L-G panel to Delhi govt: Scrap Rs 3412 crore maintenance contract for low-floor AC buses

The committee, formed on June 16 based on a recommendation from the anti-corruption branch, had principal secretary (transport) Ashish Kundra, principal secretary (vigilance) KR Meena and former IAS OP Agarwal as members.

The report states that the “committee examined the material on record and observed that the allegations in the complaint essentially pertain to the AMC of buses. The committee therefore focused its attention only on the procurement process of AMC of the buses”.

At one point it also says, “The tendering process of purchase of buses warrants no interference and suffers from no major infirmity.”

The complaint pertains to the fact that two separate tenders were floated for the purchase and AMC of the buses. It questioned the fact that AMC for the buses would kick in before the expiry of a three-year warranty period already embedded in the purchase order.

JBM Auto had emerged as the L-1 bidder, while Tata Motors was the L-2 bidder.
In its report, the committee observed that it is “unclear how splitting the tender would have helped without having broader eligibility criteria and less demanding performance standards”.

“The material on record does not show any effort made to expand the ambit of competition. The bid eligibility criteria precluded the possibility of any entity other than an OEM (original equipment manufacturer)/dealer network to participate, making it a restrictive bid… In a situation with only two bidders participating for the tender of supply buses, who also carried the onus of maintenance through a separate bid enquiry, the possibility of monopoly pricing is high and a fair price discovery could be called into question,” it said.

The committee flagged that the technical bids for supply of buses were opened ahead of the bid for AMC. “The sequencing created a situation where both the bidders knew they were the only ones in the game. Such a knowledge lends itself to possibilities of cartelisation and inflated rates, which was avoidable,” it said.

Initially, it was decided to award a Rs 4,265 crore contract for AMC of 1,250 buses, however, the number was later reduced to 1,000 buses. The vehicle manufacturers “as they were expected to mandatorily bid for AMC as well”.

However, both the purchase and the AMC were put on hold on June 12 after the complaints emerged.

On allegations of irregularities, the committee said that since the DTC can only buy low-floor CNG buses due to court orders, it has to make do with the market that has very few manufacturers.

“Yet, if these deviations had become necessary, DTC should have ensured that they did some kind of reasonableness test of the rates for AMC, especially since the rates were far higher than what they had in earlier contracts. To say that they did not have the expertise is not a good enough response,” the committee said.

“In the absence of internal capabilities, a professional agency for bid structuring and management for AMC should have been hired, or at least consulted,” it said.

The committee also had the mandate to examine whether there was any “criminal misconduct attributable to public officials”. On this question, it said, “The committee, prima facie, did not come across any material to impute criminal misconduct attributable to any public official. There were only procedural lapses apparently arising out of a bonafide decision-making process.”

The committee underscored that the time was right to “take a hard look at comprehensive reforms of the DTC”. The Delhi government had earlier announced that after the induction of the low-floor buses, the total fleet of DTC buses, which is currently around 3,760, will increase to 4,760. The DTC’s last purchase of new buses was in 2008.