Blood Sucking Humour Of The Defence Auditors

Blood Sucking Humour Of The Defence Auditors

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In January 2010 HQ ENC (V) floated an Open Tender Enquiry (OTE) for the supply of 10,000 Kgs of Coffee (100 %) at the Base Victualling Yard, Visakhapatnam [BVY (V)] for the period from 01 April 2010 to 31 March 2011. Eight firms collected the tenders, of which four firms did not quote.

Of the remaining four firms, who participated in the tender procedure, the quote of M/s Kendriya Bhandar was rejected as the samples contained coffee-chicory mix which was not as per specifications laid down in the tender document.

M/s Nestle, Chennai emerged L1 at `880 per Kg coffee (Brand-Nescafe Classic) and accordingly Rate Contract (RC) was concluded (March 2010) by HQ ENC (V) with M/s Nestle India Ltd., Chennai for `88 lakh for 10,000 Kgs of Coffee (100%).

We noticed in Audit (August 2012) that for the same period i.e. 01 April 2010 to 31 March 2011, Headquarters Western Naval Command, Mumbai [HQ WNC (MB)] had concluded (April 2010) a contract with M/s CCL Products (India) Pvt. Ltd., Hyderabad for the Continental brand of Coffee (100%) at 435 per Kg i.e. at half the rate as compared to HQ ENC (V). Our scrutiny showed that HQ ENC (V) did not call for rates and the brand name from HQ WNC (MB) though this was required to have been done as per the IHQ Guidelines of November 2006.

Further scrutiny revealed that in November 2010, in view of the impending expiry of the said RC, a fresh OTE was floated by HQ ENC (V) for the next year i.e. from 01 April 2011 to 30 March 2012, inviting bids for supply of Coffee in two types of packs viz 500 gms and 50 gms, for an estimated quantity of 12,000 Kgs and 2,000 Kgs respectively. The Technical Board approved ‘Nestle Classic’ brand quoted by both: M/s Nestle who was the L1 for 500 gm pack at `880 per Kg and M/s Indian Naval Canteen Services for 50 gm pack at `1150 per Kg.

However these rates were considered to be very high and this time, HQ ENC (V) made enquiries with HQ WNC (MB) and Headquarters Southern Naval Command, Kochi [HQ SNC (K)] to compare the rates. It was only then did HQ ENC (V) become aware of M/s CCL Products Pvt. Ltd., Hyderabad who was registered with HQ WNC (MB).

Accordingly when in July 2011, ENC (V) re-tendered on OTE basis for supply of Coffee for 2011-2012, M/s CCL Products Pvt. Ltd., Hyderabad also participated in the TE and emerged as L1 at `516 per Kg for 500 gm pack and `525 per Kg for 50 gm pack. Had there been a similar exchange of information between Commands during the previous year (2010-2011), the conclusion of contract by HQ ENC (V) at double the rate as compared to HQ WNC (MB) could have been avoided.

Meanwhile, in anticipation of delay in conclusion of this RC, BVY (V) resorted to local purchase and procured 2,000 Kgs of Coffee at `880 per Kg from M/s Nestle India Ltd., Chennai at a total cost of `17.60 lakh between the period April 2011 and September 2011.

The matter was referred (April 2013) to the Ministry of Defence. In its reply Ministry stated (November 2013) that HQ ENC (V) had concluded the contract with M/s CCL Products Pvt. Ltd., Hyderabad, for the period 2010-11 on 08 March 2010, while HQ WNC concluded contract for the same period on 27 April 2010, and thus HQ ENC concluded the contract well before HQ WNC and therefore price information could not be exchanged.

Ministry also stated that though HQ ENC resorted to open tender for procurement of coffee; M/s CCL Products Pvt. Ltd., Hyderabad did not respond. Ministry contended that procurement of coffee from M/s Nestle in 2010-11 was as per existing regulations and DPM provisions, at competitive prices.

The reply of the Ministry is however not acceptable. The Ministry’s contention that HQ WNC had concluded a contract after HQ ENC is incorrect as M/s CCL Products Pvt. Ltd., Hyderabad was registered with HQ WNC since the year 2009 and a contract for 2009-10 was also concluded by HQ WNC with them in May 2009. However, exchange of information between the Command Headquarters on brands/prices did not take place, though it was a requirement.

Further, Ministry’s reply that M/s CCL Products Pvt. Ltd., Hyderabad did not participate in tender for procurement of coffee in 2010-11, has to be seen in the light of the fact that OTE for this procurement restricted the response only to specified brands of Nescafe, Sunrise, Nestle and Tata Cafe.

In such scenario, M/s CCL Products Pvt. Ltd., Hyderabad could not have bid. Ministry’s contention that procurement of coffee from M/s Nestle in 2010-11 was as per the existing regulations and DPM provisions, at competitive prices, is also incorrect, as DPM precludes references to brand names in the RFP. This resulted in an extra expenditure of `53.40 lakh.