDURE ISSUED BY CENTRAL VIGILANCE COMMISSION

ANNEXURES

29 33 39

CIRCULAR ISSUED BY MINISTRY OF FINANCE, DEPT. OF EXPENDITURE DATED 20 JULY 2011 CIRCULAR ISSUED BY MINISTRY OF HEAVY INDUSTRY & PUBLIC ENTERPRISES, DEPT. OF PUBLIC ENTERPRISES DATED 9 SEP. 2011 SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) LIST OF BIDDERS INCLUDING MNCS HAVING RESERVATION ABOUT SIGNING IP

Annexure 6 Annexure 7

: :

41

44

HINDUSTAN PETROLEUM CORPORATION LTD. GAS AUTHORITY OF INDIA LTD. COAL INDIA LTD. MECON LTD.

RASHTRIYA ISPAT NIGAM LTD.

OIL AND NATURAL GAS CORPORATION LTD.

STATUS OF INTEGRITY PACT IMPLEMENTATION, QUALITATIVE ANALYSIS

49

48

46

51 55 56

HINDUSTAN STEELWORKS CONSTRUCTION LTD. METAL SCRAP TRADING CORPORATION LTD. FERRO SCRAP NIGAM LTD. KIOCL LTD.

57

NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. STEEL AUTHORITY OF INDIA LTD. MANGANESE ORE INDIA LTD.

58 59 61 62

64

66

NEYVELI LIGNITE CORPORATION LTD. INDIAN OIL CORPORATION LTD.

CONTAINER CORPORATION OF INDIA LTD.

OIL INDIA LTD.

69 73 71

66

BHARAT PETROLEUM CORPORATION LTD. AIRPORT AUTHORITY OF INDIA LTD.

SOUTH EASTERN COALFIELDS LTD. MAHANADI COALFIELDS LTD. WESTERN COALFIELDS LTD. CENTRAL COALFIELDS LTD.

NORTHERN COALFIELDS LTD.

MAHANAGAR TELEPHONE NIGAM LTD.

79

78

76

75

80 81 82

CENTRAL MINES PLANNING & DESIGN INSTITUTE HINDUSTAN COPPER LTD.

83

TELECOMMUNICATIONS CONSULTANTS INDIA LTD. BHARAT HEAVY ELECTRICALS LTD.

85 86 88

EASTERN COALFIELDS LTD.

NATIONAL THERMAL POWER CORPORATION LTD.

91 94 93

88

RAIL INDIA TECHNICAL AND ECONOMIC SERVICES LTD. CHENNAI PETROLEUM CORPORATION LTD. SHIPPING CORPORATION OF INDIA LTD.

BHARAT COKING COAL LTD.

BHARAT SANCHAR NIGAM LTD.

95 96 97 99

NATIONAL HYDRO POWER CORPORATION LTD. POWER GRID CORPORATION OF INDIA LTD. : SATLUJ JAL VIDYUT NIGAM LIMITED (SJVNL) :

102

Annexure 9

Annexure 8

SAMPLE NON-DISCLOSURE AGREEMENT FOR IEMs

EXPERIENCES OF THE INDIAN OIL CORPORATION LTD.

106 109

105

103

ACKNOWLEDGEMENTS
We would like to thank all those who contributed towards Integrity Pact survey and prepara on of this report, in par cular - Nodal ocers of the PSUs, Independent External Monitors (IEMs), Chief Vigilance Ocers (CVOs) and Bidders of the IP Compliant PSUs.

Our sincere gra tude goes to Shri K. Vidyasagar (Principal Secretary Health, Medical Educa on & Family Welfare - Jharkhand and Former-CVO-RINL), Shri M. N.Buch (Retd. IAS), Prof. M. P. Jaiswal (MDI, Gurgaon), Shri B. B. Tandon (Former Chief Elec on Commissioner), Shri Kanwarjit Singh (IEM-BHEL), Shri N.R. Banerjee (IEM-CCL) Shri Arun Singhal (CVO-GAIL), Shri M.B.Sagar (CVO-SCI), Shri S.M.Mishra (CVO-HPCL), Shri Shiv Raj Singh (CVO-HSCL), Ms Vismita Tej (CVO-CCL), Shri S.K.Gupta (CVO-WCL), Shri B. Pradhan(CVO-AAI), Shri K.S. Balasubramanian (CVO-NLCL), Ms Madhumita Basu (CVO-MSTC), Shri S. Galgali (CVO-KIOCL),P. S. N. Murty (RINL), Shri Paul Thomas (SAIL), Shri S. K. Singh (Nodal Ocer - OIL), Shri P. Balasubramanian (BPCL) Shri Selvakumar (CVO-TCIL), Shri B. B. N. Subudhi (NHPC), Shri Kanwar Singh (NHPC), Shri K. K. Basu (NMDC), Shri K.Kannaiyan (CPCL) Shri Shankar Bha (SCI), Shri D. Ghosh (SCI), Shri Reteesh (SCI), Shri K. R. M. Rao (GAIL), Shri V. Bobraj Jeyaharan (KIOCL), Shri Alok Kumar (CONCOR), Shri P. K. Singh (Wipro Technologies ) and Shri S. K. Mehta (BCCL). We are thankful to Dr. S. K. Agarwal (Vice ChairTII) for the edi ng and proof reading of the report, without his support it would have been impossible to complete this task, Shri A. C. Talwani (Vice Chair -TII) , Shri S. C. Bahri, Col. K. R. Dhramadhikary (Board Member-TII) and Shri R. Sampat (Ac ve Member-TII) for their valuable insights and support. We sincerely thank Shri U. S. Pandey for his experienced insights and guidance in proof reading of the rst dra . We also thank Shri P.S. Bawa (Chair-TII), Ms. Anupama Jha (ED- TII) and Shri Sanjeev, Anshul Jain, Ajay , Vinod, Ms. Sangita and Vipin (colleagues at the TII Secretariat) for their assistance in this report. We would like to acknowledge contribu ons of interns Ms. Vasudha Thirani, Shri Mayank Goel, Shri Dhirendra, Shri Akhil Khurana and Shri Karunesh Rai for assis ng us in carrying out the herculean task of interviewing various stakeholders. Our Special thanks go to Shri Dheeraj Kumar Jha, a mining engineer with Rio Tinto, who in his brief s nt with TII, assisted us in taking feedback from various IP stakeholders and also helped us in systema cally compila on of the inputs received from various stakeholders. We also sincerely thank Shri Rama Nath Jha, Director (ALAC-TII) for his input and proof reading.

Last but not the least, our thanks and sincere gra tude to Admiral (Retd.) R. H. Tahiliani, Mentor TII, who has been pioneer and great promoter of TIIs Mission and Vision.

We are extremely grateful to Shri Vinay Bhargav (Former Director, World Bank, Chief Technical Advisor, Partnership for Transparency Funds) and his organiza on for funding this Integrity Pact Survey and its publica on.

We hope to be guided by the ndings that would help us in further chiseling and rening the tool. We are grateful to Partnership for Transparency Fund who has provided nancial support and encouragement for us to undertake such a review. Special thanks are for Mr. Vinay Bhargav who has been constantly interested in seeing that the tools has added value to the organiza ons that have adopted it. Both for him and us, it is happy moment to share the ndings of the study.

The task has been ably supervised by Dr. M.P. Jaiswal, currently Professor in Informa on Systems and Dean (2009-11), Management Development Ins tute, Gurgaon, one of the highly-rated management schools in the country. He, being an expert in areas of administra ve innova on, process re-engineering, and e-governance implementa on models, is highly suited to guide the research conducted by Shri Ashutosh Kr. Mishra, Director, IP Project, TI India, and Shri Nakul Gupta, a Research Scholar with the MDI. This work is the result of indefa gable eorts in formula ng ques onnaires for dierent stakeholders like the management, the vigilance department, the IEMs, and the vendors so that a comprehensive view could be available. Seeking replies was a herculean eort. Both young researchers have shown commitment, hard work, concerted eort and hot pursuit.

It was thus considered that there ought to be an evalua on of the func oning of the tool by an expert in management who could give it a 360 degree focus. The object was to assess u lity of the tool and its impact. A feedback is necessary both to learn from mistakes and inspire condence, if the tool is found useful.

The IP has been accepted by a wide range of companies from oil, gas, minerals including coal, iron ore, manganese, copper, airport, and steel, to telecommunica ons, shipping, hydro electric projects, and reneries. This demonstrates the robustness of the tool that has a racted them to adopt the tool in order to work transparently and in the interest of bo om line by saving costs, and shadow overheads.

The uniqueness of the Pact lies in the fact it is a voluntary acceptance by the top management that acknowledges the fact that the behemoth organiza ons handle public money and therefore they are responsible and accountable to the people through the civil society organiza on, mediated by Independent External Monitors from outside their systems who can observe their func oning and resolve situa ons of conict. It is therefore a moral commitment and, at the same me, a willingness of management to expose itself to outside scru ny by experts having administra ve experience and domain knowledge.

Integrity Pact (IP) is one of the cri cal and important tools of Transparency Interna onal that has been consciously and conscien ously adopted by 44 public sector undertakings so far. The adop on of the tool was supported by the Central Vigilance Commission, the Department of Personnel & Training, the Second Administra ve Reforms Commission report, the Ministry of Company Aairs, besides the Ministry of Defense that has incorporated its s pula ons in their procurement manual.

FOREWORD

Shri P. S. Bawa Chairman Transparency Interna onal India.

January 1, 2012 New Delhi

P.S. Bawa Chairman, Transparency Interna onal India

MESSAGE

(Dr.) M. P. Jaiswal is currently Professor in Informa on Systems and Dean (2009-11) at the Management Development Ins tute, Gurgaon. He has been a Visi ng Professor-cum-Sr. Fulbright Fellow at Carnegie Mellon University, USA during 2004-05. His area of research, consultancy and teaching includes Administra ve Process Innova on and Reengineering, ERP and e-Government Implementa on Models.)

The launching of the report on Assessment of the Integrity Pact is a welcome step toward quan ca on of the ecacy of the ac vi es undertaken by Transparency Interna onal India. I wholeheartedly congratulate the Chairman-TII, his team and the authors of the report for this ini a ve. I am par cularly happy to know that this special report is just a start of eorts that TII has taken to ensure transparency in the procurement process. The ini a ve started with public sector and is now all set to include private sector as well.

It gives me immense pleasure that Transparency Interna onal India is coming out with a special report on Assessment of Impact of Integrity Pact. Ethical governance, par cipa ve ac on and transparency in opera ons are the core value on which every company and every organiza on should func on. It is a ma er of great pride for me to be associated with Transparency Interna onal India - an organiza on which is commi ed to transparency, accountability and integrity.

I urge upon all the ocers & sta of public and private sector undertakings to par cipate wholeheartedly in the ac vi es during of Transparency Interna onal India and be a part of the launch of the Report on The Assessment of the Impact of the Integrity Pact on 16th January 2011 - thereby making Transparency a way of life and Integrity Pact a great success.

M. P. Jaiswal

AUTHORS

Ashutosh Kumar Mishra Director (Integrity Pact and Corporate Support Forum) Transparency Interna onal India Ashutosh Kumar Mishra holds a bachelors degree in Mineral Engineering from Indian School of Mines ,Dhanbad. He holds cer cate degree in Cyber Laws from The India Law Ins tute, Delhi. Before joining Transparency Interna onal India , he has worked in mining and power sector and has experience in the area of handling issues related to benecia on of high ash coal , beach sand minerals and clean coal technologies.

Nakul Gupta

Nakul holds a bachelors degree in Electronics and Communica ons Engineering and is currently pursuing his doctoral degree in Informa on Management from Management Development Ins tute, India. He has several na onal and interna onal publica ons in the elds of renewable energy, electronics engineering, open source so ware, e-learning, e-governance and innova on in pedagogy along with accolades such as Interna onal Climate Champion 2009 and Brightest Young Climate Leader 2010 in his basket of achievements. He is a member of Interna onal Society for Technology in Educa on and was also selected for Stanfords Summer Ins tute of Entrepreneurship in the year 2011.

ABBREVIATIONS AND ACRONYMS


TII TI ONGC RINL/VIZAG HPCL GAIL CIL HSCL MSTC NMDC FSNL SAIL KIOCL MOIL Oil CONCOR NLCL BPCL IOCL AAI MTNL NCL SECL MCL WCL RITES MECON MoU : : : : : : : : : : : : : : : : : : : : : : : : : : : : Transparency Interna onal India Transparency Interna onal Oil & Natural Gas Corpora on Rashtriya Ispat Nigam Ltd. Hindustan Petroleum Corpora on Ltd. Gas Authority of India Ltd. Coal India Ltd. Hindustan Steelworks Construc on Ltd. Metal Scrap Trading Corpora on Na onal Mineral Development Corpora on Ferro Scrap Nigam Ltd. Steel Authority of India Ltd. Kudremukh Iron Ore Company Ltd. Manganese Ore (India) Ltd. Oil India Ltd. Container Corp. of India Neyveli Lignite Corpora on Ltd Bharat Petroleum Corpora on Ltd. Indian Oil Corpora on Ltd. Airports Authority of India Mahanagar Telephone Nigam Ltd. Northern Coalelds Ltd. South Eastern Coalelds Ltd. Mahanadi Coalelds Ltd. Western Coalelds Ltd. Rail India Technical & Economic Services Ltd. Metallurgical Engg. Consultants India Ltd. Memorandum of Understanding ANNEX : Annexure CCL : Central Coalelds Ltd. CMPDI : Central Mine Planning Design & Ins tute Ltd. TCIL : Telecommunica on Consultants India Ltd. HCL : Hindustan Copper Ltd. BHEL : Bharat Heavy Electrical Ltd. NTPC : Na onal Thermal Power Corpora on ECL : Eastern Coaleld Ltd. BSNL : Bharat Sanchar Nigam Ltd. BCCL : Bharat Coking Coal Ltd. CPCL : Chennai Petroleum Corpora on Ltd. SCI : Shipping Corpora on of India Ltd. NHPC : Na onal Hydro-Electric Power Corpn Ltd. PGCIL : Power Grid Corpora on of India Ltd. SJVNL : Satluj Jal Vidyut Nigam Ltd. NRL : Numaligarh Renery Ltd. EIL : Engineers India Ltd. OPGC : Odisha Power Genera on Corpora on CVC : Central Vigilance Commission CMD : Chairman-cum-Managing Director PSE : Public Sector Enterprises IEM : Independent External Monitor CVO : Chief Vigilence Ocer OECD : The Organiza on for Economic Coopera on and Development PSU : Public Sector Undertaking SOP : Standard Opera ng Procedure

Integrity Pact (IP), a tool devised by Transparency Interna onal to curb corrup on in public procurement and was rst implemented in mid 1990s in Germany during the construc on of Berlin Airport. ONGC was the rst PSU which implemented IP in India by entering into a MoU with Transparency Interna onal India (TII) in 2006. Since then, almost a er ve years, IP is now being implemented by 44 PSUs in India. As such, a lot of work has been done for the IP implementa on but the assessment of IPs ecacy remained an unexplored area un l now. Various stakeholders have also requested for its impact assessment to know whether IP has achieved its primary objec ve of making procurement process more transparent or not. Consequently, TII with the support from Partnership for Transparency Fund (PTF) has undertaken this task. The process started in the month of January 2011. TII representa ves interviewed various stakeholders through personal interviews, telephonic talks, e-mails and by post. A empts have been made to compile gains, success stories supported by case studies from various PSUs, as well as to highlight grey areas in IPs implementa on and possible recommenda ons to make it an eec ve tool. Almost all IP compliant PSUs, IEMs and substan al number of bidders feel that IP has helped in making procurement process more transparent but there have also been certain non-responsive cases as well. Implementa on of IP in coal PSUs is a ma er of concern for all stakeholders. Private sector is considered to be an ac ve par cipant in corrup on, and hence it is impera ve that it adopts IP. In no other me in history entrepreneurship, private economic ac vity and markets have been more important and intertwined with the economic prosperity, poli cal stability and environmental sustainability than they are at present. The nancial crisis and the economic turmoil that this crisis has triggered have thrown this insight into sharp relief. The private sector can be a source of dynamic innova on and growth. It is not ironic that mul na onals are more aware of provisions of IP, as compared to Indian companies. During the assessment process, it was found that the general awareness of IP among bidders is low and the IP compliant PSUs are the ones that need to share a blame for this. Hence, there is a need to widen the level of awareness among bidders by organizing more Focus Group Discussions (FGDs), workshops etc. Proper selec on of IEMs is an important task for eec ve implementa on of IP. Individuals with impeccable integrity and credible records should be appointed as IEMs. They should be selected from diverse elds having the knowledge of the relevant domain and the selec on procedure should not be limited to re red bureaucrats only. Unlike in other countries, where IP is being implemented on a project-to-project basis, in India it has been adopted by the companies in all the projects above the specied threshold value. Nevertheless, there has also been a demand from various quarters to implement IP on a project-to-project basis, so that according to projects the IEM can be appointed. But several PSU ocials feel that if IP is implemented in such a way then they could lose exper se of already appointed IEMs who render their advice on other issues also. Hence while deciding this issue, these considera ons have to be kept in mind before making any shi and adop ng project specic strategy. While quan fying feedback from stakeholders, we have kept 50% sa sfac on as bench mark, anything below 50% was treated as below average, 50-75% as average and above 75% as above average. Amidst clouds of corrup on, there have been quite a few silver linings as well. Most important is quan fying gains from IP, as done by Gas authority of India Limited (GAIL), case studies from GAIL, Central Coalelds Limited (CCL), South Eastern Coalelds Limited (SECL), Na onal Mineral Development Corpora on (NMDC), Bharat Petroleum Corpora on Limited (BPCL). We especially laud eorts of Chief Vigilance Ocer (CVO) of Shipping Corpora on of India (SCI), who took ac on against ocials for viola on of IP provisions.

EXECUTIVE SUMMARY

INTEGRITY PACT

INTRODUCTION

The signicance of public procurement reform for developing countries is increasingly being appreciated by development agencies globally, recognizing that the social and economic costs2 of the weaknesses in public procurement governance are compounded with increase in sovereign risk that represents for foreign investment3. However, even amongst the reformists in this area there are common misunderstandings and a lack of consensus about this ac vity, for example, many perceive it as a regulatory problem and others as a mainstream management func on. These problems are by no means limited to developing countries4. Even in those jurisdic ons with stronger administra ons the issues are poorly appreciated and suscep ble to systemic failure of accountability -- o en because the agents of accountability themselves have at best a weak apprecia on of the issues5. Cases have involved, for example, failures to understand when contractual rela onships exist; or when the passing of informa on on the process cons tutes breaches of conden ality6. Even where these weaknesses are exposed, it will commonly be on an occasional and excep ons basis despite the problems some mes being ongoing and endemic. The Integrity Pact (IP) is a tool developed in 1990s by Transparency Interna onal (TI) to help governments, businesses and civil society to ght corrup on in public contrac ng and procurements. It establishes mutual contractual rights and obliga ons to reduce the high cost and eects of corrup on. It covers all contract-related ac vi es from pre-selec on of bidders, bidding, contrac ng, implementa on, comple on and opera on. Thus, IP is intended to make public contrac ng and procurement transparent by binding all to ethical conduct. It also envisages a monitoring role for the civil society which is the ul mate beneciary of such ac on. The IP consists of a process of signing an agreement between the government or a government department and bidders for a public sector contract. It contains commitment to the eect that neither side will pay, oer, demand or accept bribes, or collude with compe tors to obtain the contract, or while carrying it out. Besides, bidders will disclose all commissions and similar payments made by them to anybody in connec on with the contract. Sanc ons will apply in case of viola ons occur. IP also introduces a monitoring system that provides for independent oversight and accountability. The IP is a model for transparency in public procurement and contracts. It helps enhance public trust in government contrac ng and hence contributes to improving credibility of contrac ng procedures and administra on in general. It enables companies to abstain from bribing by providing assurances to them that (a) Their compe tors will also refrain from bribing (b) Government bidding system and procurement will be absolutely transparent WHAT IS INTEGRITY PACT?

The concepts of transparency and accountability are nowhere more signicant in public administra on than in public procurement and contract management. Yet while these a ributes are paramount as in regards to good governance, they do not on their own dis nguish procurement from many other ac vi es of public process. Public procurement is inherently a poli cally sensi ve ac vity, not the least because it involves signicant amounts of public money even within the context of a na onal economy.1

WHY SHOULD A COMPANY SIGN IP?

(e) It creates condence and trust in decision making process, a more hospitable investment climate, and public support in the country.
1 The Organiza on for Economic Co-Opera on and Development (OECD)s Development Assistance Commi ee (DAC) es mated the volume of global public sector procurement at 8% (US$3.2 trillion) of the worldwide GDP of US$40 trillion. 2 Schapper, P. R. & Veiga Malta, J. (2004). Cmo Hacer para que el Estado Compre Mejor. Gobierno Digital, 3: 6-29. 3 Jones, D. S. (2002). Procurement Prac ces in the Singapore Civil Service: Balancing Control and Delega on. Journal of Public Procurement, 2 (1): 29-53. 4 Hunja, R. (2003). Obstacles to Public Procurement Reform in Developing Countries. WTO-World Bank Regional Workshop on Procurement Reforms and Transparency in Public Procurement for Anglophone African Countries, Tanzania. Available at www.worldbank.org. Nagle, F. J. (1992). A History of Government Contrac ng. Washington, DC: George Washington University. 5 Peachment, A. (1992). The Execu ve State: WA Inc and the Cons tu on. Perth, Australia: Cons tu onal Press 6 Finn, J. (1997, July 2). Major Changes in Tendering Law the Hughes Case. Legal Brieng No. 33. [On-line]. Available at h p://www.ags.gov.au/publica ons/agspubs/legalpubs/legalbriengs/br33.htm

(d) It helps Government and companies to reduce high cost and maintain quality control.

(c) Government will not only prevent corrup on but also extor on by their ocials, and follow transparent procedures.

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

PAGE

INTEGRITY PACTS RELEVANCE IN INDIA

(b) Corrup on hurts poorest the most.

(a) India is perceived to be one of the corrupt na ons and ranks 95th among 183 countries in Transparency Interna onal's Corrup on Percep on Index (CPI) 2011.

(c) Most people believe that corrup on is rising at an alarming rate.

(d) Frequent scandals and delays plague Government contracts and other procurement.

(e) Such delays increase costs of procurement, works and public projects and drains public exchequer. (f) Exis ng an -corrup on organiza ons have had limited success in gh ng corrup on. (g) If IP is implemented sincerely, it will be helpful as an eec ve tool in dealing with mal-prac ces in procurement/works contracts.

EXPERIENCES OF IP IMPLEMENTATION Integrity Pact ensures:

(b) Elimina on of external interven ons in ma ers of contracts and tenders. (d) Reduc on in representa ons/complaints from any bidder or contractor for review. (e) Improvement in the bo om line. (c) Improved sense of ethics in companies and among the bidders.

(a) Greater transparency and integrity between Principal and Counter Party.

PAGE

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

The IP was introduced in India in 2006 with the ini a ve of (Late) Shri Subir Raha, the then CMD of Oil & Natural Commission (ONGC). Then the Second Administra ve Reforms Commission (ARC) in its IV Report on Ethics in Governance made the recommenda on for IPs adop on in order to make contrac ng process more transparent. But it got the real boost due to the support of Central Vigilance Commission (CVC) which issued its rst circular on Dec. 4, 2007 recommending the adop on of Integrity Pact in all major procurements of central PSUs. The Prime Minister in his address on August 26, 2009 to CBI and State An -corrup on Bureaux also men oned IP as a tool to curb corrup on. As a result, so far 44 PSUs (Annex 1) have adopted IP since 2006. ROLE OF CENTRAL VIGILANCE COMMISSION (CVC) (a) Extending full support to the concept, the CVC issued circulars on Dec. 4, 2007, May 19 & Aug 5, 2008 and May 18, 2009 recommending the adop on of Integrity Pact in all major procurements of Central PSUs. (Annex 2) (c) Periodical monitoring of IP (b) Appointment of Independent External Monitors (IEMs) is approved by CVC.

IMPLEMENTATION OF INTEGRITY PACT IN INDIA

In accordance with CVCs circulars, the Department of Personnel & Training had also issued a circular on June 16, 2009 recommending IP for State PSUs. Similarly, the Dep . of Expenditure, Ministry of Finance issued an oce Memorandum No. 14 (12) 2008 E-II (A) on 20th July 2011 (Annex 3) for using the Integrity Pact in Govt. Ministries / Departments. As its follow up, the Dep . of Public Enterprises of the Ministry of Heavy Industry & PE issued an oce Memorandum No. DPE/13(12)/II-Fin on September 9, 2011 (Annex 4) to CMDs of all CPSES to decide and lay-down the nature of procurements/contracts and threshold limit for IP by September 30, 2011. FEATURES OF INTEGRITY PACT (a) A Pact (contract) is entered into by the Principal (a government oce invi ng public tenders for the supply, consultancy, construc on and/or any other service) and the Counter-party (bidders, contractors or the suppliers).

(b) The Principal and the Counter-party commit that they will not demand or accept any bribe or gi . The Principal agrees that its ocials will not do so. They will be subject to disciplinary or criminal sanc on in case of viola on. Similarly, the bidder assures that he would not pay any bribe in order to obtain and retain this contract. (c) IEM is appointed based on considera ons of his impeccable integrity record and working knowledge of tendering/contrac ng process and that panel of IEM for central PSUs is approved by CVC. Use of IEM's advice as conict resolu on mechanism is important for sound implementa on of Integrity Pact.

WORKING OF INTEGRITY PACT

(e) Regarding state PSUs, the role of CVC can be performed by the concerned state vigilance commission or Lok Ayukta as decided by concerned State Government.

(d) A set of sanc ons for any viola on by a bidder of its commitments or undertakings.

Mechanisms of ensuring accountability are necessary within a governance system, especially in public procurement wherein clearly delineated black and white is a rarity and the grey areas are the way of life

(a) Dra s of the MOU and the Integrity Pact are prepared by the Principal and approved by Central Vigilance Commission (CVC) and TII. (b) A MOU is signed between the Principal and TII. (c) Commitment is obtained from all senior ocials of the Principal to implement the IP program. (d) In case there are subsidiaries of the Principal, they are advised to follow IP of the Principal

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METHODOLOGY AND SCOPE OF THIS STUDY METHODOLOGY The purpose of the assessment of Integrity Pact is to provide a systema c method (framework) for evalua ng and mapping the procurement func on within government and allied agencies. This framework can be used to iden fy opportuni es for improvements in acquisi on processes as well as to highlight specic risks faced by each agency. Experience, knowledge and exper se of several stakeholders become an important ingredient of this framework. While many of the issues have already been discussed, this report seeks to develop a proposi on to suggest why integrity pact is likely to succeed beyond delivering minimal governance benchmarks. The analysis in this report will show that public procurement is a subject not only to divergent poli cal, managerial and regulatory objec ves, but also to Transparency and Fairness in the whole deployment of procurement process (Mapping of these has been done with the help of ques onnaires that take into account - key performance measures associated with these divergent yet related objec ves in the light of Integrity Pact Implementa on)

Public procurement is a func on of government that is most prone to corrup on, par cularly in developing countries, where there is insucient transparency and compe on. Procurement is one of the fundamental links in the supply chain of any organiza on. If this link is not managed eciently and eec vely, serious downstream challenges abound9.

SCOPE

In what follows Integrity Pact seeks to develop each of these factors as a founda on for a framework within which they can be more meaningfully ordered, related and understood. All of these elements make up the procurement environment and need to be accounted for in any useful framework if it is to reconcile the ac vi es of procurement managers with the demands of their execu ves, the agendas of the poli cians and the expecta ons of the business sector, the media and the community8

Within the management environment, control, risk mi ga on and transparency objec ves are o en the focus of centrally mandated regulatory compliance frameworks while management performance in terms of value outcomes is o en pursued through devolved decision-making and deregula on.

This report a empts to analyze the percep ons of stakeholders towards public procurement and contrac ng prac ces in IP complaint PSUs. The survey and interview methods were used in the study to analyze the percep ons of their stake holders keeping in view the lens of integrity pact towards public procurement and contract-related issues in PSUs in India.

Many jurisdic ons worldwide have, implicitly or explicitly, similar management objec ves for public procurement 10,11,12. Common policies are widespread between jurisdic ons, notwithstanding the great variances in methodologies and opera onal prac ce. Such common policies are generally constructed from the following elemental objec ves: Public condence Eciency and eec veness

These objec ves are unsurprising and are consistent with generic public management. They simply say that the management of public procurement needs to be in accordance with community standards, eec ve, ecient and consistent with the broader roles of government. However, while they seem simple, experience is that transla ng them into opera onal reality involves issues and policies that are frequently in conict if not mutually incompa ble. Broadly, above three approaches, some mes in various degrees of combina on, are employed to deliver these objec ves. The following discussion includes each of these approaches, generally dened in terms of their focus on regula on, management and centraliza on of public procurement.
Md. RaquI Islam (2007), Public procurement and contrac ng in Bangladesh: An analysis of the percep ons of civil servants, Journal of public procurement, volume 1, Issue 3, pp. 381-390 8 Paul R. Schapper, Joo N. Veiga Malta and Diane L. Gilbert (2006), An analy cal framework for the management and reform of public procurement, Journal Of Public Procurement, Volume 6, Issues 1 & 3, pp. 1-26 9 Thai, K. V. (2008). "Measuring Losses to Public Procurement Corrup on: The Uganda Case." The 3"^ interna onal Public Procurement Conference proceedings, August 28-30, 2008. [Online] .Available at www.ippa.ws. 10 Qiao, Y., & Cummings, G. (2003). The Use of Qualica ons-Based Selec on in Public Procurement: A Survey Research. The Journal of Public Procurement, 3 (2), pp. 215-249. 11 Jones, D. S. (2002). Procurement Prac ces in the Singapore Civil Service: Balancing Control and Delega on. Journal of Public Procurement, 2 (1), pp. 29-53. 12 Thai, K.V. (2001). Public Procurement Re-Examined. Journal of Public Procurement, 1 (1), pp. 9-50.
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Policy compliance and consistency

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Opera onal failures of procurement governance are a ributed by pro-regulators to weaknesses in the professionalism of prac oners rather than to any inherent weaknesses in the regula ons as such; while pro-management advocates a ribute failure to professional weaknesses but iden fy the causes with the regulatory regime itself which tends to reduce the role of management of everything other than mechanical compliance. In both cases, the broader policy context and policy roles are frequently not acknowledged at all. Governments have responded to many of the issues with cyclical reforms of regula on and management and some mes centraliza on to deliver the corresponding expecta ons of the day in terms of compliance and performance respec vely.

Extending concept13,14,15 of gure 1 further, gure 2 shows that any public procurement exercise can be subjected tocompe ng goals of conformance management and performance management, and each of these may also be compe ng with broader strategic poli cal goals of the government or reforms8.

Doing extensive literature and allied secondary resource mining (both academic as well as prac ce oriented) we can lay down basic framework of the whole public procurement no on and the role played by Integrity Pact and Transparency Ini a ves.

Taking cue from Snider and Rendons paper on Public Procurement Policy: Implica ons for Theory and Prac ce it can be proposed

Pegnato, J.A. (2003). Assessing Federal Procurement Reform: Has the Procurement Pendulum Stopped Swinging? Journal of Public Procurement, 3(2), pp. 145-175. 14 Kovacic, W.E. (1992). Regulatory Controls as Barriers to Entry in Government Procurement. Policy Sciences, 25 (1), pp. 29-42. 15 Shoop, T., (1994). Steven Kelman: Advocate of Reform. Government Execu ve, 26 (8), pp. 68-72
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Good public management and administra on, with emphasis on accountability and responsiveness to customer needs; against the backdrop of serious accountability scandals, has been seen as an aspect of good governance by donor agencies suppor ng reforms in developing countries (Economic Commission for Africa, 2003). We have divided this analysis into qualita ve and quan ta ve analysis. First the detailed quan ta ve analysis, followed by the qualita ve analysis have been described. In this par cular sec on, we propose a conceptual model (Figure 4) of analyzing value delivered by the Integrity Pact. Also, we enlist various ques onnaire responses (sta s cal items) that have helped us in mapping and quan fying the implementa on (and value) of Integrity Pact, analyze them and thereby discussing the ecacy and impact of Integrity Pact. This conceptual framework basically represents the value that Integrity Pact delivers when implemented and adopted in various Public Procurement Ini a ves. CONCEPTUAL FRAMEWORK QUANTITATIVE ANALYSIS

FACTS, FIGURES AND ANALYSIS

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Feedback from IP Compliant Public Sector Undertakings

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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Feedback from IP Compliant PSUs Chief Vigilance Ocers

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Composition of Independent External Monitors

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Feedback from Independent External Monitors:

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Feedback from Bidders

Observa ons :

1. Almost all respondent bidders feel that TII should organize more workshops to educate bidders about various provisions of IP. 2. Majority of bidders are not aware about ac vi es of TII.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

GENERAL OBSERVATIONS AND SUGGESTIONS


1. Sub-contractor must be part of IP process and program 2. In case of any default pertaining to various provisions of IP, including bribery by sub-contractor, the contractor has to be held responsible and accountable. 3. Every IP compliant bidder PSU must also sign IP document of Principal while par cipa ng in bidding process. 4. There are various instances, where bribes are routed through sub-contractors, big bidder companies, including MNCs are very much into it. 5. No cases of Bribery have been reported. 6. Almost all respondents feel that there is a need of IP like tool in India, and this tool is to be further ne tuned by taking feedback from them. 7. Almost all respondents feel sa sed with role played by CVC and TII. Major chunk of the bidders feel that TII has to be more proac ve in terms of advocacy of IP and complaint redressal. 8. Almost all PSUs feel that they are not overburdened with expenses on IEMs. 9. No PSU and CVO feels that IEM(s) is/ are duplica ng the work of vigilance department. 10. Some PSUs are changing nomenclature of Independent External Monitor for External Independent Monitor (EIM), TII suggest a common nomenclature of Independent External Monitor should be used by all. 11. Interac ve mee ngs with IEMs should be conducted more frequently and at regular intervals for speedier review of cases 12. Minutes of IEM-Management mee ng, annual report submi ed by IEMs, ac on taken report on complaints be uploaded on the PSUs website. 13. Since maximum IEMs are re red bureaucrats, there is a need to diversify pool of IEM(s), persons of impeccable integrity and having domain knowledge from private sector, academics, NGOs, Media, PSUs etc. should be also appointed as IEM. 14. IEM must submit annual report pertaining to implementa on of IP to the concerned CMD, with a copy to CVC and TII.

General

PSUs CVC

IEM(s)

15. Private sector is no more vic m of corrup on. Instead they are instrumental and hand-in-gloves with public ocers. 16. Bribery among ocials of private rms is rampant. They pay bribes to ocers from others pvt. companies to get their work done. 17. Government must bring a strong deterrent tool to curb corrup on in private sector. 18. A few PSUs have reported that World Bank doesnt allow its funded project to be a part of IP program. TII and TI-S should take up this ma er with World Bank Ocials. 19. List of all bidding companies which are not signing IP, must be displayed on concerned PSUs and TIIs website. In case of foreign mul na onal, TII may pursue this ma er with their counterparts located in the countries concerned.
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Private Sector

World Bank TI India

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Dimensions of procurement process that has to be taken care by PSUs while implemen ng IP. 1. A centralized procurement func on fosters economies of scale in purchasing, eases enforcement of procurement rules, and makes for a more transparent process to vendors. However, a hyper-centralized func on may be too slow and unresponsive to unique needs of organiza onal sub-divisions. Eec ve procurement nds the happy medium between the two extremes. All actors (government employees, vendors, and elected ocials) must be aware of the legal-ethical environment in which they operate. This requires constant training as well as clear guidelines for what cons tutes legal procedure. Maintenance of an ethical opera ng environment : Finding the proper balance between over- and under-centraliza on :

2.

3. Benchmarks for success and prac ce :

4.

Those in charge of the procurement process need to know what is thegood procurement. Is good procurement based on cost? On quality? How long should procurement take? These are but a few of the ques ons that should be addressed on an on-going basis if one is to determine the success or failure of the procurement func on. Maintaining a transparent opera on :

5.

A frequently men oned a ribute of a good procurement process is transparency. All actors in the system should know what is expected of them in terms of procedures and outcome. Where ever there is a doubt, procedures should be in place to clarify to the vendors what is expected from them. Government employees should understand how they must behave in contractual specica on and award. Procurement is a highly specialized profession. Like any other profession, it requires training and commitment to professional norms. There is a need for par cipa on in professional conferences and con nuing educa on as sine quo non. The internet has tremendous poten al for procurement. It can broaden the bidding pool while speeding up the bidding process. It can also foster a more transparent process by virtue of the speed and ease by which informa on can be disseminated. On the other hand, recent experience suggests the e-procurement is not without its shortcomings. 16
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Emphasizing the importance of on-going training :

6.

Adop on of e-Procurement while understanding its limita ons :

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7.

Implementa on is expensive, par cularly if advanced automated bidding so ware is adopted. Procurement personnel and vendors need training prior to implementa on. e-procurement may bring outof-jurisdic on (or even foreign) vendors, crea ng poten al conict with current procurement rules. Hence, it is recommended that a roll-out should be tested in one or two func ons before organiza on-wide implementa on; the upshot is that the internet and procurement is a potent match but start-up can be me-consuming and costly. Smaller ci es and organiza ons may nd that e-procurement is limited to pos ng of Request of Proposal (RFP)s and the like. Successful procurement, par cularly in contrac ng and outsourcing, requires ongoing contact with vendors to assess results and outcomes. Successful procurement requires weeding out of low quality vendors and constant outreach to those that sa sfy the cost and outcomes associated with the benchmarks established before the award of contract. Maintenance of sound rela onship with vendors is not only dened in le er-of-the-law aspects of procurement; actors must also realize the import of partnering with vendors as a means of achieving strategic organiza onal goals. This requires a high degree of professionalism and strong interpersonal skills. Rela onship management with vendors must be on-going :

Keeping an eye on these seven factors simultaneously is not easy. But if taxpayers are to get the biggest bang for the buck in the procurement process, maximizing success on these factors is essen al16.

16 Beyond the Bid: An Evalua on of State and Local Government Procurement Prac ces. By Sherri Greenberg, Aus n, TX: University of Texas, Lyndon B. Johnson School of Public Aairs, 2004.

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(Based on an ar cle of Shri Laxman Kumar Behra, an Associate Fellow at New Delhi-based Ins tute for Defence Studies and Analyses [IDSA]) published in India Strategic, November 2009)

However, the DPP 2006 and also the DPP 2008, which upholds the same, did not men on the precise role and power of the IMs. To ll up the gap the Amendment-2009, has made the provision, giving precise role and powers to this oversight agency. Henceforth, IMs are authorised to scru nize complaints with regards to viola on of Integrity Pact, through the access to the relevant oce records in connec on with the complaints sent to them by the buyer. It may be men oned that the Ministry of Defence (MoD) had made certain amendments to the Defence Procurement Procedures 2008 (DPP 2008) to further promote the domes c industry to par cipate in defence produc on; streamline formula on of qualita ve requirements; ensure greater transparency and accountability in defence procurement; and facilitate oset transac ons. According to Defence Procurement Procedures 2011, Integrity Pact is applicable on the procurement worth Rs 100 crores & above and in Defence Enterprises at Rs 20 crores & above.

The Defence Procurement Procedures (DPP) 2006 for the rst me introduced a provision called pre-contract Integrity Pact (IP), in a move to eliminate all forms of corrup on in defence deals (IP is a binding agreement between the seller and the buyer, prohibi ng any misconduct from either side). Further, the DPP 2006 also made a provision of appointment of Independent Monitors (IMs), who would be responsible to examine any viola ons of pact, brought to no ce by the buyer.

Strengthening Integrity Pact in Defence Procurement

INTEGRITY PACT IN DEFENCE PROCUREMENT

Defence procurements have always been ridden with controversies. ------ Our Government is commi ed to ensure transparency into all defece deals and enforce a ban on middleman and agents. Our Government has taken several steps to enhance the benchmarks for transparency, accountability and integrity. Our Defence Procurement Procedure (DPP) is now revised every year, whereas earlier, it was revised every two years. The focus of DPP is to encourage widest possible par cipa on from various manufacturers in the defence industry and above all, to ensure transparency and integrity in defence procurements. It is in this context -------------- the Integrity Pact is welcome. The Pact includes an agreement between the buyer and the bidder to neither give nor accept bribe in any form. Integrity Pact is an essen al tool to help government and civil society to combat corrup on, par cularly in the eld of defence procurements and the system of public contrac ng. In fact in his address to CBI and police ocers in August last year, the Prime Minister, Dr. Manmohan Sing also highlighted the introduc on of Integrity Pact for high-value transac ons. We must strengthen the ins tu on of Independent External Monitors (IEMs) under the Integrity Pact to scru nize complaints in case of a viola on of the integrity Pact. The integrity of IEMs is of crucial importance. It is here that CVC has an important role to play in the selec on of IEMs. The External Monitors must be experts in their respec ve elds and should be persons of unques onable integrity. ----- The Integrity Pact thus, establishes a monitoring process and is a legal document.

In his address to a TI India Workshop on Integrity Pact on January 23, 2010, Our Defence Minister Shri A. K. Antony commented

(Comments: TI India has not come across any of the details about the implementa on of Integrity Pact in any of the defence contract/procurement)

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

We have been repeatedly approached by a number of private sector corporates for signing MoU for the implementa on of IP in their dealings. During our study, there has been a strong demand for the introduc on of the Integrity Pact in the private sector also. Keeping it in mind, TI India is considering about its pros & cons. We wanted to have an ins tu on to play the role being currently played by CVC in appoin ng IEMs of impeccable integrity and take deterrent ac on against the concerned private sector corporate if IP is not implemented in le er & spirit once it is commi ed. Accordingly, TI India wrote a le er exploring the possibility of Securi es and Exchange Board of India (SEBI) to perform the role similar to the CVC that provides for independent oversight and accountability in case of IP compliant PSUs.

INTRODUCTION OF INTEGRITY PACT IN PRIVATE SECTOR

Instead, it approved a new disclosure-based regime for listed companies with respect to non-ethical business prac ces. Accordingly, companies would need to submit a Business Responsibility Report, along with their annual reports, to help assess the fullment of their environmental, social and the corporate governance responsibili es. These disclosures would be based on nine key principles of responsible, transparent and ethical business prac ces. These include the companies' conduct and governance being based on ethics, transparency and accountability, promo on of the well-being of all employees, respect toward human rights and environmental issues, among others. They also call for businesses to act responsibly when engaged in inuencing public and regulatory policy. These would ini ally apply to the top 100 companies.

However, rejec ng the idea of assuming a CVC-like role of an -corrup on watchdog for the private sector, capital market regulator, the SEBI in a memorandum (Annex-5) submi ed to its board at its mee ng on November 24, 2011, said a CVC-like role is not within the mandate of SEBI under the exis ng legal framework. Its jurisdic on extends to listed companies in the private sector on certain ma ers delegated under the Companies Act, and it has been established to protect the interest of investors in securi es and to promote the development of, and to regulate, the securi es market as enshrined in the SEBI Act,".

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Case Study-I

CASE STUDIES FROM IP COMPLIANT PSUs


Gas Authority of India Limited : Savings

Gas Authority of India Limited (a state owned IP compliant company) referred two cases to IEMs seeking advice before nalizing tenders: Case 1 : Procurement of bare lines pipes for VDPL project: Dia 48 X 25 mm thick: 116.9 km Dia 48 X 27 mm thick: 1.8 km

Brief

It was explained that due to sharp fall in steel prices during the period from oa ng to the opening of tender bids, there was a need to secure benet of the same in the procurement of pipes against the tender, as steel cons tutes 60 to 70% of cost of pipes. IEM advised the management to open price bids of the qualied bidders and nego ate with the lowest bidder to arrive at reasonable prices, having regard to the revised es mate which should duly be considered by ECPC while according approval for award. We were informed that as nega ons did not fetch any nancial benet, the tender was re-oated.

Case 2 : Brief :

Procurement of carbon steel bare line pipes for Dahejvijaipur up grada on project (DVPL-2): Dia 48 API 5L Gr.X-70or X -80PSL- 2

FINANCIAL BENEFITS : Fresh bids resulted in a reduc on of Rs 297.05 crore (2970.5 Million) against the ini al oer.

IEM were informed that representa ons had been received from third par es before opening of nancial bids for re-tendering or obtaining revised bids as steel prices had come down substan ally. The management apprised IEM that since the date of invi ng bids and opening of tenders, prices of steel had fallen sharply (steel index fallen by 11% up to price bid opening and has gone down further therea er.) GAIL was therefore advised that in the given circumstances it could exercise either of the following two op ons: (a) Best reduced prices could be invited from the qualied tenderers and CVC informed accordingly, fully explaining the circumstances for adop ng such a course of ac on in the best interest of the company. or It was felt that reduc on in steel prices of this magnitude within a span of three months was not a normal situa on and company must look for ways and means to secure a compe ve bid.

(b) Management could nego ate with L-1 bidder a er revising es mates to get the desired reduc on, failing which the process of re-tendering could be resorted to. The Management was le free to take ac on having regard to policy and legal tenability. As nego a ons did not yield signicant nancial benet, the tender was reoated.

FINANCIAL BENEFITS : Re tendering resulted in reduc on of cost by Rs 64.57 crores (645.7 Million).

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Case Study-II Bidders : IEM :

Monnet Ispat & Energy, Aryan Coal Benecia ons (P) Ltd., Mecnally Bharat Engg. Co. Shri M. N. Buch

Central Coalelds Limited: Role Of IEMs in Grievance Redressal

Dura on of Case : February 2011

Indicators : The result and impact of IP implementa on are dicult to measure, o en because it is dicult to establish a casual rela onship between what was done and what didnt happen. It is nevertheless possible to observe impact through indicators including : Background : Things run as planned; bidding documents were observed; contractual agreements were upheld and enforced; the project was successfully concluded. The process was visible, transparent and accountable. Informa on was shared with the public, and the par cipa on of stakeholders was possible and eec ve.

Conicts and complaints related to bidding process and contract execu on were minimized or adequately managed. The strategy facilitates the improvement of processes or the undertaking of reforms that benet future projects at organiza onal and ins tu onal (legal) levels. Corrup on is detected and addressed, and savings are made as a result or prevented damages. Central Coalelds Limited (CCL) in NK coalelds near Ranchi invited tender for se ng up 10 MT capacity washery at their Ashoka project. Three bidders, namely- Monnet Ispat & Energy, Aryan Coal Benecia ons (P) Ltd., and Mecnally Bharat Engg. Co., were declared qualied bidders a er ini al scru ny by Central Mines Planning and Design Ins tute CMPDIL (which was appointed by CCL to evaluate the tenders) It was observed that all three tenders had not quoted on a moisture free basis as required in the tender. CCL sought clarica on from all three tenderers to resubmit the yield statement of wash coal on a moisture free basis as per the prescribed level to bring all the three bidders on the same pla orm. There was an observable reduc on in costs or prices compared to the original budget

All three tenderers submi ed their clarica ons. These clarica ons were found to be in order by the CMPDIL, a er which the tender commi ee decided to open price bid in presence of the tenderers on a pre-xed date. Accordingly, the prices were opened of all three tenderers and yield was also declared by the CCL during the mee ng. CMPDIL on behalf of CCL again evaluated the composite tender both technically and commercially and declared Monnets bid as the techno-commercially lowest bid to the tender commi ee which was approved unanimously by them. As evaluated by CMPDIL, the dierence in yield of L1 (Monnet) and L2 (Aryan) was 0.3 units. Monets capital cost was Rs. 128.5 crores as compared to Rs. 163.6 crores of Aryans - a clear 20% lower bid. Monets opera ng cost was Rs. 54 per tonne as compared to Rs 69 per tonne of Aryans. The dierence in opera ng cost tenta vely saved CCL Rs. 450 crores. A er the price bid was opened and Aryan started ques oning the en re process and advocated retendering. The ma er was referred to IEM Shri M. N. Buch. Shri Buch convened a mee ng , in which all par es were present. He gave separate hearing to all three

Ac on taken : by IEM

Outcome and advantages of IP, as being observed from this case: 1. 2. 3. 5. Decrease in the number of li ga on. Be er compe ve rates for the procurement

bidders and based on inputs received from them and opinion from technical heads of the management, he upheld the original decision taken by the management, and his decision was accepted by the aggrieved partytoo.

A separate grievance redressall system has boosted condence of bidder in the system. The project became visible, transparent and accountable.

4.

Informa on was shared with the public, and the par cipa on of stakeholders was possible and eec ves 21
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Case Study III

Tender was oated on a limited tender basis in two-part bid system, i.e., techno commercial bids and price bids. Four Vendors were technically qualied. One of the vendors made representa on to IEMs that the bid of one of the vendors was received in open condi on and was considered for evalua on even though the tender specied that the techno commercial bids and price bids have to be in sealed covers separately. The tender opening commi ee members should have sealed the opened price bid of the vendor and obtained the signatures of the bidders present during tender opening. It was also noted that other vendors did not raise their objec ons at the me of opening of the price bid but sent their objec ons ten days a er opening the price bid. Considering transparency and fairness, the IEMs suggested that the tender be reoated. This sugges on was accepted. Case Study IV The IEMs deliberated on the issue and advised as under:

Bharat Petroleum Corpora on Limited : Grievance Redressal

Case History of Procurement of 10 Mul pass Drills : This case pertains to procurement of 6 nos. 10 dia. Blast Hole Drills with Opera on and Maintenance spares for four years required for BIOM, Kirandul Complex (5 nos.) and BIOM, Bacheli Complex (1 no.) at an es mated indent value of Rs. 1,923 lakhs. Global Tender Enquiry was issued on 5.06.2008 in three bid system with due date of tender opening as 31.07.2008 Oers were received from M/S. Atlas Copco Construc on and Mining Sales, Hyderabad, M/S. Revathi Equipment Limited, Coimbatore and M/s. MMHC Rudgormash Voronezh Ltd. Russia (Indian Representa ve M/s. Stork HKB (India) Pvt. Ltd., New Delhi). Accordingly, they were opened on 31.07.2008 in presence of the tenderers representa ves. M/s. MMHC Rudgormash-Voronezh Ltd., Russia (Indian Representa ve M/s. Stork HKB (India) Pvt. Ltd., New Delhi) has not submi ed the integrity pact in full as per tender. Firm had submi ed only 2 pages (rst page and last page) with sec ons 129 and 10. M/s Revathi and M/s. Atlas Copco have submi ed representa on that the oer of M/s. MMHC Rudgormash should not be considered as they had not submi ed the integrity pact in full as per NIT format. Case was referred to IEM who had opined that M/s. Rudgormashs Part-A of the bid should be considered invalid and rms bid be treated as disqualied. The recommenda ons of IEM were approved by competent authority and accordingly M/s. Rudgormash was informed.

Na onal Mineral Development Corpora on - Grievance Redressal & Savings

The oers of both M/s. Revathi and M/s. Atlas Copco were processed and order was placed with M/s. Atlas Copco on lowest oer basis. Case Study V

Shipping Corpora on of India (SCI) : Grievance Redressal

The SET-IT Projects : A Report by the Independent External Monitors (IEMs).

1. The Vigilance Division of Shipping Corpora on of India (SCI) had received two complaints regarding Implementa on of SET-IT Projects, both for awarding the contracts, one to Tata Consultancy services (TCS) and another to M/S. Entel Network Systems Pvt.Ltd. (ENS). The consultancy contract to TCS and Local Area Network (LAN) contract to ENS were nalized prior to the implementa on of Integrity Pact (IP) in SCI. 2. Due to lack of IT exper se, the Vigilance Division of SCI a er having inves gated the above complaints, could not carry out the detailed inves ga on in all respects, and thus had referred the ma er to the Central Vigilance Commission (CVC) for inspec on by the Chief Technical Examiner (CTE). While agreeing to the above, CVC advised to refer these cases for detailed study and report by the Independent External Monitors (IEMs) appointed for SCI.

4. The background of the above two contracts awarded were :


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3. On CVCs direc ons, the IEMs carried out a detailed study of the en re procurement process followed by SCI in this regard, and had elabora ve discussions with the concerned ocials of SCI and TCS.

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SET-IT CONTRACT TO TCS

A er processing a global tender, M/s. Tata Consultancy Services (TCS) was selected as the IT partner of SCI and awarded the contract on 12.10. 2006 to study and implement and end to end integrated IT system in SCI. The project was planned to be executed in two phases viz. o o Phase 1 - Study the IT requirements of SCI and prepare IT Blueprint and Roadmap for implementa on. Phase 2 - The solu ons iden ed in Phase 1 to be implemented as per the Roadmap.

During the selec on of an IT partner, the par es were not in a posi on to quote actual price of implementa on before Phase 1 was completed and the IT blueprint was nalized. In addi on to the lumpsum cost quoted by the par es for phase 1, the inter- departmental commi ee recommended that for cost comparison of commercial bids, the man-month requirements for dierent skill sets. Thus, the par es were asked to quote for the es mates regarding skill sets and four par es had given indica ve gures, which were used to arrive at the skill set requirement. These skill sets were also debated at the pre-bid conference and changes were incorporated in the Request for Proposal (RFP). The Phase 1 ac vi es of the project commenced on o6.11.2006 TCS submi ed IT Blueprint and the Roadmap on 12.03.2007. Phase 2 was scheduled to start from May 2007. TCS had submi ed the budgetary costs to SCI comprising of a capital expenditure of Rs. 28.96 crores. Since this cost was substan ally higher than what was envisaged, SCI advised TCS to prune down the scope so that the vital and essen al func ons are focused. A er extensive discussions and taking into considera on the management priori es, the SCI pain areas, the core business func onally and a robust backbone for a fully integrated system in future, TCS resubmi ed revised Implementa on Plan and presented a revised budgetary es mate of Rs.80.28 crores and Rs. 17.28 crores as the recurring annual expenditure.

When SCI oated the RFP for selec on of an IT partner for consultancy-cum-implementa on of an end-to-end integrated IT system, all the par es were asked to quote a lump-sum cost for phase 1 and since the scope an the exact quantum of work in phase 2 could not be known then, they were asked to quote cost for phase 2 based on the es mated skill set and man-months assumed by SCI, a er discussing with all the vendors during the pre-bid mee ng. All par es were also informed that the skill set rate quoted by them would be considered during the actual implementa on. On this basis, TCSs cost for Phase 2 worked out to be Rs.7.11 crore as per their commercial bid. This was based on the es mated/indica ve skill set and manmonths furnished by SCI. This gure alongwith the lump-sum cost of phase-1 was taken in the cost tabula on to arrive at the L1 party. Finally, TCS had agreed for the cos ng of Rs.10.13 crores for Phase 2 a er pruning down the scope to the great extent. In view of the foregoing and since the very scope of the tender/contract awarded to TCS had undergone a varia on, the selec on of TCS as IT partner has been challenged by the complaintant.

OBSERVARIONS

The Chief Vigilance Ocer (CVO) of SCI in a mee ng held on 12th. March, 2010 informed IEMs that this subject ma er has been referred to Dr. Gulshan Rai, Director, CERT by the CVC and also conrmed the above vide his le er Vig/TS-IT/08/D4(c)/243dt. 17th March, 2010. He requested IEMs not to do any enquiry or inves ga on or study of the allega ons pertaining to the awarding of the contract to TCS to avoid any duplica on. Further, in the second complaint (i.e. LAN contract), IEMs were requested to do the enquiry/inves ga on/study at the Shipping House only and the rest are being handled by the Vigilance Division (i.e. Data Center at Pawai).

The details of the consultancy contract awarded to TCS were discussed and deliberated by the IEMs with the ocials of SCI and TCS. In the mee ng held on 19th January, 2011, more informa on was sought.

PROCUREMENT OF LAN CONTRACT

TCS had submi ed LAN implementa on strategy on 29th April 2008, The purpose of this document was to draw a roadmap for SCI to upgrade its exis ng LAN infrastructure in line with recommenda on made in IT blueprint. In this report, TCS had stated as under : o

A request for proposal (REP) was prepared in consulta on with TCS wherein specic brand of passive components, based on the exis ng LAN cabling being used in SCI viz Sys max Cabling was men oned and tender was oated specifying the above brand name as one of the requirement criteria by SCI.

Para 2.1 - As SCI(HO) was being renovated, new network cabling was included as part of the renova on plan. The cabling was included as part of the renova on plan. The cabling on the oor was done through conduits below the oor. Cable channels were not used on any renovated oor. 23
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o o

Para 3.3 - The IT Blueprint & roadmap document had iden ed certain lacunae like scraping to GBPS speed, structured cabling etc. In exis ng passive cabling implementa on at SCI (HO). TCS had also observed that all the newly renovated oors had a Sys max cable (CAT 5e/6) for LAN. Para 5.1.2 : Since 11th oor South wing had CAT 6 cabling and North wing had CAT 5e cabling, TCS had further recommended to have one type of cabling on en re oor.

A Technical Evalua on Report was submi ed in January 2009 a er evalua on of total 17 bids received in response to the RFP, wherein only 3 par es, viz. HCL Infosystems, ENS and HCL Comnet Ltd. had emerged as the qualied bidders. ENS was the lowest bidder and had complied with all requirements of the tender IT/108/2008/21 dt.25.11.2008 oated for the purpose.

OBSERVATIONS

A er processing a global tender, a contract was awarded to M/S. Entel Network Systems (P) Ltd. (ENS) on 17th March 2009 for revamping of LAN SET-IT project at Shipping House (HO) at a nego ated cost of Rs.1.69 crore.

TCS, the IT consultants of SCI, was fully aware of the CVC guidelines. However, they jus ed their ac on by elabora ng various advantages of con nuing the exis ng cabling.

In order to minimize cost, me and eorts, TCS had recommended that oor cabling at SCI (HO) should be surveyed again to ascertain cabling as per structured cabling norms, best prac ces and capability to support GBPS and POE features. TCS had also suggested that the survey would also help in iden fying scope of the work for addi onal cabling work at HO, and the surveyed renovated oor with Sys max cable (CAT 5e/6) cabling should be sa sed and accepted for current/proposed applica on implemented during Phase 2. Nevertheless, for the purpose of standardiza on of physical layer LAN cabling, TCS had recommended to con nue using CAT 6 Sys max cabling in future.

Both the projects, viz. procurement of LAN at HO and MTI Powai oce have already been completed based on tenders oated specifying the brand name of Sys max cabling as one of the requirement criteria.

It is observed that since a brand name of Sys max Cabling was men oned in the RFP, the advantage of compe ve rates could not be taken by SCI in the procurement process. The complainants have also objected to branding the name in the tender oated.

As per CVC guidelines (No.98/ORD/1 dt.05.05.2003), specifying the brand name in the tender is prohibited as it encourages the monopolis c prac ces. In 2007, CVC had taken strong objec on for branding name for purchase of computers by SCI when the tender was eventually scrapped and SCI had to re-tender. It may be per nent to men on that SCI had also oated another fender IT/106/2009/07 in March, 2009 wherein the same specic brand of exis ng LAN cabling had been included as one of the requirement criteria for its LAN procurement in MTI Powai oce.

The concerned ocers of IT division of SCI were solely guided by the advice of the consultant TCS, who prepared the complete technical specica ons of all the IT hardware and so ware and so ware required for the SET-IT projects in SCI. Since there was a devia on from the guidelines, the concerned ocials should have recorded the jus ca on and taken the approvals of the competent authority. IEMs have not commented on the alleged bribe of Rs.30 lakhs taken by the consul ng and deciding authority.

The ocials of IT division of SCI to be fully conversant with latest technology available in the market and also conscious of the CVC guidelines while oa ng the tenders in future.

Case Study VI

Conclusion of RC for procurement of DGMS approved Cement capsules. Size 500 x 35 mm for non watery mines against our adver sed E tender No. 176 dated 6.01.10 Background The rm M/S Hi -Tech Enterprises Dhanbad represented by fax on 19.2.2010 that they had submi ed the tender papers as per specica ons, i.e., both on-line and o-line (manual) and also submi ed that. 1. With reference to the above tender we had submi ed the tender paper as per the specica ons - both on-line and o-line (manual)

South Eastern Coal Limited : Grievance Redressal

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2. We enclose the copy of acknowledgement of submission of tender on-line on 18.02.10 at 13-30 hrs, for your ready reference and kind perusal

On receipt of the above le er from the rm, the ma er was discussed by CGM (MM) over phone with the rep. of the rm wherein rep. of the rm conrmed to visit this oce on 22.02.10. to explain the case.

As the tender documents were submi ed by us, but is being claimed that there is no tender paper, we are of the opinion that there are certain ocials who must have colluded, connived and in abatement with the local vendors have claimed that the tender papers were not submi ed which was actually deposited on 17.02.10. Hope we shall be meted with proper jus ce, with suppression of the execu on of the tender, ll verifying and authen ca ng our claim. Hope for your expedient, ra onal and jus ed ac on towards the needful.

The rm also represented that:

5. The undersigned had a talk with the concerned material manager on the telephone, who had conrmed the deposi on of the tender by our rep, within minutes of the deposi on, and if need arises we shall obtain the records of telephonic conversa ons.

4. Your ocial record will conrm the visit of our rep. namely Mr. Raju ,whose visit has been recorded on 17-2-10 at 11 AM.

3. As per the specica ons, we had also deposited the tender manually/o-line on 17.02.10. Our rep. had contacted the concern materials manager, namely, Mr Sarewar and had shown him the envelope prior to deposi on of the tender paper .

Rep. of the rm visited oce on 23.02.10 and the ma er was discussed with him in the chamber of CGM (MM) wherein rep of the rm conrmed that they had submi ed the required o-line documents in their on-line bid with a copy of tender fee of Rs 5000.00. They have further submi ed DGMS approval and NSIC registra on copies along with project report, ISO cer cate, TIN no. and photocopy of the tender fee DD dtd. 13.02.10. SECL issued NIT Through E-Tendering Process only vide reference No. SECL/BSP/MMW/Sec-III/A/Cement capsules/176

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Methodology of submission of tender was Part-1 and Part-II through ON _LINE bidding up-to the scheduled me and date i.e. 18.2.2010. In addi on to the ON-LINE submission of the oer, the following documents were to be submi ed in sealed cover address to Chief General Manager (MM) on or before the due date and me of submission of required documents (for ON-Line bidding) i.e. 18.2.2010. These included Tender fee or exemp on cer cate, EMD and other documents listed at III g (i to xvi) Methodology of submission of tender of the NIT. It has been stated in the SECL note that following three bids were received on-line and o-line documents were also received from them within due date and me. 2. 3. 1. M/S High Tech Mining Products, Bilaspur M/S Bhar Chemicals, Bilaspur. M/S Pawan Putra Chemicals, Bilaspur

SECL note explains that:

4. In addi on, on-line tender was submi ed by M/S Hi Tech Enterprises, Dhanbad but their o-line documents were not received. Therefore, their on-line bid was not considered for opening. The other above three bids were opened and a er approval of board, purchase order was placed on the three Ancillary rms for supply of total 18 lakh Nos. cement capsules for non watery mines on provisional rate basis. The above men oned quan ty will, however, be sucient only for only one and half months requirement.

A. There is severe crisis for the supply of DGMS approved cement capsules, as at present there is no long term arrangement for their supply. Cement capsule is a cri cal safety item required regularly to avoid loss of life and property in UG mines.

In the instant case, M/s Hi-Tech Enterprises, Dhanbad have claimed to have submi ed the o-line documents in the tender box, though the same were not received a er opening of tender box on the due date and me. The rm, however, further claimed that all the o-line documents duly scanned are available along with their online techno-commercial bid. They proposed for board approval that:

C. In e-tender, the technical & commercial bids are uploaded in the TII portal and simultaneously, o-line documents like tender fee, EMD/EMD exemp on documents, DGMS approval (if required), BIS license etc are required to be submi ed o-line within the s pulated me.

B. Earlier, tender no 140 dtd 12.11.09 could not be nalised due to unreasonable price and suspicion of carteliza on. Hence there is a need of expedi ous naliza on of the tender.

1. As M/s Hi-Tech Enterprises, Dhanbad, have claimed to have upload the scanned copies of their o-line documents along with their on-line techno-commercial bid, we may consider opening of on-line bid of M/S Hi- Tech Enterprises. If the o-line required documents are found available and also in order, with their on line bid, their oer may be considered further. In this case, they may be asked to submit tender fee within 7 days from the date of in ma on to them and if they fail to comply, their oer may not be considered.

2. To maintain transparency and fairness, all the other three par cipa ng rms may also be informed about the above ac on in respect of M/S Hi Tech Enterprises and, in case of any objec on raised by three rms, case may again be up for kind perusal and advice of competent authority.

It is also men oned here that the above proposed ac on may enhance par cipa on.

Since the above ac on suggested at Sl. No 1 above will not be in accordance with NIT provision, approval of CMD to be obtained for waiver of NIT provision/tender terms in regard to submission and opening of tender at clause III(G), page 1-2.

Further, to strengthen and streamline the system of submission and opening of tender in case of E-Tenders, following may be incorporated in the future NIT terms to avoid recurrence of problems faced in the subject case:

All o-line required documents shall be submi ed on-line also, duly scanned, along with on-line technocommercial bid, apart from submi ng the same o-line, within the s pulated date and me. A conrma on in this regard may also be submi ed either with o-line documents or separately, but the same may be received within the s pulated me of submission. 26

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A er ge ng approval for above, all the other three par cipa ng rms were informed vide le er nos.4665-4667 dtd 16.03.10 about considering the opening of oer of M/s Hi Tech Enterprises, Dhanbad, based on the on-line documents up-loaded by the rm and they were requested to conrm that they have no objec on in this regard. In spite of regular follow up, no response was received from all the three rms and, they were reminded vide our le er Nos. 4750-4752 dtd 20.03 10 clearly indica ng to submit their reply immediately latest by 25.03.2010, failing which it shall be presumed that they have no objec on in this regard, and the case shall be processed further accordingly. M/s High Tech Mining Products Subsequent to the above, replies were received from M/s Pawan Putra Chemicals vide le er No.PPC/2009-10/HQ76 dtd. 28.03.10 and from M/s High Tech Mining Products vide le er No. HTMP/2009-10/HQ/82 dtd 28.03.10 as follows :

In reference to the above, if the acceptance of the oer of M/s Hi-Tech Enterprises, Dhanbad is under the provisionof the tender then we have no objec on in acceptance of their oer by SECL M/S Pawan Putra Chemicals Dear Sir,

Dear Sir,

Please read the NIT condi ons which as under The bidders who have not submi ed the required tender fee/exemp on documents for tender fee o-line as men oned under clause III G (i) will not be considered for opening of their online techno commercial bids. Further, if the bidder fails to submit the other required documents o-line as men oned under clause G, their price bid may not be considered for opening In considera ons of the above condi ons and also other condi ons of the tender, if the oer of M/S Hi Tech Enterprises, Dhanbad is found acceptable then we have no objec on in this regard. We feel that the ma er must be considered keeping in view all the circumstances of the case. M/s Hi Tech Enterprises, Dhanbad had oered the bid on-line in me. It is also conrmed that their representa ve had talked to Mr. Sarewar on phone and requested for his help in submission of the paper that he was sending. His man and a representa ve had come to submit o-line documents and asked Mr. Sarewar who guided him to go to the tender box. He obviously cannot conrm whether the papers were put in the box but having come there, it will be unnatural that he will not do so. The rm is also sta ng that these copies of papers which were sent o-line as required are also in the on-line bid. It is also in the interest of the enhanced compe on to open this online bid. It will be considered further only if these required papers are included in the on-line bid papers. The company is in urgent need of these cement capsules. As M/s HiTech Enterprises, Dhanbad, have claimed to have upload the scanned copies of their o-line documents along with their on-line techno commercial bid, SECL may consider opening of on-line bid of M/s HiTech Enterprises. If the o-line required documents are found available and also in order with their online bid, their oer may be considered further. In this case, as the tender fee, Dra will here be only a scanned copy, they may be asked to submit tender fee within 7 days from the date of in ma on to them and if they fail to comply, their oer may not be considered. In our opinion, it will enhance compe on, expedite ma er of procurement of needed cement capsules. I also fully support the proposal that: All o-line required documents shall be submi ed on-line also, duly scanned, along with online techno-commercial bid, apart from submi ng the same o-line, within the s pulated date and me. A conrma on in this regard may also be submi ed either with o-line documents or separately, but the same may be received within the s pulated me of submission of opening (Shri Yogesh Chandra, Independent External Monitor, fully concurred with the above opinion) Further to strengthen and streamline the system of submission and opening of tender in case of E- tenders, following may be incorporated in the future NIT terms to avoid recurrence of problems faced in the subjects case: IEM Mrs. Nirmala Buch Opined as follows: The two bidders have naturally referred to the NIT condi on of on-line and o-line submissions. The third has not replied.

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Case Study VII

Collusion between Private & Public Sector Undertakings (PSU)

Later, BHEL, another PSU, had also purchased the tender papers and asked for extension of the date of opening of the tender. However, their request was rejected on the ground that the project would miss the target of supplying power needed for Common Wealth Games scheduled for October 2010, if me extension was granted. It is a normal procedure and in tune with CVC guidelines, to extend the tender date in cases where single bid is received, in order to generate fair and adequate compe on.

In the year 2007, Damodar Valley Corpora on (DVC) had issued an EPC (Engineering, Procurement and Construc on) contract for se ng up a 1200 megawa Thermal Power Sta on at Raghunathpur in West Bengal. The contract was awarded to Reliance Energy Ltd (REL) in Dec 2007 on single tender basis, as the sole bid received was from REL.

A er awarding the project to REL, DVC gave an interest free advance of over Rs 354 crore to REL (now R Infra). It is a common prac ce to give a "Mobilisa on Advance" (of about 10 % of contract) to the EPC contractor a er award of contract for several reasons. First, it shows that the ordering party is serious and commi ed to the project. Once the advance is given, the ordering party is in no posi on to back out. Second, the zero date or star ng date of contract is counted from the date of advance payment. Third, it is a facility to the EPC contractor to start the execu on of project with the funds at his disposal. In the tender documents, it is specied whether the advance is to be given on interest or free of interest. In this case, the tender documents s pulated that it would be an interest bearing advance. The bids are submi ed by various par es taking into account that the interest charges are to be paid, i.e., the interest cost is added to the bid amount. A er award of contract to make a change in bid condi on by changing interest bearing advance to interest free advance straight away gives the benet to EPC contractor to the extent if interest charges now being made zero. If we take an interest rate of 10% on an advance of Rs 354 cr it means a benet of Rs 35.4 cr per year to the contractor. It is a universal prac ce and a golden rule that "Pos ender developments" or changes in bid condi ons to give an advantage to bidding party is a sure proof of corrup on. The date of commissioning of the rst 600 megawa unit was October 2010 ( me when Commonwealth Games were being held in Delhi). However, the project is now delayed to March 2012, defea ng the very purpose for which the tender was awarded on single bid to REL. Comptroller & Auditor General (CAG), which is mandated to audit the award of tender has not been able to do anything in this case, since the original tender le has gone missing in 2008-09. DVC has neither located the le nor registered an FIR. It has also not referred the case to CBI for a probe. DVC also changed the coal boiler specica ons a er awarding of tender, to help REL.

In February 2011, DVC cons tuted a Commi ee to look into the ma er. The Commi ee in its report in July 2011, opined that very li le steel was used in the construc on of the cooling tower, leading to poor quality construc on. The supervision and inspec on of the Tower was contracted to Tata Consul ng Engineers who failed to carry out the necessary checking and inspec on which made the fraud possible. Inspite of irregulari es commi ed by R Infra, DVC has neither registered an FIR against them nor blacklisted the company.

Collusion between DVC and R Infra was detected in the construc on of a cooling tower by R Infra. It was found that there was a short-fall in the amount of steel, needed to construct the tower. Construc on of tower has been stopped mid-way. Since the last 13 months, R Infra has not been able to take correc ve measure of demolishing the structure and reconstruc ng it. The rst unit of 600 MW was to be commissioned in Oct 2010, to give power for Commonwealth Games. By contrast when fraud was detected and work stopped in Oct 2010 the cooling tower was only about 50% complete. Since it takes two years to complete a cooling tower, it means that the cooling tower was about one year behind schedule.

The ma er was referred to Shri S. K. Shinde, Minister for power, the CVO of Ministry of Power and the CVC, by All India Power Engineers Federa on. So far, no ac on has been taken against R Infra. CVC has simply forwarded the case to CVO of DVC where it is pending, while the Minister has not responded to the complaint. (Case vii is based on a report submi ed by All India Power Engineers Federa on to TII). TIIs feedback : If the DVC had adopted IP , the ins tu on of IEMs would have helped in tackling such collusion)

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Annexure - 1

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Annexure - 2 STANDARD OPERATING PROCEDURE

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Annexure - 4

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Annexure - 5
Memorandum to the SEBIs Board on Conference organized by Transparency Interna onal India on Ethics in Business

SECURITIES AND EXCHANGE BOARD OF INDIA

2. The Central Government has taken various measures to curb the corrup on at various levels including the passing of Preven on of Corrup on Act. Central Vigilance Commission (CVC) set up under the Central Vigilance Commission Act, inquires into oences alleged to have been commi ed under the Preven on of Corrup on Act by certain categories of public servants of the Central Government, Corpora ons established by or under any Central Act, Government Companies, Socie es and local authori es owned and controlled by the Central Government. 3. Supplemen ng the eorts made by the Government, various en es of civil society are contribu ng to the ameliora on of corrup on. Transparency Interna onal India, (TII) founded in 1993 is a global civil society organiza on working towards the above objec ve. It a empts to achieve its goals by bringing together relevant players from government, civil society, business and the media to promote transparency in elec ons, in public administra on, in procurement and in business. The Integrity Pact (IP) developed by TII is one of the tools aimed at preven ng corrup on in public contrac ng. The IP is an agreement between a Governmental agency and all bidders for a public contract containing rights and obliga ons to the eect that par es to the agreement will not pay, oer, demand or accept bribes; collude with compe tors to obtain the contract; or engage in such abuses while carrying out the contract. The IP also introduces a monitoring system with the approval of CVC that provides for independent oversight and accountability. 4. SEBI received a le er dated 8th July 2011 from TII reques ng the presence of SEBI in the Conference on Ethics in Business organized by TII on 17th August, 2011. It is further stated in the le er that TII is exploring the possibility of SEBI performing the similar role of CVC with regard to the ac vi es of companies in the private sector. An ocer from SEBI has par cipated in the conference and noted the discussion.

1. The need for greater transparency in aairs of Government especially in Government procurement procedures has been felt world over for its likely benets. Transparency could enhance eciency, clarity and the ease of supply of goods and services for Governmental use. The addi onal advantages can be lesser opportuni es for covert rent seeking and nepo sm thereby saving public resources and enhancing the quality of resource alloca on. Transparency further increases accountability and can be an eec ve check in curbing the corrup on in the day-to-day ac vi es of Governmental bodies.

5. Basically the conference was targeted towards the performance of IP that was required to be adopted by all Government Organisa ons in all major procurements as directed by CVC and reviewing the role of Independent External Monitors (IEMs). IP is a model for transparency in public procurement/ contracts which establishes mutual contractual rights & obliga ons to reduce high procurement cost and adverse eects of corrup on. IP covers all contract related ac vi es from pre-selec on of bidders, bidding, contrac ng, implementa on, comple on and opera on. IEMs are appointed with the approval of CVC to monitor & assess the implementa on of IP. There were long discussions on extending the principles of Business Ethics to the Corporates in Private Sector. Representa ves from TII have informed that they have been working out modali es to extend the principles of Business Ethics, adop ng the Integrity Pact, etc. by the Corporates in Private Sector and urged that they should also extend co-opera on for eradica on of bribery, corrup on, etc., in respect of their business dealings which would ul mately help the na on to a ain the targeted growth rate.

7. Regarding the adop on of similar role of CVC in respect of ac vi es of companies in the private sector by SEBI, it may be stated that SEBIs jurisdic on extends to listed companies in the private sector on certain ma ers delegated under the Companies Act. Further, SEBI has been established to protect the interest of investors in securi es and to promote the development of, and to regulate, the securi es market as enshrined in the SEBI Act. Therefore, such a role is not within the mandate of SEBI under the exis ng legal framework. This is submi ed for kind informa on of the Board.

6. Even though CVC has issued various circulars emphasizing the necessity of adop ng IP in the Government Organisa ons in their major procurement ac vi es, however, in view of limited procurement ac vi es in the Public Sector Banks, Insurance companies and Financial Ins tu ons they are exempted from adop ng the IP. SEBI being Government Organisa on covered under the said circulars of CVC, yet the fact remains that SEBI has only very limited procurement ac vi es.

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SEBI wants listed companies to be ethical


New Delhi : Rejec ng the idea of assuming a CVC-like role of an -corrup on watchdog for the private sector, capital market regulator SEBI has said it wants listed en es to follow a nine-point disclosure norm against non-ethical business prac ces instead. The Securi es and Exchange Board of India (SEBI), which regulates thousands of listed companies as well as hundreds of other market en es like brokers, merchant banks and ra ngs agencies, has informed its board that it cannot adopt a private sectors role similar to that of the Central Vigilance Commission (CVC) for government en es. (Express India Jan. 3, 2012)

In a memorandum submi ed to its board at its last mee ng on November 24, SEBI said a CVC-like role "is not within the mandate of SEBI under the exis ng legal framework". As per the decision, companies would need to submit a 'Business Responsibility Report', along with their annual reports, to help assess the fullment of their environmental, social and the corporate governance responsibili es. These disclosures, which SEBI has proposed to be based on nine key principles of responsible, transparent and ethical business prac ces, would ini ally apply to the top 100 companies. Regarding the adop on of a CVC-like role in respect of ac vi es of private sector companies, SEBI said its jurisdic on extends to listed companies in the private sector on certain ma ers delegated under the Companies Act.

At the same board mee ng, SEBI approved a new disclosure-based regime for listed companies with respect tonon-ethical business prac ces.

The ma er came up for discussion in the backdrop of a proposal to SEBI by Transparency Interna onal, a global civil society organisa on working against corrup on, for exploring the possibility of SEBI performing a CVC-like role with respect to the ac vi es of private companies.

Further, SEBI has been established to protect the interest of investors in securi es and to promote the development of, and to regulate, the securi es market as enshrined in the SEBI Act," the regulator told its board.

The CVC was set up by the government with a mandate to inquire into oences alleged to have been commi ed under the Preven on of Corrup on Act by certain categories of central government employees, corpora ons established by or under any Central Act, government companies and other en es owned and controlled by the central government. SEBI said that Transparency Interna onal India (TII) was also working toward eradica on of corrup on by "bringing together relevant players from government, civil society, business and the media to promote transparency in elec ons, in public administra on, in procurement and in business."

In a le er sent to SEBI in July, invi ng the regulator to par cipate in a Conference on Ethics in Business, TII had suggested exploring the possibility of SEBI performing a role similar to the CVC with regard to the ac vi es of private sector rms. SEBI par cipated in the conference, held in August.

This tool also introduces a monitoring system with the approval of the CVC that provides for independent oversight and accountability.

An IP is an agreement between a government agency and all the bidders for a public contract and lays down each par es' rights and obliga ons for preven on of bribery and other corrupt prac ces.

SEBI said the conference was focused on the performance of Integrity Pacts (IP), a tool developed by TII for preven ng corrup on in public contrac ng.

SEBI told its board that it was also informed by the TII representa ves about their ini a ves for extending the principles of business ethics and adop on of IP by corporates in private sector in their business dealings. However, in view of the limited procurement ac vi es of public sector banks, insurance companies and nancial ins tu ons, these organisa ons were exempted from the IPs.

SEBI also noted that the "CVC has issued various circulars emphasising the necessity of adop ng IP in government organisa ons in their major procurement ac vi es." No ng that SEBI, being a government organisa on, was covered under the said circulars of the CVC, the board was told "... the fact remains that SEBI has only very limited procurement ac vi es." 42
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"This is all the more relevant for listed en es, which, considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaus ve con nuous disclosures on a regular basis," the board was informed. The nine key principles proposed for the new disclosures include the companies' conduct and governance being based on ethics, transparency and accountability, promo on of the well-being of all employees, respect toward human rights and environmental issues, among others. They also call for businesses to act responsibly when engaged in inuencing public and regulatory policy.

Hence, adop on of responsible business prac ces in the interest of the social set-up and the environment are as vital as their nancial and opera onal performance.

On the Business Responsibility Report, SEBI told its board that companies were "accountable not merely to their shareholders from a revenue and protability perspec ve, but also to the larger society, which is also its stakeholder."

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Annexure - 6

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

BEYOND NUMBERS
In this par cular sec on, we enlist various PSUs that have implemented Integrity Pact, analyze their responses to our open-ended ques ons, discussions and mee ngs, and thereby the status of ecacy and impact of Integrity Pact.

STATUS OF INTEGRITY PACT IMPLEMENTATION QUALITATIVE ANALYSIS

Annexure - 7

Integrity Pacts Highlights17: Feedback from PSU ONGC was the rst PSU to adopt IP.

Holding regular mee ngs with Independent External Monitors (IEMs). Savings are es mated to be about Rs.1.5 crores. The benets as men oned by ONGC are : o o o o Transparency. Low cost

72 cases were recorded Sta s cs on cases registered and resolved are available at ONGCs website.

IP boosts market capitaliza on and image of the company. VIP references have reduced. Comfortable and speedy decision making process.

o o

Till date, 43 cases have been referred to IEMs, out of which IEMs have endorsed ONGCs opinion in 34 cases and they were very contrary to managements opinion in 5 cases However, these have been accepted by management. In two cases, decisions have been challenged in the court of law In a short span of 2.5 years, ONGC has organized several mee ngs with its vendors to discuss their cases. They have ac vely par cipated in the mee ngs and immensely contributed by their valuable sugges ons. Their experiences have been very sa sfactory and their responses were very encouraging while simultaneously they exchanged views Ge ng 360 degree reviews from external experts.

IP has helped ONGC to revise the organiza ons vision and build its image as well as its reputa on.

Condence of the bidders increased.

17 Major highlights presented here are based on the Speech Given by Shri A.K. Hazarika, CMD, ONGC - at an Integrity Pact conference cum workshop at MDI, Gurgaon in April 2011.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

from me to me.

Guidelines for commitment and obliga on of counterparty are being worked out in greater detail. Good governance and transparency on the workplace are being promoted. Self assessment is also being undertaken in respect of (a) Threshold limit currently Rs.1 Crore. (b) Annual vendor mee ngs. Self assessment of IP.

Now, ONGC is planning to improve in areas le untouched so far.

Highlights of IEMs feedback Shri Arvind Varma

Thus, by adop ng IP, they have become more compe

(c) Periodic reviews and mee ngs. ve and protable

IP has helped in making procurement process more transparent. Private Sector should also adopt the IP. Shri V. K. Agarwal

IP has helped in making procurement process more transparent. Private Sector should also adopt the IP.

Strength of IP : It has a fast grievance redressal mechanism (average me taken for case disposal in ONGC is about 7 days) and the vendors have faith that the cases have been decided by senior experienced and impar al IEMs of impeccable integrity. Weaknesses of IP : Cases pertain to the stage from Bidding to awards. Reasons for reference of no case from a project in the supply/execu on stage need examina on.

Present IP monitoring mechanism is very much dependent on willing support of the PSU management and the quality and exposure of the IEMs, further development of faith between vendors and IEM mechanism is essen al.

Level of awareness and sa sfac on among Bidders : Feedback from TII :

No ocial Bidders list has been provided by ONGC. So awareness and sa sfac on level among bidders cant be assessed. No ocial feedback received from the Nodal Ocer or CVO. Two important points from the feedback of IEMs:

We expect be er response from Nodal department (IP).

(b) No issues came across from supply and execu on stage (and this needs to be examined since no issues reported does not necessarily means no problems)

(a) Major issue arise at stages from Bidding to Award (and herein the implementa on of Integrity Pact is done in an acceptable and righteous manner)

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Feedback from PSU

Integrity Pact Highlights: Total number of cases referred to IEMs - 4

Bringing IP under legal system, so that views of IEMs become enforceable and to reduce frivolous law suits /arbitra on cases. Perhaps a law similar in nature to consumer protec on act may be considered. A clause to be introduced for taking penal ac on on the party lodging a false complaint Appointment and extension of the term of IEM should be decided by CVC Implementa on of IP should be the responsibility of Vigilance Department.

Highlights of IEMs feedback Shri P. C. Parakh

In case of dierence in the views of IEMs, CVO of the organiza on may be asked to submit his views for considera on by CMD of the company.

Procurement has become more transparent with the adop on of Integrity Pact.

Not sa sed with the role of PSU management: No date for review has been conveyed in the last few months. Strengths of IP: While it is dicult to quan fy the savings and conrm reduc on in corrup on, IP has acted as fast, eec ve and low cost grievance redressal mechanism for vendors. Not all vendors believe that corrup on can be stopped through IP, there is an element of cynicism.

Weakness of IP monitoring : There is no standard system of monitoring. Each PSU follows its own system.

Level of awareness and sa sfac on among Bidders :

Sugges ons : In selec ng IEMs, some care should be taken to ensure that they should have some domain knowledge. Those who are already having enough work in hand and are not available for taking up enquires at short no ce should not be appointed IEMs. As far as possible, IEMs should be located close to the loca on of the company for easy accessibility. Private sector should also adopt IP. It would be desirable to create a standard system of monitoring. Bidders are aware about IP but sa sfac on is not up to the mark.

Feedback from TII :

Advocacy is there, but for them Integrity Pact is another compliance hokum

Conic ng nature of feedback received from Management, CVO and IEM is an area of concern. A joint mee ng of management, IEM, CVC and TII representa ve must be convened to resolve these issues. IP document has to be standardized so that these issues can be addressed.

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Integrity Pacts Highlights: With the adop on of IP, instances of contractors going in for arbitra on/legal proceedings to se le their claims/dispute have reduced to some extent. HPCL convenes mee ngs of its senior ocials, including the whole me Directors, to review/discuss the status of IPs implementa on. Independent External Monitors are regularly invited in IP mee ngs.

Feedback from PSU

IP has helped in making procurement process more transparent.

Rejec on of bids of par es who fail to sign IP some me reduces compe

IP has facilitated improvement in the HPCLs image of purchasing func on.

There is a need to exclude sub-contractor from purview of IP: sub contrac on are not decided at the me of awarding contracts to the principal. More over, HPCLs direct contract/payment is with principal. Sugges ons to improve IP program : Total complaint referred to IEMs - 8

Those PSUs which are already IP compliant and are indirectly signatory to IP program, they are to be exempted from signing IP document as bidder.

Special mechanism/process implemented by the PSU to improve the IP program: Vigilance ocials are asked to check compliance of IP while they are on the Job of reviewing tenders.

Frequency of IEM - Management mee ng : Quarterly structured, need based, when referred.

on.

Highlights of feedback from CVO:

(2) IP should not be a disqualifying criterion. It may be treated as decient document. IP has increased the visibility of ethical prac ces among the bidders. It has also created awareness among purchasing and project authori es about a neutral review of their work. 49
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(1) Foreign par es need to be brought on board

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Foreign contractor(s)/bidder(s) are not extending adequate coopera on and support in the implementa on of IP programme. Important experience and qualica ons of IEMs (I) (ii) Exposure to purchasing func on. Proven integrity in their previous jobs. Issues related to non-disclosure and the right of IEM to access technical documents is an area of concern for them.

Signing of IP can be made as a mandatory document at the me of bidders registra on.

Integrity pact (IP) has helped in making procurement process more transparent.

IPs monitoring systems strengths: Crea ng a sense of responsibility towards ethical governance, in procurement & execu on of work contracts. IPs monitoring systems weaknesses: Disqualifying criteria for non-submission. Sugges ons : Foreign par es to be taken on board for eec ve compliance.

(iii) Awareness of vigilance administra on.

Highlights of IEMs feedback: Ms. Ranjana Kumar

It shall not be a disqualifying criteria. It should be treated as a decient document and should be acceptable before opening of price bids.

Private sector must also adopt IP.

Procurement has become more transparent in general with adop on of Integrity Pact.

Sugges ons :

Strengths of IP: Objec vity, transparency, greater discipline and accountability of PSUs and the vendors.

Greater publicity should be given to IP so that vendors are more aware of its provisions.

(a) IEMs go through in detail the policies of the PSU assigned to them.

Level of awareness and sa sfac on among Bidders : Level of awareness: Average Level of Sa sfac on: Below Average

(b) Discre onary powers if accorded by PSUs to their ocials, for certain exigencies /situa ons, should be made clear, and brought to the a en on of the IEMs in the beginning itself, and their IEMs views sought for.

Feedback from TII:

Regular IEM-Management and TII-Bidders mee ngs are desirable.

PSU must organize bidders meet to make them aware of IP.

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Status of IP Implementa on of Integrity Pact:

The Number and value of tenders in which Integrity Pact was applied are detailed below:

Details regarding the number of bidders are as under:

Benets Incurred due to Integrity Pact:

Financial Benets : Substan al savings have accrued in both the cases as per details below (Please refer case study 1)

(a) Procurement of bare line pipes for VDPL projects: Fresh bid resulted in a reduc on of Rs 297.05 crores against ini al oer.

Indirect Cost Savings due to minimiza on of delays in tender naliza on and direct cost savings through naliza on of tender at a lower value. Mo vated complaints have been minimized. Vendors are careful while quo ng and feel comfortable in the post-award ma er/disputes.

Greater condence amongst bidders while tendering

(b) Procurement of carbon steel bare line pipes for Dahej-Vijaipur up-grada on project (DVPL-11) : Retendering resulted in reduc on of cost by Rs 64.57 crores.

Highlights of PSUs feedback :

IP provides a window to the bidders for redressal of their grievances and IEMs experiences help the GAIL management in taking logical and appropriate decisions. (a) Total complaints referred to IEMs : Nine

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(b) Number of IP related complaints: One Frequency of IEM-management mee ng: Quarterly (c) Other : Eight

Cases in which ac on was taken against supplier/ contractors and nature of ac on: M/S. Calcu a Transport Services contract was terminated, EMD was forfeited and contractor was put on a holiday for three years. There is no need to exempt IP compliant PSUs from signing IP document. In case of dierence of opinion, to have 3 IEMs helps in a majority view.

TII may conduct workshops, seminars etc. once in a year to educate vendors and contractors about IP and its func oning where par cipa on of vendor and contractors is to be ensured. In case of dispute, advice/sugges ons from IEMs are sought and vendors can also approach them for redressal of their grievances. Therefore, there is a possibility of reduc on in arbitra on and legal proceedings. Complaints have been reduced but there is no method to know whether it is because of IP or otherwise.

Reasons for not signing the IP

A few of the bidders have not signed the IP for the following reasons:-

In respect of tenders involving procurement, ve bidders who were not technically qualied for other reasons, refused to sign the IP. All successful bidders had signed IP. The provision rela ng to signing of similar agreement with subcontractors has not been agreed to. Seven interac ve sessions were organized to review various aspects rela ng to IPs implementa on. During these mee ngs, representa ons received from the bidders were deliberated and resolved and some sugges ons were also oered. It is helping to generate condence amongst bidders while tendering. Monthly reports on implementa on of IP have been furnished to IEMs giving details of processing of tenders at various stages i.e. at the me of oa ng of tenders, a er opening of Tender and a er award of purchase order/work order.

Some global agencies ini ally raised objec on to the principals authority to decide viola on against clauses of IP, which they fell, should be vested with courts only. Finally, they agreed to comply with the provisions of IP.

Eec veness of Integrity Pact programme

Vendors are careful while quo ng and feel comfortable of the resolu on of post award ma ers/disputes, if any. Delays have been curtailed due to quicker resolu on of tender issues/complaints and processing me reduced. Mo vated complaints have been minimized. Increase in comfort level-both for the organiza on and vendors.

Sugges ons for Improvements

Indirect cost saving due to minimiza on of delays in tender naliza on; direct cost saving through naliza on of tender at a lower value. Cri cal issues rela ng to tender naliza on have been resolved due to impar al and objec ve assessment. To evolve methodology to ensure that vendors also meet their obliga ons in terms of IP.

The issue of compliance of IP by sub-contractors needs to be studied in detail. The possibility of phased implementa on of the provisions may be examined. To establish a procurement environment where condi ons prevent possibili es of corrup on. Reverse Auc on should be opera onalized expedi ously for realising associated benets.

Company should examine the feasibility of referring the disputes to IEMs before resor ng to Arbitra on proceedings. Interac ve mee ng with IEMs should be conducted more frequently for speedier review of cases.

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Highlights of CVOs feedback:

IP has provided an opportunity to get to know transgression conducted by the bidders elsewhere in the world and the treatment thereof and thus in a way guiding us towards seeking solu on to mi gate such situa ons as well as se ng a precedent for future course of ac on. Similarly, informa on received from bidders regarding downward market trends have resulted in considerable savings. Thus representa on received in GAIL along with delibera on on the issue with IEMs who act as sounding boards, helps, GAIL management in taking mely, reasoned decision. IP has to be signed for each bid: Considering the dynamic changes in terms of ownership of business, change in person authorized to sign IP on behalf of bidder, a generic document signed once by a bidder to be applicable in all its tenders over a period of me may become redundant/untenable as an evidence in courts of law, if the need so arise. Further, varying tender specica on/condi ons would have varied response/bidders and so signing of IP by bidder for each tender necessary. Sub-contractors are to be excluded from purview of IP : Ensuring signing of Integrity Pact by sub-contractors is dicult; it is proposed that the subject clause may be modied as under; Minor dierence in IPs adopted by dierent PSEs creates unnecessary complica ons, so IP compliant PSU bidder must be exempted from signing IP with buyer PSU. IP has helped in making procurement system process more transparent.

The Bidder/contactor undertakes to obtain from his sub-contractor a commitment consistent with this integrity pact, and inform compliance to the principal. This commitment shall be taken only from those sub-contractors whose contract value is more than 20% of Bidders/Contractors contract value with the principal. The Bidder(s)/ Contractor(s) shall con nue to remain responsible for any default by his sub-contractor(s).

Tender provisions include a name of IEM and the dealing ocer; hence normally the complaints are received there or through the oces of concerned Director. But some mes copies of the complaints are received in CVOs oce directly through the complainant. Qualica ons for IEMs : Considering that provision of IP are applicable to tender bearing implica ons largely commercial/legal in nature, IEMs vast experiences in dealing the above issues both na onally and interna onally would add value to the quality of judgments, qualica on on these lines are always an add on.

Strengths of the Integrity Pacts monitoring system : Besides conveying an impression about authen city of adopted bidding process to global community at large in line with interna onal best prac ces, the system being evidence based also acts as a deterrent to otherwise errant bidders. 1. 2. Weaknesses of the Integrity Pacts monitoring system: While compliance by the PSE concerned is compara vely easy to monitor, it is extremely dicult to monitor compliance by vendors.

Highlights of IEMs feedback: Shri A. K. Kundra: 1.

At a recent conference of IEMs organized by GAIL, it was felt that greater clarity is required in the role of IEMs.

3. Private Sector should also adopt the IP

2. PSU be given more exibility in regards to the adop on of IPs framework. Keeping in view the nature of business, some minor modica ons may some mes become necessary.

The procurement in the PSU in general has become more transparent with adop on of Integrity Pact.

6. E-tendering, bill watch system and reverse auc on are already in vogue in GAIL; further IT applica ons can be explored to enhance transparency. 53

5. IP mechanism is a good tool to ght corrup on, primarily for curbing non-collusive corrup on.

4. Sub-contractors are reluctant to fall in line as quite a few of them have limited opera ons.

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7. CVC should also arrange an interface with IEMs once a year for taking feedback. 8.

9. IEMs had made some useful sugges ons based on their experience during a seminar held some mes ago in GTC, Noida. The role of IEMs needs to be further claried in the light of discussion during the seminar. 11. Weaknesses of IPs: Access to informa on in respect of foreign companies and large MNCs is limited to disclosures only. 10. Strengths of IPs: It ensures reitera on of commitment to transparency and facilitates faster dispute resolu on. IEMs are also a source of independent advice. 12. Other comments/sugges ons: The ins tu on of IEMs is gaining strength with the passage of me. The reluctance on the part of PSUs is fast disappearing. The vendors and contractors are increasingly becoming aware of it.

IEMs play a posi ve role even during the process of tendering. The CVO, however, cannot interfere at this stage.

Shri U. Sundararajan (Former IEM):

3. IP mechanism is a good tool to ght corrup on. It is one step towards the goal of gh ng corrup on. This covers the area where there is a complaint. Where there is no complaint, IP does not help. 5. Weaknesses of IPs: The present IP covers only a por on of the problem. It should deal with all complaints having a bearing on corrup on. 4. Strengths of IPs: It gives a support to the vendors and contractors so that they can rely on independent group to look at the issues. For the Company also, consequences of frivolous complaints are minimized.

2. Sub-contrac ng facing problem with regard to IP are out of the purview as of now. However, If the value is really material, it is be er to bring it under the ambit of IP.

1. The PSU in general has become more transparent with adop on of Integrity Pact.

Level of awareness and sa sfac on among Bidders : Feedback from TII:

6. The IEMs may take the help of CVOs or any other agency for ge ng a ma er examined. If IEMs Report is sent to the Board for appropriate ac on, it will have a major impact on the performance of the PSU. The level of awareness and sa sfac on among bidders is above average.

GAIL is one of the PSUs which has implemented IP very eec vely. Other PSUs can take a lead from GAIL in adop ng their model and mechanism of quan fying gains from IP. The level of sa sfac on among dierent stakeholders of GAIL is commendable.

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Status of IP Implementa on of Integrity Pact: Highlights of CVOs feedback: IP is treated as just another formality by stakeholders. There is no change of heart or a tude towards bringing more transparency. SOPs are not followed; e.g. instead of referring case (s) to all IEMs, management refers cases to selec ve IEMs. Most IEMs are not conversant with rules, regula on & manuals. The IEMs ndings are ra onal but arbitrary and more of a personalized approach rather than in consonance with rules & regula ons. However, IEMs have their own problems. They lack proper infrastructure. A few IEMs are very good but most of them act supercially. IP is a very good tool but real issue is its proper implementa on.

As per SOP, IEMs should not be a part of the managements decision making. However, the opposite happens . IP has not helped in making procurement process more transparent. Not sa sed with the role played by TII. It should be careful while entertaining complaints from bidders. Quality is more important. Even one IEM with sucient knowledge and pro-ac veness is sucient. No need to exempt IP compliant bidder PSU from signing IP document No need to exclude sub-contractor from purview of IP

IP is an embellishment. Even without IP, we have enough system in place, which if property implemented, transparency can be ensured. However, there is a clear lack of will on the part of management to ensure transparency. In such a scenario no system can work. CVCs recommenda ons should also be bindings. IEMs recommenda ons should be binding on management.

IEM of CIL must have a background of working in mining industry.

Highlights of IEMs Feedback:

Even Ministrys role is not up to the mark. Nothing will change ll people, who are at helm of aairs, change.

Shri Sujit Shankar Cha opadhyay:

At present, IEMs can help only a er issue of NIT and receipt of a complaint. It cant prevent an incident and suggest correc ve measure. IEMs should be given secretarial assistance. IP mechanism is a good tool to ght corrup on.

The procurement in the PSU in general has become more transparent with adop on of Integrity Pact

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Weaknesses of IP monitoring system: An IEM is not informed formally by the PSU about the ac on taken by the la er on his advice. A copy of the IEMs report should be sent to CVC who should monitor the ac on taken. Weaknesses of IPs: Non binding nature of the advice. Regular IEM-Management mee ngs are very much desired which is missing in the PSU. Strengths of IPs: Independent External Monitoring

Comments /sugges ons:

Level of Sa sfac on and awareness among bidders : Feedback from TII:

The division of responsibili es and task between CVO and IEMs should be spelt out in clear manner.

The IEMs should at least once be taken on a eld visit to the site in order to give them a rst-hand experience of the ground reali es.

No ocial bidders list has been provided by the PSU. CIL centrally procures only two items, i.e. (a) Explosive, and (b) Tyres for Heavy Earth Moving Machinery. Rest is all done independently by subsidiaries. Compliance of IP in CIL and its subsidiaries is an area of concern for all stakeholders of IP.

A mee ng of all concerned par es is very much desired. Ministry of Coal can take up the lead and call for a mee ng of all CMDs, CVOs and IEMs with reprehensive from bidders also, for eec ve IP compliance.

Highlights of CVOs feedback:

IP is not an eec ve tool as it would have been. Sub-contractors should be part of IP.

IP has not helped in making procurement process more transparent. IEMs should not be re red govt ocers.

Not sa sed with threshold limits of the PSU. Not sa sed with the role of TII.

Bidders have to be educated with supplementary notes regarding benets of IP

Highlights of IEMs feedback: Shri S. K. Banerjee

No comments on the CVCs role in advocacy of IP.

IP has helped in making procurement process more transparent

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Expressed his concern regarding IP and the process of procurement. At present, a casual and non-priority approach is being followed towards the implementa on of IP. He has recommended that sub-contractors should also be brought under the purview of Integrity Pact. Private sector must adopt IP

Level of Sa sfac on and Awareness among Bidders Feedback from TII:

No ocial Bidders list has been provided by HSCL, so awareness and sa sfac on level among bidders could not be assessed

The feedback from CVO and IEM is an area of concern.

PSU management has to gear itself more eec vely for implementa on of IP.

Highlights of Integrity Pact Implementa on:

No ocial feedback has been provided on the Ques onnaire. The following feedback is based on the applica on led under RTI Act 2005: MECON have not organized any vendor meet. Since EPC jobs are being carried out by the Contracts Sec on, no vendor meet is required. As per records available, there have been ve structured mee ngs between IEM and CMD of MECON. No. of complaints received by MECON from its bidders and vendors since September 2007 ll date NIL. No. of reports on Implementa on status of IP posted to CVC by CVO of MECON since Sep. 2007: 23 Level of awareness among Bidders : Below average

Internal Assessment of the impact of IP carried out by the CVO of MECON states that there has been no problem in implemen ng the IP.

Feedback from Bidders:

Feedback from TII:

Level of sa sfac on about IP among Bidders (who are aware of IP): Below Average

All desired informa on has to be uploaded on companies website.

IP shouldnt be used as g-leaf. IEM must submit Annual Report on progress of IP implementa on in the PSU.

The nodal department has to be more ac ve in terms of sharing informa on with TII.

PSU management has to be more serious and eec ve when it comes to proper implementa on of IP.

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Highlights of PSUs feedback:

Highlights of Integrity Pact Implementa on IP has helped in making procurement process more transparent. IEM-management mee ngs take place on an annual basis

Proposal for approval or xing up of threshold limit for IP is under considera on of the Board. However currently all the transac ons are covered under IP. Periodical Mee ngs are held with Senior Execu ves for monitoring the progress of the IP implementa on.

Highlights of CVOs feedback:

IP has helped in making procurement process more transparent. IEM-management mee ngs take place on an annual basis Periodical Mee ngs are held with senior execu ves for monitoring the progress of the IP implementa on. IP has made procurement process more transparent and bidders now can approach IEM for grievance redressal.

Highlights of IEMs feedback: Shri Mihir Kumar Moitra

PSU has to be more serious in IP implementa on. PSU shouldnt be given more exibility in the adop on of IPs framework. PSU is not providing adequate support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily. No need to provide secretariat assistance to IEM with in PSU premises. Sugges ons : (1) Role and responsibili es of IEM are to be told to PSUs. Weaknesses of IP monitoring system: No monitoring system in PSUs. IEMs have to ini ate the whole process. Sub-contrac ng is facing problem with regard to IP. Private sector should also adopt IP.

Level of sa sfac on and awareness among Bidders Feedback from TII:


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(2) Provision for secretarial assistance like correspondence, phone calls (STD) mobile, sta onery, transporta on etc. shouldnt be at own cost. Over the last 3 years, all such expensesare borne by the IEM. It is not incumbent on IEM to keep on ge ng in touch with PSU. It should be primarily PSUs responsibility to promptly respond to queries calls from IEM.

No ocial Bidders list has been provided by MSTC, so awareness and sa sfac on level among bidders cant be assessed. PSU must gear up its resources for proper implementa on of IP.

The report from IEM and other stakeholders is not very much encouraging.
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Highlights of Integrity Pact Implementa on:

Total Number of IP related complaints referred to IEMs, since adop on of IP programme by the PSU: Three

IP has helped in making the procurement process more transparent.

Highlights of PSUs feedback:

Complaints referred to IEMs 3 ; Total Number of IP-related complaints 2 IEM-management mee ngs take place on need basis.

Nature and outcome of IEMs review

Materials Dept : One case referred to IEMs regarding non-submission of IP as per NIT terms, IEMs recommended rejec ng the oer concerned. Engineering /contracts Dept : All tendering processes under IP are periodically reviewing by IEMs.

Projects : Case specically referred are reviewed by IEMs. Generally, each tender document is in mated in advance. Advice, if any, is given by IEMs considering PSUs informa on. Frequency of these reviews : As per requirement, on case-to-case basis. Number of cases in which IEMs advice has been accepted - 03

Number of cases in which ac on taken against suppliers/contractors and nature of ac on 59


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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

o o

Materials Dept. Projects Dept.

: :

1 Case - Oer rejected/ Not considered 2 Case - Pre-qualica on related.

1 Case - Insucient IP documenta on suppliers bid rejected

Sugges on to improve the IP:

For each bid, IP is a binding agreement for that case only. Each tender enquiry is a separate event. Signatures of bidders required for each tender enquiry.

Feedback from ocers who have a ended MDI workshop: Not sa sed with TIIs role.

List of transgression made by domes c and interna onal companies may be made available in TII website, cases where very few bidders are available for a product and transgressions made by any of them need to be addressed. For be er implementa on, interac on is required between organiza on regarding IP implementa on and related issues. All contracts has to be included under purview of IP. IEM shouldnt be re red bureaucrat.

Other Highlights (and sugges ons) of the Review Mee ng held with IEMs on August 18, 2011

Sub-contracts shouldnt be excluded from purview of IP otherwise all contracts will be executed through subcontractors.

2. Then IEMs suggested that in case of referral of complains before IEM, all par es concerned should be called and discussions held separately. This will facilitate quicker solving of the issues. 4. DGM (Contracts) informed that one party wanted to change the clause of IP. Jt. GM (S&CP) /Nodal ocer (IP) informed that the present systems of changing any clause in IP, following steps are involved.

1. IEMs appreciated that the system adopted and followed in NMDC is good-leaving no scope for complaints from the suppliers and enquired whether any complaint was received in those tenders. GM (Projects) replied that there was no complaint pending. 3. IEMs suggested for review of the tenders on quarterly basis. They men oned that that they are here to help the corpora on and not to interfere in the process.

6. Materials/Contracts Dep . explained that the reason of cancella on were mostly due to over quo ng of price, lack of minimum tenders, oers not at all matching with the requirement.

5. With the recommenda on of review commi ee and commi ee of directors, CVO processes the le and the same will be approved by the competent authority (i.e. CMD) and a erwards forwarded to TII. The clause will be modied a er the TIIs consent. DGM (Contracts) was suggested to ask the party to submit the IP of other PSUs.

7. IEMs wanted the list/status of the work of tenders issued a er their taking charge. At the end they shared their experience in brief by quo ng one or two incidents at the TIIs Mumbai conference.

8. IEMs suggested that an all India IEMs Meet may be conducted in Hyderabad in the month of October/ November 2011 under the sponsorship of NMDC. 9. In the end, IEMs, suggested for a Vendors Meet in their presence, before IEMs meet. It was informed that earlier Vendors Meet was a ended by Shri M. Gopalakirshna, former IEM.

Shri S. Anwar :

Feedback from IEMs:

Procurement in the PSU in general has become more transparent with the adop on of IP. Formal uniform and periodic mee ng between stakeholders to ensure eec veness. Private sector should also adopt IP.

All the PSUs should compulsorily appoint IEMs and formalize the IPs. This is not being done.

On the whole, the IP is a good beginning. Both PSU and Private sector companies should adopt IP in their system.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Level of Sa sfac on and Awareness among Bidders : Feedback from TII :

Low levels of awareness, medium levels of sa sfac on (but this is limited to only those who are aware of IP).

The implementa on of IP in the PSU appears to be sa sfactory but a lot has to be done to create condence among vendors and make them aware of various provisions of IP. PSU must organize bidders meet to educate them about various provisions of IP.

Status of IP Implementa on of Integrity Pact: Highlights of CVOs feedback : IEM-management mee ngs take place on an annual basis IP has helped in making procurement process more transparent Periodical Mee ngs are held with senior execu ves for monitoring the progress in IPs implementa on. IP has made procurement process more transparent. Bidders now can approach IEM for grievance redresal. Private sector should also adopt IP.

Highlights of IEMs feedback: Shri Mihir Kumar Moitra

PSU has to be more serious in IPs implementa on. PSU shouldnt be given more exibility in the adop on of IPs framework. PSU is not providing adequate support and facili es and ensuring the same from the contractors to discharge IEMs responsibili es sa sfactorily. No need to provide secretariat assistance to IEM within PSU premises. Sugges ons : Role and responsibili es of IEM is to be told to PSUs. Weaknesses of IP monitoring system: No monitoring system in PSUs. IEMs have to ini ate the whole process. Provision for secretarial assistance : Over the last 3 years all expenses on correspondence, phone calls (STD) mobile, sta onery, transporta on etc. are borne by the IEM. It is not incumbent on IEM to keep on ge ng in touch with PSU. It should be primarily PSUs responsibility to promptly respond to queries calls from IEM. Sub-contrac ng is facing problem with regard to IP.

Level of sa sfac on and awareness among Bidders : No ocial Bidders list has been provided by FSNL so awareness and sa sfac on level among bidders could not be assessed Feedback from TII: No ocial feedback and bidders list have been provided by the PSU. Management has to take IP more seriously. IP should not be used as g-leaf; seriousness has to be shown in le er and spirit.

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Feedback from the PSU:

Highlights of Integrity Pact Implementa on: IP has helped in making procurement process more transparent.

A separate IP secretariat has been established under Project Directorates in Corporate Oce, New Delhi to monitor its implementa on. The secretariat sends monthly reports to IEM about the tenders published with Integrity Pact and coordinate quarterly review mee ngs with IEMs on IPs implementa on.

Ocers have been designated at every Plant and Unit to ensure IPs implementa on and to coordinate with the IP Secretariat. Reference of IEMs is being given in all published tenders with IP; complaints, if any, are being referred to the IEMs. Vigilance department does inves ga on, in case a complaint is referred to IEMs. One bidder company has been blacklisted for submi ng forged documents. Private sector must adopt IP. Bidders meet is being organized on regular interval.

Feedback from CVO:

A er the ini al reluctance on the part of certain bidders to sign the Pact, it has now been accepted by the bidders. Further, the decisions given by the IEMs while deciding complaints pertaining to IP have also not been ques oned by the bidders. However, it is not feasible to pinpoint savings due to Integrity Pact.

IP has to be signed each me the bidder signs the pact. He is reminded of his commitments for a fair and transparent dealing. There is no need to exclude sub-contractor from purview of IP. SPECIAL PROCESS/MECHANISM TO IMPROVE THE IP PROGRAMME WITHIN THE PSU

The percentage of contracts (value-wise) that are covered under IP is less than that s pulated by CVC. However, new areas, considering their cri cality, are being brought under the ambit of the IP even though the value involved is less than the threshold limit.

IP does not envisage any change in SAILs procurement process. IP provides an added assurance to bidders that tender will be dealt with in a fair transparent manner.

SAIL has organized vendors meet to get raise their awareness levels and also to get their feedback on IP. Management holds regular mee ngs with the IEMs to discuss the issues involved and ways to take forward the IP program. One area of opera on of SAIL - Handling contracts of CMO - was not covered under IP as the contract value was lower than the s pulated threshold limit. However, considering the various aspects of the contract, it was brought under the ambit of IP. IEMs also hold mee ng with management and Vigilance before deciding on specic complaints received by them.
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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

CASE RELATED TO VIOLATION OF IP : Inves ga on into a complaint in a tender revealed that one of the bidders had submi ed a fabricated IP document. Therefore, banning ac on was taken against the party a er concurrence of IEMs. Choice and roles of IEMs play a vital role in the successful implementa on of IP in any PSU. Therefore, there must be an Ins tu onal framework to select and nominate the IEMs for appointment. Highlights of IEMs feedback: Shri Janaki Ballabh SUGGESTIONS TO IMPROVE THE IP :

IP has improved the credibility of the public procurement system. Both vendors and management of the company feel empowered to follow proper and transparent procedures. In certain cases, the eligibility/qualifying standards for short lis ng eligible vendors leave scope for improvement to make them more equitable. IEM should be given secretarial assistance within the PSU premises. There is a need to organize vendors meet along with the management along of the company and the IEMs to clarify doubt and to get an objec ve feedback Private Sector should also adopt the IP.

IP has helped in making procurement process more transparent.

Shri A. C. Wadhawan

IP has helped in making procurement process more transparent. There is less visibility and awareness among vendors. Vendors are to be made aware of IP program.

IEM should be given secretarial assistance with in the PSU premises. More IEM Management mee ng are required. Selec on of IEMs With impeccable integrity and credible records is important for eec ve implementa on of IPs.

Shri P. Shankar

In every quarter, IEM-Management mee ng is to be organized.

There should be periodical publicity campaigns to make vendors aware of Integrity Pact program. Dont feel that IEM should be given secretarial assistance by the PSU.

Unable to verify that procurement in the PSU in general has become more transparent with adop on of IP

Level of awareness and sa sfac on among Bidders : Level of sa sfac on : Below average

Strengths of Integrity Pact : Denitely Adds to the transparency of the system and helps an ordinary vendor to register his concern on any aspect of procurement process. Level of awareness about IP : Below Average.

Feedback from TII;

Dierent PSUs are following dierent mechanism for complaint handling. There is a need for standardiza on of complaint handling process. As per provisions of IP, a common person can also approach IEM, if he/she founds any malprac ces related to procurement process. Low awareness of IP and low sa sfac on level among bidders is an area of concern.

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Highlights of the PSUs feedback;

During ini al period of implementa on, it took some me for the spirit and principles IP to sink into the system. Now the concepts have been well understood by vendors and customers and we are not facing any problems. Total Complaints referred to IEMs : Nil The Integrity Pact (IP) has helped in making procurement process more transparent.

Present IEMs are doing an excellent job. Since the number of cases under IP in KIOCL is rela vely less as compared to other PSUs, two IEMs can handle KIOCL cases. There is no direct contract between buyer and sub-contractor and as such buyer cannot enforce. However, contractor can get IP signed by sub-contractor. Eec veness of IP can be improved by proper awareness programs and guidance. Review mee ngs are held with IEMs and main points are discussed in detail Implementa on of IP has helped is making procurement process more transparent. No annual report is submi ed by IEMs. No need to exempt IP compliant bidder PSU from signing IP document.

The contractor(s)/bidder(s) (especially foreign bidder) are extending adequate coopera on and support to the PSU in IPs implementa on.

Decision of bidders Management can change over a period of me, so IP has to be signed for every bid.

Frequency of IEM Management mee ng : Quarterly

Highlights of CVOs feedback:

A er implementa on of IP from 1st January 2008, as on date, IP clause was incorporated in 294 contracts. However, ll date no complaint has been received. If bidders sign IP for a specied period, this may lead to a situa on in the procurement of item below IP threshold because some par cipants will be with the IP and others without IP. IEMs should be well conversant with tender /contracts /procurement process. There is no need to exclude sub-contractors from purview of IP.

Highlights of IEMs feedback Mr. Lukose Vallatharai


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IEM may be requested to submit an annual report with respect to implementa on of IP in the organiza on.

Unable to verify that IEMs are providing good services.

Cant say that the procurement in the PSU in general has become more transparent with adop on of Integrity Pact

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The factors that would help IEM to improve their level of services: Audit of a few ongoing and closed les will throw light on overall levels of integrity and provide domain knowledge. Private Companies that are listed under the Lis ng Agreement may be asked to evolve an IP system.

IP is useful as a tool to reduce corrup on.

Within the broad framework and non-nego able principles of the IP, PSUs should be given exibility to improve transparency and probity and IP opera ons.

Corrup on can exist even a er the award of a contract to obtain favourable terms and condi ons of contract or as speed money to obtain / se le payments/delivery. Hence, occasional audit of the en re le assumes relevance. IEM should be given Secretarial assistance within the PSU premises.

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily Technology should be used to monitor and alert every devia on from the General Condi ons of Contract and a endant terms and condi ons by no fying the same in the public domain of web page. Communica on issued to all the tenderers by way of clarica ons / amendments to the Tender, arising out of pre-bid mee ng /exercise should form part and parcel of the General and Specic condi ons of Tender and it should be put up in the public domain (Website) and the IEMs too should be kept informed about such devia ons / amendments. Besides a 100% paperless, forward and reverse auc ons should be put in place.

Weaknesses of IPs : The monitoring is at a macro level, co-related to receipt of a complaint. Unless the IEMs a end a few prebid and such other micro-management mee ngs involving the department/PSU and the vendors/buyers, issues of bias/favori sm, if any, cannot be detected. At present, there is no such provision.

Strengths of IPs : There is an apprecia on by both the contrac ng par es with regard to upholding public probity and a endant nega ve consequences of breach of contract. It also averts avoidable li ga on.

The weaknesses of the monitoring system : IP is a reac ve process based on an adversarial system of law and as such there is very li le monitoring of transac ons so long as there are no complaints.

KIOCL is a rela vely mid-sized PSU. Its top leadership led by Sri K. Ranganath and ably assisted by Directors/GMs and Senior Managers are persons of high integrity. Hence, my observa ons on system improvement are general in nature and not specic to KIOCL. Level of awareness and sa sfac on among Bidders : Above average Feedback from other stakeholders:

IP should nd its applica ons globally in all spheres without limita ons and restric ons. Sub-contractors should be a part of IP.

TII may consider issuing of a standard for implemen ng IP alike the standards that exists for various management systems.

Though physical and nancial impact review on account of IP implementa on is not possible, s ll its implementa on demonstrates organiza onal commitment to clean tendering process.

Feedback from TII :

IP implementa on should not have barriers and it should encompass the en re ac vity covering all the concerned.

It is one of the two PSUs (other being TCIL) that hold an annual review mee ng with TII. CVOs, IEMs, and all the Vendors are present at the mee ngs. There has been an apprecia on of IP by both the contrac ng par es with regard to upholding public probity and a endant nega ve consequences of breach of contract. IP has also been helpful in avoiding superuous li ga ons.

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Feedback from TII:

Despite repeated reminders sent to CMD and CVO and telephonic calls made, no ocial informa on or feedback has so far been received.

[The highlights presented here are based on the speech given by Shri T.K. Ananth Kumar, Director (Finance), Oil India Limited - at an Integrity Pact conference cum workshop at MDI, Gurgaon in April 2011] OILs vision is based on transparency, ethics and good governance Very sa sfactory results observed - good response from vendors, employees and others. Almost 80% procurement is under IP at present.

Highlights of Integrity Pact Implementa on:

Feedback from PSU Duliajan Kolkata

To improve IPs eec veness, vendors mee ngs are organized in Delhi with periodical reviews Role of independent External Monitors (IEMs) and other stakeholders have been clearly dened.

It has helped OIL in market capitaliza on and its image building through transparency and good governance.

Vendors meet held to appraise vendor about IP program in OIL at 15.09.2008 11.11.2008 25.02.2009 15.06.2010 27.09.2010
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Mumbai Chennai Noida

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Sugges on Outcome Complaint Outcome

Sugges ons/complaint received from Vendors : :

Vendors meet held for feedback on IP implementa on by OIL

% Coverage achieved ll Dec. 2010 end

Threshold value reduc on

Ini al Threshold Value

Date of IP implementa on in OIL

: : :

To Rs. 50 Lakhs in December, 2010 18.02.2011 (At Noida)

Rs. 1 Crore

01.01.2010

77.59% (Rs. 1350 cr. out of Rs. 1750 cr.)

One in August, 2010 for inclusion of other connec ons in addi on to only one specied connec on in tender for supply of Tubing. Sugges on accepted. Other connec on included. IEMs found no merit in the complaint. Complaint from one vendor as his oer was being ignored in view of poor past record of failure to execute contract.

: :

Issues raised by OIL / Status :

Sugges ons/Issues raised by Vendors :

Waiver of IP between two IP compliant PSUs (BHEL & OIL) Implement IP in all tenders irrespec ve value A er Bid opening, give a chance to party to sign IP if not signed and submit with tender.

Vendors Feedback : OILs Feedback :

Whether OIL has derived any benet from IP program.

Consider one IP for all tender instead of IP signing/Submission for each tender.

Desired to know consequence in case of breach by OIL as liabili es for only vendor are men oned. Good ini a ve as it gives opportunity to vendors for redressal of their grievances. One year is a small period to judge success or shortcomings of IP program.

Execu ve handling tenders have expressed happiness as this has made system more transparent and beneted vendors. Only one sugges on and one complaint received during one year. Both resolved.

Most vendors submi ng IP with oers. Few forgot to submit IP with oer in the ini al period. Hence more vendors meet to appraise vendors.

Issues raised by BHEL for not signing IP between PSUs to be addressed by TII/CVC as a policy ma er.

Highlights of CVOs feedback:

Experience has been posi ve, although it has been only about 1.5 years experience (IP implemented in OIL w.e.f. Jan. 1, 2010). 67

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Special process/mechanism to improve the IP program: Strong awareness among external stakeholders (vendors) and internal stakeholder (concerned employees) and properly dening the process /mechanism to improve IPs implementa on. No need to exclude sub-contractor from purview of IP because the sub-contractor plays the front line role in the business transac on. Strengths of IP : The monitoring is done by an authority as high as CVC, who is highly conversed with the issues of transparency and business ethics. Secondly, TII brings along their interna onal experiences from both least corrupt and highly corrupt countries. Need to give direc ves to all PSUs for adop on of IP. Weaknesses of IP : Lack of compulsion and non-involvement of private sector. IEMs should preferably have worked in organiza ons having large scale contracts and purchase . No need to exempt IP compliant bidder PSUs from signing IP document.

IP has helped in making procurement process more transparent.

Highlights of IEMs feedback: Shri R.C. Agarwal:

By and large, the procurement in the PSU in general has become more transparent with the adop on of Integrity Pact IEMs are providing good services, but the correct feedback about it would come from the PSU and the Vendors

Vendors are aware about IP, but periodical Vendors' meet would give impetus to awareness and regular exchange of notes between Vendors may help improve condence and acceptability/ reduce Vendors skep cism in IP PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily IP mechanism is a good tool to ght corrup on, but not wholly sucient

There is no duplica on of the work carried out by the Vigilance Department and the IEM. In fact, an eec ve IEM work can be complementary to vigilance work and vice-versa The actual number of IEMs should depend on the volume of tenders being oated, number of complaints etc. Some of the PSUs may need a large number as they may be opera ng from dierent loca ons. Private Sector should also adopt IP. It will make for a more level-playing eld especially in a mixed economy like India.

Role of technology : (A) Compulsory e-tendering and introduc on of further sophis cated methods like reverse auc on etc. (B) A Standing Commi ee of Experts on e-tendering issues, if cons tuted by the CVC, would be helpful to IEMs as then they can refer technical issues to the experts for advice in cases of dispute/complaint involving the func oning of the e-tendering system etc , if required.

Shri N. Gopalaswami

IPs Strengths : IP, if implemented with sincere support of the CMD, Func onal Directors and Senior Management Personnel, will improve (a) transparency (b) ethical dealings; and above all (c) will help the management by reducing unnecessary references from the parent Ministry and other agencies like CVC and thereby consequent delays in processing tenders etc. It may also expedite decision making by ins lling greater condence in func onaries. The procurement in the PSU in general has become more transparent with adop on of Integrity Pact

IEMs are providing good services but the answer to this must come from the PSU and more especially from the Vendors The actual no. of IEMs should have relevance to the no. of tenders being oated, volume of complaints etc. - some of the PSUs like say the Coal PSUs opera ng at dierent loca ons may actually need a large no. of IEMs. There is no duplica on of the work carried out by the Vigilance Department and the IEM. In fact an eec ve IEM work can be complementary to vigilance work and vice-versa

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Vendors are aware about IP but periodical Vendors' meets would increase awareness further and exchange of notes between Vendors may help improve condence and acceptability/ reduce skep cism of Vendors. The Private Sector should also adopt the IP, there is great need. That will make for a more level-playing eld. The IP mechanism is a good tool to ght corrup on, but not wholly sucient.

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily. Present arrangement at the PSU premises is adequate. But end when work like typing, commu ng to post oces etc. is involved, help to IEMs, if possible from PSU, will be welcome. The adop on of some technology would help in IPs eec veness. For example: (A) Compulsory e-tendering and introduc on of further sophis cated methods like reverse auc on etc.

IPs strengths : If implemented with full backing of the CMD, Func onal Directors and Senior Management Personnel, IP will improve (a) transparency (b) ethical dealings; and above all (c) help the management by reducing unnecessary references from the parent Ministry and consequent delays in processing tenders etc. and by extrapola on, inuence-peddling and interference Level of awareness and sa sfac on among Bidders : Level of Awareness : Above average Level of Sa sfac on : Average

(B) A Standing Commi ee of Experts on e-tendering issues, if cons tuted by the CVC, would be very helpful as the IEMs can then refer technical issues to the experts for advice in cases of dispute/complaint involving the func oning of the e-tendering portal and the interpreta on of the func onal parameters or error messages if raised in any ma er before the IEMs.

Feedback from TII:

OIL has raised various queries with TII and CVC with respect to IP implementa on. While they received feedback from TII but they havent received any response from CVC. The delay in response not only hampers the major opera on of the PSU but at the same me discourage them. A separate cell can be created within CVC to deal with IP related issues. It has been suggested by the PSU that all PSUs under same ministry must have same IP program.

Highlights of the feedback from the PSU and CVO:

CONCOR introduced Integrity Pact in its tender from January 2008 onwards. Till date no diculty has arisen on this account. None of the bidders have had reserva ons in signing IP. CONCOR has made use of resolving the conten ous issues by u lising the IP provisions and making references to the IEMs Implementa on of IP has helped is making procurement process more transparent. Total number of complaints referred to IEMs - One.

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Number of cases in which IEM advice has been accepted and acted upon Two. IP must be signed for each bid. Frequency of IEMManagement mee ng : Quarterly

Highlights of IEMs feedback: Shri Ashok Kumar

There is no need to exempt IP compliant bidder PSUs from signing IP document.

Vendors need to be educated on the IP provisions and the op ons to protect their interest. Private sector should also adopt IP. PSU is not ge ng enough support and guidance from CVC Data of cases referred to the IEMs me taken to give the opinion, clarica on and decision given, should be put on website. Implementa on of IP is the issue, fear is lacking. PSU should give secretarial assistance to IEMs.

Implementa on of IP has helped in making procurement process more transparent.

Shri Birendra Prasad Mathur

Weakness of IP monitoring system : IEMs get involved to the extent PSUs management want. They have simply an Advisory role Sugges ons : IEMs are appointed only when a PSU voluntarily agrees. All major procurement department of government should have IEMs and publicity be given to their role & func ons. When all buying/selling agencies of dealing with public procurement develop condence that they can go/appeal to IEMs for jus ce & fair dealing, we can say some dent has been made in the problem of corrup on bleeding the country. Level of awareness about IP: Above Average. Level of sa sfac on: Above average Strengths : Helps in quick resolu on of dispute with vendors

Vendors are not aware of IPs provisions.

Implementa on of IP has helped in making procurement process more transparent

Level of awareness and sa sfac on among Bidders :

Feedback from TII:

The implementa on and eec veness of IP in the PSU is above average.

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Highlights of the PSUs Feedback

Integrity Pact has helped in making procurement process more transparent. Complaints received in rela on to Integrity Pact : NIL

IEM-Management mee ng is need based.

IP has to be signed for each bid since the person/IEM/Bidders/Ocers involved may be dierent for each occasion and each bid is to be dealt separately. Moreover, entering IP would be a preliminary qualica on for each tender and each pact has varying me dura on.

IEMs also review NLCL tender documents with regards to commercial clause.

No need to exempt IP compliant bidder PSUs from signing IP documents

As IEMs are mostly senior re red Govt. Ocials and engage in various honorary assignments, it will be be er if we have three IEMs so that in the absence of any one, the others can be approached. There is no need to exclude sub-contractors from purview of IP, what is applicable to the contractor is applicable to the sub-contractors also. If excluded, it will indirectly help the contractor and the very purpose will get defeated. No annual report is being submi ed by IEM.

Highlights of CVOs feedback :

As everything is made transparent, it establishes mutual contractual rights and obliga ons to reduce high cost and eects of corrup on. Strengths of IP monitoring system: Easy accessibility to IEMs, interac on opportunity with IEMs to be provided by the Principal. Sugges ons to Improve IP program: Weaknesses of IP monitoring system: IEMs advices are not binding. The IEMs should posses domain experience of the PSU ac vi es and the relevant eld, with which they have to deal.

Integrity Pact has helped in making procurement process more transparent.

(i) If IEMs sugges ons are not accepted, they may transmit the same to CVC for their review and for issuing suitable guidelines to the PSUs. (ii) There is no need to exempt IP compliant bidders PSUs from signing IP document.

Feedback based on le er dated 08-08-2011

Integrity Pact compliance has been made mandatory for tenders of the value Rs. 1 crore and above, thereby ensuring that 95% value of the tenders oated by NLCL comes under the ambit of Integrity Pact Programme Online integrated materials management system is in place. This is a versa le e-procurement tools (high levels of transparency and minimal levels of manual interven on) 71
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Periodic Review mee ngs are held by NLCL with the IEMs

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Major highlights of IEMs feedback : Shri D. Mukherjee Unable to verify that the procurement in the PSU in general has become more transparent with IPs adop on.

Monthly interac on with CEO & bi-monthly mee ng between IEMs not held; no complaint referred, informa on rela ng to tenders in progress not shared on a monthly basis. Also, private sector should adopt IP.

No logis c support for IEMs eec ve func oning. In annual assessment and prepara on of annual report data base has to be furnished by Principal/CVO. Weaknesses of IP: Advice by IEM is not binding on the Principal, IEM is a lone soldier. All complaints/source informa on should be furnished to IEMs to go into specic cases. (a) CVOs should interact with IEMs on a regular basis.

Sugges ons

Shri R. Poornalingam

Merely taking a mutual pledge (not to oer/accept illegal gra ca on) becomes a meaningless exercise if there is no mechanism to detect contraven on. Corrup on can exist even if the sanc ty of the tender process is maintained. It is a common knowledge that kickbacks can ow even if L1 is awarded the tender. The only way a frui ul probe can be launched is on the basis of complaints from unsuccessful bidders or into through sources. In this regard, the CVO is in a be er posi on and should share his info with the IEMs. Unable to verify the procurement in the PSU, in general, has become more transparent with adop on of IP.

(b) Logis c support should be provided to IEMs.

PSU is not ge ng enough support and guidance from the CVC. Instead of ac ng like a policeman CVC should infuse condence among management they should take quick decisions. Private sector should also adopt IP.

IEM should be given Secretarial assistance within the PSU premises, whenever needed.

Shri P. K. Banerjee

Unable to verify that vendors are aware about IP or not.

The procurement in the PSU in general has become more transparent with adop on of IP.

Level of awareness and Sa sfac on among bidders : Feedback from TII :

Sugges ons : IP aided by IEMs is a weapon in the hands of the management, which can be used for both defensive and oensive purposes. Pressure from various quarters in procurement ma ers can be resisted by elding the IEMs .Likewise several decades long procurement malprac ces can be curbed if not eliminated by unleashing the IP or IEM system. It could not be measured as any ocial bidders list has not been provided by the PSU. The issues raised by IEMs have to be resolved by the management. Regular IEM-Management-Bidders meet is very much desired. The nodal department has to be more ac ve when it comes to sharing of informa on related to IP.
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Strengths of IP : The greatest strength of IP is its informal nature-it binds stakeholders to avoid being reckless in their behavior. Since IEMs dont owe their posi on to anyone, they can exercise an impar al and benecial inuence on all.

PSU is not ge ng support and guidance from the CVC. Its approach to all PSUs needs to be looked into. An airline/bank/insurance companies need to be dealt with dierently vis--vis mining /power genera on.

Private sector should also adopt the IP, huge undetected malprac ces are rampant in private sector.

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Highlights of the PSUs feedback:

IPs Implementa on has helped in making procurement process more transparent. Enhanced fairness and transparency help us in resolving disputes, if any prior to decision making during tendering process. Till date, only one complaint has been referred to IEMs. Venue for the IEM mee ngs is the PSU oce. Frequency of IEM review mee ng is quarterly. Provides a mechanism for speedy resolu on of disputes by reference to IEMs.

Registered vendors can be requested to sign the IP document once a year. Other bidders as and when they bid for a par cular tender. There is no need to exclude sub-contractors from purview of IP. This will help to widen the awareness and scope of the IP process leading to increased transparency. There is a need to increase the number of IP workshops for vendors. Certain foreign bidders have expressed reserva ons in signing the IP document.

Highlights of IEMs feedback: Shri Janaki Ballabh

IP has helped in making procurement process more transparent.

IPs have improved the credibility of the public procurement system. Both vendors and management of the company feel empowered to follow proper and transparent procedures. It is observed that in certain cases the eligibility /qualifying standards for shortlis ng eligible vendors leave scope for improvement to make them more equitable. Private Sector should also adopt IP. There is a need to organize vendors meet along with the management along of the company and the IEMs to clarify doubt and to get an objec ve feedback

IEM should be given secretarial assistance with in the PSU premises.

Shri T. S. Krishnamurthy

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily.

Par ally, IP has helped in making procurement process more transparent.

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The standardiza on of tender procedure, comprehensive training to the persons concerned in ma ers rela ng to oa ng of tenders specifying essen al and desirable condi ons to be fullled, opening of technical bid, opening of nancial bids only a er nality is reached a er technical bid, nego a ons to be restricted only to one session of a clarica on with a compliance date. Weaknesses of the monitoring system: (a) Absence of secretarial assistance (b) Monitoring the follow-up ac on Private Sector should also adopt the IP.

IEM should be given Secretarial assistance

Delays in the appointment and renewal of IEM (in BSNL, the third IEM was not appointed for two years with the result the two IEMs carried on the work although both of them worked unanimously. If they had diered, the situa on would have been odd!) Good to have one technical person as IEM in case it is a highly engineering oriented company.

Strengths of IPs:

Recommendatory nature of its views

Sugges ons:

Periodical review of pending cases

Unbiased so as to check any external (especially poli cal) inuences

Level of awareness and sa sfac on among Bidders : Level of awareness about IP: Below Average. Level of sa sfac on: Below average

There is no standard prac ce in nalizing technical specica ons rela ng to the tender. Very o en clarica ons are sought and provided on all ma ers thereby delaying the tender naliza on. O en discussions are held in order to clarify technical specica ons thereby providing varia ons in tender specica ons resul ng in confusion in the minds of the bidders. There must be clarify /uniformity in the procedures rela ng to tenders.

Feedback from TII :

Below average, level of awareness and sa sfac on among bidders/vendor is an area of concern. PSU must organize at least annual bidders meet to educate vendors on various aspects of IP.

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Highlights of the PSUs feedback :

Integrity Pact has been uniformly and eec vely implemented across all the divisions of the Corpora on-leading to a transparency-oriented approach and faster tendering process. Regular mee ng with IEMs are being organized on a monthly basis. In these regular mee ngs, both complaints and status of tenders under IP are apprised to the IEMs in a structured manner. Informa on has been hoisted in the internet for the stakeholders knowledge and it covers status of all ongoing tenders under IP. Number of complaints referred to IEMs - Two Implementa on of IP has helped in making procurement process more transparent.

o o

Nature and outcome of the review done by IEMs: Faster complaint resolu on.

Structured review of IP compliance of tenders

Frequency of these reviews: Monthly and ongoing

No. of cases in which IEMs advice have been accepted: All cases

In case of empanelled par es or par es supplying equipments or providing services on proprietary basis one me signing of IP is sucient. Otherwise it should be tender wise. The number of IEMs in a PSU depends upon the geographical spread and the public interface requirement. On one- me basis, all PSUs can sign the IP with other PSUs to reinforce IP compliance. Many foreign bidders are not aware of IP and they are following their country-wise prac ces.

IEMs are signing Non-Disclosure Agreement (NDA) for ensuring secrecy of informa on shared by the bidder.

Stage wise reports on the progress of tenders under IP are being submi ed to IEMs on a regular basis. For ecacy, IP must be extended to private players uniformly star ng with the listed private en All PSUs should be compulsorily covered in the ambit of IP. Annual report submi ed by IEM(s) : None es.

Benets accrued due to IPs implementa on:

Review and evalua on mee ngs held between IEMs and management Frequently, No records available.

Savings incurred due to IEMs interven on in tendering process. But amount can not be quan ed tender-wise. Instances of cartel forma on by bidders has come down or eliminated.

IEMs Feedback: Shri B. C. Bora

Unable to verify whether vendors are aware of IP.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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Weaknesses of Integrity Pact : IEMs have to rely on the informa on presented to them by the PSUs and have to convey their decision based on the same. Sugges ons Periodic review by PSU Board on all complaints and decisions taken with or without consul ng the IEMs. on, excep ons must be

Strengths of Integrity Pact : Providing opportuni es to aggrieved vendors to seek redressal, fear of scru ny by IEMs, peer pressure on PSUs to provide fair play.

Sub-contractors of main vendors, at mes, refuse to abide by the IP guidelines. Private sector should also adopt IP.

Shri RSSLN Bhaskarudu

Direc ve from CVC to make technical specica ons broad-based to encourage large compe reported to Board/IEMs. Procurement in the PSU in general has become more transparent with the adop on of IP

Strict compliance of the rule of rota on of ocials holding sensi ve posi on.

Shri B. B. Tandon

Technology can play very important role in IPs eec veness. Various oces of TI should leverage technology to build and maintain a comprehensive and global data base of par es, which have commi ed transgressions from IP, so as to disqualify such par es from ambit of IP tenders globally. This will facilitate uniform implementa on of IP across the globe and minimize scope of viola on of IP by global bidders in other countries Procurement in the PSU in general has become more transparent with adop on of IP. There must be three IEMs in one PSU. Private sector must adopt IP. Sa sed with implementa on of IP in IOCL.

Feedback from TII :

Level of Sa sfac on and awareness among bidders : It could not be veried as no ocial bidders list has been provided. PSU must organize regular bidders meet.

Nodal department has to be more ac ve in terms of sharing informa on with other stakeholders.

Highlights of the PSUs feedback:

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Integrity Pact has been instrumental in fairness, equity and transparency; and has improved sense of business ethics amongst vendors. It has been instrumental in over all upli ment of public image of the organiza ons. It has also helped in reduc on of complaints /arbitra on and court cases. Implementa on of IP has helped in making procurement process more transparent.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Number of cases in which IEMs advice has been accepted and acted upon : Two Frequency of IEM Management mee ng : Need-based IP must be signed for each bid.

Number of complaints referred to IEMs : Two

There is no need to exempt IP compliant bidder PSU from signing IP document. Sub-contractors are to be a part of IP. More interac on with TII is required.

Highlights of the Annual Review Mee ng

Shri M. K. Kaw, former IEM, pointed out that as and when any complaint is received by any of IEM regarding tendering process, the same shall be discussed /reviewed by full panel of IEMs for ensuring the desired transparency and objec vity as per CVCs Standard Opera ng Procedure (SOP). Shri M. K. Kaw suggested that for giving wide publicity of IP to the tenderers, the IP clause /name of the IEM and details thereof should be given in bold le ers, which was agreed for necessary follow up. IEMs suggested that some dispute/complaints, which involve detailed examina on regarding tendering/execu on to ascertain malprac ces men oned under IP should be referred to them. IEM Shri R. C. Rekhi men oned that physical and nancial progress reports of IP projects should be submi ed to IEMs. Shri M. K. Kaw made specic references to the provisions laid down in the SOP and emphasized that the role doesnt end with the award of contract, but ll the comple on of contract and naliza on of bill.

Shri Kaw suggested that if any bidder/contractor takes up a case before any court which comes under the purview of IP, concerned should be informed about the facility under IP to resolve the ma er and dispute be referred to IEMs with the permission of the court. Shri Kaw suggested widening the scope of IP so as to cover monitoring pace and quality of work and also to establish some mechanism to assess func oning of monitoring team.

Level of awareness and sa sfac on among Bidders : Awareness : Above Average

Shri Rekhi, men oned that physical and nancial progress reports of IP projects should be submi ed to IEMs . CVO men oned that the same would be given an a proper format for respec ve ED.

Shri Rekhi suggested that in order to derive full benet of IP, there is an urgent need to focus on monitoring the progress of work and quality control during execu on.

IEMs Feedback :

45% of the respondent bidders feel that IEMs are facilita ng procurement process.

Level of sa sfac on is above average, but a major chunk of bidders feel that it is a rou ne work for them.

Shri M.K. Kaw (Former IEM)

The top management should meet the IEMs once in two months. Vendors meets should be held at dierent loca ons once in 3 months. Private sector should adopt IP. IEM must be given secretarial assistance.

Vendors are not aware of provisions of IP as not enough is being done to publicize the scheme. Only one vendors meet was held during his tenure of three years.

Implementa on of IP has helped is making procurement process more transparent.

Feedback from TII :

TII must take lead to address issues raised by PSU management .

Regular interac on between AAI-Bidders-IEM and TII is very much desired.

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IEMs Feedback: Shri P Shankar

Feedback from the PSU : No feedback either from PSU or CVO oce.

There should be periodical publicity campaigns to make vendors aware of Integrity Pact program. Do not feel that IEM should be given secretarial assistance by the PSU.

Unable to verify that procurement in the PSU in general has become more transparent with adop on of IP

Shri K. N. Singh :

Strengths of Integrity Pact : Denitely Adds to the transparency of the system and helps an ordinary vendor to register his concern on any aspect of procurement process. IP has helped in making procurement process more transparent.

Level of awareness and sa sfac on among Bidders :

No exemp on should be given to sub contractors. Private sector must adopt IP.

CVC has to be more proac ve in terms of eec ve implementa on of IP.

Level of awareness about IP is above average.

Almost 75% of respondent bidders feel that ins tu on of IEMs is facilita ng procurement/contrac ng process. IP document should be signed both by the bidders and purchasers before bid submission. No exemp on should be given to IP compliant bidder PSUs.

Maximum bidders feel that its a good tool and it helped in making procurement system more transparent

Feedback from TII :

Sugges ons to make IP eec ve: There should be ac ve par cipa on from all bidders and buyers.

Though we havent received any ocial feedback from the PSU, the response from bidders is very encouraging. The Nodal department (IP) of MTNL has to be more ac ve, when it comes to sharing of informa on related to IP.

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IEMs Feedback

PSUs Feedback : No ocial feedback has been received.

Shri Brijesh Kumar

Integrity Pact has helped in making procurement process more transparent. IEMs should be given secretarial assistance.

PSU shouldnt be given more exibility in regards to the adop on of IPs framework.

To some extent there is duplica on of work carried out by the Vigilance Department and IEM. IEMs do not know what the Vigilance Department is doing. There is a need for awareness among the IEMs about the procedures/func on of the PSUs. There should be three IEMs in a PSU.

Shri M. N. Buch

Private sector should also adopt IP.

Level of awareness and sa sfac on among Bidders : Level of awareness : Above average Level of sa sfac on : Below average

Private sector should adopt IP.

In some cases there is a duplica on of work carried out by the Vigilance Department and IEMs.

IEM should be given secretarial assistance

Knowledge of the procedures followed in the PSU is very important for IEMs.

With adop on of IP, bidders have got an alternate mechanism for grievance redressal.

As we havent received any ocial feedback from the PSU, we are not in a posi on to comment about implementa on of IP in the PSU. Coal PSU has to be more ac ve when it comes to implementa on of IP.

Feedback from TII

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Highlights of the PSUs Feedback :

Cases referred to IEMs from me to me as per the representa ons received from par cipa ng bidders and were handled by IEMs as per Standard Opera ng Procedure (SOP). Frequency of IEMManagement mee ng is need-based. IP is tender based so IP must be signed for each bid. There is no need to exempt IP compliant bidder PSUs from signing IP document.

Implementa on of IP has helped in making procurement process more transparent.

It may not be possible for bidders to execute IP with all sub-contractors within prescribed period as men oned in CMM/MCEW (Manual) for civil sec on. There is a need for regular workshop and mee ng for advocacy and ne-tuning of IP program. Benets accrued due to implementa on of IP : (a) Reduc on in complaints against PSU ocials regarding adverse integrity and the general image regarding integrity has improved. (c) Instances of cartel forma on have come down because of IP. (b) Conduct of Bidders/contractors became more transparent in not inducing /pressurizing the ocials to indulge in corrupt prac ces.

IEMs Feedback:

(e) Instances of contractors going in for arbitra on /legal proceedings to se le their claims/disputes have reduced.

(d) Extraneous interference in awarding and managing contracts has reduced.

Ms. Nirmal Buch

Implementa on of IP has helped is making procurement process more transparent. Sa sed with role played by the PSU

Strengths of IP: Gives opportunity to the venders to address their issues to an outsider, independent person. The PSU sta also is able to see how to proceed further impar ally, with condence and guidance for furthering work. Sugges ons : Based on our limited observa on of the PSU and interac on with those who have made representa ons, the number of complaints has increased with me and awareness.. The system cannot solve all problems of any malprac ces but denitely helps. It should con nue and then review again. Level of sa sfac on: Below average The level of awareness: Average

Level of awareness and sa sfac on among Bidders : Feedback from TII:

The level of sa sfac on and feedback from other stakeholders is an area of concern for us. Management has to be more proac ve in terms of implementa on of IP. Regular IEM-Management Bidders meet is desired.

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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Highlights of the PSUs feedback:

It has resulted into sharp decline in Vigilance Complaints

Implementa on of IP has helped in making procurement process more transparent.

Of the total 11 complains referred to IEMs, their advice has been accepted in 9 cases. IEMs should have thorough knowledge of tender and procurement process. Frequency of IEM Management mee ng : Annually

IEMs Feedback

IP is tender based, so it must be signed for each bid.

Each bid is being dealt separately and has separate decisions. There is no need to exempt IP compliant bidder PSUs from signing IP document.

There is a need for regular workshop and mee ng for advocacy and ne-tuning of IP program.

Shri S.K. Cha erjee:

IP infuses a sense of rm commitment into the buyers and sellers not to indulge in corrupt prac ces. It implies self imposed check and balances. Unable to verify that vendors are aware of IP or not. With the adop on of IP, procurement in the PSU in general has become transparent.

Shri B. N. Mishra

Strengths of IP : Fewer li ga ons, situa ons and increase in revenue produc vity.

There should be frequent interface between IEMs and CVC, either individually or in group.

Sub-contractors should be part of IP.

Various obstacles/hurdles are faced in ini al phase but in later stage with proper advocacy, we get desired coopera on from the PSU and Bidders. Sub-contractors must be a part of IP program. Non implementa on of IEMs recommenda ons should be viewed seriously. The level of awareness: Average

IP has helped in making procurement process more transparent.

Level of awareness and sa sfac on among Bidders : Level of sa sfac on: Below average

Feedback from TII:

The level of sa sfac on and feedback from other stakeholders is an area of concern. Management has to be more proac ve in terms of implementa on of IP, regular IEM-ManagementBidders meet is desired. 81
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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

PSUs feedback: NIL CVOs feedback:

Highlights of Integrity Pact Implementa on:

The implementa on of IP has been only for the name sake. IP has become a ritual.

Not sa sed with the role of TII.

The circulars of CVC on the role and responsibili es of IEMs is not being implemented properly in WCL.

IEMs are not aware what is the vigilance set up in the PSU and what are the role and func on of the CVO.

The impact of the usefulness of IP has not percolated to contractors. There are vested interests to prevent this, and extra eorts are needed. Sub- contractor must be a part of IP i. Sugges ons to improve IP: No need to exempt IP complaint bidder PSUs from signing IP.

IEM shouldnt be senior re red Bureaucrat IAS ocer who feels it is below their dignity to interact with vigilance.

Shri B. S. Minhas

Feedback from IEM:

ii. IEM panel may be drawn from NGO, and re red Public Sector Undertakings employees.

TII should withdraw as partner in case the IP implementa on is not being done properly.

Awareness among vendors is missing not even one complaint was received directly from any vendor regarding WCL during last three year. CVC should quarterly monitor the working of I.P. in each P.S.U. to ensure that its instruc ons are followed both in le er and spirit. IP is to be given more publicity by the PSUs, present management dont take much interest in popularising IP with their vendors. There is no monitoring by CMD or CVC. Strengths of IP: It avoids costly li ga on. It can help in ge ng procurement at compe It should hold regular mee ngs with IEMs and Vendors. Sugges ons : The PSU should give wide publicity over na onal and regional TV networks and newspapers. ve rates. Not sa sed with role of Vigilance department in WCL. Full coopera on from management is missing.

IP has helped in making procurement process more transparent.

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Level of awareness and sa sfac on among Bidders :

CVC should hold half yearly mee ng with CMDs and IEMs to review the working of IP. The mee ng can be held in groups of 7-8 PSUs, to ensure a proper dialogue. Level of awareness among Bidders: Average

Feedback from TII

Level of Sa sfac on among Bidders (who are aware of IP) : Below Average

Conic ng informa on received from IEM CVO is an area of concern, the concern management, CVC, TII and concern ministry must intervene to end this deadlock. Level of sa sfac on among bidders is an area of concern. There is need for Bidder-Management IEM TII meet to increase level of advocacy of IP among bidders.

Highlights of PSUs feedback :

There is a need to exempt IP compliant bidder PSUs from signing IP document. The number of complaints refered to IEMs Three In all cases, advice of IEMs has been accepted. With the adop on of IP a)

Implementa on of IP has helped in making procurement process more transparent.

c)

b) Instances of cartel forma on by bidders have come down.

The conduct of bidders/contractors becomes more ethical in not inducing/pressuring the ocials to indulge in corrupt prac ces.

CVOs feedback:

e) IEMs mee ng is need- based

d) Instances of contractors going in for arbitra on/legal proceedings to se le their claims/disputes have reduced. There is a need for regular workshop and mee ng for advocacy of IP program.

Extraneous interference in awarding and managing contracts reduced.

During the year 2010-11, IP was signed in respect of 100 (provisional) tenders no ed by the HQ and areas/unit of CCL. Unable to verify that IP has helped in making procurement process more transparent. People must understand IP in le er and spirit. IP is to be followed in le er and spirit. Lodging of complaint pertaining to tenders is not reducing.

As per threshold limit, IP is being signed in CCL and has become integral part of the NIT.

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Signing of IP documents once by the bidders who are par cipa ng in CCL tenders frequently will be benecial which shall be applicable to certain period. Mee ng with HODs are being organized for implementa on of IP. Implementa on of IP is being monitored on monthly basis. Special process/mechanism implemented to improve the IP program within the PSU

Irrespec ve of threshold, IP should be made applicable in all contracts and tenders.

As sub-contractors are execu ng the contract in CCL on behalf of contractor as per the term of the awarded contract, so they should be kept out of purview of IP. There is a need for regular workshop and mee ng for advocacy and

IEMs feedback :

Shri N. R. Banerjee

PSU provide adequate coopera on, support, facili es and ensure the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily only a er prodding by the IEMs! I feel there should be regular interac on between PSUs & IEMs every quarter or every four months. PSUs are not ge ng enough support and guidance from the CVC. PSUs, CVC and its senior ocials should meet and interact once every six months, IEMs can also be invited. CVO is to be a coordinator for IP implementa on and should oversee any ocial is misusing his posi on. There is duplica on of the work carried out by the PSUs Vigilance Department and the IEM. The IEMs should be given secretarial assistance.

Vendors are not aware about IP, PSUs (CMDs & Sr. ocials) should interact with vendors to apprise them of the IP provisions. IEMs should not be made to par cipate.

Procurement in the PSU in general has become more transparent with adop on of Integrity Pact.

The weaknesses of the IP monitoring system : Inadequate structured mee ng with the PSUs & its oces. Periodic (once a quarter) summarized details and progress of tender procurement should be made available to IEMs for reference. IPs strengths : Transparency and ac ng as dampeners to corrup on and carteliza on by vendors. Sugges ons : (a) More teeth needed to deal with defaulters and more interac on with IEMs and CVC.

Level of sa sfac on and awareness among bidders : Feedback from TII :

(b) CVC should meet the IEMs (like coal sector IEMs of all PSUs at the same me) once in six months to get feedback and for IEMs to get further briefed about IP. CVO of PSUs need to be controlled by CVC more eec vely dening their correct du es and scope of work. IEMs should have authority to report on adverse working of the CVO of a PSU in which strict exemplary ac ons against CVO should be taken.

Awareness about IP is above average and level of sa sfac on is average.

Though awareness among bidders is above average but more can be done to increase the level of sa sfac on among stakeholders. There is a need to ins tu onalise IEM-Management and Bidders meet. The issues raised by IEMs are to be addressed by the management, for eec ve compliance of IP.

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Highlights of CVOs feedback:

Regular bidders may have an agreement with the organiza on on IP for all tenders to be eligible for not signing IP for their each bid. Tenders may have suitable clause for the same. No need to exempt IP compliant bidder PSUs from signing IP document. No need to exclude sub- contractor from purview of IP. No case related to viola on of IP has been registered. Mee ng with CGMs/ GMs/HODs are being organized for the implementa on of IP and their interac on.

IEMs are not duplica ng the work of our Vigilance Department.

We need to be pa ent and improve wherever required and asses its benets.

With the adop on of Integrity Pact, procurement in general has become more transparent.

Weaknesses of the IP Monitoring System : Dealing contracts require deep study and knowledge of related laws. IEMs should have study exposure to all facets of it to adjudicate on them. Sugges ons to improve the IP: Periodic interac on with all IP stakeholders and lessons learnt from each others experience to be considered for incorpora on in IP

Experience and qualica ons of IEMs: They should be conversant with contracts, manuals and laws governing them, besides being persons of integrity and honesty.

In case of complaints, bidders directly approach the CVO oce

IEMs feedback:

Shri N. R. Banerjee

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily, only a er prodding by the IEMs! There should be regular interac on between PSUs and IEMs every quarter or every four months. PSUs are not ge ng enough support and guidance from the CVC. PSUs senior ocials and CVC should meet and interact once every six months, IEMs can also be invited. CVO is to be a coordinator for IP implementa on and should oversee if any ocial is misusing his posi on. There is duplica on of the work carried out by the Vigilance Department and the IEM. The IEM should be given secretarial assistance.

Vendors are not aware about IP, PSUs CMDs & Sr. ocials should interact with vendors to apprise them of the IP provisions, IEMs should not be made to par cipate.

Procurement in general has become more transparent with adop on of Integrity Pact.

The weaknesses of the IP monitoring system: Inadequate structured mee ngs with the PSUs & its oces. Periodic (once a quarter) summarized details and progress of tender procurement should be made available to IEMs for reference. 85
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Strengths of IP : Transparency and ac ng as dampeners to corrup on and carteliza on by vendors. Central Vigilance commissioner should meet the IEMs of the similar group of PSUs (like coal sector IEMs of all PSUs at the same me) once in six months to get feedback and for IEMs to get further briefed about IP. CVOs of PSUs need to be controlled by CVC more eec vely dening their correct du es and scope of work. IEMs should have authority to report on adverse working of the CVO of a PSU in which strict exemplary ac ons against CVO should be taken. Sugges ons : More teeth needed to deal with defaulters and more interac on of IEMS with CVC.

Shri N. Narasimhan

Level of sa sfac on and awareness among bidders: Feedback from TII :

Submi ed feedback directly to Shri R. Shri Kumar VC, CVC. Awareness about IP is average and level of sa sfac on is below average.

Nodal department has to be ac ve when it comes to sharing of informa on, and assis ng IEMs in discharging their du es. Bidders meet is to be organized at regular interval The feedback from IEM is an area of concern. Regular IEM-Management mee ng is desired.

Highlights of the PSUs feedback:

Annual vendor meet is being held in TCIL to propagate and give wide publicity among the employees and vendors thereby providing them the opportunity for direct interac on with IEMs and TII. It creates condence among them that the company has commi ed for selec on of vendors in a transparent & fair manner and there are external agencies to monitor the ac vity. Since the sub-contractor also executes some por on of the contact given to the main contractor, they should be within the purview of IP. Desired qualica on for IEM: They should have wide domain knowledge & experience in relevant eld, and should have handled various tenders and projects, in respect of technical, commercial and nancial aspects. Create condence among the vendors in bidding and selec on process.
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

Third IEM is required only in case of dierence of opinion between two IEMs. In such situa on, the case can be referred to CVC.

It is felt that integrity of the principal and vendor should exist always irrespec ve of project, its value loca on and dura on.

IP created condence among vendors that the process of evalua on/selec on of vendors by the company are done in a transparent & fair manner.

No need to exempt IP compliant bidder PSUs from signing IP Document.

Strengths of the Integrity Pact monitoring system:

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Reduce tender processing me due to reduc on in complaints.

Weaknesses of the Integrity Pact : It may reduce the number of par cipants in the tenders, as some of the vendors may not like to sign IP Document.

Provides more transparency thereby reduces the tension among the project handling group.

Sugges ons : It is proposed that the IP document should be signed by all vendors/contractors (including subcontractors) only once when they par cipate against any tender and should be applicable therea er for all project irrespec ve of its type, value, period or loca on. IEMs- Management mee ngs need based

As per CVC guidelines, two Annual Reports of IEMs on the progress/eec veness of IP programme in TCIL had been sent to CVC.

Nature and outcome of the review done by IEMs : Review on the threshold value, signing of IP document by the bidder for the tenders covered under IP, any complaint from the vendors, Vendors Meet etc. IEMs feedback IEMs advice in one case has been accepted.

Shri K. N. Singh:

IP has helped in making procurement process more transparent.

Private sector must adopt IP.

CVC has to be more proac ve in terms of eec ve implementa on of IP.

Level of awareness and sa sfac on among Bidders :

No exemp on should be given to sub- contractors. Level of awareness among Bidders : Above average

Feedback from TII

Level of Sa sfac on among Bidders (who are aware of IP) : Average

The implementa on of IP in TCIL is sa sfactory. Like KIOCL, TCIL also organizes regular Management TII-IEM and vendors meet. Need to bring down threshold limit for IP.

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Highlights of the PSUs feedback:

Highlights of Integrity Pact Implementa on: No ocial feedback received from PSU or CVO oce. This feedback is based on input provided by HCL ocials, who had a ended 9th April 2011 Workshop at MDI, Gurgaon (b) There is a need for private sector, state PSUs and other governmental department to adopt IP. (d) Bidders are to be made aware of provisions of IP. (c) Sub-contractors should be made part of IP program. (a) IP has helped in making procurement process more transparent.

Feedback from IEMs : NIL

Level of awareness and sa sfac on among Bidders :

Feedback from TII

Level of Sa sfac on among Bidders (who are aware of IP) : Below Average

Level of awareness among Bidders : Average

Nodal department has to be ac ve, when it comes to sharing of IP related informa on.

No feedback from the PSU.

Highlights of PSUs feedback :

IP is a very good concept for promo ng transparency in major procurements.

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Implementa on of Sec on 6 of the model IP: o o o

Exis ng Sec 6.1 of the model IP should be deleted

We have already established Purchase/Works Policies & procedures and have ins tu onalized mechanisms to examine complaints. If the implementa on issues and their implement ability are not addressed in the model IP, it may create problems leading to IP viola ons. TII should immediately issue (a) Amendment to sec on 6 of the model IP, and (b) suitable communica on to all IP compliant PSUs along with CVCs le er no. 008/VGL/801/98859 dated 19-08-2010.

(b) Categoriza on of previous transgressions in terms of Minor etc. to enable PSUs to take a view on relaxa on of Sec 5 on Previous Transgression.

(a) Single Tender procurements; Proprietary, Collaborator Purchase, Customer Contract requirements, Business Sharing Agreements, Spares/R&M/Repairs by OEMs, urgency, etc. Where the buyer PSUs has no other op on when the only vendor refuses to sign IP or insist major modica ons in the IP.

The bidder PSU who is IP compliant (having implemented IP for its major procurements) is to be exempted from signing IP document while bidding because if IP compliant Seller PSU signs IP of the Buyer PSU and later procures inputs from bidders A/B/C etc. Successful bidder A may sub-contract parts of the scope to X/Y/Z etc.; the chain of sub-contractors con nues. The issue becomes more complex when the input requirement of many projects/clients (IP compliant PSUs) is bulked to derive the price advantage. Rarely/Very/Very few sub-contractors are iden ed before contract signing.

The words all sub-contractors should be deleted from exis ng Sec 6.2.

Review by the IEM :

(a) Status of tenders issued/orders placed under the IP Review of Threshold limit Implementa on issues

Any other issue where IEMs guidance may be sought by the management Any other issue that IEMs may like to raise

(b) Review mee ng with management Quarterly (seven)

Unit visits and reviews at unit level Need- based as expressed by IEMs (Four such visits/reviews held since IP implementa on in Feb09) IP along with name of IEM is included in the NIT condi ons for the specic tender above the threshold limit.

The monthly MIR from implemen ng units/regions and consolidated MIR to IEMs cover three parts (a) New Tenders issued (b) orders placed and (C) tenders in process. The IP implementa on aspects should be quickly addressed.

Highlight of CVOs feedback

Only one complaint, received recently, from a bidder by one of the IEMs is under examina on of the IEMs/Management. Some bidders suggest modica ons in the IP. IP has helped in making procurement process more transparent.

Since February, 2009, a er implementa on of IP, the threshold value has been brought down in steps from Rs.50 crore to Rs. 10 crore at present. With this, approximately 41% of the total procurement (value-wise) is expected to be covered under IP.

Management Informa on Report (MIR) is generated every month. This was started as per the recommenda on of CVO, BHEL. Sa sed with the role played by CVC and TII.

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Strengths of IP

Desired qualica on for IEMs: Eminent personali es, widely known for their integrity and upholding of noble values in public life and thereby commanding respect in general from public. (a) Objec vely

There is no need to exclude sub-contractors from purview of IP.

There is no need to exempt IP compliant bidder PSUs from signing IP document.

(b) Impar ality

(c) Judiciousness

IEMs Feedback: Shri D. P. Bagchi

Weaknesses of IP : Since It is a dynamic process, any weakness in the system shall automa cally come to no ce with me. There is no weakness no ced in the system as of now.

(d) It generates condence and faith.

Procurement general has become more transparent with the adop on of integrity Pact. Technologies like e-procurement, reverse bidding will certainly help.

IEM should be given secretariat assistance within the PSU on as needed basis, not a regular basis.

Strengths of Integrity Pact : Give condence to everyone star ng with the management. Poli cal or Bureaucra c interference get minimised. Govt should make signing of IPs by the PSUs compulsory. Back to back IPs need to be signed by every func onary in the supply chain, this is to be avoided.

Shri Kanwarjit Singh

A Note on IP by Shri Kanwarjit Singh

It is a good tool, but with limited consequences to ght against corrup on. IP creates a posi ve percep on among minds of vendors.

Unable to verify that procurement in general has become more transparent with adop on of integrity Pact.

The IP mechanisms use as a deterrence will erode in course of me if IEMs conne themselves to monitoring the signing of IPs. Regular inter-ac on with eld ocials and vendors is necessary to sustain high level of awareness, and consequent deterrence amongst them. This is also necessary for the IEMs to have an idea about the areas where they can contribute by nudging a change in the system.

However, this process creates a very posi ve percep on in the minds of all stake holders. It is a signicant tool for preven on of corrup on and improving systems. Our eort has to be enhanced its usefulness in these two areas.

The signing of IPs, monitored by IEMs, does not in any way make detec on, inves ga on and prosecu on of corrup on easier. The IEMs are in no posi on to ensure that IPs once signed are actually implemented.

In BHEL, we have a empted to create greater awareness among the eld ocials through visits to units, which are issuing tenders for procurement. During these visits, the records of some of the tenders were also seen and the shortcomings discussed. Some of the issues were also later discussed in the mee ngs with the CMD. In the absence of any complaints addressed to IEMs ll date, the process of crea ng greater awareness and deterrence amongst the vendors has not taken o. It is necessary that the visibility of IEMs amongst vendors be enhanced in a non- intrusive manner. This, in my view, can be done through:

Compulsory reference by CMD to IEMs, of all complaints rela ng to tenders which are to be monitored by the IEMs, whether or not these are addressed to the IEMs.

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In selected few cases the IEMs must meet the complainant where he is located without the presence of any ocial of the PSU. Apart from enhancing the deterrence eect amongst the vendors, such mee ngs will give an insight to the IEMs regarding the major areas in the system on which to focus.

Shri J. M. Lyngdoh

Similarly, regular one to one mee ngs with the CVO without the presence of any other ocial of the PSU, in a structured manner, will again give an insight to the IEMs regarding the major areas in the system on which to focus. The fear of IEMs playing the role of CVO is mis-placed as the seniority levels are vastly dierent and the roles are clearly dened. Regular mee ngs of the IEMs should be held for sharing their experiences and deciding on the best way forward. Dicult to quan fy gains from IP.

Level of awareness and sa sfac on among Bidders :

Level of awareness among Bidders : Below Average

Feedback from TII :

Level of Sa sfac on among Bidders (who are aware of IP) : Average

Level of sa sfac on among bidders is an area of concern.

There is a need for Bidder-Management -IEM -TII meet to increase level of advocacy of IP among bidders. The issues raised by BHEL has to be resolved immediately for eec ve compliance of IP.

Highlights of PSUs feedback:

Highlights of Integrity Pact Implementa on:

Till date, IP has been eec vely implemented. Submission of IP by the bidders is mandatory before opening of the Bids. In case of non-submission of the same, the bid is rejected and returned back unopened. Every bidder signs an Integrity Pact for each and every bid he submits. No complaints have been reported ll date. It has helped in making procurement process more transparent. During their mee ng, IEMs have reviewed the implementa on of Integrity Pact and had suggested the following Specifying the e-mail addresses of the IEMs along with the names. Forwarding the details of the NITs published to the IEMs.

Integrity Pact has been introduced in all corporate packages having es mated value (excluding taxes and du es) of Rs. 10 crore & above with eect from 01.06.2009. It is incorporated in the Bidding Document which is signed by NTPC and also by the authorized representa ve of the Bidders. In the absence of IP, no bids are opened.

Therea er need- based review is done. Their advises as men oned above have been accepted and acted upon for eec ve implementa on of the IP Names of both the nominated IEMs have been explicitly published on NTPC tender website i.e. ntpctender.co.in along with the format of the Integrity Pact to be submi ed by the bidders along with their bids. Pre-signed Integrity Pact 91

Forwarding details of contract awarded during a period and their Integrity Pact implementa on status to the IEMs.

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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(IP) is circulated/ incorporated in the bidding documents to all the prospec ve bidders purchasing the bidding documents. The Integrity Pact (IP) adopted in NTPC envisages an agreement between the prospec ve Bidder/Contractor and the employer/Buyer only. However, in the IP, the Bidder/Contractor undertakes not to, directly or through any other person or rm oer, promise or give or inuence to any employee of the employer associated with the bidding process or the execu on of the contract or to any third person on their behalf any material or immaterial benet which he/she is not legally en tled, in order to obtain in exchange any advantage of any kind whatsoever during the bidding process or during the execu on of the contract. No Annual report has been submi ed by the IEMs No need to exempt IP compliant bidder PSUs, IP uniformity needs to be maintained.

IEMs Feedback: Shri S Murali

Unable to verify that IP has made procurement process. Havent received any complaint from any vendor. Proper implementa on of IP depends on the culture in the company. IEM should be given secretarial assistance within the PSU premises. Management has informed that bidders are aware of IP; it can be veried by TII.

Shri T. S. Krishnamurthy

While the IP looks a er large sized companies/tenders, TII should give a thought to smaller rms, mostly in unorganized sector, which prac ces tax evasion thereby adding to the black money. Par ally IP has helped in making procurement process more transparent.

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily. The standardiza on of tender procedure, comprehensive training to the persons concerned in ma ers rela ng to oa ng of tenders specifying essen al and desirable condi ons to be fullled, opening of technical bids, nancial bids only a er nality is reached a er technical bids, nego a ons to be restricted only to one session of a clarica on with a compliance date. (a) Absence of secretarial assistance (b) Monitoring the follow-up ac on Weaknesses of the monitoring system : IEM should be given secretarial assistance

Private Sector should also adopt the IP.

Delays in the appointment and renewal of IEM (in BSNL, the third IEM was not appointed for two years with the result the two IEMs carried on the work although both of them worked unanimously. If they had diered, the situa on would have been odd!) Good to have one technical person as IEM in case it is a highly engineering oriented company. Recommendatory nature of its views

Strengths of IPs:

Sugges ons :

Periodical review of pending cases

Unbiased so as to check any external (especially poli cal) inuences

There is no standard prac ce in nalizing technical specica ons rela ng to the tender. Very o en clarica ons are sought and provided on all ma ers thereby delaying the tender naliza on. O en discussions are held in order to

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Level of awareness and sa sfac on among Bidders : Level of awareness : Below average. Level of sa sfac on : Below average

clarify technical specica ons thereby providing varia ons in tender specica ons resul ng in confusion in the minds of the bidders. There must be clarify /uniformity in the procedures rela ng to tenders.

Feedback from TII

Regular Management-IEM-vendors meet is very much required.

Nodal department has to be more eec ve , in terms of sharing informa on related to IP

The low level of awareness and sa sfac on among bidders is an area of concern .

Highlights of Integrity Pact Implementa on : IEMs Feedback :

Highlights of PSUs feedback: We have not received any feedback either from PSU or CVO.

Shri Sujit Shankar Cha opadhyay :

At present, IEMs can help only a er issue of NIT and receipt of a complaint. It cant prevent an incident and suggest correc ve measure. IP mechanism is a good tool to ght corrup on. IEMs should be given secretarial assistance.

The procurement in general has become more transparent with adop on of Integrity Pact

Weaknesses of IP monitoring system : An IEM is not informed formally by the PSU about the ac on taken by the la er on his advice. A copy of the IEMs report should be sent to CVC who should monitor the ac on taken. Weaknesses of IPs : Non- binding nature of the advice. Comments /sugges ons : o o Regular IEM-Management mee ngs are very much desired which is missing in the PSU. Strengths of IPs : Independent External Monitoring

Level of awareness and sa sfac on among Bidders : Level of awareness : Average Level of Sa sfac on : Below average

The IEMs should at least once be taken on a eld visit to the site in order to give them a rsthand experience of the ground reali es. The division of responsibili es and task between CVO and IEMs should be spelt out in clear manner.

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Feedback from TII

A er sending repeated reminders, request for personal mee ngs, and telephonic calls, we havent received any feedback either from the PSU. The CVC must intervene to know eec veness and implementa on of IP in Coal PSUs. TII must have a review mee ng with ECL, in case of non-compliance of IP. TII must publicly terminate MoU with ECL. Level of sa sfac on among bidders is an area of concern. More vendor meet is to be organized to make them aware of IP.

Annual review mee ng with all stakeholders must be organized by the PSU.

Highlights of Integrity Pact Implementa on : IEMs Feedback :

Highlights of PSUs feedback: No feedback either from PSU or CVO.

Shri T. S. Krishnamurthy

IP par ally has helped in making procurement process more transparent. IEM should be given secretarial assistance. Private sector should also adopt the IP.

PSU is providing adequate coopera on, support and facili es and ensuring the same from the contractors for the IEMs to discharge their responsibili es sa sfactorily.

The standardiza on of tender procedure, comprehensive training to the persons concerned in ma ers rela ng to oa ng of tenders specifying essen al and desirable condi ons to be fullled, opening of technical nancial bids only a er nality is reached a er technical bids, nego a ons to be restricted only to one session of a clarica on with a compliance date (a) Absence of secretarial assistance (b) Monitoring the follow-up ac on Weaknesses of the monitoring system:

Delays in the appointment and renewal of IEM (in BSNL, the third IEM was not appointed for two years with the result the two IEMs carried on the work although both of them worked unanimously. If they had diered, the situa on would have been odd!) Good to have one technical person as IEM in case it is a highly engineering oriented company. Recommendatory nature of its views

Strengths of IPs:

Periodical review of pending cases

Unbiased so as to check any external (especially poli cal) inuences

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Shri B. B. Tandon

Sugges ons : There is no standard prac ce in nalizing technical specica ons rela ng to the tender. Very o en clarica ons are sought and provided on all ma ers thereby delaying the tender naliza on. O en discussions are held in order to clarify technical specica ons thereby providing varia ons in tender specica ons resul ng in confusion in the minds of the bidders. There must be a clarity/uniformity in the procedures rela ng to tenders. Procurement in the PSU in general has become more transparent with the adop on of IP. There must be three IEMs in a PSU. Private sector must adopt IP. Sa sed with implementa on of IP.

Level of awareness and sa sfac on among Bidders : No ocial bidders list has been prepared by BSNL. So it was not possible for us to take feedback from bidders. Feedback from TII Implementa on of IP in the PSU is not sa sfactory.

We strongly recommend that bidders list has to be prepared by all PSUs. It will not only help in streamlining the process of external review but also helpful in crea ng awareness about IP among bidders. Regular Bidder - IEM mee ng is desired. Annual IP review mee ng involving all stakeholders must be organized by the PSU.

Highlights of PSUs feedback:

Highlights of Integrity Pact Implementa on: This is a new concept implemented in BCCL in 2009. Ini ally, the coverage area was the tenders in which CMD/Board level approval was required. Now, it was extended to Directors level to cover more and more tenders. The performance at BCCL on IP is excellent. Total number of complaints referred to IEMs: Two IEM-Management mee ng is need- based. Coverage of IP is to be extended. IP has helped in making procurement process more transparent.

No need to exempt IP compliant bidder PSUs from signing IP document as bidder. The outcome of IP will be assessed a er some me.

Each bid should be signed separately for be er control and transparency.

Private sector should also adopt IP.

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Jus ce A. K. Chakravarty

IEMs feedback:

Weaknesses of the monitoring system:

IEM should be given secretarial assistance within the PSU premises. Absence of any procedural guidance in undertaking reviews.

The procurement in general has become more transparent with adop on of IP.

Strengths:

Non- binding nature of the recommenda ons by the IEMs may lead unfairness and injus ce in suitable cases.

Level of awareness and sa sfac on among Bidders : Level of awareness : Average Level of Sa sfac on: Below average

Approximate number of tenders received for considera on during the period under review is over 100. Happy to report that none excep ng one of them became conten ous which also found to have without any basis on scru ny. In absence of any tenable complaint either from bidders or the principal in respect of any tender there is no doubt about the fairness of the transac on held during the period. The objec ve of TII to promote corrup on free transac ons in contracts must therefore be said to have succeeded to a great extent in BCCL.

IPs are certainly pillars of strengths in enforcing fairness and transparency in govt. corpora ons.

Feedback from TII :

Level of sa sfac on among bidders is an area of concern. Threshold limit can be further brought down. The coopera on from the Nodal ocer is commendable

More vendor meet is to be organized to make them aware of IP.

Annual review mee ng with all stakeholders must be organized by the PSU.

Highlights of CVOs feedback:

Highlights of Integrity Pact Implementa on: Actual implementa on of IP in RITES was started in August 2009 with its incorpora on in the tender documents. It is the experience in RITES that vigilance complaints normally come about a year or two later than the award of work. Hence, sucient me has not yet elapsed since its implementa on has to indicate signicant change in the prevailing system. Once a bidder has signed the IP and it is valid for a specied period, there is no need for the bidder to sign IP for each bid during the period. He may be asked to a ach a copy of the same and the PSU may verify from record at the stage of scru ny of tender documents.
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

It is also dicult to indicate the contribu on of IP in making procurement process more transparent in RITES.

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As sucient me has not lapsed since the implementa on of IP, review and modica on of exis ng IP programme within PSU could not be undertaken. The sub- contractors also need to sign the IP as most of its work is awarded to them.

Sugges ons to improve the IP:

(i) An eec ve monitoring system is needed.

(ii) Case studies on implementa on of IP by various PSUs may be shared with the TI India.

Highlights of IEMs feedback: Shri B. S. Minhas

(iii) More awareness about IP Is required to be created par cularly rela ng to informa on disclosure guideline as IP compliant bidder etc.

IP has helped in making procurement process more transparent.

Sugges ons:

IP is to be given more publicity.

CVC should monitor the working of I.P. quarterly to ensure follow up of its instruc ons-both in le er and spirit. ve rates.

Strengths of IP is its avoidance of costly li ga on and help in ge ng procurement at compe The PSU should give wide publicity over na onal and regional TV networks and newspapers.

Level of awareness and sa sfac on among Bidders : Level of awareness: Average Level of Sa sfac on: Below average

CVC should hold half yearly mee ng with CMDs and IEMs to review the working of IP. The mee ng can be held in groups of 7-8 PSUs, to ensure a proper dialogue.

It should hold regular mee ngs with IEMs and Vendors.

General Observa on

Level of sa sfac on among bidders is an area of concern.

There is a need for Bidder-Management IEM TII meet to increase level of advocacy of IP among bidders. PSU must have an Annual Review Mee ng with all stakeholders, including TII.

Highlights of PSUs feedback

Highlights of Integrity Pact Implementa on: IP is an eec ve tool to bring in more transparency in the ma ers rela ng to contracts and procurements. The organiza on has been able to gain from IEMs vast experiences and valuable guidance. 97
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CPCL started with the threshold limit of Rs.10 crore from March 2009. Based on the experience, the limit was reduced to Rs.5 crore. CPCL has not experienced any diculty in the implementa on of IP. IP gives condence to the vendors / contractors about the transparency and fairness in the tendering process.

Complaint received : Nil.

Frequency of review mee ng with IEM: Quarterly. o o Threshold limit is reviewed regularly.

Special Process/mechanism to improve the IP program: Created awareness about IP through vigilance journal.

IP is to be signed for each bid as this is tender based.

Mee ngs are conducted with vendors/contractors in the presence of IEMs.

No need to exempt IP compliant bidder PSUs from signing IP document as bidder. No annual report is being submi ed by IEMs.

More private companies to be brought under the purview of IP based on the procurement value.

IEMs feedback : Shri P. Shankar

We are not in a posi on to quan fy the monetary benets. However, we are able to see the intangible benets such as improvement in condence level, transparency, fairness in dealings, etc. There is a denite improvement in the general image of the PSU.

There should be periodical publicity campaigns to make vendors aware of Integrity Pact program. Strengths of Integrity Pact: Denitely adds to the transparency of the system and helps an ordinary vendor to register his concern on any aspect of procurement process. No feedback recd. Dont feel that IEM should be given secretarial assistance by the PSU.

Unable to verify that procurement in general has become more transparent with adop on of IP

Jus ce K. Govindrajan (Retd.)

Level of awareness and sa sfac on among Bidders : Level of awareness: Average Level of sa sfac on: Average

Feedback from TII

More vendor meet is to be organized to make them aware of IP.

Threshold limit can be further brought down.

Level of sa sfac on among bidders is an area of concern.

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Highlights of CVOs feedback:

Highlights of Integrity Pact Implementa on: Three IEMs have been appointed for monitoring contracts in domes c scenario. Complaints refereed to IEMs 2009- 2010 2010- 2011 Financial Year

Till date, 12 IEM mee ngs have been convened. Total Procurement Issues 13 6

IP related contracts 3 7

Others 3 6

No need to exempt IP compliant bidder PSUs from signing IP document

Bi-monthly IP review mee ngs with HODs and P&S Dep ., ocials provide realis c exchange of view for be erment of IP. Vendor meet and Nodal contract ocers meet are also being organized by the SCI. Since sub- contractors are also involved in the performance of the contract, they should be included under IP.

IP must be signed for each bid. It reinforces organiza ons con nual commitment towards transparency and ethics. Further, it prevents any suppression of facts if there is any subsequent transgression by the bidders.

IP has helped in making procurement process more transparent.

Important experience and qualica on for IEMs: Persons of eminence, having a domain knowledge with experience in tendering & procurement are important qualica ons of IEMs. Strengths : The bi-monthly mee ng being a ended by SCIs top echelons has been able to resolve various issues involving dierent departments. Weakness : Presently, only domes c sector is covered. The ambit of IP needs to be extended beyond the domes c sectors.

Sugges ons to improve IP :

Case related to viola on of IP : In a case concerning LAN installa on in HQ, a warning le er was issued to three SCI ocials of IT Department responsible for the same. Conduc ng regular IP related mee ngs by the Management.

Highlights of PSUs feedback :

IEMs to be given more assistance and wherewithal to be able to perform eec vely Taking stakeholders into condence and have more seminars with them.

Regular interac ve sessions with the CVC and Transparency interna onal India.

The implementa on of IP in the SCI has been able to generate posi ve sen ments among its stakeholders as is evident by the number of complaints received by the CVO. 99
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ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

IP has helped in making procurement process more transparent. Total complaints referred to IEMs: Five.

IP adds brand value to SCI and also projects it as a PSU which believes and works in a transparent and ethical manner.

Frequency of IP review done by IEM: Annual

Frequency of IEM- management mee ng : Quarterly

Bi-monthly IP review mee ng with HODs and P&S Department ocials provide realis c exchange of views for be erment of IP. Vendor meet and nodal contract ocers meet are also being organized. No need to exempt IP compliant bidder PSUs from signing IP document. Since sub-contracts are also involved in the performance of the contract, they should be included under IP.

IP has to be signed for each bid as it reinforce organiza ons con nual commitment towards transparency and ethics. Further, it prevents and suppression of facts, if there are any subsequent transgression by the bidder.

Number of cases in which ac on taken against its ocials at what level and nature of ac on: One- warning le er was issued to three SCI ocials of IT Department in a case concerning LAN installa on in HQ.

Number of cases in which ac on taken against supplier/contractors and nature of ac on : One M/s Saif Marine has been banned from having business dealing with SCI w.e.f. 17.08.11.

No. of cases in which IEM advice has been accepted : One

Sugges ons to improve IP:

The decrease in the number of complaints and the posi ve vibes of the stakeholders even through subjec ve have undoubtedly brought savings to the corpora on.

Inter- PSU performance ra ng and the implementa on policies, mechanisms; experience in the world over should also be shared by TII to improve IP in India. The number of IP related complaints, inves gated by the vigilance division. Has reduced from seven in 2009-10 to three in 2010-11. (SCI management along with vigilance is in con nuous pursuit of elimina ng any ves ges of cartel forma on what so ever in the corpora on.

Bidders and contactors have become more aware of the ethical prac ces and consequences of nega ve inducements and pressure tac cs.

Highlights of the minutes of IEM Management mee ng:

Implementa on of IP has rearmed SCIs policy of transparency and ins lled more faith in the SCI management a commitment towards zero tolerance to corrup on. Perhaps, so far instances of contract going in for arbitra on/legal proceedings to se le their claims/disputes have been seen or surfaced in the corpora on.

SCI has a policy of pu ng all tenders > 2 lakhs at NIT websites and SCI website as well. The nalized contacts above the value of Rs.50 lakhs are also posted on the website. Implementa on of IP has added transparency and a more ethical behavior from the stakeholders.

Con nuing the discussion on Integrity Pact the CVO raised two major issues, viz, (i) electronic complaint box and (ii) auto-generated response to the complainants. CVO suggested that along-with manual submission, facili es should be made available to the complainants for submission of any complaint electronically to the IEMs without being meddled. He also suggested that the complainant should get auto generated response to his mail that it has been received as desired and automa cally Director (P&A) conrmed that auto generated response can be done with simple adjustment in the mail facility and electronic complaint box is already created. He also informed that three separate e-mail IDs are being created in SCI mail system for three IEMs for submission of complaint by the complainant meant for each IEMs. However, the complaints are required to be forwarded to each IEM on their personal e-mail IDs. It was decided that the transfer of emails from SCI e-mail ID system to personal e-mail ID of individual IEMs should be automa c without any intermediary involvement.

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CMD opined that before reques ng the par es for signing the IP document, we need to discuss with them and make them understand and be comfortable with the ra onale of inclusion of IP. We cannot expect them to sign the document immediately. SVP (P&S) requested the panel of IEMs for their views whether they can par cipate and give their inputs while the tender document for a par cular tender is being nalized. SVP (P&S) further requested that this will serve as preven ve measure and if there is any lacuna/shor all in the tender, it will be iden ed at the ini al phase itself leaving no possibility for an error and complaints in future.

CMD further explained that as the tender document is not a legal document, IEMs prac cal knowledge & exposure/experience will help the Tender Processing Commi ee in nalizing the tender document with accurate details. Shri S. Punhani informed that this does not come under the scope of IEMs responsibili es and the role of the IEM gets started only when there is any complaint either from the principal or from the bidder. Shri. D. T Joseph started that the involvement of IEMs in the decision making is not acceptable. Sri.S. K. Singh said this will require in depth knowledge and study which will be dicult for the IEMs. D (F) suggested that it will not be prac cal for the IEMs to evaluate the en re tender document. D (P&A) informed that this would amount to viola on of the independence of the IEMs.

CVO also expressed his view that this will contradict the cons tu onal guidelines of integrity Pact w.r.t. the roles & responsibili es of the IEMs ED (SB&S) added that they had approached the interna onal shipyards regarding the signing of the Integrity Pact document as a part of the tender documents, but they were not comfortable with this. It was concluded that it will not be possible for the IEMs to be involved when the tender document is being nalized.

Shri Sudesh Punhani

Highlights of IEMs feedback:

CMD thus concluded that at this stage Integrity Pact would not be prac cal with respect to interna onal service contracts.

IEMs to be provided secretariat assistance within the PSU premises. Weaknesses of IP : NIL Sugges ons Private sector should also adopt IP.

PSUs should draw their own terms and condi ons in framing the IP based on their needs.

Unable to verify that procurement in general has become more transparent with the adop on of IP.

(a) Role of IEMs to be specied in more details.

Shri D. T. Joseph

(b) Number of IEM - Management mee ngs should be specied and monitored.

Vendors are aware about IP, but only to the extent of signing acceptance to I P clause.

Work of IEM need not be pinned to only complaints and corrup on alone.

There is a need to conceptualize the scheme be er.

Weaknesses of the monitoring system : Weakness lies in the absence of clear parameters against which monitoring can be done 101

IEMs would look into complaints by those who have subscribed to IP, and the complaint is related to corrup on. Now, the Vigilance Department tends to make IEMs look into any viola on of instruc ons by CVC etc.

Private sector should also adopt the IP but let PSUs rst show some clear and concrete advantages of the scheme.

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

PAGE

Strengths of IPs : Preven on of delay or loss through li ga on or arbitra on.

Level of awareness and sa sfac on among Bidders : Level of sa sfac on: Average Level of awareness: Above average

Any other comments/sugges ons : Keeping in mind that the corrupt are generally more shrewd and ingenious than the others, we have to build into the scheme features that will lead to cleansing of the system, and detec on of corrup on, in a focused and prac cal manner.

Weaknesses of IPs : Collusion of corrupt par es, on either side, cannot be prevented by IP.

Feedback from TII :

SCI is the rst PSU to take ac on against its ocials, for viola on of provisions of IP. The task taken up by the CVO is commendable. As per SOP, 90-95% of the procurement in term of values must be brought under purview of IP. There is a need to expand IP base, all interna onal contracts has to be covered under IP.

The implementa on of IP in SCI is sa sfactory.

Highlights of Integrity Pact Implementa on: Highlights of PSUs feedback Conten ous issues, in par cular complaints of contractors, got resolved with support/opinion of IEMs during tender evalua on stage itself which otherwise could have taken more me or could have delayed tendering process and ul mately award of contract by delayed decision making or retendering.

For eec ve implementa on of the IP sub- contractors are required to be kept under purview of IP. Number of complaints referred to IEMs: One

Bidders have to sign IP document every me they bid for a tender, as bidders need to accept the condi on of par cular tender in which it is par cipa ng to make IP tool more eec ve and be er sensi zing issue of following ethical prac ces in the tendering process.

IP has helped in making procurement process more transparent, concerns of bidders are appropriately addressed by IEMs.

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No. of cases referred to IEMs by CMD, NHPC: Three No annual report is being submi ed by IEMs.

IEMs feedback:

Ms. Usha Sahajpal

Procurement in general has become more transparent with adop on of IP. Orienta on session for IEMs is to be organized either by TII or CVC. Private sector should also adopt IP. In case recommenda ons of IEMs are not accepted by the management, they must give a proper jus ca on.

Shri V. K. Agarwal

Weaknesses of IP: Cases came to us pertain to the stage from Bidding to Awards. No case has come from a project in the supply/execu on stage, reasons for it need examina on. Private Sector should also adopt the IP. Level of awareness: Average

Strength of IP: It has a fast grievance redressal mechanism and the vendors have faith that the case have been decided by senior experienced and impar al IEMs who are person of impeccable integrity.

Present IP monitoring mechanism is very much dependent on willing support of the PSU management and the quality and exposure of the IEMs, further development of faith between vendors and IEM mechanism is essen al.

IP has helped in making procurement process more transparent.

Level of awareness and sa sfac on among Bidders : Level of sa sfac on: Below average There is a need for Bidder-ManagementIEMTII meet to increase level of advocacy of IP among bidders. Level of sa sfac on among bidders is an area of concern

General Observa on

Highlights of PSUs feedback:

Highlights of Integrity Pact Implementa on: IP has helped in making the procurement process more transparent.

POWER GRID has a well established, fair and transparent procurement system in place. To bring about greater transparency and compe on in the procurement system, the steps taken by implemen ng IP Program and thereby presence of IEM forum has strengthened the complaints/representa ons handling system and has further enhanced vendors condence. 103

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The role of IEMs covers all phases of the contract, i.e., from the stage of No ce Invi ng Tender (NIT) to award of contract to comple on. All the packages (es mated cost more than Rs 100 crores) from the NIT to ll the award stage are presently being put up to the IEMs. Further, the representa ons/complaints, excep onal cases (with es mated cost even below Rs 100 crores but covered under IP Program i.e. es mated cost more than Rs. 1 crore), etc. are also being put to the panel of IEMs for suitably resolu on. The mee ng with the IEMs is being held on a monthly basis. The advice of IEMs has been accepted in all the cases and acted upon.

In view of the above, it is submi ed that the issue regarding adop ng a mechanism for IP compliant bidders including PSUs/other bidders submi ng IP documents once or for a par cular period of me, be examined and necessary policy be framed so as to be applicable uniformly.

Based on the experience gained a er implementa on of IP Program, it has been noted that all the par cipa ng bidders (including PSUs and interna onal rms) are rou nely submi ng the Integrity Pacts, duly signed, for all the packages while submi ng their bids. However, in view of the quantum of procurement and that large no. of tenders are being invited rou nely, it is noted that the submission of Integrity Pact with each bid is a repe ve exercise.

Sub- contractor shouldnt be excluded from purview of IP.

The process adopted by POWER GRID to hold regular mee ngs with the IEMs each month and placing before them the details of each and every contract, which is under their purview, irrespec ve of whether or not any complaint/representa on is received, has strengthened the IP program. The progress adopted in thus, u lizes the IEM forum for enhanced transparency in the award of contracts and brings out sugges ons for system improvement on con nual basis. It may also be added that implementa on of IP program has acquire its proper shape and value in the organiza on. As slowly the PSU and bidders are ge ng fruits of the program, acceptability among them has acquired the requisite level.

IEMs feedback:

It is suggested that a few mee ngs between the PSU and the IEMs can also be a ended by a CVC representa ve, wherein the CVC observa ons related to systems and procedures can be deliberated. As the nature of the benets is not tangible, these aspects can be commented a er some more experience. It may, however, be added that IEM forum through Integrity Pact Program has, in general, added to the transparency in the procurement system governance.

Shri Arvind Pande

Procurement in general has become more transparent with adop on of IP. Weakness of IP : The role of IEMs is only advisory. Private Sector must adopt IP. There is no need for IEM - Bidders meet, as IEM should stay independent of bidding process.

Shri R S S L N Bhaskarudu

Level of awareness and sa sfac on among Bidders : Feedback from TII:

Technology can play very important role in IPs eec veness. Various oces of TI should leverage technology to build and maintain a comprehensive and global data base of par es which have commi ed transgressions from IP, so as to disqualify such par es from ambit of IP tenders globally. This will facilitate uniform implementa on of IP across the globe and minimize scope of viola on of IP by global bidders in other countries Private Sector must adopt IP.

Procurement in general has become more transparent with adop on of IP.

Bidders list havent been provided by the PSUs, so it is dicult to measure level of sa sfac on and awareness.

Regular IEM-Management-Bidders meet is very much desired.

The nodal department has to be more ac ve when it comes to sharing of informa on related to IP with TII.
ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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Highlights of Integrity Pact Implementa on : No ocial feedback from the PSUs IEMs Feedback : Shri M.M.K.Sardana

Level of Sa sfac on and Awareness among Vendors/Bidders : Cant be measured as IP has not been implemented in any of the tenders Feedback from TII : IP must be implemented within a month of signing of MoU

Cant comment as IP implementa on has not been ini ated.

Internal advocacy about IP must be carried out especially among the purchase and material management department, as they are the actual machinery to Implement IP in the PSU. Training of the PSU ocials, who are expected to implement IP is to be completed, before MoU is signed by the organiza on. It has been found in many cases that middle level management is not aware of various clauses of IP, so it delays the implementa on process. Before any PSU adopt IP by entering into MoU, it must convene mee ng of all its vendors, to educate them about IP.

Threshold limit must be kept low so as to cover 90% to 95% of the total transac ons

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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The implementa on of IP in Indian Oil Corpora on (IOC), at the corporate level, is being overseen by the Corporate Aairs Department. Execu ve Director (Corporate Aairs), being the Nodal Ocer, all issues and complaints related to IP are routed to him. At the divisional level, the Heads of Finance are the Divisional Coordinators for IP. All tenders and contracts, including Single, Capex, Service related, Proprietary items tenders and Original Equipment Manufacturers (OEMs), of the threshold value of Rs. 10 crore and above, fall within the purview of IP. The threshold value of IP has been demarcated with a view to give maximum coverage to IP (90% of contracts in terms of tender value). COMPREHENSIVE PURVIEW OF IP:

EXPERIENCES OF THE INDIAN OIL CORPORATION

Annexure - 8

Bidders refusing to sign the IP, having a previous record of transgression or devia ng from the principles of IP at any stage/in any aspect of the tender are liable to be disqualied from par cipa ng in the ongoing/future tender(s)/contract(s). However, ll date, no such case of refusal, transgression or devia on has been witnessed in tenders under IP. At present, 250 tenders of Rs. 10 crore and above are under the purview of IP. THE INDEPENDENT EXTERNAL MONITORS Endorsing TIs concept of a strong Civil Society Monitoring Mechanism, the IOCL with the approval of CVC has appointed a panel of three eminent Independent External Monitors (IEMs). They are Shri B.B. Tandon, Shri RSSLN Bhaskarudu and Shri B.C. Bora. For all tenders of Rs 150 crore and above, an exclusive IEM is nominated from the men oned panel, on roster basis, to monitor and review the tendering process from incep on to the culmina on of the contract and compliance to IP therein. With a view to building a mode of easy communica on and informa on sharing with the IEMs, the IOCL in line with CVC guideline has developed a set of structured Reports. These are forwarded to the dedicated IEM on regular basis, to keep him informed about the stage-wise progress, compliance of all internal & CVC norms and devia ons resorted to, if any, in tenders (of Rs. 150 crore and above) under his scru ny. Presenta ons based on these reports are also made to the en re panel of IEMs in the regular monthly mee ngs to apprise them of the progress made in the on-going tenders and stage-wise compliance to IP. The reports are generated at the NIT issue stage, upon opening of tender, comple on of techno-commercial and price evalua on of tender, respec vely, placement of work order and culmina on of contract. STRUCTURED REPORTS - INFORMATION SHARING WITH IEMs:

All complaints/devia ons, pertaining to tenders of Rs. 10 crore and above, are referred to the en re panel of IEMs for joint delibera on. MONTHLY INTERACTIONS WITH IEMs:

The panel of IEMs meets once in a month to review the status of IP compliance, interacts with the Nodal Ocer and Divisional Coordinators and jointly deliberates on complaints received, if any. Presenta ons are made to the panel by the respec ve divisions detailing the progress of tenders of Rs. 150 crore and above, invited/nalized by them. Queries raised by the IEMs, if any with respect to tenders under review, are answered, cri cal issues related to tender naliza on are resolved and devia ons in tenders, if any, and reasons thereof, are no ed and discussed during these presenta ons. The mee ng is presided by the Chairman or Director (Finance) and/or Director (HR). In addi on to the monthly structured mee ngs, special mee ngs are also convened, if so desired by the IEMs, for delibera on and resolu on of complaints. For greater transparency, sharing of informa on with prospec ve bidders and increasing public awareness, a dedicated Sec on (viz., Integrity Pact Sec on on www.indianoiltenders.com and www.iocl.com) has been created on the website to disseminate informa on about IP which, inter alia, hoists an overview of implementa on of IP in the Nodal Ocer along with their e-mail IDs and addresses and regular updates on the current status of all tenders of Rs. 150 crore and above under IP. INFORMATION SHARING THROUGH DEDICATED WEB SPACE:

IP has enhanced a transparency-oriented perspec ve facilita ng impar al and objec ve assessment of cri cal issues rela ng to naliza on of tender. The IOCL has been able to minimize delay through quicker resolu on of tender issues and complaints under the esteemed guidance of the IEMs. This has, in turn, led to direct and indirect cost saving.
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BENEFITS OF IP :

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IP, undoubtedly, is a powerful and eec ve tool for comba ng corrup on and enhancing transparency in the public tendering/procurement process. However, it would be complacent not to acknowledge that IP is in its nascent stage steadying on the rst footsteps of infancy. Being the torch-bearers, it is our prime responsibility not only to ensure its eec ve implementa on but also to facilitate its evolu on into a stronger, broad-based and pragma c mechanism. Following are some sugges ons for further strengthening of IP : 1. Para 3.10 & 4.0 of the CVCs Standard Opera ng Procedures (SOP) s pulates informa on sharing on progress and naliza on of tenders with the IEMs on monthly basis. In line with this requirement, IOCL has adopted a well-developed review mechanism for each tender of above Rs. 150 crore which is based on the CVC guidelines as well as internal contract/procurement guidelines. Under such a system, stage-wise reports are presented to the IEMs for each such tender so as to apprise them of the compliance to IP as well as ensure transparency by respec ve tendering department. This system has been appreciated by the IEMs and allows all the IEMs to be aware to the procedures adopted. During such interac ons, many useful sugges ons have been made by the IEMs. For complaints also, a well developed system has been adopted by IOCL which includes hois ng of informa on rela ng contact details of the IEMs and transparency rela ng to informa on for the on-going tenders. WHOSE IP TO FOLLOW PRINCIPAL OR THE BIDDER STRUCTURED REVIEW MECHANISM FOR IP MONITORING :

SUGGESTIONS TO STRENGTHEN IP :

2.

3.

As per CVC guideline, individual organiza ons are permi ed to decide the threshold value of tenders to be included under IP as per their respec ve requirement/strategy. While this allows certain amount of freedom/elas city in decision making to Public Authori es/Organiza ons with regard to IP, at the same me, the dierent threshold limits create lack of uniformity and discrepancy, more so, in tenders, wherein both the principal and the bidders are the IP Compliant PSUs with varying threshold limits. Such occasions necessitate formula on of concrete guidelines as to whose threshold limit is to be adhered to while signing the Integrity Pact Agreement that of the PSU invi ng the tender or of the par cipa ng bidder PSU. Envisaging a broader based and comprehensive IP Programme, a wider par cipa on is recommended. It is observed that PSUs under the same Ministry have not signed the IP. As a result, when tenders are sent to such par es/PSUs, they seek exemp on from signing of certain IP clauses for reasons of not adop ng IP. Some of these PSUs like EIL are accomplished players in the eld of engineering/design consultancy of mega projects and cannot be ignored or rejected in order to ensure healthy compe on amongst domes c and foreign players. The ar cle 6 (1) of Integrity Pact Agreement on Equal Treatment of Bidders requires all the bidders to sign similar agreements with their sub-vendors and sub-contractors. Many bidders, especially PSUs, have expressed their inability to meet the requirements of the said clause as they are not themselves signatory to IP. In such cases, discre on should be allowed to the Management of the respec ve PSUs, i.e., the Principals to allow par cipa on of non-IP compliant PSUs as bidders so as to ensure healthy compe on. As in the case of RTI, private organiza ons par ally funded by the government also need to be brought into the ambit of IP so as to ensure transparency in u liza on of public money. Ar cle 3 (1) of the Integrity Pact on Disqualica on from Tender Process and Exclusion from Future Contracts s pulates that bidders with previous history of transgression are liable to be disqualied from the on- going/future Tender process and terminated in case contract has already been awarded/executed. Presently, for this purpose, we have to fall back upon the self-declara on of the par cipa ng/winner bidder regarding and transgression imposed in the absence of a comprehensive data base to cross-check the same. Considering that many of the par es are MNCs par cipa ng in tenders across the globe, TI can provide such pla orm across through its chapters in various countries. 107
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BROADENING THE IP BASE:

4.

EXTENDING OF IP SUB-VENDORS AND SUB-CONTRACTORS :

5.

EXTENDING IP IN GOVT. FUNDED PRIVATE ORGANIZATIONS:

6.

AVAILABILITY OF INFORMATION ON WEB REGARDING TRANSGRESSION OF IP BY BIDDER

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

7.

8.

A global list of bidders, which are signatory to IP in various countries, would also be desirable so as to have a comprehensive database on the web. The CVCs Standard Opera ng Procedures (SOP) states that the purchase/procurement wing is the focal point of implementa on of IP. However, for a more impar al implementa on of IP, it is suggested that a nodal department dis nct from the procurement/purchase wing may be entrusted with monitoring the execu on of and compliance of IP. As in case of IOCL, wherever the PSU is already providing comprehensive informa on on IP on public domain (dedicated web space), the s pula on of periodical vendor meet (as per the SOP) for familiariza on etc. may be relaxed. Moreover, during the pre-bid mee ng (both prior and a er the technical bid opening ) all the prospec ve bidders are invited to have mutual interac on. Further, equity is maintained by informing amendments in tender condi ons to all the bidders including those which have not responded to the tenders though they have purchased the tender document. DOING AWAY WITH FAMILIARIZATION OF BIDDERS WITH IP : FOCAL POINT OF IP IMPLEMENTATION:

INFORMATION ON IP COMPLIANT COMPANIES ON GLOBAL BASIS ON WEB

9.

10. LACK OF CLARITY ON HANDLING ANONYMOUS COMPLAINTS :

11. ROLE OF IEMs IN CONTRACTS INVOLVING LONG DURATIONS

There is no clarity regarding procedure for handing anonymous complaints received under IP. Such complaints are not even being considered under the RTI Act also as per decision of CIC.

12. DISCRETION OF MANAGEMENT ON INCLUSION OF SENSITIVE TENDERS:

In view of CVC s pula on of once adopted, IP is required to be eec ve from the incep on to the culmina on of a tender/contract up to the warranty guarantee stage, greater clarity with regard to role of IEM is solicited with respect to Tenders having long construc on periods or contracts on BOO/BOOT basis which have opera on period of 10 years or more a er construc on and before transfer.

13. EXCLUSION OF TENDERS ON NOMINATION BASIS FROM THE AMBIT OF IP

Discre on of the Management in implemen ng IP should be allowed in case involving sensi ve tenders keeping the commercial interest of the organiza on. This will hasten the decision making process and do away with avoidable references to CVC.

14. GREATER INTERACTION BETWEEN IEMs AND CVC ON REGULAR BASIS

In case of tenders awarded on nomina on basis or single tenders, it might not serve any useful purpose to insist on implementa on of IP norms for such tenders as the organiza on would only go for nomina on basis when other par es are not available, e.g., in case of OEM suppliers or suppliers having long-term exclusive interna onal e ups with leaders in certain eld, e.g., turbines based on dual mode of opera on such as oil and gas. Sharing of IEMs experiences in various organiza ons with the CVC would help in strengthening as well as in bringing uniformity in the implementa on of IP.

IP, as men oned earlier, is a powerful and eec ve tool. IOCL in its endeavour to match steps with TI has gone beyond the periphery of mere implementa on of a policy/opera ve mechanism. The Corpora on has groomed IP, in line with CVC guidelines, to suits its own organiza onal requirement. In the process, it has simultaneously contributed to its strength and design. Through the means of stage-wise tender process reports of the IEMs, IP has been elevated to a higher plane of more structured and interac ve mechanism. By installing a host of informa on on the public domain, IOCL aspires to broaden the knowledge base of the general public regarding IP as it believes that increased awareness paves the path to increased and eec ve enforcement. The fora of regular monthly mee ng with the IEMs have proved to be more than knowledge building exercises and have facilitated unencumbered and mely naliza on of tender.

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NON-DISCLOSURE AGREEMENT FOR IEMs


M/s. UOP LLC (UOP) 25E, Algonquin Road Des Plaines, IL 60017 Indian Oil Corpora on Limited (IOCL) Gujarat, India Tender Enquiry No. RJRMM93087 for supply of Pacol DeH- 11 Catalyst Dear Sirs,

SAMPLE

Annexure - 9

As Independent External Monitor under the Integrity Pact Program of IOCL , I will be receiving from IOCL, certain of your informa on, hereina er referred to as UOP Informa on, to be used by be in accordance with the Integrity Pact dated entered into between UOP and IOCL (Pact) for the above referenced enquiry.

In considera on of IOCL supplying to me UOP Informa on, I agree that such informa on furnished to me will be used by me only in performing my responsibili es under the Pact and that I will not disclose to others (including employees and agents of IOCL, its subsidiaries and aliates). Duplicate or use in any other manner UOP Informa on supplied to me.

Upon the comple on of my responsibili es under the Pact, I will promptly return to IOCL all UOP Informa on supplied to me. Yours faithfully

RSSLN Bhaskarudu Date : 18th November, 2010

ASSESSMENT OF INTEGRITY PACT (IP) IN IP COMPLIANT PUBLIC SECTOR UNDERTAKINGS

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