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HIGH LEVEL COMMITTEE
Organising
Committee
Fifth Report of HLC
2011
VIGYAN BHAWAN ANNEXE,NEW DELHI
Fifth Report of HLC – Organizing Committee
Contents
Chapter Title Page No.
Acronyms 3
Executive Summary 5
1 Introduction 26
2 Organizing Committee’s Budget 33
3 Governance 50
4 Revenue from Ticketing 74
5 Sponsorship 90
6 International Broadcasting Rights 103
7 Overlays 113
8 Timing, Scoring and Results 141
9 Technology Contracts through TCIL 166
10 Games Management System 177
11 Games Village Master Caterer 185
12 Games Village Catering - Kitchen Equipment 200
13 Games Village - Kitchen Equipment Installation 209
14 Venue Catering I 220
15 Venue Catering II 230
16 Ceremonies – Aerostat 240
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Fifth Report of HLC – Organizing Committee
17 Ceremonies – Art Director 255
18 Ceremonies – Lighting and Searchlights 266
19 Ceremonies – Wizcraft 280
20 Cleaning and Waste Management 293
21 Games News Service 307
22 Sports Equipment & Surfaces 324
23 Procurement of Lanyards 331
24 Expenditure on NDCC Building Refurbishment 337
25 Expenditure on Beijing Games Observer Program 349
26 Other Instances of Adverse Procurement 360
27 Recruitment 396
28 Appointment of Consultants/Advisors 432
29 Appointment of international consultant - EKS 473
30 Summary of Major Findings 488
Appendix 1: List of Contracts provided by OC 508
Appendix 2: List of documents reviewed 509
Appendix 3: List of key OC officials who were consulted 511
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Fifth Report of HLC – Organizing Committee
Acronyms
The abbreviations in this glossary are not intended to be a complete and/or authoritative
list. It was compiled to assist as a quick reference guide. There may be some abbreviations
used in the context of this report that are general and do not require further explanation,
and some are also described where it is used.
A2Z A2Z Management & Engineering Services Private Limited
ADG Additional Director General
BOQ Bill of Quantity
C&C Culture and Ceremony
CBI Central Bureau of Investigation
CCC Centralised Coordination Committee of the Organising Committee
CEO Chief Executive Officer
CGF Commonwealth Games Federation
CHF Swiss Frank
COO Chief Operating Officer
CWG Common Wealth Games
CWM Cleaning and Waste Management
DG Director General
DNC Delaware North Catering
D2010 Delhi 2010
EB Executive Board
EMC Executive Management Committee
EMD Earnest Money Deposit
EMF Event Management Firm
EOI Expression of Interest
F&A Finance and Accounts
FA Functional Area
FSC Finance Sub Committee
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Fifth Report of HLC – Organizing Committee
FTC Fast Track Committee
GBP Great Britain Pound
GMS Games Management System
GOM Group of Ministers
GOP General Organisation Plan
HLC High Level Committee
HRH His Royal Highness
INR Indian National Rupees
JDG Joint Director General
JLN Jawaharlal Nehru stadium
JS Joint Secretary
LOI Letter of Intent
MOU Memorandum of Understanding
MoYAS Ministry of Youth Affairs and Sports
MSL MSL Software
OC Organizing Committee
OCFC Organizing Committee Finance Committee
OVR On-Venue Results
RFP Request for Proposal
SDG Special Director General
SMAM Sports Marketing and Management
ST Swiss Timing
TCIL Tellecomunication Consultants India Ltd
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Executive Summary
Background
The Organizing Committee for Commonwealth Games D 2010 was established in February
2005 with Mr. Suresh Kalmadi as Chairman of the OC. The executive board of the committee
consisted of 15 members including 4 office bearers and members drawn from various
agencies namely Commonwealth Games Federation, Government of India, Government of
National Capital Territory of Delhi, and Indian Olympic Association. The OC was entrusted
the organizing and hosting of the XIX Commonwealth Games in Delhi.
The examination of the performance of OC was carried out by the HLC and its officials /
experts against the Terms of Reference of the HLC. The key areas reviewed include
governance, staffing, cosultants/advisors, revenue, expenditure, and procurement and
contracting.
Inconsistencies that permeated the OC
Introduction
Successful conduct of the games by OC was dependent, among other things, on timely
procurement and availability of a complex set of services and goods. In view of the
resources involved in these procurements and their criticality for the games, a key focus of
this review was the procurement made by OC to achieve its mandate. This review indicated
poor management of this key activity, inconsistencies and deliberate disregard of best
practices and repeated indications of misconduct on the part of the OC and its functionaries
in carrying out this activity.
These matters have been dealt with in relevant paragraphs under the various chapters of
this report, and a summary of the most common factors across contracts is as follows.
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Fifth Report of HLC – Organizing Committee
Engagement with only a very limited set of suppliers
In many of the major contracts, the OC seemed to attract only a very limited vendor or
supplier base. In various instances only a single vendor qualified at the technical stage with
the result that the contracts were awarded sans any commercial comparisons on the basis
of the sole price bid opened by the OC.
What is extraordinary is the limited supplier base that the OC attracted even for some of the
contracts that were very significant in terms of commercial value (examples include Timing
and Scoring, Press Operations and Games Village catering). For some of the contracts
reviewed, the low response rate could be attributable to restrictive pre-qualification criteria
that the OC adopted in these contracts. Instances noted include the following.
- In the case of the contract for Timing and Scoring Systems, only 2 vendors submitted
bids in response to the RFP issued by the OC. The bid of MSL was disqualified on
technical grounds and hence their price bid was not opened. The Swiss Timing emerged
as the only vendor who qualified the technical round without any ensuing price
comparison with competing suppliers.
- For international TV Rights contract that was awarded to Fast Track, only 2 suppliers
actually submitted a bid in response to the RFP. There was a key misrepresentation in
the tender document itself as these were issued for both “national and international
broadcast rights”, whereas national rights were outside the ambit of the OC’s
operations.
- In the case of overlays that were one of the highest cost contracts in aggregate value, an
EOI was issued that resulted in only 10 responses. Thereafter, six vendors were
disqualified at the EOI stage and all the remaining 4 vendors obtained one or more
packages from the OC.
- For press operations, a very restrictive criterion was set. Due to various mistakes made
by the OC functionaries, the RFP was issued twice. However, each time only one
supplier, Infostrada, submitted responses and was ultimately awarded the contract.
- In the case of award of the technology related contracts to TCIL, no comparative
quotations was obtained or evaluated by the OC. Services rendered by TCIL proved
uneconomical and unreliable.
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- For the contract for Games management systems awarded to Gold Medal Systems,
under the criteria mentioned in the RFP, only 3 vendors globally would have actually
qualified in the technical round. Two of these ‘eligible’ vendors did not submit a bid and
the award of the contract was in essence, non-competitive.
- In the case of the Master Games Village Catering contract awarded to DNC, 4 parties
were pre qualified and only 1 bid was received against RFP from DNC. When the
contract was re-tendered, only 2 vendors (DNC and IRCTC) submitted a bid. IRCTC were
again rejected in the technical round and hence the OC considered the commercial bid
of only one vendor DNC for a contract at a rate whose reasonableness can not be
established.
- In the case of the purchase of the Aerostat from K-Events, there was an apparent
unwillingness to evaluate a vendor other then k-events that resulted in the award of the
contract to K- Events based on evaluations and recommendations of the international
consultant.
- In the case of lighting, searchlight and lighting design of opening and closings
ceremonies, one vendor got a combined order through separate RFPs issued. The vendor
dictated terms and prices once it qualified in both bids.
- In the case of Art Director of scenic workshop construction works of opening and closing
ceremonies, though five nominations were available, RFP was issued only to one vendor
on recommendation of the consultants. The vendor was also issued an order for another
work in this related area on nomination basis.
- In the case of award of contract for sponsorship rights, 4 vendors were pre qualified but
only two of them responded to the RFP.
- Even in the case of small and one time procurements, numerous instances were noted
wherein the OC managed to identify and obtain quotations on invitation basis from
vendors who did not even appear to have a proper commercial place of business and/or
existed at potentially non-existent addresses.
It follows from the above, that the OC attracted interest of a very limited vendors due to the
flawed procurement process. Such contracting resulted in only a single eligible vendor in
some cases at the time pricing discussion commenced. The very fact that multi-crore
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projects enthused a low response indicates that the OC was keen to keep these contracts
exclusive/open to only a limited segment rather than to generate competition amongst
suppliers. A high entry barrier was a restrictive practice to achieve this objective.
Failure to conduct ‘price’ negotiations
In many contracts, OC did not exert any emphasis on bringing down prices at the time of
price negotiations. In several instances, in the name of price reduction, the OC reduced
scope of work rather than accomplishing unit price reduction. In other instances, the OC
expressed “helplessness” in view of the shortage of time and seemingly succumbed to
demands of vendors or provided justifications that do not appear maintainable. Examples
noted include the following:
- In the case of award of the contract for TV rights, the bid of Fast Track was
approximately INR 16 crores higher than what the OC would have paid had the contract
actually been awarded to SMAM who were the lowest (or L1) bidder. The reason for not
awarding the contract to SMAM (who were retained for sponsorship) was the ‘not
putting eggs in one basket’ analogy. It is surprising that on the other hand, the OC chose
to overlook this analogy when it gave multiple packages on cleaning and waste
management or on Overlays or catering of venues (other than CGV) to one vendor.
- In the case of Overlays, the OC did not appear to take any steps to rationalize or reduce
costs across vendors. Instead the OC chose to justify cost differences for the same item
across vendors by looking at only the “overall cost of the package”. The computation
prepared as a part of this review indicates that the OC may have incurred an additional
cost of at least INR 138 crores had the prices been negotiated and contract been
awarded on the basis of the lowest price across selected vendors for exactly the same
items in the RFP. Instead the OC only chose to look at ‘overall costs’ with no regard to
individual prices quoted by the vendors.
- In the contract for press operations awarded to Infostrada, the contract amount was
brought down by reducing specifications. There was no evidence of any rate or price
negotiations having been carried out with the vendor by the OC.
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Fifth Report of HLC – Organizing Committee
- In the contract for cleaning and waste management awarded to A2Z, there were no
negotiations with the vendor on reducing unit prices for manpower component which
was already documented in the OC’s own records as higher than ‘market rates’
estimated by the OC. The result was a higher cost of INR 1.98 crores based on OC’s own
estimates of “market rates”.
- In the case of the contract for games village catering, DNC (catering contract) and PKL
(equipment manufacturer) appeared to dictate terms to the OC that ranged from
initiating a ‘buy’ versus ‘hire’ decision for kitchen equipment (INR 3.7 crores higher cost
to the OC), detrimental contract conditions such as no warranty on previously used
equipment provided, etc. In fact, DNC raised its contract price by INR 8.58 crores after
the LOI was issued by the OC, which the OC ‘helplessly’ accepted. For the entire games
village catering, the cost went up by INR 21 crores in aggregate from the first
consolidated bid submitted by DNC to the individual contracts finally executed. The OC
appeared to lose out any negotiation capacity whatsoever owing to the ‘time crunch’
situation and instead resorted into measures such as rushing teams to Melbourne and
London at its own expense to negotiate with suppliers on matters such as delivery itself,
let alone price discussions.
- In the case of the consultant Mark Fisher refused to bring down his quotation and GOM
accepted the price having no option.
- In the case of Bharat Bala and AR Rehman they dictated price which was accepted by the
GOM
- In the case of catering consultant Ajay Grover and in case of another consultant Shashi
Tharoor, prices were dictated at their terms.
Unnecessary expenditure/lost opportunities for revenue
- The review indicated instances where the OC and its functionaries operated in a manner
that either burdened the games with unnecessary and wasteful expenditure or
significant opportunities to earn revenues were lost. The following are some of the key
instances noted during the review.
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Fifth Report of HLC – Organizing Committee
- The OC freely printed and distributed tickets aggregating to INR 71 crores in value as
complementary tickets. In terms of numbers, complementary tickets aggregate to
around 41% of the overall ticket inventory which is an extremely substantial component
of the tickets. These complimentary tickets were printed and distributed under the
instructions of Chairman of the OC and Secretary General against the advice of
consultants/third parties involved in this activity1. It is extraordinary that on one hand
there was a demand for tickets within the general public (evident from the ticket sales
data) and on the other hand the OC functionaries chose to deprive the general public of
access to the games and the OC of the revenue potential of these tickets.
- The OC awarded a contract for games news service or press operations to Infostrada
aggregating to approximately INR 9 crore whereas this was done in-house in Melbourne.
It is hard to imagine that in a media savvy country such as India, the OC refused to
identify any relevant expertise (relevant even from a legacy perspective) as against
outsourcing it completely to an overseas vendor.
- Even for procurement of basic and standard technology items such as printers, faxes,
VOIP, the OC paid a 9 per cent commission to TCIL which in turn sourced these items
ostensibly from sub-vendors. This is despite the OC having a 75 member technology
team apart from various other advisors and consultants. The OC could have clearly
saved this 9 per cent markup had such procurement been down in-house.
- For the opening and closing ceremony, the OC paid INR 2.9 crores for consultancy for a
project for bandstand that was abandoned. The OC spent another INR 6 crores on
‘sausage’ component of the Aerostat that was not used. Further, the OC spent INR 1.4
crores for ‘non-utilization of flight crews’ that was not deducted from the contract value.
The total additional/wasteful expenditure in this case aggregates to INR 10.3 crores.
- Wasteful expenditure of INR 1 core was noted on procurement of sports surfaces arising
mainly out of procuring Badminton court mats in excess of requirements and procuring
athletic equipment from an L2 bidder.
1
As evident from various email obtained during forensic analysis of emails
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Fifth Report of HLC – Organizing Committee
- An expenditure of INR 5.06 crore was wasted on sending a deligation of 111 additional
persons to the Beijing Olympics as observers. Many of these “delegates” were not
connected with the sports sector in any way. Hence, this was a total wastage of public
funds.
Time delays caused solely by the OC perplexingly used to justify high costs
The OC either seemed to commence contracting at a stage where games were at the anvil
or otherwise took a long time to finalize contracts leading to time pressures. This factor of
delay was then used as a ruse to accept significantly increased costs in the absence of any
‘alternative’ vendors given the criticality of time.
Another offshoot of the delays was the setting up of Fast Track machinery for
procurements. This resulted in the short cut for various procurements, established
procedures and compromise on safeguards to protect OC’s commercial interests. The
vendors realized the “helpless” situation of OC and price negotiations were often made in
the context of aggressive stands of the vendors. Analysis of issuance of 517 contracts
entered into by the OC clearly indicates that 91per cent of these contracts by number 2 were
awarded only in 2010. This is extraordinary and points to incompetence and in several
cases, malfeasance on the part of the OC functionaries. It is hard to imagine that a body set
up in February 2005, waited almost 5 years till in 2010 to award contracts to vendors and
then cited time pressures to justify inflated costs claimed by the vendors.
2
By value this amount to approximately 89% of the value of 517 contracts issued by the OC
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Fifth Report of HLC – Organizing Committee
Issue of contracts by OC during 2006-2010
Specific examples where the OC functionaries justified additional costs citing time delays
include the following.
- The TSR contract awarded to Swiss Timing where the OC took 2 years and 9 months to
finally award the contract to the vendor. In this case, the vendor itself has charged a
premium on INR 18 crores citing delays on the part of the OC in awarding the contract.
- The overlays contracts aggregating to INR 630 crores were greatly delayed and initiated
only in December 2009 because OC intentionally had not provided estimates / included
provision for overlays in the several budgetary exercises it had undertaken including that
by E&Y.
- The technology contract for Games Management Systems that was signed in a ‘crisis
stage’ in March 2010 aggregating to INR 21 crores.
- The contract for SMAM (sponsorship) and Fast Track (TV rights) was finally decided over
a period of 21 months.
Price differences
Complicated and longdrawn contracting process and substantial delays engendered
situations in which contracts were awarded at significantly higher costs. These had a huge
impact on the overall costs and laid the foundation of a constant barrage of requests from
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the OC for additional budgets and funds. It may be mentioned that had the OC actually
taken the right steps in a spirit that fostered fair competition amongst eligible vendors, they
would have discovered much lower costs with better results. Some of the most important
examples where price differences between vendors were significant are as follows.
- In the case of the TSR contract, as per documents obtained, the commercial bid of the
competing vendor, MSL was INR 49 crores lower than the price agreed with Swiss
Timing. It may be mentioned that MSL were rejected by the OC during the technical
evaluation and hence their price bid was not opened by the OC.
- For Games Management, the OC paid the vendor, Gold Medal Systems approximately 5
times or 17 crores more than what the vendor charged for the games in Melbourne for
predominantly the same work.
Patronage
In some instances, it was apparent that executive decisions made by the OC functionaries
were oriented towards seeking patronage outside of the OC and hence these were not in
the best interests of either the games or the underlying expenditure. Such adverse conduct
not only led to unnecessary expenditure but also contributed disrepute to the image of the
games and the country. Examples of such conduct of the part of the OC functionaries
include the following.
- Unabated printing of complementary tickets and distributing these to the detriment of
the general public. Failure of the OC functionaries to maintain any formal records for
such distribution indicates possible malfeasance behind the opaque nature of such
distribution.
- Recruiting employees, consultants and advisors on criteria other than merit of the
candidate. In key positions Chairman appointed loyalists, a large number from Pune
including one Railway Guard. Many of the selected individuals had affiliations, relations
or were otherwise connected with OC functionaries or other ‘influential’ people. This
report indicates that such recruitments were made on the basis of “who knows who”
rather than merit and experience of the candidate, even to extent that candidates with
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Fifth Report of HLC – Organizing Committee
questionable background were accommodated specially at senior position with decision
making power.
- Beijing Olympics observer program where an expenditure of INR 5.06 crore was wasted
on the reckless exercise of patronage by the Chairman, OC led the selection of many
peopled unrelated to sports management to go on this trip. The delegation was mainly a
pleasure trip at government expense.
Quelling ‘dissent’
In was noted in the review of some contracts that key personnel within the OC hierarchy
appeared to be changed at times when they expressed dissent or raise questions on adverse
procurement procedures followed. The fact that such changes were made at the same time
the relevant employee ‘questioned’ decisions was too coincidental. It is likely that such
changes were made to ‘manage” dissidence in respect of decisions that had already been
made in a particular manner. Examples noted include the following.
- In the TSR contract, Sandeep Arya (who was an Advisor) was appointed as JDG
(Techology) to supersede Sujith Panigrahi (ADG Technology) at a time Sujith Panigrahi
started raising red flags and concerns around the bias towards Swiss Timing and the
resultant unfair contracting.
- In the ticketing FA, Sanjeev Mittal, Ticketing FA head, was reassigned at a time when
forensic email analysis showed him raising concerns over the mass printing of
complementary tickets. He was succeeded by another FA Head who appeared to largely
‘toe’ the line and philosophy of the Chaiman to support such largesse showered by the
OC.
- When the differences cropped up between the officials in the reporting process of work
or in the matter of award of contract or technical evaluation process (as in TSR case),
there was bitter exchange of official notes between the officials. This was an indication
of typical dysfunction in the senior ranks of OC.
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Involvement of local agents as representatives of foreign vendors
A rhetoric continually provided by the OC to support many seemingly adverse decisions was
that the conduct of games would entail and necessarily require international expertise.
Consequently, a key feature in many of the contracts was permission to form consortiums
under which foreign vendors would be the lead partners (from a technical evaluation
perspective) and Indian partners may assist (from a local representation perspective).
It was however noted that such conditions are likely to have resulted in situations where the
presence of foreign parties may have used only to justify higher costs and most of the work
was carried out by the Indian counterparts. An example was the case of Overlays where the
foreign partner in one of the contract, ESA-JV, held only a minority stake in the joint venture
company formed specifically for the purpose of contracting with the OC.
We further noted that in certain instances, Indian entities and individuals appeared to have
been engaged by various foreign vendors for unrelated contracts. For example, it was noted
that Gem International and Tristar Enterprises were associated with Swiss Timing and
Games Management Systems respectively. Both these entities have common addresses and
individuals associated with them. Tristar also managed to secure a contract for the supply
of Lanyards to the Accreditation FA (with some indications of unfair contracting even in that
contract). The role of such entities and individuals needs to be examined with respect to any
irregularities that may have occurred.
Various other indications that contracting process was vitiated
Additionally, a number of other inconsistencies were noted indicating serious flaws in the
manner in which contracts were initiated, negotiated and awarded by the OC. Given that
there was a semblance of impropriety in such cases, it is likely that that these may have
resulted in misconduct on the part of OC and its functionaries. Some of the most significant
examples in this regard include the following.
- The EOI for the TSR contract (ultimately awarded to Swiss Timing) was issued by the
Secretary General’s office without even the FA Head or the Technology Consultant’s
knowledge. They both expressed their ‘surprise’ at the issue of the EOI and
recommended its withdrawal, a request that was not acceded to.
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- The Chairman, OC kept the EB in the dark about detrimental contract conditions in the
SMAM contract and the OC may have ultimately suffered a loss of INR 28.45 crores.
Additionally a Deed of Variation was executed in seemingly great secrecy which had the
effect of potentially compromising the position of the OC with respect to possible
disputes over the claim of sponsorship commission.
- In the case of Overlays, a potentially false declaration was made by officials involved that
they based initial budgets on “standard price lists” displayed by suppliers on their
websites when, if fact, it is unlikely that such information is available in the public
domain on websites in the form needed by the OC. Further, there is indication that the
OC functionaries approved the procurement aggregating to approximately INR 38 crores
on the basis of ‘ad hoc’ prices quoted by suppliers, with full knowledge that such prices
were not maintainable. Also, the OC may have lost an opportunity to save cost of
approximately INR 138 crores due to its failure to conduct price negotiations. Further,
there was complete failure to monitor any delivery of items made available by the
suppliers under the contract.
- The award of the contract for kitchen equipment to Constellation project revealed that
the evaluation committee failed to spot absence of required information and overlooked
other inconsistencies in the bid documents and yet cleared the vendor in technical
evaluation.
- There was change in the payment terms in respect to the contract for press operations
with Infostrada. The change in basis of payment from the bid of the vendor, the LOI and
the final contract resulted in an excess of payment of at least INR 0.38 crore on the basis
of payments released so far.
- In the case of procurements for lanyards flawed evaluations resulted in the rejection of
vendors at the technical stage. An apparently erroneous report was overlooked by the
technical evaluation committee that resulted in the award of a contract to a potentially
‘favored’ vendor. While the specifications provided for fire retardant material, a simple
test of igniting the product immediately resulted in the lanyard catching fire.
- In many cases, the OC functionaries acted in complete disregard for systems of
approvals. For example, in the case of the kitchen equipment installation contract for
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the games village, the LOI was issued before approvals from the EB were sought. Also, a
critical change was made to the TSR RFP without clear approval from the EB.
- Forensic email analysis indicated that Overlays vendors may not have provided the
requisite quality contemplated under the contracts. Further, as there were no
documented checks carried out by the OC to verify the quantity and quality of such
overlays, there is no contrary evidence to dispel concerns.
- For the cleaning and waste management contract, the OC knowingly awarded
substantially the entire work to a vendor, whose capability to deliver as per the OC was
doubtful. The OC did not take any appropriate risk mitigation steps and the vendor also
was unable to provide the requisite services during the actual conduct of the games.
- In contract for catering for the venues, the inspection carried out to verify the
competence of the potential vender overlooked certain major deficiencies and adjudged
it as competent. Following the award of the contract, the vendor could not supply
hygienic and reliable food
- Time delays resulted in an important and expensive piece of equipment such as the
Aerostat being shipped without any testing. Further, payments were released to the
vendor without submission of insurance documents, which was contrary to the contract
terms.
- A conflict of interest was noticed in relation to the kitchen equipment installation
contract in the games village. A consultant was engaged in the catering FA in the same
period during which the OC was negotiating a contract in a company he was financially
interested in. The Legal FA (who possessed no legal qualification) opined that this did not
involve conflict of interest.
- For various small and one time procurements, it was noted that falsification of
documents to provide legitimacy of decisions to award contracts seemed to be an
acceptable practice. The apparent ease with which some of this documentation was
moved and approved within the OC without raising red flags was surprising.
- For various small and one time procurements, the OC ended up obtaining quotations
from vendors who did not have any signs of commercial activity at their stated place of
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business, especially as many of these were based on comparative quotations obtained
by the OC from the “market”.
Potential Financial impact
The Potential financial impact of inconsistencies and adverse contracting as identified for
contracts reviewed is approximately INR 382 Crores. However, some of these could
represent notional loss, maximum possible losses and some could represent cost saving
opportunities. Due to the absence of additional and detailed information such as true costs
of alternate procurement, it is not possible to distinguish or isolate actual costs involved in
all cases. The detailed findings on each of these contracts and others are set out in the
ensuing sections of the report.
From the above, it is evident that the conduct of OC operations saddled the games with
additional costs that could have been avoided had the OC functionaries conducted
themselves in a manner consistent with the trust reposed in them. However, the adverse
behavior that marked the contracts damaged the country’s reputation and cast shadow on
the spirit of the games.
Factors that contributed to their perpetration
The adverse conduct of OC functionaries resulted in multiple instances where excessive or
unnecessary expenditure was incurred and/or the possibility to gain additional revenue was
not adequately realized. The fact that the OC and its functionaries attempted to indulge in
such irregular or extraordinary procurement with relative ease suggests existence of various
factors in the operating environment in OC that enabled or facilitated such perpetration.
Some of the key issues noted in this regard are as follows.
Existence of a coterie and wrong tone at the top
The tone at the top in OC was contrary to what would be expected in an organization such
as the OC. As detailed in the review, appointments to some of the key positions (such as
Secretary General, successive Director- General, Finance & Accounts, Members of the
Executive Committee and consultants) were made by the Chairman based on relationships
and influence without regard to the merit of the candidate. These functionaries were
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vested with large decision making powers either directly or through the mechanism of pliant
committees. Consequently, it is likely that a coterie was created within the top level of the
OC that was not conducive to the environment in the organization. In a situation where
most of the decision making was controlled by the Chairman and his loyal appointees, it was
unlikely that any significant challenge would be provided to decisions made by any or all of
them. This observation assumes significance due to the following.
- The very fact that people seemed to be shunted, transferred or superseded at times
when they appeared to dissent or raise concerns suggests that the philosophy was to
recruit and promote candidates who would follow directions without question.
Patronage in appointments appeared to have been used quite effectively to elicit such
behavior in the organization.
- At many times the OC seemed to function as a ‘club’ where the criteria for recruitment
and promotion seemed “who knows who” rather than merit. For example, the Chairman
himself brought on individuals as employees and consultants from his constituency in
Pune, overlooking equivalent or better talent available elsewhere.
- A conflict of interest was allowed to exist in as high an office as the Chairman’s
secretariat. For example, an OSD in the Chairman’s secretariat was found to be
associated with a private travel agency through which the travel of the Chairman was
booked multiple times, as against using travel agencies appointed by OC.
- People with questionable backgrounds such as Nachiketa Kapur, who the Appointment
Committee of the Cabinet (AAC) opined should not be given any ‘sensitive post’ were
given appointments by the OC. Other examples such as V.K Verma (DG) and R.P Gupta
(ADG- Venue operations) against who vigilance enquiries at previous government
positions were being conducted, TS Darbari against whom complaints were received
while he was working in OC were also recruited disregarding the red flags. Potentially
inappropriate behavior by other individuals in the Chairman’s secretariat was also noted
during Forensic email reviews.
The existence of a coterie appeared to have resulted in a situation where unethical and non
transparent behavior was tolerated and promoted. Consequently, it is likely that these
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factors resulted in a tone at the top that seemed to propagate acceptability of lowered
ethical standards within the OC.
Did not bring the ‘best’ expertise to the games
The argument used by the OC functionaries to explain high expenditures in terms of “best
expertise” is not maintainable and appears to be just a deflection from the real issues
involved. While the OC was mandated to conduct the games in an effective and efficient
manner apart from providing legacy considerations, the actions of the OC functionaries
seemed to contradict such directives.
- While the chairman was empowered to appoint advisors and consultants, at his
discretion though the “recommendations” of search/selection committee, it was clearly
evident that appointment of many Indian advisors and consultants was motivated and
not in the best interests of the games. There were no apparent skill sets of candidates
that justify appointments made or compensation offered to them apart from other
irregular practices noted in the appointment and for such individuals.
- In terms of in-house expertise, many FA heads did not have any relevant experience in
their areas of operation. For example the DDG-Legal did not have a basic law degree,
but proceeded to dispense legal opinions on matters referred to him; the FA heads for
significant FAs such as catering, overlays, accreditation, ticketing, ceremonies, did not
have any prior experience in these areas.
- The OC attempted to bring foreign consultants in many areas, but failed to create an
environment where best possible results could be ensured from their appointment. This
is evident from the fact that despite obtaining the purportedly best international
expertise, the OC continued to endure difficulties in contracting in almost all areas
where consultants were engaged.
- While the OC continued to contend that engaging foreign vendors would bring an
international element to the games, it is doubtful as to what portion of work was
actually international as most of such vendors proceeded to engage local agents and
suppliers in their ‘consortiums’.
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Fifth Report of HLC – Organizing Committee
Created ‘panic’ on timing
It is evident that things were delayed to an extreme point causing an ostensible panic which
was used by the OC functionaries to either obtain exceptional approvals or provide
justifications for inflated cost. Such delays were not isolated incidents but permeated the
entire OC across contracts and FAs. This would be established by the fact that more than 90
per cent of contracts of the OC, by number, were awarded commencing January 2010 i.e.
barely 9 months before the games.
Failure of governance and oversight
Another fact that enabled perpetration of improper conduct was the failure of internal
control systems to identify red flags or take action against errant behavior. Documentation
and paperwork appeared to move in line with the authority matrix without significant
objections or concerns, even when, prima facie, inconsistent information or irregularities
(for example comparative quotations were dated after payment was made) were noted in
some of the procurements reviewed.
Even where it appears that concerns were raised by some individuals in the OC, it is not
evident if resultant action was taken on these concerns. For example, Jarnail Singh, CEO in
OC, raised a concern on the evidence of work being done by Indian consultants and
advisors. While letters were issued by him to consultants asking them to detail work done,
responses were not obtained in a majority of cases.
It is also noticeable that appropriate oversight in terms of vigilance, audit and pre-audit was
not set up by OC for critical areas and areas of potential wrong doing especially as red flags
or concerns appear to have been raised in the large number of issues that seemingly existed
across the OC.
In the case of budgeting, the Chairman continued to project the revenue neutrality of OC
despite significance evidence to the contrary. Till late in budget making exercise, no
provision was made for one than 1/3 of functional areas and inadequate provision was
made for some areas. In the initial years, this could be possible but it was utterly
unjustifiable in 2009. Evidence suggest that Chairman was leading a budget making process
that was unprofessional and incompetent. Even two months prior to start of the games, the
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Fifth Report of HLC – Organizing Committee
Chairman approached Government for sanction of more than INR 900 Crores when there
was no need for additional funds.
Policy of appeasement
The OC also appear to succumb to the pressures and demands made by CGF functionaries
even though some of these may not have been conducive to the Indian environment or to
the revenue interest of the games. For example, CGF functionaries appeared to exercise
considerable influence in the award of contracts to SMAM (for sponsorship) and Fast Track
(for International TV Rights) both of which resulted in additional expenditures and
underperformance against budgeted revenues.
The OC also seemed overly dependent on foreign consultants to engage other such
consultants and vendors. Consequently, the OC relied heavily on foreign consultants on
referrals and did not create any internal capacity to identify and examine relevant expertise
through their own efforts.
The OC paid all expenses of Mike Hooper, CEO-CGF even when ostensibly Chairman OC was
of the opinion that he did not add value to the OC. Consequently, it is likely that actions of
the OC were skewed towards keeping ‘allies’ happy and thus may not be have been in the
best interests of the games or its underlying expenditure.
Dysfunctional management
From a forensic review of emails and correspondences between various functionaries at the
OC, it was evident that strained relations existed at various levels that may have resulted in
a less than conducive environment for employees to contribute effectively. While such
dysfunction could exist in any large organization, the fact that it existed at the highest levels
within the OC without redressal was alarming. Some of the most significant indicators in
this regard are as follows.
- CEO was not given adequate responsibility when he joined the OC in 2009. Again till the
end, he was not given crucial powers (appointment of staff, consultants, and vendors,
signing of contracts, etc) and was not made the head of the Secretariat.
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Fifth Report of HLC – Organizing Committee
- The former COO, V.K. Gautam appeared to have serious differences of opinions with T.S.
Darbari (Joint DG) and VK Verma, DG.
- By and large email communications showed that a number of employees and foreign
consultants appeared extremely cynical about the governance and managerial ability of
the OC.
- There were frequent reassignments and turnover of employees at key times.
Failure of the maker-checker concept
Though the OC created a very comprehensive and multi-layered approval and oversight
structure, each successive level appeared ineffective in preventing abuse. A reason perhaps
was the ability of the Chairman and other functionaries to control significant appointments
both within the OC hierarchy and oversight committees (such as the EB and EMC).
Consequently, a strong structure on paper hid the concentration of power as governance
was entrusted to management in complete contrast to the maker-checker concept.
‘Unquestionable’ power and authority of the Chairman
By virtue of the powers of his office, the Chairman had complete control over all aspects of
the OC’s operations that included the power to make or divest appointments, make
‘emergency’ orders that would be ratified by the EB, etc. Vesting of complete power in an
individual without compensating control was, in retrospect, a bane that led to situations
such as those enumerated in this report.
The Chairman also appeared to misuse these powers vested in him as was evident in
instances such as distribution of tickets, patronage shown to various sections, contracting
situations such as catering, changing ‘dissenting’ employees, etc, which neutralized any
compensating controls.
Extravagant approach in the light of revenue neutral philosophy
Throughout the run up to the games, OC kept emphasizing on a revenue neutral position to
justify additional expenditure and budgets whereas, in reality, the situation was different. It
was very evident that the OC did not exercise any reasonable logic and relied on anecdotal
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Fifth Report of HLC – Organizing Committee
estimates for budget preparation. The review of various revenue areas clearly indicates that
the OC grossly overestimated the revenue potential. As regard expenditure, the review
indicates that these were grossly underestimated and were prepared without basic
diligence such as providing for expenditure on major activities. Consequently, the OC kept
misrepresenting a revenue neutral position to justify its extravagant approach in its
spendings.
In reality, the conduct of OC functionaries demolished all revenue earning potential and
contrarily subjected the government to huge inflated costs and expenditures.
Summary and conclusions
The irregularities and adverse conduct that appeared to permeate a large part of the OC
affected the smooth preparation and build up of games and its image. This climate
encouraged misconduct, misdemeanor and in cases, possible personal profiteering by OC
functionaries, caused losses, led to missed revenue opportunities and generated
unnecessary expenditure.
As detailed in the ensuing sections of the report, the cause and effect analysis clearly
indicates that it may have been possible to achieve the same level of success of the games
with far lower costs and blemish for wrong doing had the OC conducted operations in a
transparent, fair and equitable manner.
A key feature of the build up of the games was the delays. The organizational failures and
wrongdoings led to delays which in turn provided the excuse for manipulation of the
procurement procedures and override of controls. The delays were all pervading and
stressed the management process to an extent that it could pull down the entire build up of
the games. OC’s ways of doing things neither conformed to best practice nor met the
expected ethical norms.
Fortunately, a mix of favorable factors including government intervention, though belated
and tremendous effort by a number of dedicated officials in OC and other stakeholders saw
that the games were held despite all the road blocks arising from incompetence,
inappropriate behavior and extreme delays.
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Fifth Report of HLC – Organizing Committee
The system of poor governance, failures and override of controls in the OC engendered a
work culture where wrong doing was tolerated. As detailed analysis showed, in many cases
the culpability of OC officials, especially those who were perceived to be close to the
Chairman, was evident and wherever possible this review has identified such cases.
Inevitably, the culpability factor gravitates upwards to stop at the door of the Chairman,
who retained complete and absolute power over all aspects of OC’s operations.
The review brings out that in many cases, the Chairman personally took steps that were
detrimental to the OC’s interest but there was no appropriate forum in the OC where such
actions could be called to question. Therefore, the accountability for all these failures and
wrongdoings was never identified.
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Fifth Report of HLC – Organizing Committee
1 Chapter 1: Introduction
1.1 Background
1.1.1 The Organizing Committee Commonwealth Games 2010 Delhi (OC CWG Delhi 2010) came
into existence on 10 February 2005 as a registered society under the Societies Registration
Act, 1860. It was resolved by the Commonwealth Games Federation (CGF) in the General
Assembly held in Jamaica on 13 November 2003 to entrust the organizing and hosting of the
XIX Commonwealth Games to the Indian Olympic Association (IOA). As per Clause 2(C) of
the Host City Contract, signed by the Government of India (GOI), the Government of
National Capital Territory of Delhi (GNCTD), IOA, and CGF, the CGF delegated the
organization of the Games to the OC CWG Delhi 2010.
1.1.2 The Host City Contract identifies and binds the five key stakeholders who are responsible for
the successful delivery of the XIX Commonwealth Games 2010 Delhi. It was incumbent upon
these stakeholders to undertake all measures, including adequate financial provisions, to
deliver the Games in the most befitting manner within the framework of the Constitution,
Protocol and Guidelines of the Commonwealth Games Federation (CGF). The key delivery
partners are:
Commonwealth Games Federation (CGF);
Indian Olympic Association (IOA);
Organising Committee (OC);
Government of the National Capital Territory of Delhi (GNCTD);
Government of India (GoI).
1.1.3 The requirement to fulfill multiple functional roles as well as several support areas in the
organization and management of an event of the stature of the XIX Commonwealth Games
2010 Delhi also includes several ministries, departments and agencies of GoI and several
local and municipal bodies of the GNCTD.
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Fifth Report of HLC – Organizing Committee
1.2 Scope of Report
1.1.4 This report contains the findings and conclusions on the review of the organization and
conduct of games by the Organizing Committee. The review was carried out in the light of
the Terms of Reference( TOR) of the High Level Committee, with special focus on:
Effectiveness of organizational structure and governance of Organizing Committee including
recruitment, role of senior functionaries, consultants, and advisors
Efficacy of vigilance and internal audit as a mechanism of oversight
Planning and execution of key contracts for service delivery with reference to time, cost, and
quality
Alleged misconduct, irregularity, wasteful expenditure, and wrong doing in
contracting/procurement of goods and services
Inability to accomplish revenue targets set forth to make the event revenue neutral
Role of individuals, employees, consultants and advisors on various aspects related to the
conduct of OC’s operations.
1.3 Areas selected for review
1.1.5 The areas for review were selected considering their criticality and significance to the
conduct of games and/or likely misconduct and irregularity. The review concentrated on
following aspects of the games:
OC’s Budget
1.1.6 The section contains review of the budget prepared at OC and revisions/revalidations
performed on the same.
Governance
1.1.7 The section on Governance covers the review of the organizational structure of OC, role of
senior functionaries, and effectiveness of vigilance and internal audits mechanisms related
to control and oversight.
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Fifth Report of HLC – Organizing Committee
Key Sources of Revenue
1.1.8 The section on revenue covers the OC’s conduct related to revenue generation from games
operations as well as expenditure on contracts awarded to earn such revenue. The
following are the three broad categories that comprise the core revenue generations
aspects at the OC.
Table 1.1: Revenue areas selected for review
Functional Area Scope Contractor Projected Actual
3
Revenue Revenue
(INR crore) (INR crore)
Ticketing Revenue from ticket Consortium of 100 39
sales IRCTC, Broadvision,
and TicketPro
TV Rights International M/s Fast Track 260 2144
Broadcasting Rights
Sponsorship Revenue from M/S Sports 960 2355
Sponsorship Rights Marketing and
Management
Significant Expenditure areas
1.1.9 According to the information provided, the OC entered into approximately 517 contracts
aggregating to INR 1,649 crores in value.6 The review was oriented towards expenditure
incurred by functional areas that were considered most significant from the perspective of
the TOR of the HLC. On an overall basis, the review covered examination of contracts in 10
functional areas of the OC aggregating to expenditure of INR 1,131 crores in addition to the
various administrative actions for which financial value was not the key signifier.
3
From EY/EKS revalidated budget
4
Revenue of USD 46.404 million (conversion rate USD 1 = INR 46.28)
5
Most of these revenues were received from Government/PSO where efforts of SMAM were not evident
6
As per the data provided by OC. A copy of all such contracts is attached in Appendix 1.
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Fifth Report of HLC – Organizing Committee
Table 1.2: Contracts selected for review
Contract
# Functional Area Scope Contractor Amount7
(INR Crore)
PICO / Deepali Overlays
231
Consortium
GL Litmus/ Meroform 165
Overlays and Games Overlay/ Temporary
1 Venue Fitments as a Turnkey NUSS LI:/Comfort Net 141
Development project on rental basis
ESAJV :/ D Art : Indo
93
Consortium
Total 630
M/s. Swiss Timing,
Timing Scoring & Results 112
Switzerland
Telecommunications
2 Technology IT Procurement 69.13
Consultants of India Ltd.
Games Management M/s. Gold Medal
21
System Systems, Canada
Master Caterer – Games Delaware North –
66.59
Village Australia
Venue Catering (Workforce M/s AFP, M/s IRCTC, M/s
27.20
and Lounges) Gravis, M/s Seven Seas
3 Catering
Kitchen Equipment
M/s PKL 8.63
Purchase for game Village
Installation and Supply of M/s Constellation 9.50
Kitchen Equipment at
7
All values are rounded off to whole number
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Fifth Report of HLC – Organizing Committee
Contract
# Functional Area Scope Contractor Amount7
(INR Crore)
Games Village
Aerostat M/s K Events 36.75
Lighting & Search Lights PRG 16.46
4 Ceremonies Event Management – 21.49
M/s Wizcraft
D2010
Cultural Show Omang Kumar 16.49
Sports Equipments &
5 Sports Various 278
Surfaces
Cleaning & Waste Main Stadium &
6 A2Z Maintenance 19
Management Ceremonies
7 Press Operations Press Operations Info strada Sports 9
8 Accreditation Lanyards Tristar Enterprises <1
Office
9 Building Refurbishment NDCC Building 32
Administration
Observer Programme in
10 CGA Relations NA 8.00
Beijing Olympics
Small and ‘one-time’
11 Various FAs Various NA
administrative expenditure
8
Total expense on Sports Equipments
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Fifth Report of HLC – Organizing Committee
General Administration
Additionally, a number of other areas related to the OC’s conduct of operations were reviewed.
These include the following.
Staffing and Personnel
Consultants and Advisors
Appointment of EKS
1.4 Methodology
1.1.10 The areas identified above were reviewed in the background of timelines for conducting the
games; financial and administrative guidelines of the OC; generally accepted good practices
related to governance, administration and procurement; conformity to delegations of
financial and administrative powers; general norms of proprietary and information provided
to HLC.
1.1.11 As part of the review approximately 1 terrabyte of electronic records and information was
obtained and reviewed. This roughly translates, in terms of paper, to a 45,000 square feet
warehouse, having 5-feet cupboards stacked with dual side single spaced printed
documents.
1.1.12 In several cases, original records were not available at all or were available late as OC had
supplied concerned records and documents to the statutory agencies including the C&AG of
India, the Income Tax authorities and agencies like Central Bureau of Investigation and
Enforcement Directorate. In several cases the review work was carried out on the basis of
the copies of the original records as made available by the OC. In some areas, review could
not be taken up as the records were still in use for ongoing investigation work by these
agencies.
1.1.13 In a few cases, review was not taken up as investigation by other agencies has made
progress and any work by the HLC would amount to overlapping and duplication.
1.1.14 The procedures carried out generally included the following.
Forensic imaging of computers of identified OC personnel and subsequent review of information
including recovered deleted data, where considered necessary
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Fifth Report of HLC – Organizing Committee
Email review of available emails obtained from the vendor managing the email hosting services
for OC
Data analysis over available financial data, ticketing data, bill of quantities for select contracts,
and other information as deemed relevant for review
Public documents and records searched including company reports available from Ministry of
Corporate Affairs website (www.mca.gov.in)
Correlation of information with relevant data available at other departments of Government of
India
Examination and desk study of relevant hard copy notes, contract and agreements evaluation
reports, office orders, and approvals pertaining to the area under review
Interview and discussion with various functionaries of OC
External visits to corroborate information as necessary
1.5 Acknowledgement
1.5.1 Committee expresses its thanks to the officers and staff of the OC who cooperated by
providing the information and documents sought. The Committee also acknowledges the
amenities and office space provided by OC to facilitate the conduct of the review.
Committee further places on record it’s thanks to the offcials of CBI, IRCTC, Income Tax, ECIL
and TCIL who have extended their time and support and allowed access to their records.
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Fifth Report of HLC – Organizing Committee
2 Chapter 2: Organizing Committee’s
Budget
2.1 Background
2.1.1 The Indian Olympic Association (IOA) had the responsibility for preparation of the first
budget of the Commonwealth Games 2010. Mr. Suresh Kalmadi was the President of the
Indian Olympic Association at the time. The first budget was to be prepared and put before
the Cabinet for their approval prior to the commencement of the bidding process for the
Commonwealth games. The IOA prepared a budget of INR 296.61 crore and projected
sponsorship revenue of INR 490 crore as per the cabinet note dated 20 May 2003.
2.1.2 This first budget underwent two revisions and finally an expenditure budget of INR 656.86
crore (i.e. USD 141 million as per the Bid document9) was submitted as part of the Bid
document submitted to the CGF in November 2003.
2.1.3 The OC was established in February 2005. Mr. Suresh Kalmadi was appointed as Chairman
of the OC for the Commonwealth Games D 2010. Accordingly, the baton for preparation of
budgets was handed over by the IOA to the OC in 2005. The first budget prepared and
submitted by the OC to the MYAS for approval in September 2006 amounted to INR 896
crore10.
2.1.4 Subsequently, the OC realized that they needed to prepare a revised budget as the previous
budget estimates were incorrect/ falling short of actual expenditures. Accordingly, the OC
appointed Ernst & Young in March 200711 to revalidate and prepare a revised budget.
2.1.5 Thereafter, on the basis of the submission of the revised and revalidated budget, the MYAS
approved the final budget of INR 1,620 crore12. The adhoc procedures adopted by the OC to
prepare the budget for the Commonwealth Games have been dealt with in this report.
9
Refer Annexure 2.1 for Budget estimates as per Bid document.
10
Refer Annexure 2.2 for minutes of EFC meeting held on 13 September 2006 to consider the budget of OC.
11
Refer Annexure 2.3 engagement letter sent by OC to Ernst & Young for validation of the OC Budget.
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Fifth Report of HLC – Organizing Committee
2.1.6 A brief chronology of the key events relating to the budgeting process is set out in the table
below.
Table 2.1: Chronology of budgeting process for OC
Year Particulars
2006 Initial Budget of INR 896.01 crore submitted to GOI.
2007 MYAS sanctioned the First Budget of INR 767.01 crore on 9th April 2007
2008 Revalidated budget of INR 1,323.94 crore submitted to MYAS on 15 April
2008
Revised revalidated budget of INR 1,420.67 crore submitted again after
correction of error on 9 July 2008
Revalidated Budget of INR 1,873.17 crore made after discussion with
Secretary MYAS on 5 December 2008
2009 Final revised estimates of INR 1,857.89 crore submitted to MYAS on 2 June
2009
MYAS sanctioned second budget of INR 1,620 crore on 18 November 2009
Budget for TSR amounting to INR 52 crore and sports equipment amounting
to INR 35.25 crore sanctioned by MYAS in November 2009.
2010 Overlays budget of INR 687 crore sanctioned by MYAS on 30 March 2010.
Additional budget for ceremonies FA amounting to INR 193.42 crore
sanctioned by GOM on 2 June 2010.
2.2 Preparation of adhoc budgets and repeated revisions
First to third budget prepared
2.2.1 As mentioned above, the IOA prepared the first budget for the Commonwealth Games
2010. As per a document retrieved through computer forensics from the computer system
of Mr. Praveen Grover, Director, Treasurers office, “This budget was prepared by IOA based
12 th
Refer Annexure 2.4 MYAS approval letter dated 18 November 2009 for INR 1,620 crores as OC Budget.
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Fifth Report of HLC – Organizing Committee
on the first hand information available at that time. IOA neither had the actual facts and
figures nor any expertise in working out the estimated cost of organising Commonwealth
Games”13.
2.2.2 As per the same document retrieved, a second revision14 of the budget was carried out and
the expenditure budget of INR 296.50 crore was increased by INR 103 crore bringing the
expenditure budget to INR 399.50 crore. The GOM minutes have recorded the expenditure
budget of INR 399.50 crore and revenue budget of INR 10 crore as the first budget
submitted by IOA. According to the GOM minutes, Mr. Kalmadi requested the Government
of India to underwrite this short fall and sign the Host City Contract in 2003 15. Subsequently,
according to the GOM minutes dated 17 September 2003 and 1 October 2003, an
expenditure budget of INR 399.05 crore16 with respect to the Organising Committee was
approved by the Ministry based on IOA’s proposal.
2.2.3 The budget was revised a third time prior to the submission of the Bid document in
December 2003. According to the document retrieved17 as mentioned above, “The budget
was revised to finalise the official bid documents, after consulting the CGF and other stake-
holders. Officials of Sports Ministry were involved in the meetings with CGF. The increase in
the cost was due to additional components viz. Opening and Closing Ceremonies, Cultural
Programmes, Doping and Medical Services, QBR, Youth Games (INR66.50 croes), etc.” This
third revision brought up the expenditure budget to INR 656.86 crore (i.e. USD 141 million
as per operational plan in the Bid document, December 2003). It was noted that as per the
Bid document the “games operational plan has been based on the relevant data and study
conducted by M/s A Sharma & Company, Financial consultants with the information
obtained from the last Commonwealth Games and International Sporting events held in
13
Refer Annexure 2.5 for document retrieved from Mr. Praveen Grover’s computer system.
14
Refer Annexure 2.5 for details of second revision from the document retrieved from Mr. Praveen Grover’s
computer system
15
Refer Annexure 2.6 for letter from Mr. Suresh Kalmadi to Rajiva Srivastava, Secretary, MYAS.
16
Refer Annexure 2.7 for break up of expenditure components for staging the Commonwealth Games, 2010.
17
Refer Annexure 2.5 for document retrieved from Mr. Praveen Grover’s computer system.
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Fifth Report of HLC – Organizing Committee
Delhi”18. It must be noted that, the budget submitted in the bid document in December
2003 was 117% higher than the budget estimates discussed in the cabinet meeting in May
2003.
2.2.4 The revision of the budget for the third time based on the relevant data and study
conducted by M/s A Sharma & Company, also failed to cover all aspects of the budget for
the common wealth games. This is apparent from the document retrieved which shows
that the budgets were revised 8 times even after the submission of the budget in the Bid
document.
2.2.5 The document retrieved clearly reveals that even at the time of bidding for the
Commonwealth Games, the personnel responsible for preparation of the budget had
neither the actual facts and figures nor any expertise in working out the estimated cost of
organising Commonwealth Games. Evidently, it was prepared in an adhoc manner with no
reliable estimate of the nature of costs that could be incurred in organising an international
event of such magnitude. It may be correct to say that India, went ahead with its 2003 bid
with no clue about what the implications would be for the country in terms of the costs
involved. This failure cost the exchequer heavily as the expenditure profile of CWG unfolded
over the years.
2.2.6 The IOA did not make any further revisions/ changes to the budget after the submission of
the Bid document in December 2003. All further revisions were made by the OC after its
establishment in 2005.
Preparation and Deliberations around the Fourth budget of INR 896 crore
2.2.7 The first budget prepared and submitted by the OC to the Ministry for approval in
September 200619 amounted to INR 896 crore. As per the justification provided in the
document retrieved20, increase in budget from INR 656 crores at the time of Bid to INR 896
crore was attributable to “IOA had to make a last minute offer of US$ 1,00,000 to each CGA
as training grant to win the bid (INR48 crores). Revision was also necessitated due to
18
Refer Annexure 2.1 for Bid Document 2003.
19
Refer Annexure 2.2 for minutes of EFC meeting held on 13 September 2006 to consider the budget of OC.
20
Refer Annexure 2.5 for document retrieved from Mr. Praveen Grover’s computer system.
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Fifth Report of HLC – Organizing Committee
addition of 3 more disciplines resulting in increase of 1,000 athletes and officials, India's
participation in M2006 Closing Ceremony, Volunteers Programme, Contingency, increase in
the budget for Pune Youth Games by INR43.50 crores (from INR66.50 crores to INR110.00
crores), etc.”
2.2.8 The OC submitted the proposal for a budget of INR 896 crore in September 2006. The
proposed budget was deliberated over by the Expenditure Finance Committee(EFC) in
September 2006. As per the minutes of the Expenditure Finance Committee meeting held
on 13 September 2006, Suresh Kalmadi, Chairman, OC, stated that “the games would be
revenue neutral and may in fact yield a surplus. Compared to the expenditure of about INR
1,500 crore incurred at the conduct of the Melbourne Games, the outlay of INR 896 crore
projected by the OC was reasonable…..”21.
2.2.9 Additionally, Mrs. Vijaylakshmi Gupta, ADG Finance, OC, expressed confidence on achieving
the revenue projection of INR 900 crore. She mentioned that “unit cost norms in respect of
expenditure have been worked out on the basis of the inputs from five main sources viz., (i)
CGF, (ii) Host City Contract, (iii) Melbourne Games, (iv) government agencies connected with
Transport/ Hospitality and (v) CGF manuals”. She also indicated that “the OC Budget could
not be treated as final, and the OC would be on a learning curve as they move forward” 22.
2.2.10 Based on these projections of expenditure and revenue provided by OC officials and their
assurance that the games will be revenue neutral, the Ministry approved a budget of INR
767 crore on 9 April 200723. Considering the nature of OC budget, the Ministry of Youth
Affairs and Sports, Government of India, approved a ‘Non- Plan expenditure budget’ of INR
767 crores to the Organising Committee towards conduct of the Games. This budget of INR
76724 was inclusive of the budget for the Commonwealth Youth Games in Pune.
21
Refer para 3 in Annexure 2.2 for minutes of EFC meeting held on 13 September 2006 to consider the budget
of OC.
22
Refer para 4 in Annexure 2.2 for minutes of EFC meeting held on 13 September 2006 to consider the budget
of OC.
23
Refer Annexure 2.8 MYAS approval for Non- plan expenditure budget of INR 767 crores.
24
The functional area wise break up has been provided in Annexure 2.9.
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Fifth Report of HLC – Organizing Committee
2.2.11 Subsequently, the MYAS approved a further increase of INR 66.50 crore for the
Commonwealth Youth Games in Pune. Thus the total budget for the Commonwealth Youth
Games went up to INR 110 crore25. Accordingly, the total budget for the commonwealth
games increased from INR 767.01 crore to INR 810.51 crore.
2.2.12 Further, it was also communicated by the Ministry that the funds will be provided to the OC
as an unsecured loan at the Government rate of interest prevailing at the time of release.
The repayment of the loan and interest would commence only after the commencement of
the revenue generation by the OC. On 7 August 2007, the Ministry conveyed to the OC that
all past releases as ad hoc advances amounting to INR 127.51 crore (i.e. during the period
2004-05 to 2006-07) may also be treated as loan instead of grants from the respective date
of release26.
Benchmark M2006
2.2.13 It must be highlighted at this point that the Benchmark M2006 submitted by the OC along
with the proposal for INR 896 crore budget and as attached to the EFC minutes, clearly show
that the M2006 games were not revenue neutral. Summary is provided in the table below:
Table 2.2:
Benchmark M 200627
Expenditure Revenue
Amount in AUD Mn Amount in INR Amount in AUD Mn Amount in INR
crores crores
450.2 1,575.6 240.6 842
25
Refer Annexure 2.10 for approval of revised budget of INR 110 crores for CWYG, 2008, Pune.
26
Refer Annexure 2.11 for MYAS letter for conversion of past releases of funds to OC into loan.
27
Refer Annexure 2.12 for Benchmark M 2006 submitted to MYAS as part of Budget proposal of INR 896 crores
submitted by OC.
38
Fifth Report of HLC – Organizing Committee
2.2.14 Thus it is alarming that the above mentioned figures were overlooked by the OC and
Ministry and an expenditure budget was approved on the basis that the games will be
revenue neutral.
2.2.15 It must be noted that even after the OC prepared the above budget on the basis of the M
2006 games, 14 functional areas were still not accounted for. Thus it is apparent that the
2007 budget was also prepared without adequate consideration and informed decision.
The 2007 budget had not accounted for the following functional areas and their related
expenses amounting to INR 385.59 crores:
Table 2.3:
S. No. Expenditure Area Revised Estimates Total
(INR Cr.) (after discussion)
1 Sponsorship 237.45
2 T.V. Rights 34.73
3 Logistics 16.43
4 Finance 13.54
5 Sustainability & Environment 13.06
6 Spectator services 12.78
7 Procurement 12.36
8 Ticketing 11.74
9 Legal 8.22
10 Security 8.19
11 Accreditation 7.46
12 Cleaning & Waste Management 5.71
13 Merchandising & Licensing 2.11
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Fifth Report of HLC – Organizing Committee
14 City Operations 1.81
2.2.16 It is surprising to note that the OC had not budgeted for as many as 14 functional areas in
the 2007 Budget, even though they had planned to create these departments as per the Bid
document submitted in December 200328.
2.2.17 Another point to be noted is that the cost norms used have been based on the rates of
travel, transports, hotels and catering obtained from ITDC, Balmer and Lawrie & Co. and IHC
etc29. There seems to be a mismatch between the assumption used for the budgets and the
promises in the Bid document. As per the Bid document, the Federation Group, Techincal
Officials, IF delegates/ observers, news media, VIP’s would be provided accommodation at
appropriate first class location in first class conditions/ minimum 3.5 to 4.0 star hotel
facilities which could be upgraded with negotiations etc will be provided 30. It is thus
apparent that the initial budget of INR 767 crores was not prepared even in line with the Bid
document.
2.3 Preparation of revalidated budget
2.3.1 In 2006, the OC realized that they needed to prepare a revised budget as the previous
budget estimates were incorrect/ falling short of actual expenditures. This time OC hired
Ernst & Young to prepare the revised budget in March 2007. A budget of INR 1,323.94
crores was prepared by E&Y and submitted to MYAS in April 2008. This budget was revised
to INR 1,779 crores in July 2008. Finally in December 2008, a revalidated budget of 1,857
crores was submitted to MYAS31.
2.3.2 On 18 November 2009, the Ministry of Youth Affairs and Sports, Government of India
approved the revised budget of the OC for the conduct of the games amounting to INR
28
Refer Annexure 2.1 – page 40 of the Bid Document 2003.
29
Refer para 4 in Annexure 2.2 for minutes of EFC meeting held on 13 September 2006 to consider the budget
of OC.
30
Refer Annexure 2.1, page 138-141 of the Bid Document 2003.
31
Refer Annexure 2.5 for details of budgets prepared and revised as per document retrieved from Mr. Praveen
Grover’s computer system.
40
Fifth Report of HLC – Organizing Committee
1,620 crores inclusive of INR 110 crore for the Commonwealth Youth Games, Pune 32. This
approval was based on the revalidated, revised budget estimated by Ernst & Young of INR
1,857 crore inclusive of INR 110 crore for the commonwealth youth games Pune.
2.3.3 It must be noted here that in 2009, the OC had already commenced issue of Expression of
Interest and RFP’s for various contracts and were in the process of receiving commercial
bids from contractors under some functional areas like Catering, Cleaning and waste
management, Ceremonies, Technology, Ticketing etc.
2.3.4 It is also worth noting that even though the OC had issued RFPs for the abovementioned
functional areas before approval of the revised budget, the revised budget in case of
catering, cleaning and waste management, Technology and Ticketing still fell short of the
actual expenditures and OC re- appropriated budgets from other functional areas to these
functional areas.
2.3.5 This highlights the fact that either the OC had no idea about the expense to be incurred
under these functional areas or were unable to negotiate the rates with the contractors. It
also reflects on the total failure of the OC in taking ownership of the budgets and adhering
to the same. In most cases the OC officials have cited extreme time constraints and agreed
to the prices laid down and dictated by the contractors. This may also be an indicator of
possible collusion among the OC officials and contractors to earn commission and kickbacks.
2.3.6 It must also be noted here that even the revised budget approved in November 2009 did
not consist of an overlays budget. The Expression of Interest for the contracts for Overlays
was issued by the OC in December 2009. Government repeatedly requested OC to provide
estimates for overlays expenditure but OC did not provide the same till end 200933. The
Ministry approved overlays budget of INR 687 crore in March 2010.
2.3.7 The total final expenditure budget as approved by the Ministry is summarized in the table
below34:
32
Refer Annexure 2.4.
33
Refer section on Overlays.
34
A functional area wise break up of the initial budget and the final approved budget has been provided in
Annexure 13.
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Fifth Report of HLC – Organizing Committee
Table 2.4:
Particulars Final approved Budget Initial 2007 Budget % Increase
(Amount in INR crore)
(Amount in INR crore)
35 Functional areas 1,510 700.5 115.5%
Common wealth 110 66.5 65.4%
Youth Games, Pune
Overlays 687 - 100%
Additional budget for:
- Ceremonies 193 - 100%
- Sports equipment 35.25 - 100%
- Timing, scoring and 52 - 100%
result system
Total 2,587.25 767.10 237.37%
A document recovered through computer forensics from the computer system
of Praveen Grover, Director and Treasurers Office revealed justification provided for
making budgets under new functional areas / increasing budgets in certain functional
areas35.
2.4 Re-appropriation of Budgets
2.4.1 The OC had the flexibility of + 25% for re- appropriation of funds across various heads,
within the overall approved revised budget of INR 1,620 crore. Re- appropriation beyond
25% would require the approval of MYAS. Further, this re- appropriation was not
35
Refer Annexure 2.14 for details.
42
Fifth Report of HLC – Organizing Committee
permissible on the items of expenditure relating to generation of revenue from
sponsorship/ broadcasting rights etc36.
2.4.2 Further, a Finance sub- committee with the Government nominees of the Executive Board
i.e. Secretary (Urban Development), Secretary (Sports) and Additional Secretary/ Special
Secretary (Expenditure) of the Ministry of Finance37, was constituted to scrutinize in
particular, all decisions that are placed before the Executive Board for approval38.
2.4.3 However, the OC was unable to adhere to the budget of INR 1,620 crore approved by the
MYAS. On 7th June 2010, Mr. Jarnail Singh, CEO, OC, wrote to Mrs. Sindhushree Khullar,
Secretary, MYAS, seeking permission “to cut allocation of eight FAs and give additional to
three FAs”39.
2.4.4 The justification for increasing the budget via re- appropriation under the 3 FA’s is given in
the table below40 :
Table 2.5:
Functional area Approved Additional Reason for additional requirement
Budget requirement
(in INR crore)
(in INR crore)
Catering 63.33 87.00 “INR 106 crore already committed
for Games Village. Majority of
tenders yet to be finalized”.
36
Refer Annexure 2.4 para 1 (ii) (a).
37
Refer Annexure 2.15 – minutes of meeting were sent to Additional Secretary/ Special Secretary
(Expenditure) of the Ministry of Finance,
38
Refer Annexure 2.15 for Terms of Reference of the Finance Sub- committee for OC, Commonwealth Games,
2010 detailed in the minutes if the first Finance Sub- Committee meeting held on 20 November 2009. .
39
Refer Annexure 2.16 for re- appropriation details proposed across 11 functional areas and submitted for
approval from MYAS.
40
Refer Annexure 2.16 for re- appropriation details proposed across 11 functional areas and submitted for
approval from MYAS.
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Fifth Report of HLC – Organizing Committee
Cleaning and waste 11.22 20.00 “High cost coming through tenders”.
management
Technology 185.05 60.00 “Payment of INR 30.00 Cr to MTNL
and additional requirement of
equipments for games”. It must be
noted that this contract had been
entered into in October 2009 and
thus the OC should have made a
provision for the same.
Total 259.6 167.00
The above reasons given by the OC for re- appropriation of funds reek of the
incompetence or failure in the budget process as the re- appropriations have been
requested based on tenders received from vendors or on account of committed
payments.
It should be noted that there was considerable delay in the tendering process for
important FAs like catering, cleaning and waste management and Technology ostensibly
for ‘lack of time’ and ‘successful conduct of the games’. Detailed review of these tender
cases showed that such delays were avoidable and deliberate in many cases and even
collusion between the vendors and OC management was possible in these cases. End
result was that such delays provided the grounds to demand additional money for the
games.
2.4.5 The MYAS approved the re- appropriation in all the functional areas except the proposed
cut in the expenditure head related to Sponsorship41. The additional re- appropriation
approved in the three FA’s is given in the figure below:
Table 2.6:
Functional area Approved re- appropriation
41
Refer Annexure 2.17 for MYAS approval for re- appropriation of funds from one functional area to another
within the approved budget of the OC of INR 1,620 crore.
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Fifth Report of HLC – Organizing Committee
(in INR crore)
Catering 53.50
Cleaning and waste management 20.00
Technology 24.00
Total 97.50
2.4.6 Subsequently, Mr. Jarnail Singh, CEO, OC, sent two more requests for re- appropriation to
Mrs. Sindhushree Khullar, Secretary (Sports) in June and July 201042. However, the MYAS
did not approve these requests. Instead in July 2009, MYAS ordered the OC to prepare “a
more realistic proposal” so that the correct position of additional requirement vis-à-vis
savings could be anticipated under the various FA’s43.
2.4.7 The OC responded to the above mentioned request of the MYAS in November 2010. This
request was prepared by Gp. Capt. KUK Reddy, ADG, Finance and Accounts44. As informed
through discussion, no response has been received from the MYAS till date.
Additional demand for budget in June 2010
2.4.8 In June 2010, Mr. Suresh Kalmadi sent a request for allocation of additional budget of INR
913.94 crores (inclusive of the INR 194 crores approved earlier for ceremonies) to Ms.
Sindhushree Khullar, Secretary (Sports), MYAS. According to Mr. Kalmadi, this additional
allocations was “essential on account of certain activities under Ceremonies, Catering,
Cleaning & Waste Management, Communication, Image & Look, Office Administration,
Technology and Sports etc. which were either not envisaged earlier or where the scope of
work has got enhanced”45. The Chairman’s plea for additional allocation of budget also
stated that “in the coming days we are likely to face serious financial crunch as some of the
42
Refer Annexure 2.18 for letters from CEO, Jarnail Singh.
43
Refer Annexure 2.19 for letter from MYAS on 16 July 2010.
44
Refer Annexure 2.20 for letter from KUK Reddy to MYAS requesting for re- appropriation and further release
of funds
45
Refer Annexure 2.21 – page 1, para 3 of the letter to Secretary (Sports), MYAS along with Annexure A and B
giving details of additional requirement with justifications against each Functional area of the OC.
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Fifth Report of HLC – Organizing Committee
Functional Areas have either already exhausted their approved budget or may exhaust the
same very soon in fulfilling the contractual obligations”46. This clearly depicts the failure of
the OC to estimate the expenses to be incurred on account of lack of understanding of the
scope of work required in some of the most essential functional areas of the organisation.
Further, it also clearly highlights the fact that the OC merely succumbed to the prices
quoted by the vendors and did not negotiate to remain within the allocated budget of INR
1,620 crores.
2.4.9 In the request letter, Mr. Suresh Kalmadi, Chairman, OC, also alleged that “our budget came
under further strain as the Organising Committee had to bear an amount of INR 469.76 Cr47
out of its allocation of INR 1,620 Cr which were otherwise liabilities of other Ministries of
Government of India”48. Mr. GC Chaturvedi, SDG, Finance and Accounts stated during
discussions, that this allegation is not supported by any agreement in writing between the
GOI and OC. Further it must also be noted that the OC had already made an estimate for
some of these expenses like Office space rental, Games news service, grant for participating
countries and license fees in the revalidated budget of INR 1,620 crores, approved by MYAS
vide letter dated 18th November 2009. Accordingly, there seems to be a contradiction
between the Chairman’s statement and expenditure estimates made by the OC.
2.4.10 It must be noted that the MYAS did not approve this additional budget request.
2.4.11 This request for additional allocation of budget for INR 914 crores was exclusive of overlays.
Accordingly, this demand pitched the OC expectation to INR 2534 crores excluding Overlays
expenditure and INR 3,221 crores inclusive of Overlays of INR 687 crores which is
astounding. Reasons for this additional allocation given in Annexure B49 to the letter clearly
highlight the failure of the OC to estimate the expenses to be incurred, lack of
understanding of the scope of work and lack of negotiation with vendors.
46
Refer Annexure 2.21 – page 1, para 5 of the letter to Secretary (Sports), MYAS along with Annexure A and B
giving details of additional requirement with justifications against each Functional area of the OC.
47
Refer Annexure 2.21 – break up of expenses to be borne by GOI.
48
Refer Annexure 2.21 – page 2, para 3 of the letter to Secretary (Sports), MYAS along with Annexure A and B
giving details of additional requirement with justifications against each Functional area of the OC.
49
Refer Annexure 2.21 – Annexure B giving details of additional requirement with justifications against each
Functional area of the OC.
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Fifth Report of HLC – Organizing Committee
2.5 Revenue estimates were baseless
2.5.1 As per the EFC minutes of meeting held on 13 September 2006 to consider the budget of
the OC,. Suresh Kalmadi stated that the Games would be revenue neutral and may in fact
yield a surplus. Further, in the same meeting, the ADG Finance, OC, Mrs. Vijaylakshmi Gupta
expressed confidence on achieving the revenue projection of INR 900 crore. As per the OC,
revenue projections were also made keeping in mind the Benchmark M2006 Games. A
comparison of the OC revenue budget, Benchmark M2006 and actual revenue realized is
given in the table below:
Table 2.7
S.No. Revenue streams Initial Benchmark Revised Actual
Budget M 2006 in Budget (Nov Revenue
(2007) in INR INR crores 2009) in INR realized in
crores crore INR crore**
1 Broadcasting 299.70 220.5 370 198.22
2 Sponsorships 450 383.2 960 218.79
3 Ticketing 100 201.2 100 28.63
4 Merchandise 50.30 32.4 50 0.80
5 Donations - - 300 1.00
6 Obligations of - - 96
GOI
7 Licensing - 4.70 -
concessions
8 Interest on - - - 12.80*
revenue account
Total 900 842 1,876 460.24
*Interest on revenue account is subject to reconciliation
**Revenue as on 29 January 2011
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Fifth Report of HLC – Organizing Committee
2.5.2 Key notings from the comparison above are as under:
Revenue actually realized only 24.5% of the total projected revenue of INR 1,876 crores.
CWG 2010 realised only 54.7% of the Benchmark M2006 revenue.
The above summary clearly shows that the revenue projections were not in line with the
Benchmark M2006 Games as mentioned by the OC officials in the EFC meeting in
September 2006.
The projections from Donations were made as per the following assumptions:
- Donations: Primarily from not-for-profit organisations / trusts promoting sports &
youth
- Raffles: Currently 8 states allow lotteries –Maharashtra, West Bengal, Punjab, Kerala,
Goa, Sikkim & NESA
- GOI could help if the ‘special’ Delhi 2010 lottery could be extended nationally
Most of the sponsorship revenue has come from PSU (Government undertakings).
2.5.3 The above assumptions taken by the OC seem to be completely baseless and adhoc. No
substantial evidence has been provided which can substantiate the projections of earning
INR 300 crores from donations, raffles, lottery etc. This has been validated by a collection of
only INR 1 crore from donations and raffles. Also, there is no benchmark in M2006 Games
for donations.
2.6 Other issues
Appointment of ex- Secretary Sports, MYAS, as Director General of OC
2.6.1 On November 13, 2003, in Jamaica, the 2010 Commonwealth Games bid was awarded to
Delhi, with 46-22 voting in favour of Delhi, against the city of Hamilton. On the award of the
Games to Delhi, the Host City Contract was signed by Mr. Suresh Kalmadi, President ,IOA;
Mr. Vijai Kapur, Lt. Governor of Delhi, for the host city, and Mr. Rajiva Srivastava, then
Secretary, Sports for the Government of India, in the presence of all member countries, at
the CGF General Assembly.
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Fifth Report of HLC – Organizing Committee
2.6.2 Mr. Rajiva Srivastava, on retirement from the Government of India in May 2004, joined the
Organising Committee Commonwealth Games as Director General on 10 February 200550 at
a salary of INR 45,000 per month which was increased to INR 95,000 per month in October
200651. In March 2007, he resigned from the OC and was appointed as Principal Advisor on
the same date on an advisory fee of INR 80,000 per month plus other facilities 52. Further, in
November 2009, he was also appointed to look after the overall functioning of the 23 sub
committees set up to advise the Executive Management on matters relating to planning and
monitoring of the Functional areas on behalf of the Chairman’s Secretariat 53.
50
Refer Annexure 2.22.
51
Refer Annexure 2.23.
52
Refer Annexure 2.24 – Resignation letter and appointment letter as Principal Advsior to OC.
53
Refer Annexure 2.25 – Office order.
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Fifth Report of HLC – Organizing Committee
3 Chapter 3: Governance
3.1 Background
This section of the report should be read in conjunction with the main report of the HLC.
1.1.1 In November 2003, the Commonwealth Games Federation (CGF) entrusted to the Indian
Olympic Association (IOA)54 the responsibility of organizing and hosting the Commonwealth
Games (CWG) in Delhi in 2010.Under a Host City Contract (HCT)55 signed in the same month,
the IOA and Organisisng Commmittee (OC),which was yet to be formed, jointly and
severally undertook to organize the games while the Government of India(GOI) and the
GNCTD of the Host City undertook to support, facilitate and finance the organisation of the
Games. It was acknowledged that the Games are the exclusive property of the CGF. The lOA
delegated the organization of the Games to the OC as per the conditions of HCT.
1.1.2 Review of the records and documents made available by the OC and discussion with senior
functionaries of OC revealed serious issues of governance in the OC.
3.2 Mandate of OC
3.2.1 The OC was formed in February 2005 and registered as a Society under the Societies
Registration Act XXI of 1860.The GoI appointed the Chairman of the OC and authorized him
to form the OC and the Executive Board with the approval of the GOI. Record does not show
show that Chairman consulted or took approval of GoI before the Memorandum and Rules
and Regulations of Organising Committee was registered. GOI provided funds to the OC for
the organization of the games, initially as grants and later as loans from the government
budget on the premise that the games would be revenue neutral.
54
IOA is also the CGA for India.
55
The HCT was signed on 13 November 2003 between the Commonwealth Games Federation England (CGF). Indian
Olympic Association (IOA), the Government of India (GOI) and the Government of National Capital Territory of Delhi
(GNCTD).
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Fifth Report of HLC – Organizing Committee
3.2.2 In short, OC’s mandate was to organize the games with the funds provided by the GOI and
with support from the IOA. Underlying assumption was that OC would raise revenue to
repay the loans from GOI.
3.3 Corporate structure of OC
3.3.1 The corporate structure of the OC 56 included the following:
The Chairman (Chief Executive)
A society consisting of not more than 500 persons in the Governing Body (GB)
An Executive Board (EB) consisting of 15 members to manage the properties and affairs
of the Society and to formulate/evolve rules and procedures for staffing, recruitment
and financial transactions etc.
Executive Management Committee (EMC)57
A whole time Secretariat headed by Director General to carry out functional
responsibilities in conduct of the games.
Sub Committees to assist the various Functional Areas (FA) heads.
The above aspects of governance in OC are discussed as following:
3.4 Chairman’s power
3.4.1 An unmistakable feature of OC’s governance structure was the centralistation of powers in
the hands of Chairman through formal allocation of power in the Memorandum and Rules
and Regulations of OC, use of power through Executive Board and committees like the EMC
formed by Chairman with persons nominated by him.
56
Refer to Annexure 3.1 for Memorandum and Rules and Regulations of the OC (MRR) and General Organisational Plan
(GOP)
57
In March 2006, EB was informed of creation of Executive management consisting of Chairman, Vice Chairman, SG and
the Treasurer. Subsequently an Executive Management Committee (EMC ) was formed( order of Chairman allocating
specific power to the EMC was not available) with Chairman to exercise power of approval of expenditure from INR 50
lakh to INR 3crore. Refer Annexure 3.2.
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Fifth Report of HLC – Organizing Committee
3.4.2 It appears that there was no internal accountability framework for OC Chairman as he could
not be called to question in any governance forum in the OC like the Executive Board or the
General Body which were not independent enough to play this role since these institutions
were effectively controlled by the Chairman.
3.4.3 In addition to the formal allocation of power to himself, the Chairman ensured that crucial
powers remain concentrated with persons who enjoyed his confidence. The top heavy
structure of OC till 2009 facilitated this process.
3.4.4 For example, the power to appoint persons up to the Project Officer level and the power of
signing of agreements were conferred on the Secretary General. In fact the Secretary
General was seen to be signing orders of posting and distribution of charge etc to the senior
officials at Jt. DG Level in some cases( for example, Jeychandran). Besides, Director General
who was handpicked by him was made the Chairman of the OC Finance Committee.
3.4.5 While the Executive Board was the highest governing body in the OC, great deal of financial
power was concentrated in the hands of the office bearers and selected officials through the
creation of the Competent Financial Authority ( CFA)58. Two such CFAs were EMC (Secretary
General, Treasure and Vice Chairman and presided over by the Chairman) and Expenditure
Approval Committee (Secretary General, Treasurer and DG, later CEO).
3.4.6 This pattern prevailed in other areas also. The Search Committees or Selection Committees
for selection of senior functionaries and consultants were often headed by the Secretary
General.
3.4.7 Thus the Chairman functioned through a coterie. Any person outside the coterie would not
normally be given substantial decision making opportunities. Even when government
deputed senior government officers, for example the Chief Executive officer (CEO) in
October 2009 to the OC to improve its management, these crucial financial and
administrative powers (appointment of staff and consultants and signing of agreements and
contracts) were not delegated to the CEO.
58
Refer to Annexure 3.3 for Financial and Administrative Guidelines of OC, Rule 3
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Fifth Report of HLC – Organizing Committee
3.4.8 A regards external accountability, the Chairman proclaimed as per a recent news item 59 that
he kept government informed of all decisions at every step. This was not correct as various
actions taken by him were not adequately reported even to the EB. (The case of not
informing or taking consent of EB in signing of a Deed of Variation which compromised the
interest of OC in the contract for sponsorship rights with SMAM is a typical example).
3.4.9 The formal powers of OC Chairman as listed below were identified from a review of the
relevant documents:
Power to invite any person to become member of the OC60 and chair the meetings of
General Body and to have full authority to conduct the meeting. Chairman’s decision on
the conduct of the meeting shall be final.61
Power to make additions and alterations in the composition of EB as deemed necessary
in the interest of Society’s aim and objectives62.
Power to create any committee or sub committees or Advisory bodies and appoint
suitable persons to these committees63
Power to approve contracts and agreements as chairman of EMC and EB
In case of emergency, “the Chairman shall take decision in the interest of the Society and
shall inform the EB in its next meeting and which shall be ratified by the EB” 64.
Full financial powers, both in respect of capital and revenue expenditure, in emergent
circumstances and get the same ratified by the EB (as explained earlier, EB had no option
but to ratify such decisions)65
Power to appoint the staff of OC from Director and above66
59
Times of India dated 25/02/2011. Refer Annexure 3.4
60
Rule 3 MRR of OC
61
Rule 5 (ii) Ibid
62
Rule 4 (ii) Ibid
63
Rule 6 MRR of OC
64
Rule 8 MRR
65
Rule 3 of the of Administrative and Financial Guideline
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Fifth Report of HLC – Organizing Committee
Power to engage the Consultants and Advisors67
Power to outsource national /international consultants on the basis of recommendations
of the appropriate committee to be constituted by the Chairman
3.4.10 The COCOM commented since end 2007 on the centralized decision making power in OC
and by implication the lack of delegation as a weakness in OC. But its homilies were
disregarded by the OC Chairman as he took no action to delegate his own power or powers
allocated to the Secretary General (Lalit Bhanot). This power structure in OC remained intact
well after the CEO was appointed by the Government.
3.4.11 Not only there was absence of delegation, an instance of further concentration of power
was noticed from the way Rule (8) of OC’s Rules and Regulations were amended. It is seen
from the proposal of the amendment to the Memorandum and Articles of OC, approved in
the 16th EB meeting held on 19th December 2009,68 that Chief Executive Officer would be
appointed by the Chairman to the Executive Board. However, this amendment withdrew the
following provision in the rule:”The Director General shall head the Secretariat.”
3.4.12 By withdrawing this provision, a vacuum in the rule position was created as to who shall
head the Secretariat. As there was no certainty in this regard, Chairman became the
supreme arbiter in this matter. Thus even while he headed the OC, he also now assumed the
power on case by case basis as to who effectively headed the Secretariat. As new
uncertainty was created by this amendment, Chairman’s power was further increased.
3.5 Budget Making Process
3.5.1 A very crucial aspect of governance was the provision of funds and accountability for its use.
The IOA led by Chairman in initial years and Chairman leading the OC in later years
continued to project the revenue neutrality of games despite mounting evidence against it.
66
Refer to Annexure 3.6 for the Recruitment and Selection Manual, Page 6
67
Refer to Annexure 3.5 for Chapter 2 of the Para 6 Noted D in the Administrative and Financial Guidelines
68
Refer to Annexure 3.7 for the proposal for amendment of EB
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Fifth Report of HLC – Organizing Committee
3.5.2 Till late in budget making anecdotal revenue projections were made to support the
proposition of a revenue neutral games. Again no provision was made for nearly one third of
functional areas and inadequate provision was projected for some areas.
3.5.3 In the initial years there could possibly be an excuse for it but it was utterly unacceptable for
its continuance in 2009.
3.5.4 Chairman was seemingly leading a budget making process that was incompetent and
unprofessional. Even three months prior to start of games, he approached the government
with request for additional funds for more than INR 900 Crore when there was no evident
need for such funds.
Executive Board
For effective governance, the EB needed to be suitably empowered through balance
composition and operational freedom.
Checks and balance in the EB was affected by the rules of OC regarding its composition
and this affected its independent and objective functioning as highest governance
institution. Besides, serious operational constraints restrained its functioning. These
factors contributed to significant dilution of the corporate governance of OC by the
Chairman.
The EB had a subservient position to the Chairman. For example, in case of emergency, it
was provided that “the Chairman shall take decision in the interest of the Society and
shall inform the EB in its next meeting and which shall be ratified by the EB”. EB’s
approval was taken for granted in this situation.
The EB had 15 members. Rule 4 of the MRR of OC provided that quorum of the EB was
one fifth of the membership and “decisions shall be taken by simple majority of the
members present”
It appears that a holding a meeting of EB was legally possible with three members
including the Chairman. If Chairman and another member agreed, any decision could be
approved by simple majority of the members present in such a meeting. These rules of
OC ignored best practice. For example, the Executive Board of the CGF needed a quorum
of half the members.
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Fifth Report of HLC – Organizing Committee
Of the 15 members of OC, 6 members were nominated/ appointed by the Chairman (2
from IOA, 4 from sports federations) out of 15 members. He also had the power to
nominate any member if there was a vacancy due to some reason. Thus government
representation and outside members (4 from government and 3 from CGF) could be a
minority when Chairman would vote with the persons nominated by him.
On more than one occasion, rational objections and observations by the Secretary,
MYAS (GOI representative) were ignored or bypassed in the EB meeting. Such situations
could not arise if adequate representation of the main stakeholder ie government was
ensured in the EB.
The operational hurdles that affected its efficiency and independence included
circulation of the agenda for EB meetings at the last moment and infrequent meetings of
EB. Some EB members frequently raised these issues.
The gap between two meetings was more than 6 months on several occasions. In six
years (2005 to 2010), EB had 27 meetings of which 11 meetings were held in 2010.In
2006 to 2008 only 8 meetings were held and in 2005 and 2009 4 meetings each were
held. Thus on average less than 3 meetings were held in first five years.
EB meetings often had large number of agenda items involving complex financial and
administrative issues. For example, in the 15th EB meeting held on 10 September 2009,
19 items were to be discussed. Often the items would have many sub items. Due to last
minute circulation of agenda papers, the members were evidently not given enough
time to deliberate on these matters.
The Chairman would in many cases give inadequate information or misleading to the
members of EB. For example, the information given to EB on the contract with SMAM
for sponsorship rights was incomplete and even misleading. Therefore, informed
discussion on the agenda items was not possible.
In consequence, EB was often seen to be delegating blanket powers to the EMC to a
point of abdicating the responsibility of governance. A few examples would be especially
noteworthy: (1) In the case of the contracts with EKS&E&Y they authorized the EMC to
conclude contract and inform them about it. (2) In the case of the contracts with SMAM
and Fast Track, EB delegated the responsibility to EMC for negotiation and finalization of
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Fifth Report of HLC – Organizing Committee
contract. (3) In the case of the refurbishing the NDCCII building, the EB authorized EMC
to finalize contract without considering the budget. EMC exceeded the budget provision
for this expenditure many times over without prior approval of EB and reported the
matter to EB as fait accompli.
Executive Management Committee (EMC)
As per the General Organisational Plan (GOP)69, the EMC was entrusted with “all
administrative and financial powers with respect to planning, execution, coordination
and monitoring within the overall budget approved by the Executive Board”. The
Financial and Administrative Guidelines empowered the EMC as competent financial
authority with power of financial approval upto INR 3 crore (revised to INR 6 crore from
March 2010).
No specific order was available in OC which empowered the EMC to exercise extensive
administrative power, in addition to its power as CFA. However, EMC was exercising
such powers since its inception in its numerous meetings in 2007 and 2008.
Additionally EB was routinely delegating various financial and administrative
responsibilities to the EMC. Such matters included approval of tenders for various high
value international contracts, negotiations of commercial rates with foreign contractors
and approval of their rates, approving RFP for contracts, hiring and refurbishing of excess
office space etc. Again on 19/11/200970, while redistributing power of CEO and DG,
Chairman conferred on EMC the power to monitor the progress of work of the
Organising Committee. Thus in totality, the EMC was vested with enormous power.
The cases dealt by EMC included the cases of various expenditure sanctions, re-
appropriation of budget, selection and appointment of senior functionaries like DG and
international consultants( for example Sashi Tharoor) , selecting a jumbo delegation for
Bejing Olympics in complete disregard for propriety and economy, deciding recruitment
process for selection for posts of Director and above, empanelment of firms for
69
Refer to Annexure 3.8 for the GOP Page 33
70
Refer to Annexure 3.13
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taxation and advisory services and legal services, fixation of core salary of the
competition manager and Venue managers etc.
Members of EMC consisting of office bearers of OC (Chairman, VC, Treasurer and SG)
were appointed by the Chairman. While informing the EB71 of his decision in this regard,
Chairman did not indicate the criteria for selection of these key functionaries to OC. Nor
did the EB ask him about it as seen from the minutes of the EB.
For the major procurements, OC had prescribed “game time experience” as eligibility
criteria. However, the same did not appear to be applied for selection of its leadership
team, namely the “executive management”.
In absence of any criteria, these appointments do not manifest recorded evidence of
transparent assessment of their competence and experience to hold these positions and
therefore may be considered as patronage.
Only one of the EMC members (Treasurer) had experience of working in a large
organization. The competence and experience of EMC members to manage the multi-
sport event like the commonwealth games, the complex management and
administrative matters and complicated international contracts and agreements, was
not evident. In course of this review, many irregularities were noticed in regard to the
tenders and contracts and various other matters decided in the EMC.
Question about the ethical conduct of the senior leadership was also important. One of
the members of EMC (Lalit Bhanot) was arrested by CBI for suspected wrong doing in a
case relating to Queen’s Baton Relay.
Yet another matter was the inherent conflict of interest in the working of EMC in regard
to the decisions relating to IOA. For example, in the case of decisions for providing fit out
of Olympic Bhavan and approving expenditure for purchase of furniture for Olympic
Bhavan, it was noticed that three EMC members ( Chairman, Treasurer and Vice
Chairman) holding position in IOA) took decisions which appeared to be in favour of
IOA. It would have been appropriate for the Chairman to entrust other functionaries in
OC to deal with financial decision concerning IOA and Olympic Bhavan.
71
Refer to Annexure 3.2 BE Meeting minute dated 22/03/2005 Item no 3
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Fifth Report of HLC – Organizing Committee
3.6 Key Functionaries of OC Secretariat
3.6.1 Recruitment of some senior functionaries in OC Secretariat was reviewed in the context of
the governance problems. Noticeably, several of these handpicked officials are presently
under CBI custody or were in such custody for reported wrong doing. In an previous section,
issues of the selection of leadership positions (EMC members) were discussed. The review
raised several issues of poor governance:
In recruiting retired officers from GOI, Chairman as the appointing authority, disregarded
established procedures of GOI (cases of Rajeeva Srivastava, Jeychandren).
Chairman allocated sensitive charges to a retired GOI officer (Jeychandren), in defiance
of categorical advice against such practice from the government in that regard. In some
major contract, Jeychandren was reportedly involved in suspected wrongdoing and he
was reportedly arrested by CBI.
Chairman gave patently incorrect information to Secretary, MYAS regarding T. S. Darbari,
against whom serious charges were made by ED and CBI.
Chairman OC provided employments to serving and retired officers (Rajeeva Srivastava
and V K, Gautam) from the MYAS. This could explain at least partially the inadequate
oversight of the nodal ministry as seen from the liberal sanctioning of funds to IOA’s
proposals, uncritical acceptance of the Rules and Regulation of OC leading to creation of
a potentially subservient Executive Board, vesting widespread financial and
administrative powers in executive members appointed by the Chairman and provision
of excessive powers for the Chairman.
3.7 Dysfunctional senior management
3.7.1 An outcome of the coterie style functioning in OC was that when the differences cropped
up between the senior officials in the matter of reporting the progress of work , award of
contract or technical evaluation of bids ( as in TSR case), bitter feud was noticed. For
example, VK Gautam made stringent comments in official email, of interference in his work
by TS Darbari in the name of Chairman’s review process and VK Verma wrote about the
incompetence of VK Gautam. Exchanges and office notes highlight emergence of
management silos, misalignment and communication breakdown within the top leadership
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Fifth Report of HLC – Organizing Committee
of OC. The mail exchange in particular also indicates interdepartmental competition and turf
war between rival factions.72
3.8 Officers deputed by the GOI were not allocated important responsibilities
3.8.1 In 2010, GOI deputed to OC a number of senior officers to improve OC’s functioning. They
included S/Sri Jarnail Singh, a former Chief Secretary level officer, Sudhir Mittal, an
additional Secretary level officer, Jiji Thomson and Sanjeev Mittal, both of joint secretary
rank. Besides, G.C.Chaturvedi joined as Spl DG( F&A). It was noticed that some of these
officers were not provided adequate responsibilities till the matter was contested. Following
cases will illustrate the point:
3.8.2 Jarnail Singh who joined as CEO on 16/10/200973 was formally given the responsibility only
on 06/11/200974 and that too only for Administration, Finance & Accounts and Security with
responsibility for coordination with ministries and relating to cabinet/GOM/COS
Following the above order , on 18 /11/2009 CEO wrote75 to the Chairman that “ it has to
be clearly mentioned that CEO will supervise the work of DG , Special DGs , COO and
Joint DGs and that they all will report to him…. Untill and unless this is clearly mentioned
in that order CEO cannot be responsible for performance of OC and also cannot function
as CEO.”
Only when this matter was stressed, the Chairman revised the earlier order on
19/11/200976 when 20 FAs were to directed to report to CEO with some other
responsibilities. Other FAs were to report to the DG.
Even then there was no direction in this order that CEO will head the Secretariat which
was evidently main purpose of sending a CEO to OC.
72
Refer to Annexure 3.9 for the Key email between V K Gautam and TS Darbari
73
Refer to Annexure 3.10 for the Joining Report of Jarnail Singh dated 16 October 2009
74
Refer to Annexure 3.11 for the Office Order dated 6 November 2009 signed by Suresh Kalmadi
75
Refer to Annexure 3.12 for the secret note from Jarnail Singh dated 18 November 2009 to Chairman bearing no CEO/E-
1?41/2009
76
Refer to Annexure 3.13 for Office Order 19 November 2009 signed by Suresh kalmadi
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Fifth Report of HLC – Organizing Committee
Surprisingly there was no mention of the charge of COO in the order of redistribution
dated 19/11/2009, who stopped attending to his work soon after the issue of this order.
This above matter indicates that the Chairman was not willing to delegate responsibility
to CEO and relented when faced with protest from the CEO. In the process, valuable
organizational time was wasted.
However, it still needs to be mentioned that the CEO would not be shown important files
and cases pertaining to his area as was seen when the Deed of Variation for contract for
sponsorship rights with SMAM was secretly approved without processing the matter
through him.
3.8.3 G.C. Chaturvedi, who joined in April 2010 had extensive experience in Insurance Industry
while working in the Finance Ministry (Department of Financial Services), was not given the
responsibility of the risk management dealing with insurance policies of OC which was being
handled by Jeychandran as Jt. DG and later OSD (Revenue).
3.9 Appointment related issues for key functionaries
3.9.1 Rajiva Srivastava, IAS retired from GOI as Secretary, MYAS on 31/05/2004. He was
appointed as Director General (DG)by the Chairman OC on 10 February 2007.He resigned
from the post of DG on 20 March 2007. He was reappointed by the Chairman on next day 77
as the Principal Advisor to the Organizing Committee at an Advisory Fee of INR 80,000/- pm.
He continued in this position till 31.10 2010.
On 11 March 2005, the Director (AIS) in the Department of personnel and Training, Min.
of personnel wrote78 to him in response to his letter of 7/3/2005(copy not available in
the OC file) seeking permission of the GOI for his appointment as DG of the Secretariat
of the forthcoming commonwealth games, that “it is understood that the aforesaid
Organizing Committee is substantially controlled by the Government. As such,
permission of the government for your aforesaid employment is not necessary under
Rule26 (1) of the AIS (DCRB) Rules, 1958.” This instruction does not appear in line with
77
Refer to Annexure 3.14 for DO letter from Suresh Kalmadi to Rajeeva Srivastava dated 20/03/2007
78
Ref to Annexure 3.15 for the letter from SK Lohani Director (AIS) DOPT
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Fifth Report of HLC – Organizing Committee
the instructions from GOI which was invoked in the case of another official
(Jaychandran) as discussed later.
There was a serious conflict of interest issue in this case. The MYAS was the nodal
department of the GOI for the commonwealth games Delhi 2010 and therefore he was
dealing directly with the organizational matters, provisions and release of funds to IOA
for bidding for Commonwealth games and formation of OC. In this post Rajiva Srivastava
was expected to have interacted with the Chairman and key office bearers of IOA, who
subsequently constituted the Executive Management in the OC. However, within less
than an year of his retirement from service, he took up employment with OC where he
was required to report to the Chairman OC and the Executive Management who were
mainly IOA office bearers, with whom he was dealing as Secretary MYAS in the GOI, prior
to his joining OC. His independent functioning as Secretary MYAS vis a vis the Organizing
Committee could be questioned in view of his subsequent employment with the OC.
3.9.2 Shri V.K. Gautam, IAS
It is seen from the record of discussion of the Search Committee dated 10.02.2007, 79
that based on the suggestion of Executive Secretary to Chairman, the Search Committee
(Lalit Bhanot, A K Mattoo, Rajiva Srivastava and B.B.Kaura) considered the case of V.K
.Gautam for the post of Chief Operating Officer(COO). He was offered appointment by
Chairman as COO on 15 .02.2007 and was appointed to the post on 07.09.2007. He
joined OC on 07/09/2007 as COO. Prior to his appointment in OC, Gautam was working
as Director in the MYAS on deputation from his parent cadre and dealing with all matters
pertaining to OC.
From an Office Order of OC issued on 19.11.200980, it was noticed that all charges of
Gautam (Security, catering, technology, transport, accommodation etc) was transferred
to either CEO or the DG. Gautam stopped attending office from 21.12.2009 soon after
this reallocation of charge. Gautam submitted leave applications in various spells for the
period upto till 31.10.2010 He was repatriated to his parent cadre (Maharashtra) wef
31.11.2010.
79
Refer to Annexure 3.16 for the minutes of the third meeting of the Search Committee dated 10/02/2007
80
Refer to Annexure 3.13
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He had drawn his salary from OC from 21/12/2009 to 30/09/2010.Gautam’s leave
application was not sanctioned by the Chairman. Noting this fact, the DDG (Est) raised
the question on 31 /12/2010 how his absence from 21.12.2009 to 31.10.2010 (10
months and 11days) was to be regularized. DDG ( Estt)and Jt Dg ( A&F) wrote to the
CEO on 31 December 2010 that Gautam, former COO’s leave period 21.12.2009 to
31.10.2010 was not sanctioned by Chairman.81
On this, the COO observed that “By delaying, we have put OC in awkward situation. We
should not have kept him on rolls of OC and should not have paid him till 31-09-
2010.seperate file may be moved to recover the salary from a person who authorized
the payment of Vijay Gautam from 21-12-2009 onward without sanction of leave. This
should be processed immediately and given to Finance FA.”82
Available records and computer forensics revealed serious disagreement between him
and the V.K, Verma, complained against Guatam to Chairman on 5/10/2009. Besides,
Gautam protested against the interference in his work by the Joint DG T.S.darbari.(
referred in an earlier section on dysfunctional management) 83
It was noticed that Gautam was bypassed by Lalit Bhanot in matters of contract for TSR
and in selection of the TCIL for technology contracts
3.9.3 M. Jeychandren, Jt DG. ( F&A), and OSD( F&A)
Jeychandren, while working as FACAO, SE Railway, was selected by Chairman for the
post of ADG, CWG Secretariat. Chairman requested Minister of Railways on 08/10/2007
for sparing his services for appointment in OC. On 03.03/2008 M. Jeychandren, joined as
Jt. DG (F&A). He was promoted as ADG (Finance and Accounts) on 31/07/2009. He
retired from government service on 31/01/2010.
Based on a recommendation in 08/12/2009 by the Treasurer84, Chairman reappointed
him as Jt DG (Finance and Accounts) from 01/02/2010. Subsequently on 19 February,
81
Refer to Annexure 3.17 Office Note dated 31/12/2010
82
Refer to Annexure 3.17
83
Refer to Annexure 3.18 for the DO Letter to Laloo Jadav from Suresh Kalmadi dated 08/10/2007
84
Refer to Annexure 3.19 for the confidential note dated 08/12/2009
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Fifth Report of HLC – Organizing Committee
2010, his posting order was retrospectively changed as Officer on Special Duty ( OSD)
(F&A).
Review of his case showed the following discrepancies:
Though clearance of the Government of India was needed for post retirement
employment, OC asked for permission only from Ministry of Railways in May 2010 ie 5
months after his retirement. On 2/06/2010, Director, Railway Board gave him
clearance85. However the Joint Secretary (Estt) DOPT stressed that obtaining prior
permission from the government through the prescribed channel will be applicable. In
view of this position, the reappointment of Jeychandren in OC appeared to be illegal
Chairman OC persistently defied the order of MYAS regarding the re appointment of
Jeychandren in the Finance & Accounts FA after his retirement as shown below:
- The Secretary, MYAS wrote to the CEO, OC on 01/02/201086 that” you may ensure
that in the event of his being continued after retirement it is not proper to designate
him as the Head of Finance and Accounts FA. Since the budget of OC has been
considerably enhanced, and the expenditure flows are likely substantial in the next 6-
8 months, it would be necessary to designate serving officer as Head of the Finance &
Accounts FA.”
87
- On 08/02/2010, the Secretary, MYAS reiterated the same instructions to the
Chairman : ” it is not appropriate to continue Shri Jeychandren as joint DG (F&A)” as
a serving officer should be appointed as the Head of Finance and Accounts Functional
Area and in addition budget for overlays of INR 678 crore is being proposed for
further approval.”
Only on 19/02/2010, this letter from MYAS was processed in OC. The Director (Estt), OC
wrote in his note in considering this letter , to CEO “replacing such an experienced
person by a serving officer may not be desirable at the crucial juncture when the
85
Refer to Annexure 3.20 for Letter no 2010/E(o)11/17/2 dated 02/06/2010 from N Soman ( Deputation) Railway Board
86
Refer to Annexure 3.21 DO letter No 9/Secy/(SP)2010 dated 01/02/2010 from Ms Sindhushree Khullar to Shri Jarnail
Singh CEO
87
Refer to Annexure 3.22 DO Letter no 9/Secy(SP)/2010 dated 02/08/2010 from Ms Sindhushree khullar to Su8resh
Kalmadi
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Fifth Report of HLC – Organizing Committee
preparations for the games are in full swing and the time left for the game is short( 8
months only). If we do so we may disturb the present working arrangement in the F&A
Functional Area.” This note was approved by the CEO.
On the same day an office order signed by Lalit Bhanot, Secretary General was issued
in OC that ”In supersession of the office order dt 30/01/2010,Shri Jeychandren was
appointed on contract basis as OSD( Finance & Accounts)88 wef 01/02/2010 to 31-11-
2010 in the scale of INR 1,00,000- INR 1,50,000.”
Evidently, MYAS instructions were totally disregarded in OC and Jeychandren was
continued in the same charge, though on contract basis. As per information provided by
OC, on 24/5/2010 he was appointed as OSD (Revenue) and asked to look after the
matters of taxation also as additional charge.
He was reportedly arrested by CBI in connection with the case of Queen’s Baton Relay
case of OC. However, OC administration informed that, no formal information about his
arrest or chargesheet has so far not come to Workforce FA.
3.9.4 Shri V.K. Verma, Director General
Irregularity in his appointment has been discussed in section 27.5.1. He was appointed in
OC in disregard of the various vigilance cases pending and reported against him. He was
recruited even while he was a member of EB raising issue of independent governance
role of EB. He was noticed to be engaged in suspected wrong doing and was reportedly
arrested by CBI. Details of these cases are not available with OC.
3.9.5 Shri T.S. Darbari, Jt Director General (Revenue, Marketing and Chairman Secretariat)
T.S. Darbari resigned on 31 January 2009 from HP where he was working as Director –
Corporate Strategy and joined OC on the same day89 as per the recommendation of the
Search Committee (Vice Chairman, Secretary General and Director General).In his joining
report he mentioned that “I shall be reporting to the Chairman.”Chairman wrote to the
MD of HP India90 “…It has therefore been decided, in public interest to appoint Sri T.S.
88
Refer to Annexure 3.23 Order no G/126/2008-Estt dated 19 February 2010
89
Refer to Annexure 3.24 Joining Report dated 31/01/2009
90
Refer to Annexure 3.25 letter to Neelam Dhawan , Managing Director HP by Suresh Kalmadi dated 23/12/2009
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Fifth Report of HLC – Organizing Committee
Darbari, Director (Corporate Strategy) HP India as Joint Director General (Revenue &
Marketing) OC for the Commonwealth Games..”
Darbari joined OC at much lower salary package (approximately one third of his reported
compensation in the previous job). As per the notes of the Search Committee 91 he was
drawing in HP a compensation package of INR 50 lakhs per annum +stock option award ,
bonus and incentives and the total package worked out to INR 50-60 lakhs per annum.
On joining OC on 31 January 200, he was given a salary of INR 1.50 lakh plus HRA @ 30%
of core salary, +medical allowances and other facilities like transport, mobile landline
and internet etc.
It is noticed that Chairman OC made a incorrect statement to Smt. Sindhusree Khullar,
Secretary , MYAS on 11/02/2010 in his confidential Do letter92 stating that “I would like
to clarify that Mr. T.S. Darbari is not part of Chairman Secretariat. Lt. Genl ( Retd) SS
Dhillon, who retired as Dy . Chief of Army Staff is working as the Jt. Dir General,
Chairman Secretariat.” The following facts contradict this incorrect statement:
On 23.07.2009 the Director Employment Relations, OC wrote a note that “Mr Darbari is
working in the Chairman Secretariat from the beginning. The matter relating to the
confirmation may be decided by the Chairman.” The Chairman signed the note in
endorsement of this position.( Copy attached )
On 13/03/2009, the Chairman wrote in a communication marked Most Immediate that
“Shri T.S. Darbari has joined Organizing Committee wef 31 January 2009 as Jt. Director
General (Revenue, Marketing and Chairman Secretariat) and is reporting to me. All
documents connected with his appointment, including his appointment letter, are
available with the Secretary General. “
From computer forensics it was noted that V K Gautam wrote a strong mail to Darbari on
25 April 2009 in regard to his interference in his work on behalf of Chairman.
On 24 December 2009 Chairman issued an Office Order stating that “Shri T.S. Darbari , Jt
Director General shall be heading the following functions (i) Marketing , Revenue and
91
Refer to Annexure 3.26 miniutes of Search Committee dated 22/01/2009
92
Refer to Annexure 3.27 Confidential DO letter dated 11/02/2010 from Suresh kalmadi to Sidhushree Khullar
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Fifth Report of HLC – Organizing Committee
Sponsorship FAs (ii) Commonwealth Business Club of India (iii) He shall continue to
support me on all strategic/important matters in the Chairman’s Secretariat.”This order
proves that Darbari was closely involved with Chairman and was effectively working in
the Secretariat.
On 05/08/2010, CEO wrote to the Chairman93 that “Secretary (Sports) has been sending
letters to us suggesting that Shri Darbari may be relieved of his duties immediately in OC
pointing out that his name has not been cleared in the earlier inquiry also being
conducted by the Customs Authorities. In view of the alleged involvement of Shri Darbari
in both the cases and as this is bringing bad name to OC, it seems advisable that by
agreeing to the suggestion of Secretary ( Sports), the services of Shri Darbari be
terminated . Chairman may kindly sign the termination order placed below.”
Darbari was terminated from Service wef 5 August 2010 by the Chairman94 pending an
inquiry by the ED, Ministry of Finance into case of alleged involvement of Shri Darbari in
the payment of unreasonable amount to a British Firm at the time of QBR ceremony in
London. However details of the case are not available with OC.
3.9.6 Shri Sanjay Mahendru, Dy. Director General (Information Services)
Mahendru was working as Sr. VP, Global Information Technology with DHLI-IT when he
was selected by Search Committee on 4/05/2009 as DDG( Information Services) with
core salary of INR 1 lakh and other allowances ( total cost to the company INR 15.72
p.a.)95 He joined OC on 08/05/2009. On 4/05/2009 DG wrote on the note that he could
be utilized for network solutions reg. tetra secure communications and similar project s
in technology.
He submitted his resignation on 19/04/201096 to be effective from 15/05/2010.It was
accepted by the Chairman as the appointing authority and he was relieved accordingly.
93
Refer to Annexure 3.28 Note dated 05/08/2010
94
Refer to Annexure 3.29 Order dated 05/08/2010
95
Refer to Annexure 3.30 Appointment Letter dated 06/05/2009
96
Refer to Annexure 3.31 Resignation letter to CEO dated 19/04/2010
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Fifth Report of HLC – Organizing Committee
He was arrested with others from OC in connection with the wrongful payment to AMC
films in connection with the QBR launch in London. However a detail of the case is not
available with OC.
3.9.7 Shri P.K.Srivastava, Project Officer in Chairman’s Secretariat
The irregularity and favouritism in his appointment has been discussed in the section on
dealing with Staffing . He was given a special raise in his pay beyond the scale of pay of
Director vague grounds. This indicated that he was one of the close associates of
Chairman which earned such favours for him.
3.9.8 Shri Ashok Sahota, OSD in Chairman Secretariat
The irregularity and favouritism in his appointment and malpractice has been discussed
in the section on Staffing. He was running a travel agency from where the air tickets of
Chairman were booked.
3.10 Vigilance structure in OC
3.10.1 From early 2010 serious complaints and allegations started surfacing about procurements in
CWG. The complaints were being handled by the same concerned FAs who were dealing
with the subject matter of complaint .This unacceptable situation which was prevailing in OC
indicated the cavalier attitude of Chairman towards accountability.
3.10.2 The CEO brought the attention of Chairman to this matter97 and proposed that a CVO should
independently review complaints against any FA. Only in March 2010 a serving officer from
Ministry of Defence joined and it was proposed that she should be given the charge of CVO.
3.10.3 However, selection and posting order of the Chief Vigilance Officer (CVO) in CWG was not
processed through the CEO98. Chairman totally disregarded the established procedure in
selection and allocation of responsibilities to the CVO and did not keep the concerned
department and CVC in picture in this matter.
97
Refer to Annexure 3.32 Note from CEO dated 16/12/2011 in response to a request for information from the High Level
Committee
98
Refer to Annexure 3.32
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3.10.4 On 20/03/2010 an office order issued by the SG99 ordered that “it has been decided with the
approval of competent authority” that Dr Gurjot Kaur, Addl. DG (Procurement) was to act
as the Chief Vigilance Officer in addition to her present duties. This order was not marked to
either the MYAS or the Chief Vigilance Commissioner. No records were made available to
show the procedure followed for selection of the CVO. The CEO, who was responsible for FA
(Administration and Work Force), has confirmed that the above posting order, signed by the
Secretary General was not processed through him though the matter was known to him.100
3.10.5 On 27.04.2010 Secretary, Central Vigilance Commission, having noticed that a part time CVO
was appointed in the CWG, expressed concern to the CEO, CWG101 that prescribed
procedure was not followed in the selection of the CVO and that an officer whose
assignment pertains to procurement related activities, which is a vigilance sensitive activity
and can give rise to serious complaints/allegations, has been entrusted with CVO’s charge.
He pointed out that such an officer can not be impartial/independent CVO and that it is a
“clear case of conflict of interest when the same officer is in charge of vigilance and
procurement.”
3.10.6 He mentioned that the procedure included that (a) a panel of officers were to be made
available to the Commission for consideration to enable the Commission to make a selection
and to recommend the right person for the job (2) It was incumbent on the organisation to
consult the Commission and obtain its prior approval in r/o the officer proposed to be
appointed as the CVO.
3.10.7 On 4/5/2010, Director MYAS wrote102 to the CVO that as advised by the CVC, the CVO
should be divested of one of the two charges forthwith. On 17/5/2010, CEO wrote to the
Secretary, CVC that Gurjot Kaur was divested of the charge of Procurement Function Area
and will continue to act as the CVO of the CVC. On 24/09/2010 the Director, CVC informed
that CVC has accorded post facto approval for appointment of Gurjot Kaur as CVO, CWG.
99
Refer to Annexure 3.33 Office order No H/11/2010- Estt dated 20/03/2010 dated 20/03/2010 signed by Lalit Bhanot
100
Refer to Annexure 3.32
101
Refer to Annexure 3.34 for Letter bearing 010-CVo-07-841 from K.S. Ramasubban Secretary CVC dated 27/04/210
addressed to Jarnail Singh
102
Refer to Annexure 3.35 for Do letter from Promod Agarwal dated 04/05/2010 to Jarnail Singh
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Fifth Report of HLC – Organizing Committee
3.10.8 In practice, no preventive vigilance was set up in CWG though a full scale experienced
officer from the GOI was available for that work. It shows also the incompetence of the
Secretary General in dealing with such matters. Even when the CVC intervened, the remit of
CVO was intentionally kept limited to reactive vigilance while scope of potential corruption
and irregularities increased.
3.10.9 The CVO mentioned during discussion that she was not issued with any TOR for the job of
CVO and no separate staff was initially allotted to her for CVO’s job and procurement staff
was used for vigilance work. A Director and an Administration Assistant was provided to her
after the Games were over. As for the work of CVO , she informed that the CVO was dealing
with the complaints, which mostly was received from the GOI ( a list of 60 complaints were
provided by the CVO).Besides, she was in charge of Central Record Room and also in some
cases worked as the interface with CBI.
3.11 Pre audit and internal Audit
3.11.1 On 13/04/2007, the Treasurer OC wrote to Rahul Bhatnagar , Joint Secretary, MYSD that OC
has established a comprehensive audit mechanism comprising of pre payment
scrutiny(PPS),Statutory Audit by Chartered Accountants and post payment Audit by Internal
Audit Cell of the Finance Division.
Pre payment Scrutiny
3.11.2 It was noticed that for pre audit function, only one Project Officer (PO) was posted in the
Accounts FA of OC for this purpose. He was working under the overall charge of the Jt DG (
F&A). During discussion with the concerned pre audit staff, it was informed that no formal
guidelines or procedures of pre audit were established to guide the staff.
3.11.3 It was noticed that, only one Project Officer (PO) was posted in the Accounts FA of OC for
for pre audit function. He was working under the overall charge of the Jt DG ( F&A).
3.11.4 The PO informed that 100% payment is pre audited in OC. However, there was no evidence
of pre audit coverage as no records are kept in the pre audit wing relating to pre audit
observations on the payments reviewed by them. Besides, it was stated that objections
were also raised verbally. In several cases deficiencies noticed by the pre audit staff was
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reportedly mentioned verbally by such staff to the respective FA. However, it was not
possible to verify this information as specific cases were not mentioned during discussion.
3.11.5 The pre audit appears to be totally ineffective in view of the large number of irregularities
noticed in payment of contracts, purchases and personal claims.
Internal Audit and Audit Committee
3.11.6 The Internal Audit is an important oversight function particularly the activities involving
financial implications. Since OC’s budget expanded to significantly large amount,
importance of internal audit increased. It was mentioned by the Treasurer in the EB meeting
held on 21/05/2007 that an Internal Audit Firm of repute and Audit Committee of the Board
needed to be appointed which is a normal practice in any corporate sector. EB approved this
proposal. However, for five months after EB approved the proposal of engaging an Audit
Firm of repute, there was no action in this regard. It appeared that that no outside firm of
repute was engaged for internal audit of OC. Instead an Internal Audit Wing was
functioning with “one man audit cell” managed by PR Roy, Sr Accountant. 103.
3.11.7 Only on 19/10/2007104 an office note issued under signature of the Treasurer stated that
“considering the need to upgrade the level of internal audit, it is recommended to promote
Mr.P.K.Chawla , Dy Director (Accounts) as Director- Internal Audit and Systems.” This note
stated further that he would also assist the audit committee of the EB and interact with
them on behalf of the OC and he would report to the Chairman. Thus the decision of the EB
was overlooked by OC by not appointing any outside firm for conducting internal audit of
OC. There could not be any better example of the subterfuge of EB’s authority and that too
in the crucial area of internal oversight.
3.11.8 Subsequently, on 7/04/2008 Chairman issued an Officer Order that Ms. Shovna Narayan, Jt.
Director General would also look after all matters relating to Internal Audit and the Audit
Board.105 She was also required to service the Audit Committee.
103
Refer to Annexure 3.36 Office Note dated 19 October 2007
104
Refer to Annexure 3.8
105
Refer to Annexure 3.37 Order bearing no G/110/2007-Estt. dated 07/04/2008 signed by Suesh kalmadi addressed to All
Officers/Staff of OC
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3.11.9 When Shovna Narayan was given the charge of internal audit, there was no additional staff
support for internal audit and only the supervision arrangement was changed. It continued
to report its activities to Audit Committee. Consequently, the internal audit arrangement
only changed form but not substance.
3.11.10 A review of the activities of the internal audit indicated that its coverage did not extend to
major areas of financial decisions and major contracts and aimed to provide an effective
safeguard against fraud and irregularities. The present review noticed large number of
irregularities in payment of contracts, purchases and personal claims etc. The internal audit
did not raise beyond its subservient and ineffective position in this dispensation.
3.11.11 An Audit Committee started with three members M. Ramachandran( Chairman),VD
Nanavati and VK Verma. However, it did not hold any meeting till September 2008. This
committee mostly discussed the matters pointed out in internal audit. It was also setting an
annual plan of internal audit.
3.11.12 In its first meeting of the Audit Committee (08/09/2008),106 it was announced that AK
Mattoo replaced VK Verma who had joined the OC as DG. It is noticeable that internal audit
was expected to cover financial decisions and approvals by the Executive Management of
which AK Mattoo was a member and participant. Besides, it was being serviced till late by a
Director level officer in OC who was handpicked by Chairman and who was reporting to the
Chairman. In January 2010 N Ramachandran was inducted in Audit Committee and AK
Matto was no more the member107.
3.11.13 Evidently the efficacy of internal audit from such an arrangement was doubtful. The Audit
Committee was manned by a person (Treasurer) whose functions were to be reviewed by
the Committee. The Director Internal Audit had no independence; he was an employee of
OC in another area and now in his revised and exalted role was to report to Chairman. He
was suitably rewarded for his role as internal auditor as seen from the way he Chawla was
promoted.
106
Refer to Annexure 3.38: Minutes of Audit Committee circulated under OC/AC?08-09?01 dated 08/09/2008
107
Refer to Annexure 3.39: Office Order dated 4 January 2010 signed by Suresh Kalmadi
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3.11.14 It is seen that he was promoted by Chairman as Deputy Director General (Internal Audit) on
31/08/2010 retrospectively from 01/04/2009.108Needless to say that this order brought
huge financial benefit to Chawla apart from the fact that such retrospective promotion
appeared to be one of its kind in OC.
3.11.15 It was seen that following his retrospective promotion , Chawla also claimed transport
allowance retrospectively and Jt DG ( KUK Reddy) allowed him this irregular benefit by
recording a false comment of having discussed this matter with Spl. DG( F&A) who
questioned the proposal of KUK Reddy to sanction such benefit retrospectively.
3.11.16 The irregularities pointed out in internal audit were not pursued to its logical end. As seen
from the ATR of Audit Committee, these irregularities were just noted for future compliance
by the respective FAs. There was no instance when the Audit Committee proposed action
against delinquent officials of OC based on internal audit findings.
108
Refer to Annexure 3.40: Order dated 31 August 2010 signed by Lalit Bhanot
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4 Chapter 4: Revenue from Ticketing
The ticketing policy, particularly the issue of complementary tickets by OC, was against
public interest and revenue negative in intent and purpose. The Chairman had setup a
non-transparent mechanism to ensure unabated supply of complimentary tickets
against advice of the ticketing agency and disregarded all norms of best practices.
Consequently, while demand for priced tickets increased, the stadiums remained empty
and OC suffered a staggering opportunity loss of INR 71 crore on sale of tickets.
4.1 Background
4.1.1 Sale of games tickets was one of the major components of revenue generation from the
games. OC persistently presented to the GOI that the games would be conducted in a
revenue neutral manner and expenses incurred by the Government of India would be off set
from various revenue streams. Ticketing was a major source of revenue. The projected
revenue from ticketing was assessed at INR 100 crore in EY revalidated budget of December
2009. In contrast the actual revenue realized by the OC from ticket sales was INR. 39
crore109
4.1.2 The Ticketing FA in the OC was responsible for the planning and delivery of the ticketing
program. Responsibilities of this FA included all activities related to printing and sales of
games tickets. The Ticketing FA was led by Sanjiv Mittal, JDG till 6/10/2010 and then
onwards by Monica Jolly, Director.
4.1.3 The OC engaged Indian Railways Catering and Tourism Corporation (IRCTC) in partnership
with Broad Vision and TicketPro as Ticketing Agency at a fee of INR 14 crore for the sales
and distribution of tickets. The responsibilities of the Ticketing Agency included aspects of
ticketing technology platform, administration of ticketing inventory, delivery and
management of the call center, and delivery of tickets110.
109
Refer to Annexure 4.1 for copy of ticket sales report prepared by OC
110
Refer to Annexure 4.2 for the responsibilities of the Ticketing Agency
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4.2 Overview of ticket sales
4.2.1 On an overall basis, the OC printed and distributed 1,140,532 valid tickets for use at sports
events and ceremonies111. Ticket sales data was independently obtained from the ticketing
agency for the purpose of analytics. A number of data analytics queries were run on the
data sets to identify trends and patterns in the sale and distribution of tickets, as well as to
identify red flags that may be evident of or point to misconduct. The analysis revealed the
issues described in the following paragraphs.
Extremely abnormal number of complementary tickets
4.2.2 The analysis of tickets issued is set out in the figures below.
Figure 4. I: Break up of tickets between revenue and non-revenue earning tickets
Ticket Sales
Non-Revenue Revenue
Tickets Tickets
578,750 561,782
51% 49%
111
Sales data obtained from Ticketpro and barcode scanner data at turnstiles obtained from ECIL: Refer to Annexure 4.3
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Fifth Report of HLC – Organizing Committee
Figure 4 2: Break up of tickets non revenue tickets between complementary and others112
Non-Revenue Tickets
Others
110,726
19%
Complimentary
468,024
81%
4.2.3 There are two important issues that emerge from the analysis of the figures presented
above.
More than half of the tickets generated by the OC did not generate revenue.
Majority of the non-revenue generating tickets (81%) were complementary tickets. This
indicates that the primary distribution of free tickets comprised complementary tickets
issued at the discretion of the OC and that a very small percentage of the free tickets
related to actual sports related matters such as accreditation113.
61% of complementary ticket holders did not attended the games
4.2.4 An analysis of the turnstile barcode scanner data revealed that 84% of revenue ticket
holders attended the events while only 39% of people who held complementary tickets
actually attended the events. This is contrary to the OC’s contention (discussed
subsequently) that complementary tickets were strategically used to drive attendance of
events. In other words free tickets necessarily did not result into large attendance as
assumed by OC.
112
The other components on non-revenue generating tickets included categories such as accreditation and ground passes
as per data provided to us
113
These represent add on tickets for special events provided to persons already holding an accreditation for other sports
or activities
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Fifth Report of HLC – Organizing Committee
Issuing complementary tickets when demand for paid tickets was at its peak
4.2.5 Comparison of cumulative sales of Revenue & Complimentary tickets from September 15
2010, onwards indicates that post Opening Ceremony on 3 October 2010, the sales for
revenue tickets increased drastically. However, despite this rise in sales, OC kept on printing
large quantities of complimentary tickets. The data indicates that though revenue potential
from ticket sales was high as seen from strong demand for priced tickets, from 5 October
2010 onwards OC persisted in printing and distribution of large quantities of complimentary
tickets.
Complimentary Revenue
600000
500000
400000
300000
200000
100000
0
10
10
0
0
0
0
0
0
0
0
0
0
0
0
0
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
0.
0.
.9
.9
.9
.9
.9
.9
.9
.9
10
10
10
10
10
.1
.1
15
17
19
21
23
25
27
29
1.
3.
5.
7.
9.
11
13
Quantification of potential loss of revenue
4.2.6 As per internal determination by ticketing FA at OC loss of revenue through the sale of
complementary tickets is INR 71 crores.114
Table 4.1: Summary of loss due to complimentary tickets
S.No. Ceremonies/Sports # of Complimentary Tickets Cost of Complimentary
Tickets
Ceremonies 22,900 INR 566,014,500
1
Atletics 197,588 INR 71,246,200
2
Archery 1,146 INR 466,600
3
Badminton 12,848 INR 3,225,100
4
Boxing 3,480 INR 1,873,750
5
114
The OC report on the value of complimentary ticket in Annexure 4.4
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Fifth Report of HLC – Organizing Committee
S.No. Ceremonies/Sports # of Complimentary Tickets Cost of Complimentary
Tickets
Shooting -Clay Target 7,420 INR 130,000
6
Cycling 2,380 INR 1,068,000
7
Diving 8,079 INR 2,275,550
8
Shooting -Full Bore 334 INR 82,500
9
Gymnastics 24,899 INR 8,683,148
10
Hockey 100,778 INR 31,039,650
11
Lawnball 7,358 INR 900,050
12
Netball 11,648 INR 1,745,700
13
Shooting –Pistol 7,776 INR 230,750
14
Rughby Sevens 3,580 INR 598,250
15
Swimming 3,625 INR 2,449,450
16
Squash 18,378 INR 3,057,150
17
Table Tennis 15,897 INR 3,107,000
18
Tennis 15,265 INR 3,556,550
19
Weightlifting 9,216 INR 2,756,500
20
Wrestling 20,143 INR 9,126,600
21
Total 494,738 INR 713,632,998
4.2.7 According to the computation prepared by HLC team independently, the potential loss of
revenue just for complementary tickets issued for the opening and closing ceremonies is INR
56 crore which is included in the above and approximately equals the Ticketing FA’s
computation for opening and closing ceremony.
4.3 Highlights of the complementary tickets
4.3.1 It is noticeable that the Executive Board (EB) approved the Ticketing Policy only in its 26th
meeting held on 21st Sep 2010, only two weeks before the start of games, whereas the first
tickets were already printed on 25 August 2010. This is indicative of how the issue of
revenue generation from ticketing was neglected by the EB while the Chairman had a free
hand in following a revenue negative approach in distribution of large number of
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Fifth Report of HLC – Organizing Committee
complimentary tickets in disregard of demand for priced ticket as explained in the ensuing
sections.115
4.3.2 In the EB meeting116, a presentation was made by Sanjiv Mittal, Jt DG, on the
Complimentary Ticket Policy, Prime Event Limitation Ticketing Policy for OC VIPs, and
Distribution of Unsold Tickets at Games Time as Complimentary. Further to these
presentations, Monica Jolly discussed the status of the ticket sales for Commonwealth
Games. She mentioned that as on 21st September only 10% of tickets were sold and to
avoid empty stands Complimentary tickets should be printed and distributed based on the
availability of the unsold tickets. The policy approved117 by EB for the allotment of unsold
tickets identified certain constituent groups for the distribution of these tickets.
In the case of Sports Sessions, the policy allowed OC to distribute approx 30% of
inventory 5-8 days in advance incase a significant number of seats in the event remained
unsold. Further if 2-3 days before the event a significant inventory was left unsold then
10-15% of inventory would be pulled out for complimentary issues.
In case of Opening & Closing ceremonies the policy notes that if 7 days in advance a
significant number of tickets are left unsold then those will be distributed as
complimentary. The complimentary tickets will have a price printed on them and carry
an additional line “Complimentary – Void if Sold” to distinguish from revenue tickets. No
limit was set, in the policy, on the number of such tickets that could be distributed as
complimentary.
4.3.3 It may be mentioned that ticketing Policy was not conclusive in defining how the Ticketing FA would
decide the significant number of tickets that remained unsold for an event, or the quantity of
significant number of tickets in this context.. Also, in case of Opening & Closing ceremony there was
no maximum percentage defined for pulling out complimentary tickets from unsold inventory. The
EB also authorized Chairman, OC to take necessary decision to fill up stadiums by distributing tickets
beyond 30%, if required for all events.
115 th
Minute of the 26 EB meeting on 21 September 2010 in Annexure 4.5
116 th
The 26 EB held on 21 September 2010
117
Please refer to 4.5 for a copy of the policy
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Fifth Report of HLC – Organizing Committee
4.3.4 An example of this flawed definition of “significant” and its misuse by the OC to issue
complementary tickets is evident from the analysis of the daily sales data for the opening
ceremony.
According to the ticket sales data for the opening ceremony, around 25,000 tickets were
already printed on 27 September 2010 (7 days prior to the event) which were 67% of
available tickets in spectator zones.
From a review of the sales trend for the opening ceremony, it was evident that tickets
were in high demand, as sales of the Revenue tickets increased by over 78% between 16
Sep to 27 Sep.
It is thus surprising that in this scenario where demand was peaking and significant
tickets were already sold, OC took a decision to deem the balance 33% tickets in the
spectator zones as “significant unsold tickets” and issue a large number of them (8,329)
as complimentary118.
4.3.5 Although OC officials denied the existence of any other complimentary policy, a
Complementary Tickets Policy, Dated 07/06/2010 sent by Mr. Nalin Pant, APO Ticketing, to
Ms. Monica Jolly was discovered. The policy is restrictive with regards to complimentary
tickets and clearly identifies few select custodians for the same. 119
This policy states that Complimentary tickets result in diminished revenue, which
impacts the budgets set out by OC and any seats distributed as complimentary
discriminate against all other spectators who have purchased a ticket to gain entry into a
venue and reduce the number of tickets available to the general public.
Policy identifies only 6 categories of recipients including slum children and caps the total
complimentary tickets to around 2-3%.
118
Refer to Annexure 4.6 for the details of unsold tickets at that time
119
Refer to the Email and Policy in Annexure 4.7
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4.4 Potential creation of documents- complementary tickets policy
4.4.1 Through computer forensics a soft copy of a policy titled ‘Distribution of Unsold Tickets at
Games Time Policy’120 was obtained from Monica Jolly’s computer which was also dated 21
Sep 2010121, the day of the Executive Board Meeting where the policy was approved.
4.4.2 It was noted that the complimentary ticket distribution policy as mentioned in the EB
meeting differs from the recovered document in following aspects.
The policy acknowledges that last minutes sales at the venue office are expected to be
high and an overall 25% have been allocated for distribution to various groups
The recovered document lists down only 6 Constituent groups as opposed to 42
mentioned in the policy attached to the EB meeting minutes
The recovered document provides a cap of 5% for each constituent group and identifies
various approving authorities for issuance of complementary ticket to each constituent
group
4.4.3 Additionally, through computer forensics, an email dated 16/10/2010 was obtained which was sent
from a generic id ticketingdelhi2010@gmail.com to Monica Jolly, Director Ticketing FA with an
attachment “Ticketing Policy” was detected. The email states “Do not forward this to any one. Its
post dated so imp it remains in soft copy with u only”. Upon examining the attachment, it was noted
that the document is substantially similar as the Ticketing Policy approved by EB on Sep 21, 2010 in
terms of the content122.
4.4.4 From the above it appears that firstly there were two materially different versions of a
policy document that existed on a given day (21 September) and secondly the email
communication insinuates that the actual policy document purportedly approved by the EB
may have been created at a later date. In view of the above, it is possible that documents
were created at a later date to ratify actions of OC functionaries at that point in time.
120
Refer to Annexure 4.8 for a copy of the document
121
The date mentioned physically on the document
122
Please refer to Annexure 4.9 for a copy of the document and the email
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Fifth Report of HLC – Organizing Committee
4.5 Adverse conduct related to printing of complementary tickets
4.5.1 Several emails were discovered that indicate attempts made by the office of the Ticketing
FA (presumably at the instance of the Chairman) to hold back tickets for sale to general
public while giving precedence to issue of complimentary tickets. Such a policy severely
affected the revenue generating potential from sale of tickets. Besides, such practices
constituted an improper conduct that was severely detrimental from a financial aspect
leading to loss of significant revenue to the OC. The exchanges of emails indicating how the
potential sale of tickets was scorched are discussed below.
From the email communication dated 17/5/2010 between Monica Jolly, Director
Ticketing FA and IRCTC it appears that Monica Jolly wrote “…make sure that only 50% of
inventory is only on sale at any given point of time as desired by chairman…” 123. Thus the
office of the ticketing FA made conscious efforts to curb the sales to general public by
not releasing the inventory for sales.
In an email communication dated 08/10/2010 from Monica Jolly Director Ticketing FA to
IRCTC, Monica Jolly requested IRCTC to print 1600 Complimentary tickets of Closing
Ceremony worth INR 6.4 Cr for Chairman. Ms. Veera from TicketPro, in response to this
email, urged Monica that only 422 tickets are left for public and they will be sold soon
and hence it is not necessary to give Complimentary tickets. But, Monica responded
“Vera-Please print the tickets as complementary for the chairman. No inventory will be
released to the general public now”124.
In an email communication dated 10/10/2010 it appears that the ticketing agency as
well as the consultants were aware that the tickets could easily be sold and should not
be given out as complimentary. Vibhor Jain from EY wrote to Monica Jolly with a copy to
Sanjeev Mittal and others stating that “….Was reviewing the Closing ceremony report. As
is clear from the report below while we have huge demand for INR 4,000 category we
have held back 3,756 seats amounting to almost 1.4 Cr which can be easily sold out. I
again see the repeat of Opening wherein last minute we give out these as freebie while
123
Please refer to Annexure 4.10 for a copy of this email
124
Please refer to Annexure 4.11 for a copy of this email
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Fifth Report of HLC – Organizing Committee
they could have been easily sold….”125.Veera from TicketPro further wrote that “I
completely agree with you. The tickets that can be easily and quickly sold should not be
printed as complementary”. Rajni Hasija from IRCTC further wrote that “we propose that
tkts should be released to public for sale as demand is high”
In an email communication dated 2/10/2010, a day before the Opening Ceremony,
Monica Jolly, Director Ticketing FA instructed the agency to print all remaining inventory
(Category A & B) as complimentary thereby not leaving any additional tickets for sale to
the general public126.
4.6 Adverse conduct related to distribution of complementary tickets
4.6.1 The Director, Ticketing FA, initially informed the HLC team that they did not maintain a
complete record of the distribution of complimentary ticket distribution despite these
tickets carrying a price. After several requests by the committee for this information, the
Ticketing FA provided a high-level summary of ticket distribution for Opening/Closing
ceremonies. These details were limited to the names of the constituent groups and number
of tickets delivered. The note from Ticketing FA mentioned that for other sports, tickets
were distributed in bulk by the National Federations and stake holder of OC 127.
4.6.2 Computer forensics, revealed an email drafted by Ankit Mehrotra, APO Ticketing with an
attachment “Collated Reports Comp Tickets”. The attachment lists down the number of the
complimentary ticket by value, given to various person/groups. This file has distribution
details of 184,735 tickets out of a total of 468,024 complimentary tickets printed.128
4.6.3 Consequently, it appears that even though enough details were available with the Ticketing
FA on distribution there was an apparent unwillingness to share these details.
Consequently, in the interest of full public disclosure, the details obtained for the
distribution of 184,735 tickets are set out in Annexure 14. While the contents of this list
cannot be verified as the OC has not kept an official record for distribution, nevertheless,
125
Please refer to Annexure 4.12 for a copy of this email
126
Please refer to Annexure 4.13 for a copy of this email
127
Please refer to Annexure 4.14 for a copy of this communication to the committee
128
Please refer to Annexure 4.15 for the email and the attachment with distribution details
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Fifth Report of HLC – Organizing Committee
this list contains names of individuals who range from politicians, media, bureaucrats,
celebrities, sports personnel, amongst others in whose name the tickets were ostensibly
issued by the OC. It could not be verified whether these tickets were actually received by
the mentioned individuals in the list.
4.6.4 For the balance tickets for which no information has been received, the possibility of
wrongful conduct related to distribution cannot be ruled out.
4.7 Printing of excess tickets over capacity of venues
4.7.1 At the instance of Mr. Suresh Kalmadi, Chairman and Mr. Lalit Bahnot, Secretary General,
the Ticketing FA authorized printing of tickets over and above the total inventory of
available tickets. In an email communications dated 8/10/2010 and 9/10/2010, Monica Jolly
directed the Ticketing Agency to print complimentary tickets over and above the inventory.
The email notes that this request has been approved by Suresh Kalmadi, Chairman and Lalit
Bahnot, Secretary General. These tickets were printed with the following disclaimer to the
agency:129
“OC takes the responsibility of all kinds of possible consequences of overcrowded venues. OC
is aware of the fact that the bar codes given to ECIL can all be used and some clients that
have bought tickets some time ago and will come in order to have their ticket(s) redeemed
won´t receive their ticket(s) because the bar codes will be exhausted. OC will take care of all
claims of clients that might face this problem”
4.7.2 As the extra printing of tickets continued unabated, the ticketing agency had to finally write
to the Ticketing FA that they will not be able to continue this. In an email communication
dated 13/10/2010130 agency wrote to Ticketing FA stating “…With reference to your order
below, We regret to inform you that it may not be possible for us to continue to reprint the
tickets as desired in this order. As per your request we have done it many times with the
following undertaking from OC although we have not agreed to it but we thought that it
was an exceptional need of client that had to be fulfilled…” “….We as ticketing Agency
129
Please refer to Annexure 4.16 for a copy of the emails
130
Please refer to Annexure 4.17 for a copy of the email
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Fifth Report of HLC – Organizing Committee
,strongly recommend that we should not reprint any more tkts further for this event of
hockey…”
4.7.3 The above clearly indicates the unabated and uncontrolled printing and issuance of
complementary tickets under authorization of Chairman and Secretary General.
4.8 Possibility of misconduct related to distribution of tickets
Printing of prices on complementary tickets
4.8.1 In an email dated June 27, 2010 Monica Jolly instructed Ticketing Agency to print
Complimentary tickets out of Chairman’s quota of complimentary tickets. From the email
exchange it appears that Ticketing FA wanted the price to be printed on the Complimentary
tickets. In the email exchange, the Ticketing Agency wrote back stating the following. 131
“…..Frankly, I didn´t expect that complimentary tickets will be requested during the Phase
one. This doesn´t make any sense to me…”
“….usually the complimentary tickets show no price or 0/- to avoid or at least make
harder to tout such tickets. However it is no problem for us to show the price on the
complimentary tickets. We will manage it for the next time….”
4.8.2 It follows from the above that even in the view of the ticketing agency, printing of prices on
complementary tickets was not considered a normal practice. It may be mentioned that
printing a commercial value on a free ticket provides some sort of a value benchmark
making them susceptible to black market or unauthorized sales for a consideration.
4.9 Failure of ticketing infrastructure at games venues affected sales
4.9.1 Several email exchanges were obtained which were between the ticketing agency and
Ticketing FA on the problems faced at the Box Offices due to unavailability of uninterrupted
electricity and internet connections. Some examples are set out below.
In the email communication dated 7/10/2020 IRCTC wrote “…JLN is phasing many
problems for electricity. Electric supply is disconnected for few minutes this happens
131
Please refer to Annexure 4.18 for copy of the emails
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three times in a day. UPS provided in JLN box office is not able to support all the
hardware. Restart of ADSL/ broadband and printer takes 20 minutes, in normal cases but
when transaction is taking place not only the printing is affected, the ADSL gets hanged.
In any case booking in box office get affected for 30-40 minutes after every failure. It is
therefore suggested that UPS of bigger capacity may be provided in the box office of JLN
sports complex….” 132
In the email communication dated 8/10/2010 IRCTC has complained to the ticketing FA
on the lack of infrastructure support at the box office. In this email IRCTC has written to
Monica Jolly, Director Ticketing FA stating “…I think we wont be able to like this in view
complete disowning of box offices by OC. All logistics like internet, electricity etc were to
be provided by OC which they have miserably failed…”133
In the email communication dated 8/10/10 IRCTC wrote “…The internet connection in
box office provided by OC has failed at JLN. Photones given by OC are not working. There
is a huge crowd at the counters. Please resolve….”134
4.10 Concerns raised internally by other OC employees
4.10.1 Several emails were discovered where officials of the OC raised concerns related to the
distribution of complimentary tickets, unavailability of tickets to general public despite
empty stadiums, and a possible black marketing of complimentary tickets.
In an email communication from Sudhir Mittal (Special DG, OC) dated 10/10/2010 he
raised concerns related to the distribution of Complimentary tickets and over potential
revenue loss. He also mentioned that people are complaining that tickets are shown
“SOLD OUT” on the website as well as ticket office even when the stands are empty135.
S.P. Gupta, Venue Administrator, in his email to Suresh Kalmadi dated 9/10/2010 wrote
“…Stadias are empty and people are crying for tickets but those are not available at
132
Please refer to Annexure 4.19 for a copy of the email
133
Please refer to Annexure 4.20 for a copy of the email
134
Please refer to Annexure 4.21 for a copy of the email
135
Please refer to Annexure 4.22 for a copy of the email
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counter even on payment…”. Mr. Gupta has requested that Venue Administrators should
be allowed to distribute complimentary tickets on the pattern of the day passes and
availability of the seats. Further to this, Mr. Harish Kumar, Retd IPS, wrote to Suresh
Kalmadi endorsing the views of the venue administrators and stated “….It is perhaps the
most saddening fact of the games that stands are empty and ticketing booths say they
are fully sold out..”. He also mentioned in his email that on 9/10/2010 police arrested a
Sanjiv Sanghvi having an accreditation card of OC Member on the charges of black
marketing the complimentary tickets136.
4.11 Change in FA head at a critical juncture
4.11.1 An email was obtained from Sanjiv Mittal, JDG written to Suresh Kalmadi, Chairman on
7/10/2010. In the email Mr. Mittal suggested that since there is a surge in ticket sales over
the last few days, OC should not distribute unsold tickets as Complimentary for any of the
sports except Athletics137.
4.11.2 In an office order issued by Suresh Kalmadi, Chairman, Sanjiv Mittal was directed to give
charge of the Ticketing FA to Monica Jolly, Director Ticketing on 7/10/2010 which was the
same date as the email above138.
4.11.3 An email was discovered through computer forensics dated 8/10/2010 written by Sanjeev
Mittal, Jt DG Ticketing FA, where he raised further concerns over printing of complimentary
tickets. He stated that “….I hope requisite approval was obtained before sending the order to
IRCTC as no response to my e-mail to Chairman and CEO was received by me as I was not in
favour of getting these tickets as complimentary except Athletics…”139
4.11.4 It is significant that Mr. Sanjiv Mittal was asked to relinquish his charge of ticketing FA on
the same day that he voiced his dissent. While on the office order of Mr. Sanjiv Mittal, it is
noted that his transfer was to “resolve catering issues by dedicating yourself exclusively to
this FA”, it appears to be linked to his dissent as mentioned above.
136
Please refer to Annexure 4.23 for a copy of the email
137
Please refer to Annexure 4.24 for a copy of the email
138
Please refer to Annexure 4.25 for a copy of the office order
139
Please refer to Annexure 4.26 for a copy of the email
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4.12 Summary and conclusions
4.12.1 The conduct of OC functionaries with respect to issuance of complementary tickets caused a
potential revenue loss of INR 71 crores by the OC’s own estimates. It is extraordinary that in
a games event of this stature, more than half of the tickets issued were complementary
given that the mandate of the OC was to conduct the games in a revenue neutral manner.
4.12.2 From the inception itself, the OC’s estimates of ticket revenues were exaggerated. Till mid
2010, these estimates were repeatedly highlighted to project the revenue neutral position
of the games. Clearly this indicates lack of diligence by the OC in preparing such estimates
and smacks of lack of integrity.
4.12.3 Red flags continued to be ignored on complementary ticket printing and distribution
throughout the period leading up to the games. The Ticketing FA was ignored signs of
potential revenue opportunities and continued to issue instructions to print complementary
tickets presumably with the approval of the Chairman and Secretary General of the OC.
4.12.4 The OC Chairman and the concerned ticketing staff appeared to have acted without
accompanying accountability. Specific examples of such behavior, amongst other issues
mentioned in this section, include the following.
Potentially backdating policy documents140
Failure to maintain documentation and records related to distribution of complementary
tickets and arbitrary manner of their distribution141
Indiscriminate printing of complementary tickets when all evidence indicates that they
could have been sold to the general public
Over printing tickets inspite of the opposition voiced142
Frequent overruling of advice of managers and changing key personnel at a critical
juncture
140
Please refer to paragraph 4.4
141
Please refer to paragraph 4.6
142
Please refer to paragraph 4.7
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Attempt to restrict the flow of tickets to the general public contrary to spirit and purpose
of the commonwealth games
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5 Chapter 5: Sponsorship
5.1 Background
5.1.1 Chairman OC consistently projected to the Government of India that the games would be
revenue neutral and funds provided by the Government to OC would be recouped from its
revenue streams. A major component of OC’s total revenue projection for INR 1876 crore in
the revalidated budget (2008)143 was the sponsorship revenue of INR 960 crore. OC awarded
M/S Sports Marketing & Management (SMAM) the sole sponsorship and technical services
consultancy to deliver the sponsorship revenue. SMAM promised sponsorship revenue of
$100 million (revised to $ 240 million equivalent to INR 1080 crores144 ). But as of January
2010, only INR 238.30 crore in cash and INR 136.26 crore in Value in kind (VIK) was
contracted. Of these, as of February 2011 INR 193 crore of cash was received mainly from
Government/PSUs (INR 75 crore from the Railways, INR 20 crore from NTPC and INR 50
crore from Central Bank) and it was determined by OC that SMAM’s efforts were not
involved in these contracts. However, SMAM has submitted invoice to OC for sponsorship
commission for approximately INR 50 crore for these contracted amounts including those
from the Government and PSUs.
5.1.2 A brief chronology of the key events relating to the award of contract for sponsorship rights
is set out in the table below:
Table 5.1: Chronology of tendering process for Press operations
Date Particulars
13 September 2005 Chairman appraised EB that EOI was being invited for the
Broadcasting and Sponsorship rights
22 December 2005 Approval for advertisement of expression of interest for
143
Refert to Annexure 5.1: Revenue projection in the revalidated budget
144
With a conversion rate of USD 1 = INR 45
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Date Particulars
sponsorship and broadcasting rights granted in the 4th Executive
Board meeting.
12 and 13 March 2006 Issue of Expression of Interest for Sponsorship and National and
International Broadcasting Rights.
EOI for the National and International Broadcasting Rights
received from:
- Sports Marketing and Management, Australia
- Sportifive International,Switzerland
- Leisure Sports Management, Kolkata
- Total Sports and Entertainment India, Mumbai
19 May 2006 Tender documents issued to all four companies.
3 June 2006 Response to tender documents received from:
Sports Marketing and Management
Leisure Sports Management, Kolkata
7 June 2006 Proposal received from the two companies submitted before the
Executive Board for approval. The Executive Board gave in-principal
approval for appointment of: Sports Marketing and Management as
consultant for Sponsorship and Commercial Rights on the basis of
their track record. A marketing sub-committee was constituted
which included O P Kelkar, Michael Hooper, Lalit Bhanot and A K
Mattoo( from 31.10.2006) to hold negotiation with the approved
party.
25 July 2006 First meeting of the Marketing Sub-Committee
25 July 2006 Mike Hooper presented the model draft agreement for
International Broadcasting Rights and Sponsorship Rights. The draft
agreement was referred to Financial experts and legal experts for
their view.
August 2006 to March Consultation with Financial and legal experts on draft contract and
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Date Particulars
2007 related issues
22 May 2007 Second committee appointed by Chairman to discuss pending
unresolved issues with SMAM and to finalise the contract for
sponsorship and licensing marketing services
25 July 2007 Second committee submits report
25 July 2007 EMC approves the recommendations of the Second Committee
25 July 2007 Contract Signed with SMAM, Singapore for CWG D2010
26 October 2007 Contract Signed with SMAM, Singapore for CYG
07 July 2010 Deed of Variation signed with SMAM, Singapore
06 August 2010 Notice of termination of contract sent to Group Managing Director
SMAM
05 August 2010 EB in 23rd Meeting approved the termination of contract
5.2 Selection of SMAM was influenced by the CGF representatives
5.2.1 The procurement of consultancy service for sponsorship rights and international
broadcasting rights by OC was initiated under the shadow of the Host City Contract
conditionality that bestowed overriding rights to the CGF in sponsorship and commercial
rights of CWG 2010. The extracts from the minutes of 6th Executive Board (EB) meeting of
07/06/2006 illustrate how the CGF representative used the Host City contract provisions to
press for selection of SMAM:
“The President CGF Mr. Michael Fennel expressed his views that the Board may take a
decision in principle approving the appointment of M/s Sports Marketing &Management
for the sponsorship and commercial rights and M/s Fast Track for international
broadcasting rights based on their experience , past track record and their offer “
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”Mr. Mike Hooper, Chief Executive Officer of CGF noted …Host City Contract still required
CGF approval in relation to the appointment of any agencies for the exploitation of
sponsorship and television rights. In this regard he concurred with the observations made
by both the Chairman and the CGF President on the credentials of the recommended
agencies and as such if a decision was taken to appoint them then this approval would be
forth coming.”
5.2.2 In line with these comments from CGF members, Chairman requested the EB for the
selection of SMAM. The EB approved, in principle the appointment of SMAM for
sponsorship rights (and Fast Track Events for international broadcasting rights).
5.2.3 It is noticed that when SMAM failed to generate the stipulated level of revenue and EB
discussed the termination of contract, Mike Hooper disagreed to be associated with the
process. It is seen from the minutes of 23 rd EBmeeting of 05/08/2010145 that when
SMAM’s failure to generate promised revenue was being discussed, Mike Hooper advised
that “as a representative of the CGF, he would abstain and would not participate in the
discussion on the matter. “
5.3 International Partnership restricted bid response
5.3.1 It is noticed that, in the EOI issued on 12 March 2006, OC called for an international partner
for sponsorship and commercial rights for CWG, Delhi 2010 (D2010) and Commonwealth
Youth Games, Pune (CYG). The EOI advertisement was thus oriented towards international
firms with experience of previous games. Though international partnership was mentioned
in the draft EOI which was included in the agenda notes, Chairman did not specifically seek
EB’s approval for issue of EOI for international partnership. Nor did EB specifically approve
international partnership. Besides, the notice inviting tender for sponsorship rights issued to
the shortlisted firms did not call for international partnership.
5.3.2 OC’s sponsorships came mainly from government and PSU sources. Thus issue of EOI for
international partnership had no rationale. On the other hand, the call for international
partnership appears to restrict response from Indian agencies.
145
Refer to Annexure 5.2: Minutes of EB meeting Page 7
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5.4 Wasteful expenditure on purchase of rights from 69 countries
5.4.1 It is interesting to note that INR 1.37 crore was paid by OC during August 2009 and May
2010 to 69 countries for exploiting the commercial rights associated with the international
sector of QBR under an agreement with the Commonwealth Games Federation (CGF) 146. As
against this, no global sponsorship was acquired. It was inconceivable that small countries
would be a source of sponsorship revenue for CWG. Therefore this expenditure appeared to
be a total waste of public funds.
5.5 Contracting process delayed to accommodate SMAM
5.5.1 The contracting process took 17 months (March 2006 to July 2007). The delay in contracting
was mainly attributable to the deliberations of successive committees to sort out various
demands of SMAM regarding taxation, fee structure and creation of special entity for
signing of this contract. This is explained below:
In response to the RFP147 two responses were received– one from SMAM of Australia
and other from Leisure Sports Management Pvt. Ltd of Calcutta. Since the Indian bidder
did not agree to quote minimum guaranteed amount and make a presentation, their bid
was not considered by EB in its meeting of 7/06/2006.
EB agreed to give in-principle approval of the consultancy contract to SMAM in the
above mentioned meeting and set up a Marketing Sub Committee (O.P Kelkar, Mike
Hooper, Lalit Bhanot and later Chairman added A.K.Mattoo to this committee) to hold
negotiations with approved parties (SMAM and for another case Fast Track) to better
clarify contractual obligations, including financial arrangements and the applicable fee
structure. EB desired that then the matter should be placed before the EB.
The Marketing Sub Committee, appointed on 31/10/ 2006148 gave its report on 22/03/
2007. The Chairman appointed another committee on 22/05/ 2007149 to resolve the
146
Refer to Annexure 5.3 : Agreement dated 14 February 2008 between the OC and CGF
147
Refer to Annexure 5.4 :RFP dated 19 May 2006
148
Refer to Annexure 5.5 Office Note regarding the Marketing Sub Committee
149
Refer to Annexure 5.6 Office Order dated 22 May 2007 regarding formation of committee
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pending issues and finalise the contract. Direction for holding negotiation with SMAM
after in- principle approval of the bid significantly weakened OC’s position.
SMAM’s attorney vide their email of 21/03/2010 sent the final draft of SMAM
agreement to OC which indicated that the executing entity with whom the contract was
to be signed was still open to be decided by SMAM after considering tax implications.
Sometime in May 2010 SMAM proposed a new company SMAM, Singapore which was
incorporated on 08/06/2007. From the records made available,150 it appeared that OC
was informed that two shares of the new company were transferred by M/s Sonny Seet
to SMAM Australia on 1/7/2001.
We noted that final signing of the contract was a hurried affair. The second committee
finalized its recommendations on 25/07/ 2007. On the same day, the Executive
Management Committee (members- Chairman, Vice Chairman, Treasure, and Secretary
General) approved the recommendations after deliberations with the representatives of
SMAM and approved the signing of draft contract. On the same day (25/07/2007), the
contract was signed by Secretary General, Lalit Bhanot.
SMAM, Singapore was also awarded the sponsorship consultancy for CYG PUNE 2008151
on 26/10/ 2007.They were paid INR 2.98 crore (TDS deduction of INR 38.18 lakh ) on
14/12/09 as commission though most of the sponsorship for CYG was obtained from the
PSUs. The signing of contract with SMAM for CYG Pune was not reported to EB by the
Chairman.
OC placed an Action Taken Report and a brief summary of the matter in the 10 th EB
meeting held on08/01/2010. However, in this report OC management did not mention
the date of signing the agreement with SMAM. Nor did Chairman bring to EB’s notice
the important facts like (a) contract provision of open ended tax liability of OC (2)
provision of payment of commission for government and PSU sponsorships and (c)
signing contract with a newly formed company ( SMAM, Singapore). There were several
detrimental provisions in the agreement with SMAM as explained below.
150
Refer to Annexure 5.7: Certificate No 2 reagrding number of shares held by SMAM and Director’s Resolution dated 01
July 2007
151
Ref to Annexure 5.8: Agreement dated 26 /10/2007
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Potentially detrimental provisions for OC
Commitment for minimum net revenue target was a key consideration for awarding the
contract in favour of SMAM. The offer of the sole Indian bidder was not considered as
they did not offer any minimum net revenues. However, the contract with SMAM
stipulated that SMAM only agreed “to endeavor to achieve a net (exclusive of the
contract sum) sponsorship and licensing revenue target of US$100 million (inclusive of
cash and VIK)”. This condition in the contract was not a guarantee in any sense of the
term. In August 2010 SMAM asserted that it “never did commit or guarantee any such
revenues” while contesting the termination notice152.
Contract was signed with newly a registered company without any mention of the
SMAM, Australia, the original bidder. OC management informed that there are no
record to show that legal opinion on change of entity and possible was consulted
regarding change of the entity (SMAM, Singapore). Consequently any legal safeguard to
protect OC’s interest also does not appear to have been considered.. This created
operational and financial risks as the new company had no experience of working in
India and no capital base.
The commission was payable on all contracts irrespective of their sourcing from
government and PSUs. OC agreed for payment of commission of 15% of the revenue and
VIK upto $ 50,000, 20% from$ 50,000 to 100,000 and 22.5% beyond $100,000. The
provision of paying commission on contracts with government and PSUs unduly loaded
the contract in favour of SMAM. The Marketing Sub Committee and the Committee
appointed by Chairman to examine taxation and legal aspects did not flag the issue.
When Prof. Malhotra raised the matter in the EB on 11 May 2010, Chairman justified the
payment of commission to SMAM for PSU sponsorship.
Absence of penalty clause in the agreement in case of failure to raise the promised
revenue became an even bigger risk as SMAM, Singapore had no asset base and any
recovery action was hardly possible as SMAM Australia was not included in the contract
as guarantor or third party (concern raised by the Legal advisor and the FA ( Finance) in
this regard were disregarded).
152
Refer to Annexure 5.9: Para 1 Page 2 of the letter from Mike Bushel dated 10/08/2010 while contesting the termination
notice
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The agreement provided exclusive sponsorship and commercial rights to SMAM (Recital
E of the above mentioned contract). This closed all options to OC to engage any other
consultant in the eventuality of SMAM failing to achieve their target.
The agreement with SMAM restricted their liability to pay tax at the aggregate rate of
12.54 %. though actual tax rates were 43% (the tax consultant raised serious concern in
his mail of 17/05/2007 in this regard).Thus OC accepted open ended and high tax liability
for SMAM over and above 12.54%. The tax burden assessed by OC’s revenue wing on the
invoices submitted by SMAM for their final claim of INR 49.03 crore works out to INR
31.53 crore.
5.6 SMAM’s failure to generate revenue was not monitored
5.6.1 OC made little efforts to periodically review SMAM’s performance. This is inexplicable as
specific year wise milestones for contracting and realizing revenue were established in the
contract153 . ADG (Revenue) raised the issue of SMAM’s poor performance in October 2009
with the Chairman and called for an open advertisement to the sponsors but no action was
taken on that proposal of ADG (Revenue). Even after the QBR rally (2009) in England failed
to get any international sponsor, which was a key justification for award of contract to
SMAM, they were not confronted with their failure. Only in February 2010, the Treasurer
(Anil Sharma) wanted to formally review the performance of SMAM. A Sponsorship
Approval Committee was set up to review the matter.
5.6.2 The internal records of OC indicated that Treasurer ( Anil Khanna) was aware of indifferent
performance of SMAM. They were not taking OC officials’ approval for the deals in time,
they did not deploy adequate staff and D2010 was neither getting mileage in foreign
countries nor any international and multinational sponsors. Besides, SMAM made nil
contribution in major deals signed so far. So action was overdue. Besides OC did not
examine if the pricing of sponsorship designed by SMAM was too high for Indian market.
153
Refer to Annexure 5.10: Appendix3 of the Agreement with SMAM – Projected cash flow of Delhi 2010
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The Deed of Variation with SMAM was a closely kept secret
5.6.3 The Chairman and other OC officials including Jeychandren, (Advisor,F&A) , Secretary
General (Lalit Bhanot) and CEO reviewed poor performance of SMAM during March to
April, 2010 and negotiated with SMAM. Following these deliberations SMAM sent to OC a
Deed of Variation in May 2010 which proposed fixed fee and percentage fee thereon based
on revenue collected for settlement of the issue.
5.6.4 The above mentioned Deed provided that commission would be payable by OC on
sponsorship proposals received till now for INR 211.7 crore (this included contracts from
Central Bank, NTPC and Air India), a management fee varying from 7.5% to 11.25% on the
sponsorship proposals received/finalized from PSUs from the date of effect of DOV and tax
liability of SMAM would remain unchanged at 10.54%. Besides, OC would apply to the GOI
for 100% exemption from payment of tax on the total taxable income of SMAM. These
variations in the contract had significantly compromised the position of OC in regard to
possible dispute over the claim of sponsorship.
Table 5.2
S.No Conditions mentioned in Original Agreement Conditions mentioned in DOV with
with SMAM dated 25-07-2007 SMAM dated 07-07-2010
1 Commission on PSU revenue - Yes Commission on PSU revenue - No
Management fees on PSU revenue-
USD 0 to 5,00,00,000 – 7.5%
USD 5,00,00,001 to 10,00,00,000 – 10%
USD More than 10,00,00,000 – 11.25 %
2 Performance Targets to achieve a net (exclusive Commitment of payment of commission
of the contracted Sum) sponsorship and on sponsorship contacted on the effective
licensing revenue target on effected date : US $ date – INR 211.7 Crs.
100 Million
3 BG, Standby Letter of Credit or Escrow D2010 has agreed and under taken to
Agreement or opening of a current account furnish to SMAM an unconditional,
with an Indian International bank agree on the irrevocable and unfettered bank
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appropriate instrument / modality with in 6 guarantee ( with out protest, demur or
months from the date of execution of this dispute and without reference to D2010)
agreement.
4. D 2010 has agreed that the total Income Tax No change in obligation to obtain 100 %
Liability under IT Act of SMAM shall be limited to Tax Exemption from GOI by OC and Not
10.54 % of the contracted Sum. D2010 shall by SMAM on its Income Chargeable to Tax
make an application to the appropriate in India under the agreement.
authority in the GOI to obtain 100 % exemption
from payment of tax on the total Income of
SMAM generated in India under the agreement.
5.6.5 It appears from available records that this proposed Deed of Variation was dealt with in
great secrecy. Records made available indicated that this DOV appeared to be mainly
handled by Jeychandren in consultations with DDG (Legal) Stuart Corbishley154 and was
signed by Secretary General (.Lalit Bhanot). OC management has confirmed that CEO
informed that this Deed of Variation155 was not shown to CEO before its execution.OC
management further stated that (a) note portion of the file/folder relating to Deed of
Variation is not readily traceable. (b) given the OC’s functioning it is not possible that SG
would have signed the Deed of Variation without Chairman’s approval.
The extent of secrecy around this matter can be further guessed from the fact that when
a few weeks after signing the Deed of Variation, a draft termination notice was sent to
the Legal Advisors for their advice, they were not informed about it. The Chairman did
not disclose the Deed of Variation to EB when the agenda for termination of contract
with SMAM was presented in the in the 23rd EB meeting of 05/08/2010.
154
Refer to Annexure 5.11: Note dated 05/06/2010 containing 8 pages by Jeychandren Page no 6 item 1
155
Refer to Annexure 5.12: Deed of Variation dated 07/07/2010 containing 15 pages
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A notice of termination of contract issued within a month of Deed of Variation
5.6.6 Intriguingly, only one month after the signing of the deed of variation, the EMC in its
meeting on 05/08/t 2010 decided to terminate the contract and EB approved the
termination.156
5.6.7 SMAM contested the notice of termination157 as vague, erroneous and misconceived and
demanded the arbitration and immediate payment of $227.7 million. An internal
assessment by OC indicates that in three years time, SMAM have only marginally
contributed to contracting sponsorship revenue and only INR 6.920 crore may be payable
to them for their efforts in contracting a few sponsorships.. However, this is only an
assessment.
5.7 Summary and conclusions
5.7.1 This is clearly a case where the OC was subjected to pressure from CGF functionaries for
contracting a vendor preferred by them as was the case with the Fast Track The contract
conditions were detrimental to OC’s interest. OC Chairman kept the EB in the dark about the
detrimental contract conditions and even the Deed of Variation that compromised OC’s
position in regard to payment of commission and additional tax burden. Chairman’s recent
assertion in the media that he kept the Government was informed of the contracts at every
step was false, as seen in this case.
5.7.2 Net result of this contract with SMAM was that OC lost valuable opportunity for raising
sponsorship revenue and may have suffered a potential loss of INR 28. 44 crore. This
excludes cost of possible litigation, fees for advisors and numerous meeting hours spent on
the contracting process as mentioned in the table below. The Chairman and his confidants,
who piloted the signing of the contract and the Deed of variation were fully accountable for
this loss and wastage of OC resources.
156
Refer to Annexure 5.13: Notice of Termination dated 6/08/2010 containing 3 pages from Lalit Bhanot to Mike Bushel
157
Refer to Annexure 5.14: Letter dated 10/08/2010containing 6 pages from Mike Bushel to Lalit Bhanot
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Potential and actual expenditure for sponsorship rights
Items of expenditure Amount in INR
Payment made to CGF for commercial rights for
sponsorship to the CGAs of participating countries in 1.37 crore
the foreign leg of QBR
Expenditure made on support activities for SMAM by
0.21 crore
OC
Potential tax payable on the SMAM’s invoiced amount
31.54 crore
(INR04 Crore) as assessed by OC
Invoices for commission submitted by SMAM( decision
49.04 crore
is yet to be taken)
Expenses incurred on legal opinion, multiple meetings
and negotiations with SMAM and cost of making Not assessed
variation of the contract and termination of contract
Damage for lost opportunity of earning revenue
Not assessed
through alternate source due to failure of SMAM
Possible cost of dispute resolution potential arbitration
Not assessed
with SMAM
82.16 crore ( excluding the cost
Total
not assessed)
Income
Commission obtained with major efforts from SMAM (
INR 53.7 crore
Hero Honda and Coke)
INR 28.46 crore (excluding the
Approximate potential Loss
unassessed costs)
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6 Chapter 6: International Broadcasting
Rights
In this case, even though the contracting process commenced in 2006, the OC went ahead by
issuing an RFP with unclear criteria at the inception itself. Further, even though there was
enough time to negotiate prices the OC issued a contract at a higher commission rate and
did not reduce cost by 50% or INR 16.1 crores as compared to the quote provided by the next
vendor. In this case, it was also apparent that the OC was subject to pressures seemingly
exerted by the CGF functionaries to favor appointment of a particular vendor.
6.1 Background
6.1.1 The TV Rights FA was responsible for sale of both National and International Broadcast
rights for the Commonwealth Games. However, in effect, their activities were restricted to
international TV rights as the national rights were handled by Prasar Bharti158.
6.1.2 The FA engaged a vendor, Fast Track Sales Limited, to assist with the sale of the
international rights. The vendor sold the International broadcast rights to 19 international
broadcasters for a total contract value of USD 46.4 million. Out of USD 46.4159 million (i.e.
INR 214.14 crores160) OC has already received USD 37.77 million (i.e. INR 174.83 crores) till
January 2011161.
6.1.3 The ensuing paragraphs deal with the prime concerns (primarily being deviation for general
practices, sham magnification of revenue and faulty tendering process) noted with respect
to the sale of International Broadcasting rights.
158
Refer paragraph 1.2 for further detail.
159
Refer Annexure 6.1 for total contracted value for sale of International Broadcasting rights.
160
Refer Annexure 6.2 being letter to PB from OC for settlement of accounts for International Broadcast rights. Gross
revenue as per letter is INR 214.14 crore.
161
Refer Annexure 6.1 for revenue received till date from sale of International Broadcasting rights.
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6.1.4 A brief chronology of the key events relating to the award of contract for International TV
Rights is set out in the table below.
Table 6.1: Chronology of tendering process for Press operations
Date Particulars
22 December 2005 Approval for advertisement of expression of interest for
sponsorship and broadcasting rights granted in the 4th Executive
Board meeting162.
12 and 13 March 2006 Issue of Expression of Interest for Sponsorship and National and
International Broadcasting Rights.
EOI for the National and International Broadcasting Rights
received from:
- Sports Marketing and Management
- Sportifive International
- Fast Track
- Total Sports and Entertainment India
19 May 2006 Tender documents issued to all four companies.
3 June 2006 Response to tender documents received from:
Sports Marketing and Management
Fast Track Events
162
Refer Annexure 6.3.
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Date Particulars
7 June 2006 Proposal received from the two companies submitted before the
Executive Board for approval. The Executive Board gave in-principal
approval for appointment of:
Sports Marketing and Management as consultant for
Sponsorship and Commercial Rights and
Fast Track Events as Consultant for International Broadcast
Right sales.
A marketing sub-committee was constituted which included O P
Kelkar, Michael Hooper, Lalit Bhanot and A K Mattoo to hold
negotiation with the approved party.
25 July 2006 Mike Hooper presented the model draft agreement for
International Broadcasting Rights and Sponsorship Rights. The draft
agreement was referred to Financial experts and legal experts for
their view.
22 March 2007 Negotiation held with Fast Track Events. Final agreement was
approved by the Marketing Sub-Committee in its second meeting.
6.2 Ownership of Basic feed
6.2.1 In all major International sports events the OC selects/ appoints a Host Broadcaster agency,
funds its activities and, thus, owns the basic feed that is produced by Host Broadcaster. It
constitutes an internal revenue committee for overseeing revenue generation activities and
also appoints a marketing agency for maximizing its revenue from sale of feed to Right
Holder Broadcasters (RHB). In this case, though the funds were provided by Prasar Bharti/
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Government of India, the ownership of feed was still claimed by the OC who appointed a
marketing agency for negotiating amounts payable by RHB’s. This position was untenable.
Though OC had no financial stake in the production of basic feed it decided arbitrarily to
share revenue arising from sale of basic feed in the ratio of 70:30163 and 60:40 between OC
and PB for International Broadcast Rights and Broadcast Rights within India.
6.3 Revenue target and actual realization
6.3.1 As per the Income and Expenditure Statement164 prepared by the Melbourne 2006
Commonwealth Games Corporation and Melbourne 2006 Commonwealth Games Pty Ltd,
the total revenue earned through Television Broadcast rights was AUD 62.455 million (i.e.
INR 212.55 crores165). Fast Track, however, projected a revenue range of USD 30 to 35
million166 (i.e. INR 136 to 158 crores167) in the bid document submitted to the OC. The
projected revenue was 36% lower than the actual revenue earned during Melbourne 2006
Commonwealth games and this shortfall would be much higher if revenue realized in
Melbourne games is adjusted for inflation. Further, Delhi games were covered on HDTV
format and justification given for this decision was that it would help in earning higher
revenue. Thus, projected revenue figure was substantially understated by the marketing
agency and television broadcast rights should have been sold for a much higher value.
6.3.2 The actual realization of revenue from sale of International broadcast rights to 19
international broadcasters was USD 46.4 million (INR 214.14 crores168) which was higher
than the projected revenue. However, out of INR 214.14 crore shown as gross receipts from
RHB’s, the net realization169 of revenue has been assessed as INR 51.80 crore by OC of which
163
Refer Annexure 6.2 being letter to PB from OC for settlement of accounts for International Broadcast rights.
164
Refer Annexure 6.4 being the Income and Expenditure account for the period 15 July 1999 to 31 August 2006.
165
An average conversion rate of 1 AUD = INR 34.0328 for the year 1 January 2006 to 31 December 2006 has been used.
The average conversion rate has been taken from www.oanda.com.
166
Refer Annexure 6.5 for revenue projected by Fast Track in the bid document submitted by them.
167
An average conversion rate of 1 USD = INR 45.1746 for the year 1 January 2006 to 31 December 2006 has been used.
The average conversion rate has been taken from www.oanda.com.
168
Refer Annexure 6.2 being letter to PB from OC for settlement of accounts for International Broadcast rights.
169
Refer Annexure 6.2 Gross revenue less CGF license fees, withholding tax, agency commission, establishment cost and
service tax as applicable.
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PB’s share is INR 15.54 crore against their expenditure of approximately INR 360 crore on
host broadcast activities. The actual net realization is 43% lower than the net realization
estimated in the revalidated budget prepared by prepared by E&Y. Thus it is apparent from
the above that the earning of USD 46.4 million is only a sham magnification of revenue.
Failure to achieve budgeted revenue target
6.3.3 Revenue to be earned from sale of International Broadcast rights as per the revalidated
budget prepared by E&Y was INR 260 crore. According to the summary, as on 31 January
2009, OC had already entered into contracts worth INR 212.25 crore and estimated
contracts worth INR 47.25 crore yet to be contracted170. Thus, OC was unable to even meet
its budgeted revenue of INR 260 crore as it has earned only USD 46.4 million (i.e. INR 214.14
crore171) from the sale of International Broadcasting Rights.
6.4 Key ‘misrepresentation’ in the tender document
6.4.1 A fundamental mistake made in the issue of the EOI and Tender document may have led to
inappropriate responses by vendors and could have deterred other potential bidders from
participating in the bidding process. A review of the EOI and tender revealed that these
were issued for the purpose of obtaining EOI/ Tenders for both “National and International
broadcast rights” whereas the mandate of the OC was only to seek bids for international
rights given that the OC had full knowledge that the National rights were being handled by
Prasar Bharti only. Given that the decision on National broadcast rights to be handled by
Prasar Bharti (Doordarshan) had already been taken as far back as in the games bid
document in December 2003172, it is not clear why the OC chose to issue an EOI/ Tender
document for a scope clearly outside the ambit of its operations173.
170
Refer 6.6 for revalidated revenue budget figures.
171
Refer Annexure 6.2 being letter to PB from OC for settlement of accounts for International Broadcast rights.
172
Refer Annexure 6.7
173
Refer Annexure 6.8 for advertisement of EOI and Tender document issued.
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6.4.2 In response to the ‘faulty’ EOI the OC received 4 responses174 against which Tender’s were
issued. In turn, only two vendors namely, Sports Marketing and Management (SMAM) and
Fast Track Sales Limited (Fast Track) submitted their proposals in response to the Tender
document. On the lines of the ‘faulty’ EOI/Tender document their responses included both
National and International broadcast aspects of the tender.
6.4.3 The faulty criteria may have resulted in only two responses being received. It is possible
that had the EOI/Tender document been issued for international rights, it may have resulted
in generating interest from a broader base of vendors.
6.5 Substantial financial loss due to wrongful award of contract
6.5.1 In reviewing the evaluation of the responses to the tender, it was noted that the contract
was not given to the lowest bidder which is a material departure from procurement
procedures. In this regard, the following points were noted:
The overall fee proposed by Fast Track for both International and National Broadcast
Right Sales was higher than the fees proposed by Sports Marketing & Management
(SMAM)175.
According to the tendering process, the contract should have been awarded to the L1
bidder which was SMAM. However, the contract was awarded to Fast Track Sales
Limited whose commercial charges were higher.
The EB approved the departure from the normal tender requirements. In this regard,
the 6th EB meeting minutes on 7 June 2006 record that the vice president, CGF, HRH
Tunku Imran stated that “OC should not put all its eggs in one basket and should appoint
different agents for sponsorship and broadcasting rights” 176. Consequently, the EB
justified that as SMAM had already been awarded the contract for sponsorship rights,
174
Refer Annexure 6.9 for names of vendors from whom responses were received.
175
Please refer to paragraph 1.5.5
176
Refer Annexure 6.9
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Fast Track were approved in principle177 to be appointed for international broadcasting
rights.
Potential loss of INR 16 crores to the OC
6.5.2 M/s Fast Track Sales Limited proposed a commission rate of 15% of total revenue from
International Broadcast Rights sale.
6.5.3 SMAM proposed a commission rate of 12.5 % for contract of International Broadcast Right
sales. SMAM further proposed to reduce their commission rate to 7.5% for International
Broadcast Right sales if they were awarded the contract for both International Broadcast
Sales Rights and Sponsorship & Licensing178.
6.5.4 In view of the above, it is clear that had the OC awarded the contract to SMAM, they would
have agreed a commission rate of 7.5% as against the 15% quoted by Fast Track. It may be
mentioned that the contracts for both SMAM (for sponsorship) and Fast Track (for TV
Rights) were approved together as an agenda item in the 6th EB meeting held on 7th June
2006.
6.5.5 Consequently, the OC has incurred a potential loss of INR 16.1 crores due to grant of
contract to Fast Track resulting from the different commission rates quoted by SMAM. The
computation of potential loss has been given in the table below:
Table 6.2
Particulars Fast Track SMAM
Commission rate 15%179 12.5% 7.5%
Actual gross revenue INR 2,141,400,000 INR 2,141,400,000 INR 2,141,400,000
Commission INR 321,210,000 INR 267,675,000 INR 160,605,000
Excess commission - INR 53,535,000 INR 160,605,000
177
Refer Annexure 6.9
178
Refer Annexure 6.10.
179
Refer Annexure 6.11.
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% excess commission - 17% 50%
6.6 OC’s failure to negotiate with vendor
6.6.1 On receipt of the in-principal approval for appointment of Fast Track, the EB constituted a
marketing subcommittee (Please see para 1.6.2 below) for conducting negotiations with
Fast Track. Even after prolonged180 negotiations the marketing subcommittee agreed to the
commission of 15% as proposed initially by Fast Track181 without any changes or reductions.
6.6.2 This is inexplicable in view of the lower commission offered by the other vendor SMAM
(12.5%) even on a standalone basis. The minutes of the marketing sub-committee meetings
provided to us do not reveal any instances of discussion held between the committee and
the vendor with respect to reduction in the commission rate but pertain more to the
operational aspects. This clearly indicates that the committee did not make any effort to
negotiate prices with the vendor. It is noticeable that the same committee which
negotiated price with SMAM for the contract for sponsorship rights almost at the same time
bargained for reduction of quoted rates and succeeded in gaining some reduction in rates.
6.7 Senior functionaries favored appointment of Fast Track
Role of CGF functionaries
6.7.1 Review of the minutes of the 6th Executive board meeting held on 7 June 2006, revealed
that key CGF functionaries i.e. Mr. Michael Fennel, CGF President and Mr. Mike Hooper, CGF
CEO favored the appointment of Fast Track Events. As per the minutes Mr. Michael Fennel,
CGF President “expressed his views that the Board may take decision in principle approving
the appointment of M/s Sports Marketing & Management for the Sponsorship and
Commercial Rights and M/s Fast Track for International Broadcasting rights based on their
experience, past track record and their offer. He further mentioned that the OC may hold
negotiations with the parties”182.
180 rd nd
Tender submitted by Fast Track on 3 June 2006 and the final contract was signed on 22 March 2007.
181
Refer Annexure 6.11.
182
Refer Annexure 6.9
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6.7.2 In the same meeting it has been noted that Mr. Mike Hooper, CGF CEO, stated “the
commercial, marketing and broadcasting rights associated with the Games vests with the
CGF and whilst the CGF had, through the Host City Contract, further transferred them to the
OC the Host City Contract still required CGF approval in relation the appointment of any
agencies for the exploitation of sponsorship and television rights. In this regard he concurred
with the observation made by both the Chairman and the CGF President on the credential of
the recommended agencies and as such if a decision was taken to appoint then this approval
would be forthcoming”183.
Role of OC functionaries
6.7.3 The EB approved in principle the appointment of the above mentioned vendors after OC
Chairman, Mr. Suresh Kalmadi suggested that the board grant the approval 184.
6.7.4 The Executive board approved the appointment of Fast Track Events as consultant for the
International Broadcasting Rights sales and appointed a sub committee marketing consisting
of Mr. O.P Kelkar, Mr. Lalit Bhanot, Mr. A.K. Mattoo and Mr. Mike Hooper to hold
negotiations with consultant185.
6.8 Summary and conclusions
6.8.1 This is clearly a case of contracting where the OC, as far back as in 2006 went ahead in
issuing a contract with unclear criteria at its inception. Further, even though there was
enough time to negotiate prices with a vendor, the OC went about issuing a contract at a
higher rate and not using an opportunity to reduce cost by 50% or INR 16.1 crores as
compared to the quote provided by the next vendor who also qualified the technical
criteria. The reason of “not putting all eggs in one basket” was used to justify such a
monumental increase in costs.
6.8.2 It is apparent that the OC was subject to pressures seemingly exerted by the CGF
functionaries to favor appointment of vendors. It is extremely surprising that a committee,
183
Refer Annexure 6.9.
184
Refer Annexure 6.9.
185
Refer Annexure 6.12.
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as high powered as the EB, knowingly approved a contract at such inflated costs resulting
from the intervention, recommendations and comments of CGF functionaries.
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7 Chapter 7: Overlays
The review indicated a convoluted contracting process that resulted in the OC negotiating
contracts at excessive costs. The excess amounts related to procuring exactly similar
items as per the RFP at different rates across the vendors aggregates to INR 138 crore.
Additionally the OC knowingly issued orders for purchase of items at ‘ad-hoc’ rates that
aggregate to INR 37 crore thereby causing substantial additional loss through improper
procurement. A number of other inconsistencies were noted that ranged from incorrect
and flawed budgets to clear dereliction of duty by not monitoring or recording any of the
items provided under the contract. The justification provided by the OC for not
conducting negotiations appropriately was lack of time as the games were on the anvil.
However, delays in commencing procurement activities in the first place resulted from
OC’s own conduct in not providing estimates to Government despite repeated requests.
7.1 Background
7.1.1 The Overlays FA of the OC was primarily tasked with activities related to provision of supply,
installation, testing, commissioning, operation, maintenance, dismantling and removal of
Games Overlay/ Temporary Fitments at Delhi 2010 Commonwealth Games Venues as a
Turnkey project on rental basis186. The ‘Overlays Providers’ were required to provide all
management, labour, equipment and consumables required for successful supply,
installation, testing, commissioning, maintenance, operation, dismantling and removal of
the overlays equipments and any other work required to ensure successful functioning of
the entire Overlays187.
7.1.2 In order to accommodate 17 sports, the competition events had to be held across
23 Competition, 32 Training and 7 Non- Competition Venues located within the National
Capital Territory of Delhi. Some of these venues were the Jawaharlal Nehru Stadium
Complex, Talkatora Stadium, Siri Fort Complex, Yamuna Sports Complex, Delhi University,
186
Refer para 2, page 4 of the Expression of Interest (‘EOI’) attached as Annexure 7.1.
187
Refer para 1 of the Scope of Works attached as Annexure 7.2.
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Major Dhyan Chand National Stadium apart from other multi-sport and sport-specific
venues188.
7.1.3 For the purpose of contracting for overlays, the OC divided the above mentioned venues
into 7 ‘clusters’189 and asked for rates on turnkey basis for each clusters. According to the
EOI, a maximum of 4 clusters could be awarded to one Overlays Provider subject to their
meeting the eligibility criteria190. As a result of ‘turnkey’ basis of bids, the vendor quoted
rates, which included add-ons. This made the rates opaque as there was no indication if the
‘add-ons’ were consistently applied on the basic rates of individual items.
7.1.4 A brief chronology of the key events relating to the award of contracts to these 7 clusters is
set out in the table below.
Table 7.1: Chronology of tendering process for venue development and overlays
Date Particulars
5 December 2009 Issue of expression of Interest (‘EOI’)
24 December 2009 Request for Proposal (‘RFP’s’) uploaded on CWG web site
6 January 2010 - 12 Submission/ opening of EOI
February 2010
10 vendors responded
4 vendors were qualified for issuance of RFPs
Issue of RFP to the shortlisted firms
22 January 2010 Pre- Bid meeting
15 February 2010 Submission of Bids and Opening of Technical Bids
24 February 2010 Technical evaluation approval
188
Refer para 1, page 4 of the EOI attached as Annexure 7.1.
189
A cluster is defined as a contracting unit comprising multiple venues. Refer page 15 and 16 of the EOI attached as
Annexure 7.1 for detail of clusters.
190
Refer EOI amendment attached Annexure 7.3. Amended EOI was issued on 19 December 2009.
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26 February 2010 Opening of commercial Bids
26 – 29 March 2010 First round of negotiation
22 to 24 April 2010 Second round of negotiation
5 May 2010 Issue of LOI subject to approval by Executive Board
2 June 2010 Signing of Final Contracts
7.1.5 The process resulted in awarding of contracts in the manner set out in the Table 7.2
below191.
Table 7.2: Contract awards related to overlays contracts
Clusters Vendor name Contracted value in INR Crore
Cluster 1 and 6 PICO/ Deepali 230.76
Cluster 3 and 7 GL Litmus/ Meroform 165.45
Cluster 2 and 4 NUSS LI/ Comfort Net 141.07
Cluster 5 ESAJV/ D Art Indo 92.93
Total 630.21
7.2 Excessive rates agreed by OC due to failure to negotiate effectively with vendors
7.2.1 Based on the analysis of the rates for 403 similar items (out of total of approximately 580
items) contracted across the four overlays contracts, OC could have achieved at least a
saving of INR 138.09 crores192 had the contracts been awarded based on the lowest quoted
price for the item amongst the 4 suppliers. In many cases the differences between the
lowest and highest rates for the same item was more than 100 times. As explained earlier,
these rates included ‘add-ons’ by each vendor at rates unknown to OC. It may be
191 nd
Refer Annexure 7.4 – Brief Note-sheet dated 2 February, 2011
192
Refer to Annexure 7.5 for the detailed computation.
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mentioned that for the purposes of the analysis, the items where the specifications for
these items are exactly the same across all clusters as per the RFP have been considered.
7.2.2 The computation for a sample of 10 items has been depicted in the Table 3 below:
Table7.3: Computation of excess value paid
Code Item Contracted Total value Lowest Value at Excess
BOQ (Qty) at quoted Lowest Value paid
Contracted price quoted
price# price
(A) (B) (C) D = (A)*(C) E = (B) - (D)
16.06 Garbage Solid 323 583,882 4 1,292 582,590
Waste Bags
16.02 Biohazard Waste 371 865,136 6 2,226 862,910
Bags
16.05 Biodegradable 341 756,306 6 2,046 754,260
Garbage Bags
9.141 Fridge 450L 126 10,496,184 26,808 3,377,808 7,118,376
Lockable_FOH
17.05 Stepper 69 7,368,412 5,706 393,714 6,974,698
12.11 Machinery - 25 9,676,682 70,953 1,773,825 7,902,857
Tugger & Trailer
17.04 Cross Trainer 49 12,222,524 146,765 7,191,485 5,031,039
5.03 Chilled 27 30,683,696 307,338 8,298,126 22,385,570
Containers 6.0m
x 2.5m
refrigerated
container
17.06 Multi Gym - 12 46 17,291,512 220,147 10,126,762 7,164,750
stations with
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pulley and leg
extension cables
13.46 Air conditioning 78 43,353,153 203,151 15,845,778 27,507,375
HVAC - 11T
#Total value at Contracted price: Contracted price*Contracted quantity quoted by each vendor in each cluster.
7.2.3 In respect of the vast differences in amounts as noted in the table above, the OC provided a
broad explanation that the contracts were awarded on a turnkey basis and hence they did
not negotiate individual prices193. The OC also explained that there was no time to re-
tender even though they were aware of such vast differences in costs for similar items
across vendors194.
7.2.4 It has been noticed that the DG/ CEO/ Chairman, ordered in one of the communications
prior to the second round of negotiation meetings as follows: “Reduce BOQ where the
operational delivery of games is not affected. These need to be arrived at in consultations
with the vendor”. Further, the briefing note for second round of negotiation expressly state
the orders from the DG/ CEO/ Chairman are that “re tendering was not option now” as
overlay delivery was to commence in end June 2010195.
7.2.5 From the records of the negotiation committee it has been noticed that OC did not hold its
ground in negotiations with the overlays suppliers and appeared to be accepting their
demands and conditions without scrutiny. Consequently, the negotiation of item rates with
the vendor was ineffective.
7.2.6 A summary of the minutes of these meetings mention that according to the vendors, “the
rates across the clusters are not comparable as each cluster has its own unique feature
depending upon its importance, type of venue, type of event, its location etc”196. Further,
the vendors stated that “the position of the lowest is based on the overall cost of the offer
193
Refer Annexure 7.6 – Briefing note for second round of negotiation - para 2.8(iii), page 3
194
Refer Annexure 7.6 – para 2.9, page 4
195
Refer Annexure 7.6 –para 3(i) and para 3(c), page 4-5
196
Refer Annexure 7.7 – para 7.3 from summary note provided by Overlays FA.
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and it is possible that rates of some individual items are high as compared to the rates of
vendor for the same item or absolute market price for that item”. The minutes further
mention that “An exercise to compare the individual rate is therefore neither warranted
nor need to be undertaken”197. There is no indication if OC critically examined this
contention.
7.2.7 Consequently, based on the above it has been noticed, that the OC;
Did not carry out exercise to reduce or rationalize rates across vendors or made
apparent attempt to negotiate or reduce rates.
Accepted widely varying rates for same items across the venues without challenging the
vendors rationalizations for significantly different rates.
7.3 Payments on ‘ad hoc’ rates
7.3.1 The review of item price lists agreed with overlays vendors, revealed that prices were
provided even against certain items for which ‘zero quantities’ were ordered/ mentioned.
The minutes of the negotiation committee, recorded that “wherever the quantities were
zero they had not really applied detailed analysis for arriving at the rates for that item and
these rates were ad-hoc and cannot be taken for comparison”198.
7.3.2 The OC issued a released BOQ to the overlays vendors in July 2010199. The released BOQ for
the clusters formed almost 71.6%200 of the total contract value for all clusters.
7.3.3 The review of the released BOQ, revealed that quantities were ordered against the “zero
quantity” items in the agreed price lists. Thus the OC clearly issued procurement orders at
incorrect or non-negotiated rates, with full knowledge that these rates were deficient and
did not reflect the market rates for such items as asserted by the vendors themselves.
7.3.4 As per the released BOQ numbers, the value of items released against such “ad-hoc”
process aggregate to INR 37.40 crores201 as set out in the Table 4 below:
197
Refer Annexure 7.8 – Minutes of second round of negotiations meeting with vendors - para 2.1, page 3
198
Refer Annexure 7.8 – para 1.3 (iii), page 1
199
Refer Annexure 7.9 – Brief status note provided by Overlays FA. – Para 1, Page 8
200
Refer Annexure 7.10 – Detailed calculation
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Table 7.4: Value of Zero Contracted Quantities
Cluster Vendor name Value of Zero
Contracted Quantity in
INR Crore
I PICO Deepali 3.84
VI PICO Deepali 4.45
8.29
II Nussli 2.61
IV Nussli 2.26
4.88
V ESAJV 1.53
1.53
III GL Meroform 3.66
VII GL Meroform 19.04
22.70
Grand Total 37.40
201
Refer Annexure 7.11 for detailed computation.
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7.3.5 As the final payments have not been made by the OC, the amounts computed above are
only indicative and subject to change based on final determinations to be made by OC.
7.3.6 Consequently, it is apparent that the OC issued BOQ’s on rates that they clearly knew were
ad hoc and therefore needed validation. By placing order on such basis, the OC officials
facilitated payment of large amounts at ad-hoc rates. The committee considers that this
constitutes intentional misconduct on the part of these employees.
7.4 Inconsistencies in tender procedures
Global tender was not global
7.4.1 During discussions with various OC functionaries including Mr A.K. Saxena, JDG, Venue
Development and Overlays, it was informed that the OC felt that only foreign vendors would
be eligible to bid for the overlays contracts as no Indian vendor had the experience or
competence to deliver an overlays contract on a turnkey basis.
7.4.2 Given this contention, the OC should have issued a global tender as per para 2.5 of its
financial and administrative, guidelines that state the following. “Where it is felt that the
goods of the required quality, specifications etc., may not be available in the country and it is
necessary to also look for suitable competitive offers from abroad, the copies of the tender
notice may be sent to the Indian embassies abroad as well as to the foreign embassies in
India. The selection of the embassies will depend on the possibility of availability of the
required goods in such countries”202. Further, this condition is also mentioned in the
General Financial Rules (GFR) of the Government of India.
7.4.3 However, the EOI and RFP for overlays were not sent to “the Indian embassies abroad as
well as to the foreign embassies in India” in order to make the tender “global” as per the
OC’s own guidelines. The EOI was published only on the website of the OC and Indian
newspapers between 5th and 7th December 2009203.
202
Refer Annexure 7.12 – Extract from the financial and administrative guidelines of OC
203
Refer Annexure 7.13 – Archived tenders from the CWG 2010 website.
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Eligibility criteria for vendors circumvented
7.4.4 During discussions with various OC functionaries including Mr. A.K. Saxena, JDG, Venue
Development and Overlays, it was noted that:
The primary purposes for floating a global tender for overlays was the ‘inexperience and
lack of competence’ in India to deliver items contemplated.
The vendors were permitted to form a consortium for the purpose of the contract. The
consortium would identify the lead partner who would be termed as the respondent to
the EOI. The respondent would be the lead partner in the consortium and only their
turnover shall be considered for the evaluation.
There was a requirement to have an Indian partner in the consortium bidding for the
overlays contracts as it was felt that an Indian partner would be able to ‘understand the
Indian conditions’ and be able to execute the contract effectively and efficiently.
7.4.5 An analysis of the EOI terms showed that there were no provisions for identifying the lead
partner on objective criteria such as percentage of allocation of work or percentage of share
of the partner in the joint venture entity. It was left to the discretion of the vendors to
decide which party would form a lead for the consortium. Under this scenario, an Indian
partner could project the foreign partner as the ‘lead partner’ and use its credentials to
qualify under the criteria. The work however would predominantly be performed by the
Indian partner who may have otherwise been ineligible. The gap in the EOI provision was
fully exploited for selecting an Indian vendor with only an ostensible involvement of the
foreign partner as explained below.
7.4.6 Basis the above example, it is evident from the structure of the legal entity formed, that the
Indian partner owned and controlled the entity rather than the lead partner whose
credentials may have been used to qualify under the EOI.
Review of the Memorandum of Association (MoA) for ESAJV D-ART INDO India Pvt. Ltd204,
which won the contract for Cluster V, it was observed that the shareholding between the
companies which formed the joint venture, was skewed towards the Indian partner of
204
Refer Annexure 7.14 – Memorandum of Association (MoA) of ESAJV D-ART INDO India Pvt. Ltd.
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the consortium i.e. D-ART INDO India Pvt Ltd. The lead partner in the consortium i.e.
ESG Arena JV held only 1% of the total equity share capital in the joint venture.
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Table 5: Shareholders of ESAJV D-ART INDO India Pvt. Ltd.
Name No. of Shares % of Total
Sanjay Malhotra 100 1%
D-ART Furniture Systems Pvt Ltd 8,300 83%
(Authorized Representative – Sanjay Malhotra)
Indo Office Solutions Pvt Ltd 1,500 15%
(Authorized Representative - Sanjay Malhotra)
ESG Arena Joint Venture 100 1%
Total Equity share capital 10,000
In the technical bid submitted by this joint venture, the details of experience by both the
companies in the joint venture were listed. The ESG Arena JV was the foreign company
that met the conditions for turnover and experience required by the EOI but they held
only 1% share.
However, the only experience listed against D-Art Furniture System/Indo Office Solutions
is “2010 Delhi Commonwealth Games” in the technical bid. It is very surprising that the
consortium partners bidding for the contract mentioned that they were working for the
Commonwealth Games, Delhi, even before they were appointed205. In other words they
205
Refer Annexure 7.15 – Technical Bid 1 – Form 1 – Respondent details (copy made from the originals seized by CBI)
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had no experience of the overlays supply work. The technical evaluation of the offers
should have noted this fraudulent assertion of the responding vendor.
Arbitrary disqualification of vendors at EOI stage
7.4.7 The EOI for overlays contracts received responses from 10 vendors, of which 6 206 were
selected by the evaluation committee for participating in the next stage of the bidding
process. The summary has been set out in the Table 7.6 below:
Table 7.6: Selection of Vendors
Name Selected by Evaluation Final selection by Remarks
Committee – EOI stage Evaluation Committee
on 14 January 2010 on 19 January 2010
M/s Pavillion & Interiors No No
M/s EPS Gmbh, Germany No No
M/s Uniplan Yes No Refer para
1.5.9
M/s Pico Deepali Yes Yes
M/s Nussli Yes Yes
M/s Cityneon Yes No Refer para
1.5.9
M/s ESAJV Yes Yes
M/s Kingsmen/ Sercon No No
M/s GL Meroform Yes Yes
M/s JKW Ventures No No
The evaluation committee comprised the following members207:
206
Refer Annexure 7.16 – EOI evaluation committee minutes – Last page
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Mr A.K. Saxena, JDG, Venue Development and Overlays
Mr. M. Jeychandran, JDG, Finance and Accounts
Mr. R.P. Gupta, ADG, Venue Development and Overlays
Mr. Surjit Lal, DDG, Procurement and Overlays
7.4.8 The evaluation committee, on 14 January 2010, recommended that the RFP should be
issued to 6 applicants. However, Mr. VK Verma, DG, OC, suggested through a note to the
evaluation committee that the following four vendors should be selected and approval
should be sought from the OCFC for this208. Given the sensitive nature and the magnitude
of the contract, it is not clear if Mr. V.K. Verma was specifically entrusted this task in his
capacity as the Director General of the OC. These vendors were as follows.
M/s Pico Deepali,
M/s Nussli
M/s ESAJV
M/s GL Meroform
7.4.9 Subsequent to the suggestion made by Mr. VK Verma, DG, OC, Mr. Jarnail Singh, CEO, OC,
through a note to the evaluation committee dated 16 January 2010 suggested that the issue
be discussed in the OCFC209. The issue was thereafter discussed in the OCFC meeting
chaired by Mr. Jarnail Singh, CEO on 19 January 2010.
7.4.10 According to the note to the evaluation committee prepared by Mr. Surjit Lal, DDG,
Procurement and Overlays, the issues raised and discussed in the OCFC and course of action
suggested are as under210:
“The experience details submitted by M/s Uniplan and Cityneon did not qualify them as it
was not related to games. The OCFC suggested that clarifications should be obtained
from them as to whether they had any experience relating to the games overlays. The
207
Refer Annexure 7.16 – Submitted for approval to these committee members, Last Page
208
Refer Annexure 7.16 – Approval notes by Mr. V.K. Verma, Last Page
209
Refer Annexure 7.16 – Approval notes by Mr. Jarnail Singh, Last Page
210
Refer Annexure 7.17 – Note prepared by Surjit Lal, DDG (Procurements & Overlays)
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OCFC also recommended that they should submit the supporting certificate from the
relevant Games Organising Committee”.
The OCFC held the view that this proposal was not required to be placed before them at
this stage as the issues involved needed to be resolved by the ‘Organising Committee’.
7.4.11 On 2 February 2010, the evaluation committee verified the clarifications received from the
vendors as per note prepared by Mr. Surjit Lal, DDG, Procurement and Overlays and
considered and approved the disqualification of M/s Cityneon and M/s Uniplan on account
of the reasons as set out in the Table 7 below211:
Table 7.7: Reasons for disqualification of vendors
Name Reason for disqualification
M/s Uniplan Non submission of certificate from Beijing Olympic
Committee/ Organising Committee, as the Committee was
no longer in existence.
The Committee believed that the vendors experience at the
world games/ UEFA Euro 2008 and FIFA World Cup 2006 was
not adequate to qualify as vendors for delivery of overlays
for Commonwealth games.
M/s Cityneon The letter of award from DOHA Asian Games Organising
Committee for development, production, supply and
installation of the DOHA 2006 culture exhibition stands and
display units was “considered to be not meeting with the
eligibility criteria” by the evaluation committee”.
Further, the matter was also referred to Ms. Samantha
Cotterel, who was Overlays Director in DOHA Asian Games
Organising Committee and Overlay Expert Advisor to OC.
She stated that “the experience detailed in the letter of
award” “doesn’t qualify as relevant experience required by a
211
Refer Annexure 7.17 – para 3 and para 4.
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overlay vendor for the supply of games, overlay, commodity
and services”.
7.4.12 In this fashion, the bids of Uniplan and Cityneon were disqualified based on the issues
mentioned above. From a reading of the above, it appears that the disqualification of the 2
additional vendors at the EOI stage appear to be subjective as the evaluation committee
could have considered the experience of the organizations:
In case of M/s Uniplan, even though they were unable to submit certificate of work done
from Beijing Olympics Orgainising Committee, they had submitted experience of
providing overlays at other world games which could have been considered.
As the OC had non-competition venues for the games for which overlays had to be
obtained, the experience at the DOHA Asian Games should not have been overlooked/
discounted.
7.4.13 It is pertinent to note that all the 4 vendors who were short listed under the EOI received an
award of a contract from the OC related to overlays212.
‘Pragmatic view’ during evaluation of Technical Bids facilitated certain bidders
7.4.14 At the time of evaluation of the Technical Bids submitted by the selected 4 vendors, the
evaluation committee had the following observations with respect to the solvency
certificates submitted213:
The certificate by Pico Deepali, was in the name of Pico Far East Holdings Limited and
not in the name of the Lead Member of the consortium i.e. Pico Hongkong Limited.
Thus, the evaluation committee stated “As solvency is of the parent company, a parent
company undertaking may be necessary”.
In case of Nussli the evaluation took a view that due to Swiss laws it is not possible for
their bank to provide financial disclosers of customers. In this regard the evaluation
committee noted that a parent company undertaking may also be necessary with
212
Refer Annexure 7.4 – Page 1
213 th
Refer Annexure 7.18 – Minutes of meeting held on 19 February, 2010 to consider the technical bids for overlays
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Fifth Report of HLC – Organizing Committee
amounts mentioned to decide the maximum number of clusters that could be awarded
to this entity.
7.4.15 The final recommendation by the evaluation committee was that the requisite clarifications
and documents that were mentioned in the minutes should be obtained from the relevant
vendors. Mr. VK Verma, DG, OC, overruled obtaining of clarifications/ documents with
respect to solvency certificates and stated that “With a view to derive maximum competitive
advantage, pragmatic view should be taken on financial certificates. In almost all other
tenders finalized by the OC, to the best of my knowledge, net worth of the company or
solvency status of the parent group is a safe enough premise to consider a company sound.
In any case, performance guarantee, I am sure will be secured from vendors who are
awarded the work”214.
7.4.16 The above recommendation by Mr. VK Verma was read and agreed by Mr. Jarnail Singh,
CEO, OC, A.K. Saxena, JDG and ADG, Venue Development and Overlays215. Consequently,
the points raised in the evaluation committee minutes were not followed up further based
on the “pragmatic view” as suggested by Mr. Verma.
7.5 OC did not maintain records to verify the receipt and return of materials
7.5.1 During the review, the OC has not provided a reconciliation of the list of items received,
used and taken back from each venue under the overlays contracts.
7.5.2 According to discussion with Mr. A.K Saxena, JDG, Venue Development and Overlays, the OC
was still in the process of preparing the reconciliation of items. It is not clear how the
reconciliation would be done at this stage when the after 4 months of the conclusion of the
games, the entire overlays structure has been dismantled.
7.5.3 Further, Mr. Saxena informed, that the CVC had deputed 9 technical examiners from 9
September 2010 onwards to verify overlays. However, till date OC has not received any
detailed comments, reports regarding the verification/ visits undertaken by the CVC 216.
214
Refer Annexure 7.18 – Approval note by Mr. V.K. Verma, last page
215
Refer Annexure 7.18 – Approval signatures on the note by Mr. V.K. Verma
216
Refer Annexure 7.19 – Note provided by OC FA with respect to the overlays verification.
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7.5.4 Considering that the items provided by the overlays contractors were required only for
temporary period i.e. during the games time, the OC should have, in the last, maintained a
record and reconciled items received, used and sent back. It is extraordinary that at the
outset the OC did not appear to set up any processes to verify the items or institute
appropriate checks in this regard internally when it is known that the overlay items would
be returnable.
7.5.5 As no records have been maintained by the OC and considering that the contracts were on a
turnkey basis, most of the items have been taken back by the overlay vendors. Therefore, it
is now impossible to verify the quality of the material supplied by the vendors. OC has not
maintained any records to corroborate what was provided.
7.6 Poor quality of material supplied by vendor
7.6.1 There were a lot of concerns raised in the media and in other quarters on the quality of
materials provided by the overlays vendors given the rates at which these were procured by
the OC and that these were expected to conform to “international standards”.
7.6.2 As an example, computer forensics revealed an email by Col Ashok Matlotia (Retd), PO
Venue Development and Overlays to Mr. A.K Saxena, JDG, Venue Development and
Overlays, describing the poor quality of material supplied by one of the overlays vendors i.e.
Nussli217.
Email dated 8/9/2010
7.6.3 In the email dated 8/9/2010 Retd. Col Matlotia mentioned that Nussli “maintain that all
these items have OC's approval. Who in OC can approve such substandard old local branded
items?” Col Matlotia also attached photographs as examples of allegedly sub-standard
products to his email which are reproduced below218.
217
We were unable to separately determine the cost paid for these items by the OC due to the absence of additional
details to trace these back to individual contract components and also as final bills are not available
218
Please refer to Annexure 7.20 for the full email and attachments
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Local Made Sockets Non ISI Tubelights Fittings
Old ACs
Email dated 15/9/2010219
7.6.4 In an email dated 15/9/2010 Col Matlotia further wrote that “….M/s Nussli has not left any
subject where he did not deliberately diluted the standards much lower than INDIAN forget
about the INTERNATIONAL…… M/S Nussli still deliberately delaying all the works to force us
in the situation where we have no option but to accept Poor standard of workmanship,
substandard equipments materials, All who have seen these are laughing at us. As
intimated through me earlier mails M/s Nussli has installed VERY OLD window types ACs. ALL
electrical fittings are local make and assorted local makes. In the name of Tubelight fittinghs
inside the tents The Tents give shabby look. They are dirty. structures are not properly
anchored. Electrical DBs not of standards….. Now the toilet works within the stadium was
219
Please refer to Annexure 7.21 for the full email and attachments
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deliberately delayed becouse he is using all local sanitrywares and materials for the
plumbing. ….Furniture quality is one subject which one discuss every day….”
Email dated 17/9/2010220
7.6.5 In an email dated 17/9/2010 Col Matlotia wrote that despite clear instructions to replace
old air-conditioners no action was taken by the contractor to install these. He mentioned
that the contractor had tried to give “cosmetic treatment” to the old machines by changing
the outer grill only but had not replaced the machine. He attached the following picture as
an example.
“Old AC clearly Visible”
7.7 Flawed budgeting and planning
Background
7.7.1 The OC entered into an Advisory services agreement with EKS in July 2006221 to provide
Venue Development Support services to the OC. In November 2006, the OC not only
extended the advisory agreement but also increased the scope of service to include Venue
development programme management and Facilitation support (Project scheduling review
and monitoring). According to clause 2 of the revised agreement, the planning and
220
Please refer to Annexure 7.22 for the full email and attachments
221
Refer Annexure 7.23 – Advisory services agreement with EKS.
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implementation of the overlay programme would continue through to 2010 and would be
important to continue the programme support role until final delivery222.
7.7.2 In accordance with the above mentioned advisory agreement, EKS submitted a Games
Overlay Strategy paper in July 2007223. The strategy paper addressed the scope and options
for the delivery of the Games Overlay for the commonwealth games D 2010.
7.7.3 However, the OC did not act upon the suggestions in the strategy paper submitted in July
2007224. In October 2008, EKS submitted a revised overlays strategy paper. According to
para 3.2.2 of the revised paper, “The report’s findings were not acted upon and neither the
recommended solution, nor any other solution was adopted. At that time, the Organising
Committee had two and a half years before most of the venues were completed and handed
over. Now, there is just over a year and the change in timescale means that alternative
solutions need to be investigated”225.
7.7.4 The preferred recommendation according to the revised strategy was that, the OC adopt a
separate expert supplier to deliver overlays and avoid the problem of multiple agencies
delivering the overlay226. However, for this recommendation to be implemented, the OC
would have to carry out an initial games overlay scoping exercise and then tender the
complete games overlay design and delivery package. EKS believed that it was unlikely that
the OC will establish a Games Overlay programme before the end of the year. Therefore,
they recommended that the OC adopt the turnkey solution with outsourced management,
design and delivery. Accordingly, the OC adopted the Turnkey solution for provision of
overlays during the games227.
222
Refer Annexure OVR 24 – Extension to Advisory technical services agreement with EKS.
223
Refer Annexure OVR 25 – Extract of the Strategy Paper for Games Overlays by EKS
224
Refer Annexure OVR 26 – Revised strategy paper - para 3.1.
225
Refer Annexure OVR 26 – para 3.2.2.
226
Refer Annexure OVR 26 – para 3.3.1.
227
Refer Annexure OVR 26 – para 3.6.
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Budget chronology
7.7.5 The initial budget of the OC amounting to INR 767 crores, approved by the MYAS in April
2007 did not include a budget for expenses to be incurred under overlays. Even after
repeated requests in the CGF CoCom meetings and MYAS, the OC failed to take the requisite
action and prepare a budget. The OC was finally able to appraise and prepare estimates for
overlays only in December 2009228.
7.7.6 Overlays were identified as a critical area and serious concerns were raised repeatedly in all
meetings of CGF CoCom starting from November 2006. The key issues raised in these
meetings with regard to overlays are summarized in Table 8 below229:
Table 7.8: A summary of issues related to Overlays discussed in CoCom meetings
Meeting Date Key Issues Raised
1st CoCom 20-23 The venue briefs establish Games time requirements but do
November not define detailed overlay as this is not possible until more
2006 detailed operational planning has been undertaken.
The scope and responsibility for overlays is yet to be defined.
2nd CoCom 14-16 May In the OC budget the financial responsibility and final
2007 allocation of funds are yet to be determined for Overlays.
3rd CoCom 14-18 There is no effective Overlay planning process in place.
January An immediate priority is to secure overlay and operational
2008 planning staff and consultants to ensure that infrastructure
development does not stall.
4th CoCom 10-11 An immediate priority is to secure overlays and operational
November planning staff and consultants to ensure that infrastructure
2009 development does not stall.
There is no current overlay solution in place.
th
5 CoCom 11-13 May Overlay design and delivery program is high risk and very
228
Refer Annexure 7.27 – Office memorandum issued by the MYAS for consideration of budget of OC for Overlays.
229
Refer Annexure 7.28 – Extracts of CoCom minutes.
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2009 tight.
OC planning does not support early resolution of Overlays
requirements.
7.7.7 Even after continuous prodding from CGF the CoCom, the OC did not take any initiative to
prepare the overlays budget. Accordingly, it can be concluded that the OC deliberately
delayed preparation of the overlays budget.
7.7.8 In addition to the prodding in the CGF CoCom meetings, Mr. Mike Fennell, President, CGF,
also emphasized the need to take immediate steps to finalise the fit out of the venues which
essentially included the concept and design of the overlays in the 9 th Executive Board
meeting held on 14th August 2007. In response, Mr. Suresh Kalmadi, Chairman, OC,
mentioned “the overlay issue was discussed in the Group of Ministers meeting on 6 th August
2007 wherein while accepting, in principle, a tentative budget of INR 400 Cr, it was decided
that the OC had to finalize the concept design of overlays as per requirements of the Games
and prescribe the timelines for fit out so that the venue agencies can deliver the same in
time”230. Accordingly, the OC was of the opinion that the overlays would be provided by the
venue owners.
7.7.9 Subsequently, in July- August 2009 it was decided that overlays shall be procured by the OC.
According to the agenda note for the 6th meeting of the Coordination Committee for CWG
of MYAS with the Chief Minister GNCTD and Chairman OC to be held on 27th July 2009 it was
stated that the following decision with respect to overlays was taken in the Infrastructure
Monitoring Committee held on 15th July 2009: “These are temporary fittings and fixtures
required only during Games Time. It was decided that the overlays will be budgeted and
procured by the OC. The venue owners in consultation with OC will decide the items to be
retained by them. After the Games, financial adjustment for items retained by Venue
owners would be made”231. Thereafter in the 3rd meeting of the Infrastructure Monitoring
Committee held on 6 August 2009, chaired by Secretary (Sports), it was stated with respect
to Equipments and Overlays “It was decided earlier that these items will be procured by OC
230 th
Refer Annexure 7.29 – Extract of 9 Executive Board meeting minutes.
231 th
Refer Annexure 7.30 – Minutes of 6 meeting of Coordination Committee held on 27-7-2009
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and the items, which will be retained by venue owners shall be decided later”232. Thereafter
the OC began the process of preparing a budget for the procurement of overlays.
7.7.10 A brief chronology of the Budgeting process for overlays is set out in the Table 9 below:
Table 7.9: Chronology of budgeting process for venue development and overlays
Particulars Date Budget Budget Remarks
prepared/ approved by
submitted for GOI for
Overlays Overlays
Initial budget approved 9 April 2007 - - Refer para
by Government of India 1.7.10
below.
Budget figure per initial June – Over INR 1,500 - Refer para
exercise August 2009 crore 1.7.11
below
EFC meeting to discuss 28 July 2009 - - Refer para
revised budget 1.7.14
submitted by OC below
EFC meeting for 5 January INR 948.52 crore INR 687.06 Refer para
consideration of 2010 crore233 1.7.16
Overlays budget below
7.7.11 There was no expense head budgeted for overlays in the initial budget prepared by the OC
in 2007. As stated in the paragraphs above, this was probably as the OC was of the opinion
that the overlays would be provided by venue owners.
232
Refer Annexure 7.31 – Minutes of meeting of the Infrastructure Monitoring Committee held on 27-8-2009
233
Refer Annexure 7.32 - Approval from Ministry of Youth Affairs and Sports granted in March 2010.
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Misrepresentation in making budget estimates
7.7.12 The initial budget for overlays amounting to approximately INR 1,500 crore, was prepared
by the OC Overlays FA for their internal working. The negotiation committee meetings234
mention that this budget was prepared on the basis “of list prices/ prices on the web of
overlays suppliers (i.e. M/s PICO and M/s GL Meroform)”
It is highly surprising that the OC officials found standard price lists on the sites of the
vendors mentioned above as currently their websites (and of others) do not display any
such ‘standard information’. It does not appear to be an industry practice to exhibit the
price list in that manner as even currently no such rates are displayed on these websites.
Therefore the above statement could be a misrepresentation. There is no evidence such
as prints or screen shots available with the OC to support this statement.
Even in the unlikely event that such lists were available, there is no information on what
judgments and adjustments were used to prepare budgetary estimates that were almost
4 times the final contracted amounts.
It follows that the negotiation committee comprising of Mr. Sudhir Mittal (Spl, DG), Mr.
Jiji Thomson (Spl DG (V. Ops), Mr. A.K. Saxena (JDG V&D), Mr. Harsh Kumar (JDG,
Technology), Gp. Capt. KUK Reddy (ADG, F&A) and Mr. R.P. Gupta (ADG, VD&O) 235, took
cognizance of the above mentioned budget figure and presentations made by Mr. A.K.
Saxena, FA Head, and the negotiation committee did not raise concerns on the process
adopted for estimation, which prima facie, appeared inflated.
OC did not provide Overlays budget estimate to GOI despite repeated request
7.7.13 Review of the Coordination committee meeting minutes, revealed that the Committee, in
several meetings of the coordination committee taken by the MOS, MYAS in 2008-2009
where Chairman OC was present, Secretary, MYAS repeatedly raised concern at the delay in
furnishing the budget estimates for overlays by OC. In the 4 th Meeting236 on 29 January
2009, the Secretary stated that, in the COS meeting held on 9 September 2008, OC had
234
Refer Annexure 7.33 - Minutes of the Negotiation Committee meeting dated 26-29 March 2010
235
Refer Annexure 7.33 - Minutes of the Negotiation Committee meeting dated 26 to 29 March 2010.
236 th th
Refer Annexure 7.34 – Minutes of the 4 Meeting of Coordination Committee on 29 January, 2009
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indicated that this information would be available by 19 September 2008. This was later
reviewed at the level of Cabinet Secretary again on 23 October 2008, where commitment
was given that all details would be made available by 31 October 2008. As yet, this
information is not available with the OC. This problem has been brought to the notice of
OC. He also noted that as the budget of the OC is being finalized, this would need to be
indicated quickly so as to be incorporated in the budget in time.
7.7.14 In the 5th meeting237 held on 12 June 2009 the committee noted that in issues related to
scope and design of overlays and plan for conduits, cabling etc. of various venues, most of
the venue owners informed that they have yet to receive the detailed plan.
7.7.15 Therefore, there was no clear basis of the estimate adopted by the government in
December 2009. Subsequently, in the EFC in its meeting held on 28 July 2009, the non plan
expenditure of INR 1,620 crore for OC, CWG Delhi 2010 was recommended towards the
conduct of the games. In the same meeting Secretary, MYAS informed the Committee that
“the following 5 items of expenditure were yet to be appraised and approved:
(i) Overlays,
(ii) Equipments
(iii) TSR System
(iv) Expenditure related to telecom
(v) Security equipments”238.
7.7.16 Accordingly, it was decided in the EFC meeting that, a separate EFC/ CNE proposal would be
moved for Games overlays after the detailing was completed and cost estimates were made
available by OC.
7.7.17 The note in the EFC Memo dated 30 December 2009 states “No firm costs estimate for
overlays was available earlier and therefore a tentative estimate of INR 400 crore on account
of overlays had been made”239. As the cost estimates were significantly more than the INR
400 crore, as suggested in the EFC meeting in July 2009, the OC considered “substantial
237 th th
Refer Annexure 7.35 - Minutes of the 5 Meeting of Coordination Committee on 12 June, 2009
238
Refer Annexure 7.36 - Minutes of Meeting of Committee of Non- Plan expenditure (CNE) on 28 July 2009.
239
Refer Annexure 7.27 – point 2.b)
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discounts”240 and prepared a revised budget of INR 948.52 crore, which was submitted to
the Ministry of Youth Affairs and Sports for review and approval in December 2009. The
Ministry of Youth Affairs and Sports finally approved a budget of INR 687.06 crore in March
2010241 for overlays.
Substantial delays in the planning stage
7.7.18 The entire process from the release of the EOI to the awarding of the LOI took a period of
almost 6 months to complete. It may be mentioned at this stage that commencing the
tendering process so late in the run up to the games, in itself, subjected the process to a
stress test. It is highly surprising that key decisions related to contracts that constituted a
core component of the games apart from being a third of the OC’s financial expenditure
were subjected to such delays.
Deeply flawed estimates
7.7.19 It follows from the above that the OC made little effort, despite prodding by the Ministry to
acquire any clarity or appreciation with respect to the nature of activities involved on
overlays. This is evident from the absence of the expense head in the initial budget and the
‘adhoc basis’ (i.e. basis list prices/ prices available on the websites of overlays suppliers)
adopted for preparation of budgets by the OC. This was further substantiated by the
recommendation made in the EFC meeting held on 28 July 2009 as already mentioned in
italics in para 1.7.16 above.
7.7.20 It must also be noted that the OC issued the EOI and RFP in December 2009, even before
the finalization of the quantities and cost estimates required for the games. Further, the
commercial bid from the four bidders was opened on 26 February 2010, prior to the receipt
of approval of the overlays budget from the Ministry.
7.7.21 The lack of clarity with respect to the nature of activities involved in the FA had a direct
impact on costs related to overlays.
240
Refer Annexure 7.33 - para 6 of Minutes of Negotiation Committee Meeting held between 26 to 29 March 2010. We
have not been provided with any information with respect to these “substantial discounts” considered.
241
Refer Annexure 7.32 - Approval from Ministry of Youth Affairs and Sports granted in March 2010.
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As against the cost estimates of INR 400 crore242 in July 2009, the sum total of lowest
bids for all 7 clusters in February 2010 came to INR 1,534.92 crores243. It is not surprising
therefore the budgets were made by OC post receipt of commercial bids, reflecting the
high rates’ quoted by vendors without any independent validation of rates.
The final budget for overlays was approved by the GOI only in March 2010 for INR
687.06 crores and the only option used by the OC was to reduce quantities ordered.
This was a compulsion as the tendering process was delayed and the delivery was to
commence in early June 2010.
7.8 Summary and conclusions
7.8.1 From the review of the contracting process, it is evident that significant questionable
practices were adopted in by the OC officials in awarding and monitoring contracts that
resulted in undue benefit to suppliers. This summary is based on the following key points.
For large part of 2008- 2009, OC officials did not provide budgetary cost estimate to the
Government despite repeated request from them. This prevented preparation of
realistic budget for overlays on the ground of ostensible lack of knowledge of cost of the
contracts. Therefore the budgeting process was delayed.
OC contended that the first budget of INR 1500 crores was based on “standard price lists
available on the website” of 2 suppliers. On one hand the OC claimed that they could
not correctly estimate cost and on the other hand they claimed that standard price lists
were available on websites, which inherently, contradict each other.
The prolonged non submission of budget estimates to the government and then reliance
on the commercial bids for preparation of budget gives the impression that it was a
deliberate ploy to make purchases at unsupportable costs.
Of the 6 vendors who responded to the EOI, 2 were disqualified on technical grounds. In
the case of some of the 4 short listed vendors who were finally awarded contracts, OC
took pragmatic views to overlook some important financial and technical parameters.
242
Refer para 1.7.16 above.
243
Refer Annexure 7.33 – para 2.3 of Minutes of Negotiation Committee Meeting held between 26 to 29 March 2010.
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Thus selection of vendors was not transparently made and arbitrary considerations were
cited to award the contracts.
OC failed to negotiate prices effectively with vendors. The costs were reduced on the
basis of reduction in quantities and not reduction of unit prices. Despite high tendered
cost, re-tendering was not done on the ground of time considerations.
Failure to negotiate prices with vendors cost the OC a potential loss of at least INR
138.09 crores simply based on the lowest price contracted amongst selected vendors. If
the price of the items would have been negotiated down further, the loss/overpayment
would even exceed this amount.
Further, the OC issued BOQ’s against certain items to vendors with full knowledge that
the rates quoted by the vendor were ad-hoc and not backed by the vendors ‘detailed
analysis’. The quantum of such items as per the BOQ aggregated to INR 37.4 crores.
The OC completely failed to monitor items provided by the vendors under the contract.
No records of verifications have been provided to us and we were informed that these
were not maintained. It is not apparent to us how the OC intends to certify final bills of
these vendors as they have denied existence of any corroborative information to verify
these. In fact, they have represented to us that they had asked the CVC to verify these
amounts but did not receive reports. The failure of the OC to introduce any internal
monitoring mechanisms is extraordinary given that this was the most significant
expenditure by value in relation to the overall expenditure of the OC.
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8 Chapter 8: Timing, Scoring and Results
Certain key officials of the OC consistently indulged in malpractices, manipulated OC’s rules
and procedures and misled the Executive Board and OC Sub Finance Committee solely with the
intention to eliminate competition and favor a particular vendor. The loss caused due to their
misconduct would be at least INR 18 crores due to delayed award of a contract to ‘pre-
decided’ vendor and at a cost of INR 49 crores higher as compared with the bid of the rejected
vendor.
8.1 Background
8.1.1 The OC appointed M/s Swiss Timing – Omega for provision of Timing, Scoring, & Result (TSR)
services for the Commonwealth Games, 2010. The total value of the contract was INR
1,124,550,000. (Please refer to Annexure 8.1)
8.1.2 The key details pertinent to this contract are provided in the table below:
Table 8.1: Overview of the contract
Contract Timing, Scoring and Results System Services
Contractor M/s Swiss Timing – Omega
Contract Date 11 March 2010
Contract Value CHF 24,990,000/INR 112,45,50,000
Details of Work Services including, but not limited to:
Timing and Scoring Equipment, Equipment Management,
Local Results Service, Record Management, TV Graphics,
Central Results Service integration, Integration and
Connectivity, Complete Testing, Operational Planning, and
Program Management
Details of Bids Received Two bids received:
1 Swiss Timing (Omega)
2 MSL Software, Spain
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Fifth Report of HLC – Organizing Committee
Details of Bidders selected in Pre- Only one bidder qualified, i.e. Swiss Timing – Omega
qualification
8.1.3 The selection process for awarding TSR contract took around 2 years and 9 months since the
first presentation made by Swiss Timing and 1 year since the publication of EOI. The key
events during this time are presented below in a chronological order.
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Fifth Report of HLC – Organizing Committee
Figure 8.1: Timeline and Key Events
July 22, 2008 March 23, 2009 October 1, November 4, December 4, December December 29, March 11,
2009 2009 2009 19, 2009 2009 2010
June 25, 2007 March 6, 2009 July – August October 4, November 30, December 17, December 20, January 15,
2009 2009 2009 2009 2009 2010
Presentation by Swiss Draft EOI TSR Planning at Amendments to Approval by EMC to Ratification of Commercial Bid EB approves ST
Timing/Gem circulated Venues with RFP open only ST Decision to Select ST Evaluation of Swiss revised offer
International
Visits by Swiss Technical Bid by Finance Sub- Timing
ST recommended by Publication Timing Officials
of Publication of Pre-qualification Committee
Technical Bid Evaluation Ratification of Decision Negotiation TSR Contract
Committee for Sports EOI RFP Evaluation (No to Select ST by EB Meeting with Swiss awarded to Swiss
Presentation by Swiss
Surface
Timing/Gemand Equipment consensus on MSL) Timing Timing
International
Critical changes in the Technology FA during this time
September 7, November 17, November 19, November 24, November 27- December 16, December 20, February 3,
2009 2009 2009 2009 30, 2009 2009 2009 2010
All FA’s are Sandeep Arya Sandeep Arya
Appointment of
distributed between obtains approval Resigns. Ajit Sirohi
Sandeep Arya as
CEO and DG (VK for opening only ST takes the reins as
Advisor (Tech)
Verma). Technology Technical Bid Head (Technology FA)
Promotion of FA reports to Mr. Sujit Panigrahi Ajit Sirohi Ajit Sirohi
Sandeep Arya to JDG Verma thereafter resigns appointed as ADG Resigns
(Tech) thus assuming
the role of head of
technology FA
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Fifth Report of HLC – Organizing Committee
8.2 Dissent amongst OC officials and futility of EOI for TSR contract
8.2.1 TSR would ordinarily be handled by the Technology FA, whose work was to be coordinated
by the COO244. However, the OC issued an EOI on 23rd March 2009 for TSR contract, without
consultation with Technology FA or the concurrence of COO.
8.2.2 Mr. V K Verma, the DG, involved himself in this matter though his role was defined in the
GOP as “DG will be head of the OC Secretariat and shall be responsible for execution and
administration of the Secretariat. He will coordinate the activities of the OC Sub- Committees
that require coordination with government agencies and delivery partners.245”
8.2.3 The manner in which the EOI was issued raises concerns about the OC’s intention to seek an
active interest from service providers. Following observations point towards the discord
amongst OC officials and futility and failure of the EOI process.
EOI for TSR, which is primarily a technology driven component, was published on OC’s
website and in the Hindustan Times on 23 March 2009 without any consultation or the
knowledge of Technology FA.
The notes exchanged by Mr. VK Gautam, COO and Sujit Panigrahi, ADG Technology on 23
March 2009, the same day that the EOI was published, indicate that both officials were
unaware of this EOI. Mr. Gautam expressed that the EOI was generic, non-technical in
nature, and sufficiently vague in terms of scoping of specification and deliverables. Even
the technology consultant, Brian Nourse expressed his surprise and disappointment with
the EOI and recommended that the same be withdrawn until a clear agreement on the
TSR scope, and responsibilities is reached within OC246.
In the Coordination Committee meeting held on 29 January 2009, Mr. Sudhir Nath,
Secretary of Sports mentioned that OC should place the short listing done by them of
244
As per the GOP Page 54, “COO: Responsible for all Games services, the COO is key position in the OC Secretariat and
will require an individual with tremendous project management expertise and experience and leadership qualities related
to handling multi dimensional functional groups.”: Annexure 8.2
245
Refer role of DG as per GOP: Annexure 8.3
246
Refer notes exchanged between Sujit Panigrahi, COO, and Brian Nourse after the issuance of EOI: Annexure 8.4
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Fifth Report of HLC – Organizing Committee
TSR provider on their website and give opportunities to other suppliers also by way of
EOI, if they think that they also satisfy the conditions on which short listing was done 247.
According to the OC records, on 6 March 2009, Lalit Bhanot issued a letter to Rahul
Bhatnagar with the detailed criteria for the EOI248.
A note for approval to the JDG (Venue) and DG, (with the EOI attached) was issued by
Surjit Lal on 21 March 2009, which stated "...The contents to be placed on website as
approved by the Ministry of Sports are enclosed. It is for approval and instruction to the
concerned officer to place the enclosed matter on the website of OC, CWG Delhi 2010 on
urgent basis...” This was approved by AK Saxena and VK Verma on the same date249. It
should be noted that no member of Technology FA approved this note.
Email for publication of this EOI on OC website was sent by Mr. Arun Kumar Kesri (office
of Mr. Lalit Bhanot, Secretary General) on 21 March 2009 after 6:00 PM. Although Mr.
Kesri copied Sujit Panigrahi on this email it was possible that the same would not have
been noticed by Mr. Panigrahi before Monday 23 March 2009250.
The OC received responses to this EOI from two vendors, M/s Mondo and M/s
Technovision. These responses were disqualified by the evaluation committee for not
meeting the prequalification criteria since they were both in the business of supplying
video boards and were not TSR suppliers.251 Consequently, this left only M/s Swiss
Timing as the short listed vendor, as mentioned in the published EOI, for further stages
of procurement process. However, OC issued the RFP on 1 October 2009 under the open
tender system by disregarding the entire EOI process followed earlier.
8.2.4 This whole process resulted in wastage of 6 months worth of time and effort and
significantly delayed the procurement process for TSR.
247 th
Refer Minutes of 4 CoCom Meeting: Annexure 8.5
248
Refer Letter from Bhanot to Rahul Bhatnagar 6 March 2009: Annexure 8.6 No response email/letter from the Ministry is
available with the OC
249
Refer Note put up by Surjit Lal and Approved by AK Saxena and VK Verma on 21 March 2009: Annexure 8.7
250
Refer emails from Arun Kumar Kesri and Ananda Swaroop dated 21 March 2009 : Annexure 8.8
251
Refer Evaluation Report of Responses to EOI : Annexure 8.9
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8.3 Apparent bias of OC officials towards Swiss Timing
8.3.1 OC showed strong bias towards Swiss Timing, even much before the tendering process
commenced. Events/actions to this effect were as follows.
Swiss Timing was appointed as the TSR service provider at Pune Youth Games, 2008 on a
Single Tender basis252.
OC officials were in constant contact with personnel from Swiss Timing and Gem
International, who were Swiss Timing’s India representatives even prior to the issuance
of RFP for TSR.253
Swiss Timing and Gem International made presentations on TSR for Pune Youth Games
2008 and CWG 2010 on 27 June 2007 to officials of the OC 254. It was noted that the
pages related to the “Financial Offer” were missing in these documents provided to us
whereas these were mentioned in the index of the presentation. OC could not explain
the disappearance of these pages from the presentation copy.
Minutes of meetings held on various dates between 25 July and 1 August 2009 (6-8
months prior to the award of contract), to review Timing and Scoring Requirements for
competition venues indicate that apart from OC Officials such as Vijay Kumar Gautam
(COO), ASV Prasad (JDG, Sports) and Jamaal Raazi (Director, Venue Technology), these
meetings were attended by Claude Favre of Swiss Timing, and A.K. Madan, P.D. Arya and
Yogesh Sharma from Gem International. Moreover, all the discussions regarding
planning of TSR requirements at these venues were centric to suggestions and inputs
provided by Claude Favre from Swiss Timing255.
8.3.2 At various meetings prior to the award of contract, Senior OC officials had asserted that
Swiss Timing would be awarded the contract for TSR. Excerpts from the minutes of some of
these meetings are summarized below.
In the 3rd meeting of the Committee for Sports Surface and Equipment, held on 22 July
2008, Mr. Lalit K. Bhanot mentioned that in the case of TSR choice is very limited and
252
Refer note from DG dated 19 November 2009 : Annexure 8.10
253
Please refer to Annexure 8.11
254
Refer Agenda for Swiss Timing and Suis Ascor Presentation : Annexure 8.11
255
Refer minutes of meetings for review of TSR requirements: Annexure 8.12
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Fifth Report of HLC – Organizing Committee
“Swiss Timing has monopoly in multi sporting events”. In this meeting, it was
unanimously resolved to recommend Swiss Timing for “all games except Shooting for
which SUIS ASCOR was recommended256”.
In the first meeting of the Centralised Coordination Committee (CCC) of OC for the
finalization of Overlays held on 26 September 2008, Mr. Lalit Bhanot again
recommended Swiss Timing as the TSR provider257.
In the second meeting of the CCC held on 16 December 2008 it was clarified that the
budget provision for Timing and Scoring system would be made by the Venue owners as
this was a legacy requirement (and NOT an overlay) and the hardware would be supplied
by Swiss Timing. It was also noted that the procurement needs to be centralized to bring
about effective process of tender and selection258.
8.4 Eligibility criteria of EOI and RFP tailored towards Swiss Timing
8.4.1 The eligibility /qualification criteria in the EOI published by OC on 23 March 2009 appear to
be restrictive towards Swiss Timing with the OC clearly mentioning in the EOI that only Swiss
Timing qualifies on the basis of criteria mentioned259.
The committee discovered an email dated 30 March 2009 written by Brian Nourse
(Technology Consultant) to Sujit Panigrahi. In this email, Brian attached the Technology
Review Report, where he mentioned that OC should determine the scope of the TSR
provider based on its strategic requirements, and this should not be driven by the TSR
provider 260.
Also, in the official communication between Vijay Kumar Gautam and Sujit Panigrahi on
23 March 2009 (day of EOI issuance) Mr. Gautam stated that the EOI was ‘too generic,
non-technical in nature and sufficiently vague in terms of scoping of specifications and
256
Refer Minutes: 3rd Meeting of the Committee for Sports Surface and Equipment-22 July 2008: Annexure 8.13
257
Refer First meeting of the CCC for finalization of Overlays: 26 September 2008 : Annexure 8.14
258
Refer Second meeting of the CCC for finalization of Overlays: 8.15
259
Refer to EOI in Annexure 8.16
260
Refer Brian Nourse’s email and Technology Review Report dated 30 March 2009 : Annexure 8.17
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Fifth Report of HLC – Organizing Committee
expected deliverables’261. This further highlighted that not only had the EOI been issued
without the knowledge of key stakeholders, it was also vague and not drafted as per the
objectives of D2010.
8.4.2 The eligibility criteria was altered at the draft stage.
Sujit Panigrahi prepared a draft RFP on 29 August 2009 that listed 7 eligibility criteria,
and referred to past experience in ‘at least 3 previous Olympics or Asian or
Commonwealth, Pan-American or Similar International Games in the past 5 years’.
However, in the 8th OC Finance Committee Meeting on 22 September 2009 Pan-
American games were removed from the list of eligible past experiences on the
intervention of Mr. V K Verma, DG (who was the chairman of the committee) 262.
The inclusion of Pan-American games as a qualifying event in the RFP was proposed by
VK Gautam, COO (who was directly responsible for Technology FA). The minutes also
document that Mr. Jeychandran, Member Secretary, mentioned that Pan-American
games had indeed been taken into consideration by OC in some of the tenders, in which
he was a member. No other counter argument was put forth by any other member of
OCFC as per the documented minutes. However; the committee minutes indicate that by
“unanimous” decision Pan-American games was deleted from the RFP263.
It may be mentioned that Brian Nourse, Technology consultant to OC, in his email dated
21 May 2009 to COO and ADG had recommended Pan American games as a relevant
event for consideration for TSR experience264 which was thus disregarded by the
invention of Mr. V.K.Verma, as above.
Mr. Sujit Panigrahi, in his mail to the Tender Committee members dated 11 November
2009, mentioned that RFP was prepared keeping in mind that at least all qualified global
TSR providers should be able to bid and qualify. He further iterated that the idea of
broad basing the requirement was to have “fair competition”. However the OC Finance
261
Refer Note from COO dated 23 March 2007: Annexure 8.18
262
Refer note by COO dated 25 September 2009 in Annexure 8.19
263 th
Refer Minutes of 8 Meeting of OCFC 22 Sept 2009: Annexure 8.20
264
Email from Brian Nouse in Annexure 8.21
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Fifth Report of HLC – Organizing Committee
Committee restricted competition by allowing only one edition of Olympics,
Commonwealth Games and Asian Games265 as suggested by Mr. Verma.
8.4.3 OC, on the behest of Mr. VK Verma, made an unauthorized and critical change to the
eligibility criteria in the RFP 3 days after it was published on 1 October 2009 making the
criteria even more restrictive than what was previously agreed.
One of the criteria in the RFP published on 1 October 2009 mentioned: “The bidder
should have the experience of operating Timing and Scoring Equipments and/or
delivered Local Results Systems in any of the previous Olympics, Asian or Commonwealth
Games in the past 5 years”.
The above criteria was altered on 4 October 2009 pursuant to a note from VK Verma 266
to read as: “The bidder should have the experience of operating Timing and Scoring
Equipments delivered Local Results Systems in any of the previous Olympics, Asian or
Commonwealth Games in the past 5 years”267. It is peculiar that in his note Mr. Verma
has referred only to a discussion in his room between him and Sujit Panigrahi where Mr.
Rahul Bhatnagar, Member OC Finance Committee was present. He did not deem
necessary that an approval from OC finance committee or another apex body was
needed for such a change. The change in the two criteria is the removal of and/or in the
line “Timing and Scoring and/or Local Results System”.
It was noted that in the 8th OC Finance Committee meeting, held on 22 September 2009,
where the TSR RFP was approved no decision was taken for making the above change.
The change was discussed in the meeting and committee only suggested to seek legal
opinion on this matter268. The 9th OC FC meeting was held on 6th October 2010, i.e. after
the changes in the RFP were already published. Thus, implying that not only was the
change restrictive in nature it was also unauthorized.
Other discrepancies indicative of foul play were noted in the documented minutes of
subsequent OC Finance Committee meetings (9th, and 10th)
265
Email from Sujit Panigrahi dated 11 Nov 2009 in Annexure 8.22 The global TSR providers as mentioned by Sujit Panigrahi
are : Swiss Timing/Omega, MSL, Ssangyong, Seiko, Delta Tra, and Data Entry Systems
266
Refer Note from VK Verma dated 3 October 2009: Annexure 8.23
267
Refer Amended RFP: Annexure 8.24
268 th
Refer Extract from Minutes of 8 OCFC Meeting: Annexure 8.25
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Fifth Report of HLC – Organizing Committee
- In the 9th OCFC meeting held on 6th October 2009 it was noted that VK Gautam
circulated modified minutes of 8th meeting and the same modifications were
confirmed by the committee269. In contrast, the minutes of the 10th OCFC meeting270
held on 16th November 2010 noted that with regard to TSR discussions, the
modifications submitted by Mr. Gautam were not confirmed by the committee and
Mr. VK Verma advised that minutes should be confirmed only after all the members
of committee had perused and agreed with Mr. Gautam’s revised comments.
Incidentally, Mr. Gautam did not attend the 10th meeting and any other OCFC
meeting thereafter.
- The 10th OCFC meeting, held on 16th November 2009, notes that Mr. Jeychandren,
Member Secretary, informed the committee that RFP related to TSR was put up on
the website on 4th October 2009 and technical evaluation of the bids has already
taken place. In view actual timelines for the pre-qualification evaluation of the bid it
is noted that Mr. Jeychandran’s comments were false and misleading. This
misinformation led to the conclusion of Finance Committee to not pursue any
discussion/decision that could have an effect on altering the RFP condition. The
committee noted “If any attempt to make such changes is done it would definitely
lead to allegations /litigations which in the opinion of the undersigned are highly
avoidable”.
In reference to the discussion of 9th OCFC meeting Mr. VK Gautam, in his office note
dated 7/10/2009 to Sujit Panigrahi, mentioned that the only changes to the draft RFP
discussed and agreed upon in the 8th FC meeting held on 22nd September 2009 pertained
to exclusion of “Pan-American or Similar other International Events” from the eligibility
criteria. With regard to V K Verma’s note dated 3 rd October 2009 for the changes in RFP,
Mr. Gautam mentioned that he has only seen that note on 7 th October 2009 and in 9th
OCFC meeting Mr. Rahul Bhatnagar, JS (ISD), clearly mentioned that no changes to be
made in the published RFP except the change mentioned above. Mr. Gautam also wrote
that “In the light of above, we cannot be more restrictive in terms of prescribing
269 th
OC was not able to provide these modified minutes of the meeting: Refer Minutes of 9 OCFC Meeting: Annexure 8.26
270 th
Refer Minutes of 10 OCFC Meeting: Annexure 8.27
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Fifth Report of HLC – Organizing Committee
eligibility and evaluation criteria other than what is already been incorporated as per
deliberations/recommendations of the FC”271
8.4.4 It appears that the change made to the RFP, as mentioned above, was simply uploaded to
the website of the OC and there was no public dissemination made through either
newspapers or notification on the website that these had been revised. Instead, OC
resorted to sending emails to all bidders who had downloaded the RFP till that date. Record
of such emails were not provided. Additionally, apparent contradictions between OC’s claim
of sending emails and enquiries received from one of the bidders were noted.
According to the minutes of the 16th EB meeting, held on 19th December 2009 an email
was sent by Sujit Panigrahi to all prospective bidders, who had downloaded the RFP till
that date, requesting them to download the revised TSR RFP again from the website 272.
However, in response to an enquiry from Juan Leon of MSL on the modified TSR tender
document Sujit Panigrahi in his email dated 17 November 2009 wrote “…There is some
discussion going on regarding this clause. I will update when I know about the exact
situation..”273. This clearly indicates that Sujit Panigrahi was probably not even aware of
any change and thus may not have sent the letters as suggested in the minutes above.
It may also to be noted that Juan Leon of MSL in his enquiry with reference to the
removal of ‘and/or’ from the eligibility criteria wrote, “…We are regularly monitoring the
website and content to check for changes, and today we have noticed that the TSR
tender document that is published for the TSR tender has been modified and does not
match the original one that was published, which is the one we have responded to in our
response for TSR…”. He further stated that “…I please urge you and the rest of the
Organising Committee of the 2010 Delhi Commonwealth Games to find out what has
happened, who are the people responsible for this event, and what are the penalties
applied to them. Further, if any of these changes clearly benefits any of the tenderers in
this bid, I would like to ask for the rejection/disqualification of such company...”
271
Please refer to Annexure 8.28 for Mr. Gautam’s note dated 7 Cctober 2009 to Sujit Panugrahi
272 th
Please Refer to Annexure 8.29 for Minutes of 16 EB Meeting
273
Refer to Email Exchange between Juan Leon and Sujit Panigrahi: Annexure 8.30
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Fifth Report of HLC – Organizing Committee
8.5 Disqualification of MSL at Pre-Qualification Stage
8.5.1 Only two vendors i.e. MSL Software and Swiss Timing responded to the RFP published by OC
for TSR. OC decided to disqualify MSL Software at the pre-qualification stage on grounds
that are not maintainable. The chronology of events is summarized below:
The pre-qualification bids were opened and evaluated on 4 November 2009. A four-
member committee was formed for the evaluation of these bids, comprising: Gp. Capt.
KUK Reddy (ADG Finance), Mr. V.K. Saksena (ADG Revenue), Sujit Panigrahi (ADG
Technology) and Surjit Lal (DDG Procurement)274.
There was no unanimous conclusion reached at this meeting, with KUK Reddy and Surjit
Lal expressing a view that MSL Software did not meet the eligibility criteria, and V K
Saxena, and Sujit Panigrahi expressing the view that both bidders qualified. 275It is to be
noted that the views of Sujit Panigrahi and VK Saxena were also technically endorsed by
Mr. Derek Philips (Venue Technology) and Mr. Brian Nourse (International Consultant,
and ex-head of Technology, Melbourne 2006)276.
This disagreement led to a long drawn procedure of evaluation of MSL’s pre-qualification
bids, including evaluation by V K Verma and TCIL and involvement of Mike Hooper to
opine on the same in order to reach a decision. It should be noted that Mr. VK Verma
expressed his preference to include TCIL’s opinion in the evaluation of TSR bids in the 8 th
OCFC meeting held on 22 September 2009277 i.e. long before this issue came up. Mr.
Verma finally recommended obtaining and considering TCIL’s views with respect to the
pre-qualification evaluation of MSL and ST in his note dated 19 November 2009 278.
Around this time Mr. Sandip Arya, a former Advisor (Technology) was promoted as Joint
Director Technology FA at the time the evaluation was being committed 279. As result of
this change, Sujit Panigrahi would now be required to be reporting to Sandip Arya. The
274
Please refer to the Evaluation of Pre-qualification bids on 4 November 2009: Annexure 8.31
275
Detailed comparison of the views of committee members on MSL: Annexure 8.32
276
Please refer to Sujit Panigrahi’s email dated 9 November 2009: Annexure 8.33
277 th
Refer Extract from 8 OCFC on TCIL: Annexure 8.34
278
Refer Note by DG: 19 November 2009: Annexure 8.35
279
Refer Paragraph 1.6 for details
152
Fifth Report of HLC – Organizing Committee
decision to disqualify MSL was finally put up for approval by Sandeep Arya, a former
advisor on 27 November and approved by the EMC on 30 November 2009.
8.5.2 The entire process for pre-qualification evaluation of MSL took more than 20 days, and
involved deliberations of 4 senior officials of Evaluation Committee, opinion by TCIL,
suggestions of Mike Hooper, intervention by VK Verma, and “interpretation” by Sandeep
Arya, who was elevated as FA head of Technology at s critical stage. The following
discrepancies in this process were noted:
The response from Mike Hooper received via email on 25 November 2009 advised that
he was not aware of a situation whereby MSL Spain provided the full TSR Systems for
Games consistent with the Scope of Work detailed in the RFP, but he acknowledged that
they had provided some of the elements of OVR Services at previous Commonwealth
Games as sub-contractor280. This was interpreted by Sandeep Arya as CGF’s opinion that
only Swiss Timing qualifies for the further evaluation.281.
The note prepared by Sandeep Arya on 27 November 2009 to disqualify MSL required
EMC approval. The note carries a line “EMC Approved” signed and dated 30 November
2009; however no such approval could be located in OC EMC minutes made available to
the HLC.
While the evaluation committee was divided on the matter of MSL’s disqualification, Mr.
VK Verma, DG, performed his own evaluation and submitted a report dated 19
November 2009282. The key observations made by Mr. VK Verma, DG, have been
evaluated and our remarks are summarized in the table below.
280
Refer Email from RK Sacheti to Mike Hooper and Response: Annexure 8.36
281
Refer Note by Sandeep Arya dated 27 November 2009 : Annexure 8.37
282
Annexure 8.35. Further Technology FA was aligned to DG (Mr. V K Verma) on 19 November 2009 there by allowing him
to give his advice in the matter
153
Fifth Report of HLC – Organizing Committee
Figure 8.2: DG’s observations and remarks on the same
DG’s Observations Remarks
…As regards Timing, it is concluded that M/s On their website, MSL state “…MSL provides
MSL are not in the business of Timing automatic timing, measurement and scoring
equipment and services, nor have they systems, integrating these with the results
provided any Timing function in any of the systems. Video capture systems are also available
three designated multi-sport events… for those sports that require them. This service
includes the installation and operation of all
As regards Timing, which is the most complex
systems by qualified MSL personnel…”283
and critical technology package, which covers
athletics, swimming and cycling, M/s MSL Further, MSL were contracted by the OC of the
Spain neither have the equipment nor the Asian Games, Guangzhou to provide Timing &
capability and experience of providing and Scoring, scoreboards and Operational Support, as
delivering this service… specified in their pre-qualification paperbook284.
Further, in response to an email from Sujit
Panigrahi, MSL have furnished details of specific
Timing and Scoring in the last Olympics, Asian and
Commonwealth Games285.
…In the Doha Asian games they have done no As per the MSL pre-qualification documents, MSL
timing and have neither claimed to have have provided Timing and Scoring for Golf at the
provided these services… Doha Asian Games
…In the Beijing Olympic Games also, they As per the MSL pre-qualification documents, MSL
have not provided any Timing service or have provided Timing and Scoring for the following
equipment… events at the Beijing Olympics:
283
Report from MSL’s website: Annexure 8.38
284
Refer MSL Eligibility Criteria Documents: Annexure 8.39
285
Refer email from MSL to Sujit Panigrahi regarding relevant experience: Annexure 8.40
154
Fifth Report of HLC – Organizing Committee
DG’s Observations Remarks
Beijing Olympics Beijing Paralympics
Baseball Equestrian
Football Football 5
Softball Football 7
Tennis Goalball
Taekwondo Wheelchair Rugby
Wheelchair Tennis
Further, MSL also stated in their pre-qualification
paper book that they have provided Timing &
Scoring in the following events at the Athens
Olympics in 2004:
Event Services
Baseball Timing & Scoring Data
Entry
Equestrian Timing & Scoring
Hockey Timing & Scoring Data
Entry
Football Timing & Scoring Data
Entry
Softball Timing & Scoring Data
Entry
Tennis Timing & Scoring Data
Entry
155
Fifth Report of HLC – Organizing Committee
8.5.3 Based on the above facts it appears that certain OC officials deliberately created a situation
to eliminate MSL Software during prequalification stage. The arguments used by Mr. V.K.
Verma appear to be false, when seen in the light of information available either in the
public domain or in MSL’s bid itself. HLC is of the view that officials like V.K Verma and
other senior OC functionaries, like Lalit Bhanot and Sandeep Arya, were deeply interested
and involved in the concerted wrong doing to manipulate facts and the procurement
process to favor a certain vendor. The evaluation by TCIL is also suspect in the light of these
same facts. The ultimate beneficiary of this situation was Swiss Timing as a sole vendor to
whom the RFP was issued.
8.6 Critical management changes in Technology FA during the selection process
8.6.1 OC made critical organizational changes in Technology FA at key junctures of the selection
process that included appointment of Mr. Sandeep Arya a former advisor to the OC position
of Technology FA head (JDG - Technology) followed by the resignation of serving ADG (Mr.
Sujit Panigrahi who appeared to dissent against the conclusions being reached to issue the
RFP to the sole bidder). The nature and timing of these changes appear to be closely and
directly linked to the selection process in the EOI stage. It appears that such changes may
have been made to deliberately supersede existing employees in the OC such as Mr.
Panigrahi who proved inconvenient to achieve the designed objective of discarding the offer
from MSL.
Sandeep Arya, who was appointed as Advisor (Technology) in September 2009 was
promoted to the position of JDG Technology on 17 November 2009, thus superseding
Sujit Panigrahi who was ADG (Technology) Head of Technology FA. The following issues
were noted while examining Sandeep Arya’s personal file286:
Sandeep Arya was appointed as Technology Advisor with the approval of Mr. V K Verma,
DG, Mr. Lalit Bhanot, SG, and Mr. Suresh Kalmadi, Chairman. His appointment was based
only on a proposal submitted by Mr. Abrar Hussain,(Director, Workforce) and
subsequent approval by the above. No member of Technology FA or COO’s office was
involved in his selection as Technology Advisor.
286
Refer Sandeep Arya’s personal file: Annexure 8.41
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Fifth Report of HLC – Organizing Committee
His appointment as JDG, Technology was based on the report by a selection committee
that comprised of Mr. AK Mattoo, Treasurer, Mr. Lalit Bhanot, SG, and Randhir Singh,
Vice Chairman. Again, no member of Technology FA or COO’s office was involved in this
selection. Also, his selection is preceded only by a note from NP Singh, ADG Admin &
Workforce, where Mr. Singh has indicated that Sandeep Arya is available for Full Time
employment with OC and OC may want to utilize his services more gainfully.
His personal file does not include any of his educational/experience certificates.
According to his CV in the file, he was the chairman of ‘Amtrak Group’ and MD of ‘Presto
Infosolutions Limited’. Research indicates that both the companies listed in his bio-data,
Amtrak Group and Presto Infosolutions; have the same office address i.e “6 Community
Center, East of Kailash, New Delhi”.287
His public profile on a professional networking website www.linkedin.com indicates that
he is the MD of Amtrak Technologies (P) Ltd. since February 1991. However, the
company was incorporate only on 12 February 1996288 as per ROC records.
Through an office order dated November 19th 2009 Mr. Suresh Kalmadi, Chairman OC
distributed all FA’s between Mr. Jarnail Singh, CEO and Mr. V K Verma, DG. The
technology FA from that date reported to Mr. VK Verma289.
Sujit Panigrahi submitted his resignation on 24 November 2009 expressing discontent
over creation of this new position in the Technology FA and stated, in his note to Jarnail
Singh, CEO and Mr. Suresh Kalmadi, Chairman that ‘I sometimes wonder is it by taking a
straightforward, professional stand on evaluation of TSR Tender, despite internal
pressures, has put me into this disadvantageous position by higher management!290’.
Sandeep Arya prepared an office order on 27 November 2009 that disqualified MSL
based on the TCIL evaluation report and his interpretation of Mike Hooper’s comments.
He also attended the Swiss Timing’s technical bid evaluation on 4 December 2009 and
obtained approval to open commercial bid from Finance Sub-Committee on 17
287
Details of the two companies in Annexure 8.42
288
Incorporation Certificate & Linkedin Profile in Annexure 8.43
289
Refer Office Order Dated 19 November 2009: Annexure 8.44
290
Refer Sujit Panigrahi’s HR Records - resignation letter : Annexure 8.45
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Fifth Report of HLC – Organizing Committee
December 2009291 and the Executive Board on 19 December 2009292. Thereafter, Mr.
Arya ceased coming to office with effect from 20 December 2009 due to ill-health and
resigned from his position on 24 December 2009.
Ajit Sirohi joined as a replacement for Sujit Panigrahi on 16 December 2009 293. From his
personal file it was noted that Mr. Sirohi had no notable prior work experience. He took
over the responsibilities of the TSR contract with effect from the date of the opening of
the Commercial Bid on 20 December 2009 on account of the absence of Sandeep Arya
(his immediate supervisor and head of Technology FA). It is to be noted that Ajit Sirohi
was known to Mr. Surjit Lal, DDG Procurement (also involved in the TSR tender
evaluation) as he cited him as his reference in the job application form. Ajit Sirohi
submitted his resignation on 3rd February 2010.
8.6.2 Inducting certain employees/new employees with doubtful or unclear credentials into
decision making positions at times when existing officials were their dissent or had reported
being under ‘internal pressures’ to appoint a particular vendor was not simply accidental. It
is very likely that these changes were orchestrated to facilitate selection of Swiss Timing as
the TSR vendor.
8.7 Financial impact of MSL’s rejection
8.7.1 The financial bid of MSL was opened by CBI as part of their investigation of TSR related
allegations in Commonwealth Games, 2010. The contents of the financial bid were obtained
from CBI to assess the loss incurred by OC in respect of the decision to disqualify MSL. From
a comparison of financials quoted, it appears that the actual cost agreed with Swiss Timing,
was INR 49 crores higher than the quote of MSL as summarized out in the table below.
291
Refer Minutes of FSC Meeting 17 December 2009: Annexure 8.46
292
Please refer to Annexure 8.29
293
Refer Ajit Sirohi’s HR Records: Annexure 8.47
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Table 8.3: Notional Saving on Comparison with MSL Bid
Conversion
Particulars Currency Amount Rate INR
CHF
Commercial Bid of Swiss (Swiss
Timing Frank) 24,990,000 45 1,124,550,000
Commercial Bid of MSL294
(Inclusive of GMS & Inclusive
of Taxes) Euro 12,738,053 66 840,711,498
Difference 283,838,502
Saving on GMS (included in
MSL bid) 210,000,000
Total Notional Saving 493,838,502
8.7.2 On a review of the financial arrangements agreed with Swiss Timing, it is noted that there
was a further financial loss of INR 18.5 crore that was quantified due to substantial delays in
the process of awarding TSR contract.
During the meeting of the Negotiation Committee with Swiss Timing held on 29
December 2009, the committee observed that Swiss Timing’s bid was much higher than
the rate charged for Melbourne 2006. When this question was posed to Swiss Timing,
they gave a percentage break-up for the components in the differential amount. They
attributed 25% of the increase in amounts due to shorter timelines in the case of the
games at Delhi.
294
Refer MSL Commercial Bid: Annexure 8.48
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Table 8.4: Approximate Financial Impact of Delayed Award of Contract
Amount
Particulars Currency
Amount Spent in Melbourne for TSR in 2006
(approx)295 (A) AUD 12,000,000
Average Conversion AUD to INR March 2006296
(B) 0.0310509
Approximate expenditure in INR on TSR
(Melbourne 2006) (C=A/B) INR 386,462,228
Commercial Bid for TSR - D2010 (D) INR 1,124,550,000
Approximate Increase in Amount (E=D-C) INR 738,087,772
25% of the same297, attributable to shorter
timelines as per bidder (F=Ex25%) INR 184,521,943
8.8 Incorrect representation that offer was within budget
8.8.1 The negotiation committee recommended that Swiss Timing’s offer entailed a cashflow of
INR 107.95 crore and should be accepted by the OC as this amount was ‘less than the
budgeted INR 109.23 crores298’.
8.8.2 In this regard, it was noted that the budgeted amount included INR 7.7 crores for legacy
equipments that were not a part of Swiss Timing’s offer. Thus it appears that the committee
misinformed the Executive Board that amounts quoted by Swiss Timing were within the
budget, without taking into consideration budget reductions for items not quoted by Swiss
Timing. Excess value of contract over budget is set out in the table below.
295
Refer Email from Brian Nourse dated 21 May 2009: Annexure 8.49
296
Refer X-rates page: Annexure 8.50
297
Please refer to Minutes of Negotiation Committee Meeting: Annexure 8.51
298 th
Please refer to Minutes of 17 EB Meeting and Budget as Discussed by Negotiation Committee: Annexure 8.852
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Table 8.5: Budget vs Cost of TSR services
Particulars Amount (Cr.)
Budget for TSR Services (A) 109.23
Less Budget for Legacy Equipment 7.7
included therein (B)
Budget Available (C=A-B) 101.53
Net Cash Outflow as a result of TSR 107.96
Contract (exckusive of legacy
equipment) (D)
Excess of Cost over Budget (E=D-C) 6.43
8.9 Role of Indian representative of Swiss Timing
8.9.1 As per minutes of meetings and other records, officials of Swiss Timing in their meetings at
OC were accompanied by representatives of a firm, Gem International. Though Gem
International was not party to the contract between the OC and Swiss Timing, their
representatives had been attending the meetings with OC along with Swiss Timing right
from 2007299. They also accompanied Claude Favre (of Swiss Timing) during the meetings
with the OC to plan for the TSR requirements at venues during July and August 2009, much
before Swiss Timing was contracted for this work300. Incidentally, Gem International also
represented Suis Ascor, the selected vendor for TSR for Shooting Sports301.
8.9.2 In the contract for Games Management Systems (a separate contract) the selected bidder
M/s Gold Medal Systems, nominated M/s Tristar Enterprises as their local point of
contact302. An internet search on Tristar Enterprise and Gem International revealed that the
key personnel of Gem International and Tristar Enterprises are same individuals, i.e. Mr. A.
299
Please refer to Annexure 8.11
300
Please refer to Annexure 8.12
301
Please refer to the Gem International Visiting Cards: Annexure 8.53
302
Please refer to minutes of the Commercial Bid Clarifications for GMS: Annexure 8.54
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Fifth Report of HLC – Organizing Committee
K. Madan and Mr. P.D. Arya. Further, on viewing the location of their office addresses via
Google Maps, it was observed that both the offices exist in the same building. 303
8.9.3 It was further noted that Tristar Enterprises was awarded the contracts for the procurement
of lanyards and printing of accreditation cards. The total amount paid to Tristar Enterprises
by OC till date is INR 1.3 crore304. Certain irregularities were noticed in this procurement as
reported in chapter 24.
8.9.4 The above clearly indicates the involvement of Gem International and Tristar Enterprises in
multiple areas where contracts were awarded by the OC. The committee feels that that
their roles and financial dealings should be examined with respect to any irregularities that
may have been committed.
8.10 Summary and conclusion
8.10.1 It follows from the above that the key officials of the OC have consistently indulged in
malpractice to manipulate OC rules and procedures and to mislead the Executive Board and
OC Sub Finance Committee solely with the intention to eliminate competition and to favour
a particular vendor. The loss caused due to their misconduct would be at least INR 18 crores
due to delayed award of a contract to ‘pre-decided’ vendor and INR 49 crores as compared
with the bid of the rejected vendor. This is evident from the following.
The OC officials deliberately delayed the tender process resulting in a 2 year 9 months
long process. The vendor included an amount of approximately INR 18 crores in the bid
citing delays as a reason for cost increase.
EOI’s were issued from the office of the Secretary General (Mr. Lalit Bhanot) without the
knowledge of the concerned FA and the Technology Consultant. Significant dissent was
expressed by the FA head and the foreign consultant also expressed the view that this
EOI should be withdrawn.
There was an apparent bias of the OC functionaries towards Swiss Timing. There is
adequate evidence that Swiss Timings was interacting with OC officials long before the
EOI was issued. This opportunity was not provided to any of the other potential
303
Results of the search on M/s Tristar Enterprises and M/s Gem International on internet: Annexure 8.55
304
Report from OC F&A
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vendors. The perceived bias went to the extent that in one meeting, Lalit Bhanot
expressed that Swiss Timing had “virtual monopoly in multi-sporting events”.
The eligibility criteria for past experience in the RFP were changed at the intervention of
Mr. VK Verma. The apparent reason for such change was to make the pre-qualification
of vendors more restrictive.
The RFP was changed 3 days after it was published in a manner that again made it more
restrictive on past experience perspective. The direct benefit of this change accrued to
Swiss Timing as they were potentially the only one vendor who would meet the criteria.
It is worthwhile to note that there is no evidence that the change in EOI conditions was
communicated to vendors who “downloaded” the RPF as asserted by the OC. In fact,
there is email evidence that representatives of MSL, who submitted the competing bid,
wrote to the OC stating that the tender was modified and they were not made aware of
the change.
The competing bidder, MSL, was disqualified at the pre-qualification stage itself, without
reviewing its technical and commercial packages and without sufficient cause, especially
as they were the only other vendor who responded to the RFP. The cost difference
between the MSL financial bid and the contract awarded to Swiss Timing for the same
scope of work is estimated to be INR 49 crores.
The decision to disqualify MSL at the RFP stage was taken on the basis of a note
prepared by Sandeep Arya, a previous advisor to the OC, who was designated as the
technology FA head when the evaluation process was on. Sandeep Arya was brought in
to supersede Sujit Panigrahi, who was raising the red flag and expressing concern abount
the bias towards Swiss Timing and the resultant unfair contracting. Sujit Panigrahi
resigned immediately as the management change was made. Further Sandeep Arya
resigned on “health grounds” as soon as the contract was signed.
There is evidence that suggest documents were falsified. There is a file note by Sandeep
Arya that states the disqualification of MSL was approved in an EMC meeting on 30
November. There is no record available with the OC for an EMC meeting held on that
date.
There is also evidence that suggests untrue statements were made in order to show that
award of the contract was within the budget. While stating that the contract amount for
Swiss Timing for INR 107.95 crores was within the budget of INR 109.23 crores the
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negotiation committee omitted to reduce INR 7.7 crores from the budget for legacy
equipments that was not a part of the Swiss Timing bid. Thus, on a like to like
comparison, the amounts quoted by Swiss Timing were over the budget.
8.10.2 The adverse conduct of the following officials of the OC that led to the significant losses as
referred to above is clearly evident.
Lalit Bhanot, who first recommended that Swiss Timing had a monopoly in TSR for multi-
sport events and chaired the meeting where it was resolved to recommend them as the
vendor. He also issued the draft eligibility criteria skewed to favour Swiss Timing, which
was finally incorporated in the EOI which was published on the OC website.
V.K. Verma, who was responsible for narrowing the eligibility criteria in the RFP
published in November before its publication, and further narrowing it after publication.
V.K. Gautam and other OC officials who held the TSR planning meetings in July-August
2009, where Swiss Timing and Gem International representatives were closely involved
in the planning process.
Sandeep Arya, who recommended the disqualification of MSL and opening of only Swiss
Timing’s Technical and Commercial Bid during his brief stint as JDG Technology, after
which he resigned.
The Chairman for approving the appointment of Sandeep Arya in a manner that
appeared to be directly related to awarding of the contract to Swiss Timing.
8.10.3 The role of the apparent Indian representatives of Swiss Timing, Gem International and their
associated company Tristar should be examined in detail as apart from this contract, their
involvement was also clearly visible in other contracts such as Games Management Systems
(refer chapter 11) and Lanyards (refer chapter 24). It appears that these entities and their
related functionaries such as A.K. Madan and P.D. Arya clearly operated as agents for
multiple foreign vendors in dealings with the OC.
8.10.4 Even though officials at OC showed an unprecedented inclination towards Swiss Timing in
awarding the contract, Swiss Timing considers the support and efficiency of OC as inferior
and cites the additional costs and risks in Delhi as one of the key reasons for charging a
higher amount. In a full page advertisement by Swiss Timing in Hindustan Times, dated
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Fifth Report of HLC – Organizing Committee
08/03/2011 the agency clarified its position on the TSR controversy and mentioned the
following besides other reasons:305
“Before, during and after the Games, the Swiss Timing experts had to work under
disastrous, chaotic conditions. Despite this situation, Swiss Timing delivered an
impeccable service to the athletes of the Commonwealth Games 2010”
“Finally, the financial and the administrative conditions, as well as the support and
efficiency of the Organizing Committees in Delhi and Melbourne were unfortunately
absolutely not comparable; the additional costs and risks in Delhi of course reflected in
the offer”
305
Please refer to Annexure 8. for a copy of the Advertisement from Swiss Timing in Hindustan Times dated 8/3/2011
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9 Chapter 9: Technology Contracts through
TCIL
Our review of this case indicates that outsourcing of procurement without any safeguard
against an irregular selection of contractors and/or excess purchase, created opportunity for
wrong doing. Additional layers in the procurement resulted in an additional and avoidable
cost incurred by OC.
9.1 Background
9.1.1 The OC appointed Telecommunications Consultants India Ltd. (TCIL) in October 2009 for
providing Telecom, IT and Networking Projects for Commonwealth Games. The scope of
services for TCIL covered turnkey implementation on such projects on a cost plus basis. OC
agreed that as part of the contract, TCIL will subcontract most or all of the projects and
would be paid a management fee for its services. We reviewed the records of procurement
files and records as made available in the office of TCIL, Delhi.
9.1.2 The contract with TCIL was signed on 22 October 2009 by Mr. Lalit Bhanot, Secretary
General, based on approvals of the EMC306.
9.1.3 The scope of work for TCIL was initially 4 contracts which was further increased to 13
contracts for total value of approximately INR 80 crores307. The TCIL’s fees was payable at 9
% of the landed cost (total cost of products and services including all the applicable taxes
308
which are charged by the vendor / supplier) . We reviewed 5 contracts valued at INR
69.13 crores (77% of the total value of all contracts) engaged into by TCIL based on
significance of spend and nature of services. For all these contracts, payments were made
by the OC to TCIL who paid its sub-vendors.
306
Copy of Agreement – Annexure 9.1
307
The final invoices for some contracts through TCIL are still pending submission to OC and hence, exact amount cannot
be determined.
308
The detailed list of contracts finalized through TCIL – Annexure 9.2
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Table I: Summary of TCIL Contracts reviewed
Tender Tender Name Value
No.
(` in crores)
T-2 Tender for Supply, Installation, Testing & Commissioning of Cabling 11.62
System for Commonwealth Games Delhi 2010.
T-3 Tender for Supply, Installation, Testing & Commissioning of Voice 1.63
over IP (VoIP) Telephony Solution at GHQ, Commonwealth Games
Delhi 2010, New Delhi City Centre Tower-II
T-4 Tender for Supply and Operational Support for Network Equipment 28.94
for Commonwealth Games Delhi 2010.
T-5 Providing Computer Hardware for Commonwealth Games Delhi 8.05
2010.
T-10 Providing Office Automation Equipment for Commonwealth Games 18.89
Delhi 2010.
Total 69.13
9.2 Selection of TCIL without the knowledge or concurrence of COO
9.2.1 TCIL introduced themselves to OC via proposal dated 09/09/2009 from R K Upadhyay,
Chairman & MD TCIL, addressed to Mr. Suresh Kalmadi, Chairman OC. In this proposal TCIL
expressed their interest in taking up the assignment on turnkey basis for telecom and IT
projects at CWG D2010.309 This proposal was forwarded to EMC for consideration by Mr.
Sandeep Arya, Advisor (Technology) through his note dated 09/09/2009. 310 It should be
noted that Mr. Arya was appointed on 07/09/2009 (2 days before this proposal) without any
selection/search committee or involvement of any member of Technology FA related to his
309
Proposal sent by TCIL to Chairman, OC – Annexure 9.3
310
Please refer to Annexure 9.4 for the note sent by Sandeep Arya
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appointment. His adverse conduct in the award of the TSR contract as set out in chapter 9 of
this report has already been discussed.
9.2.2 Further to the above proposal the EMC met on 11/09/2009 at 6:00 PM in the office of Mr.
Suresh Kalmadi, Chairman to discuss and decide upon the proposal sent by TCIL. In this
meeting EMC considered the proposal sent by Mr. Arya for the appointment of TCIL and
approved the same. However, the committee did not discuss or decide upon the
prospective fee for TCIL and neither is there any mention of the fee by TCIL in their
proposal.311
9.2.3 In a letter dated 16/09/2009, from J S Chabra, TCIL to Chairman, OC, Mr. Chabra mentioned
that TCIL’s cost shall be 10% of the landed cost of the procured goods. Following this Mr.
Lalit Bhanot wrote to TCIL in his letter dated 17/09/2009 and confirmed that OC will engage
the services of TCIL at 9% fee of ‘landed cost’. The same was confirmed by TCIL via their
letter dated 21/09/2009.312
9.2.4 From the minutes of 8th OCFC meeting held on 22nd September, 2009, it is evident that
appointment of TCIL was not done in consultation with VK Gautam, COO to whom the
Technology FA reported. In fact Mr. Gautam expressed his surprise as per the minutes when
VK Verma, DG informed the OCFC about their appointment. In this meeting, Mr. Gautam
stated that he is not in agreement with appointment of such an agency in his FA without his
knowledge.313 Mr. Gautam also opined that by appointing an agency with no games time
experience as the interface will not only hit the whole principle of engaging agency with
games time experience in Olympics, Asian or Commonwealth Games but will also lead to
operational risks as well as wastage of limited OC resources.
9.3 Multiple layers of contracts causing significant extra costs
9.3.1 The Technology FA, was a strong team of about 75 professionals. Additionally, as set out in
the consultants section, a number of consultants were also engaged for the Technology FA.
Given that the OC already has put in place significant infrastructure, it is not evident why a
311
Please refer to Annexure 9.5 for the EMC meeting minutes
312
Please refer to Annexure 9.6 for copies of communication between TCIL and OC
313 th
Copy of MoM of 8 OCFC meeting attached in Annexure – 9.7
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third party was brought in for the sole purpose of sub-contracting on a cost plus basis, with
its consulting fees at 9% of the total landed cost of the tenders. Besides, it is not clear why
some of the consultants or OC staff could not be associated with TCIL team for ensuring that
OC rules were broadly observed in the contracting process. We noticed that OC did not
inquire with the TCIL about the fairness and transparency of procurement or reviewed their
tender files to safeguard OC’s interest. No audit clauses or service level agreements to this
effect were in the TCIL contracts. In fact, OC issued a directive to TCIL stating that they
should ensure that all queries and tasks be handled by them directly without any back
reference from OC unless absolutely essential314.
9.3.2 Our review of the contracting procedures followed by TCIL indicated multiple layers of
contracts and sub-contracts executed in relation to the final delivery of services for which a
contract could have directly been executed between the OC and the supplier. By default,
each extra layer contributed to additional cost which was paid by the OC. One such example
for the procurement of VoIP based telephony system is set out below. Even if one were to
conservatively assume a mark up of 5% at each level (even though TCIL had a 9%), a INR 100
procurement that could have been made directly from the supplier, cost the OC INR 122 (a
22% inflation) through 4 layers of sub-contracting.
314
Copy of Letter attached – Annexure 9.8
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Figure I: Layers in the VoIP contract
st
1 Layer
nd
2 Layer
rd
3 Layer
4th Layer
9.4 VOIP contract
9.4.1 TCIL awarded the VOIP solutions contract for INR 1.63 crores to M/s eRoads with multiple
layering of sub-vendors as set out in figure I above. It may be noted that there were 3
vendors short listed by TCIL based on the responses to the tender received by them. The
underlying technology provided by all these 3 vendors was of Avaya Inc.
9.4.2 We noted that M/s Avaya Global Connect Ltd. (AGCL) was one of the rejected bidders on
technical grounds in this tender and that they were the subsidiary of Avaya Inc in India. A
summary of the evaluation of AGCL by the technical committee of TCIL is set out below.
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Table 9.2.: TCIL technical evaluation
TCIL Technical evaluation committee Remarks
comments
AGCL had not submitted any OEM AGCL had actually submitted the OEM
authorization. authorization certificate from Avaya Inc.315
Surprisingly, the other 3 short listed bidders
(M/s eRoads, M/s Intec and M/s TelExcel) also
submitted OEM authorization from Avaya Inc
which stated that the services would have to
be procured from AGCL only.316
AGCL did not submit the ISO certificate. M/s AGCL were the subsidiary of Avaya Inc at
the time the determination was made. They
AGCL submitted the ISO certificate of Avaya
submitted the ISO certificate of M/s Avaya Inc.
Inc. The technical evaluation committee
rejected the bid of AGCL citing that Avaya
Inc is different from AGCL.317
9.4.3 TCIL rejected the bid of AGCL citing that they did not have an ISO certificate and awarded
the contract to M/s eRoads318. In reviewing the award of the contract, we observed that the
manufacturer of the equipment, Avaya, clearly mentioned in its OEM authorization to M/s
eRoads that they would have to procure the equipment through M/s AGCL. The extract of
the authorization is reproduced below.
315
AGCL OEM authorization certificate copy attached in Annexure 9.9
316
OEM authorization certificates attached in Annexure 9.10
317
ISO Certificate of Avaya Inc submitted by AGCL – Annexure 9.11
318
Please refer to Annexure 9.12 for the TCIL technical evaluation report
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9.4.4 Based on the above, it is evident that TCIL rejected the bid of AGCL on a technicality with
the full knowledge that the vendor to whom the contract was being awarded would
necessarily have to source the equipment from AGCL.
9.4.5 Thus the TCIL technical evaluation committee members indulged in a blatant malpractice to
favor a particular supplier in the award of this contract. The OC Technology FA has denied
any knowledge of such sub-contracting at this stage.
9.5 Office Automation Equipment contract
9.5.1 TCIL awarded a contract of the supply of office automation equipment (comprising printers,
scanner, copiers, etc) to M/s A2Z Maintenance and Engineering Services Limited (A2Z) for
INR 18.89 crores. This is the same entity that obtained the contract for cleaning and waste
management from the OC (supply of labor and materials).
Lack of credentials of the vendor
9.5.2 A2Z are an engineering and infrastructure company and as mentioned on their website,
have a service portfolio which includes Transmission, Distribution, Feeder Renovation, Rural
Electrification, Railway Electrification, IT Application – Power Sector and Service Value
Chain. Providing Office Automation Equipments like Printers, Photocopiers, Scanners and
Fax Machines does not figure anywhere in their service portfolio listed on its website319.
9.5.3 Most of the equipments sourced from them are manufactured by Xerox, a well known
brand. The website of Xerox provides a detailed list of 12 authorized dealers in the Delhi
Region. M/s A2Z Maintenance & Engineering services do not figure in that list320.
319
Service offerings of A2Z – Annexure 9.13
320
List of authorized suppliers of Xerox in Delhi region – Annexure 9.14
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No bid submissions by parties other than selected vendor
9.5.4 The tender was issued on 31 March 2010 and representatives of Xerox, Canon, HP, Ricoh
India and A2Z attended the pre-bid meeting on 6 April 2010321. Following this meeting, only
one bid was submitted and that was of A2Z in consortium with Xerox. Considering the high
value of the bid amount, it is surprising that no bids were received from any of the other
parties such as Canon, HP or Ricoh India.
Notice inviting tender was misleading
9.5.5 Notice inviting tender published in the newspapers appears to be ‘misleading’. The text
mentioned in the NIT advertisement published in 4 newspapers was: “Tender No.:
TCIL/S&TC/CWG/OAE/T-10 dated March 30, 2010 for Providing Audio Visual equipment for
Commonwealth Games Delhi 2010.”322 This could possibly explain the low response to the
tender notice.
Access by bidder to confidential information- potential wrongful conduct
9.5.6 As per tender documents, the initial deadline for submission of bids was 13th April, 2010.
However, there were six (6) extensions to the deadline and bids were finally opened on 17th
May, 2010. The corrigendum to revise the submission deadline was published only on TCIL’s
website323 whereas the NIT was published in daily newspapers.
9.5.7 On 11th May, 2010, representative of M/s A2Z Maintenance & Engineering services Ltd,
(“A2Z MES Ltd.”) wrote a letter to the General Manager, TCIL saying “Since we have already
submitted our bid in original well before the defined deadline for the subject tender.
However, your organization has taken a decision to extend the tender date on account of
single bid that too from us, so you are kindly requested to return our bid for resubmission as
per revised date.”324
321
Minutes of the pre-bid meeting attached in Annexure 9.15
322
Newspaper advertisement and NIT attached in Annexure 9.16
323
Copy of Corrigendum – Annexure 9.17
324
Copy of Letter attached in Annexure 9.18
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9.5.8 It is highly questionable how the vendor(s) got to know that they were the sole bidders for
this contract as none of the corrigendum’s issued mention the reasons for extension. In our
view, access of the vendor to such information at that stage could be possible if the TCIL
officials would facilitate the matter.
9.5.9 The original sealed bid was returned to A2Z MES Ltd. on the same day 325 and they submitted
a revised bid. This action of returning the original bid was highly questionable. Given that
A2Z had full knowledge that they were the sole bidders, the possibility of manipulation of
rates in the resubmitted bid cannot be excluded. This however cannot be verified as
original bids were returned by TCIL to them.
9.6 Network equipments and servers
9.6.1 We noted that in case of certain procurements for network equipments and servers, there is
potential over invoicing by TCIL for equipments that as per OC Technology FA have not been
used.
9.6.2 The summary of initial estimates (as per LoI issued to the supplier), final procurements and
actual quantity per OC’s report based on NMS (Network Management System)326 is
summarized below:
325
Please refer to Annexure 9.18 – Highlighted in the letter
326
Report provided to us by OC Technology FA – Annexure 9.19
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Table 9.3: Summary of Wasteful Procurement in Network Devices and Servers
Hardware Initial Estimate Final Quantity Actual functional Extra Procurement
Procured quantity
(as per BOQ in
Letter of Intent) (as per final BOQ (as per OC’s report Quantity Cost
from TCIL) based on the NMS)
Network 1206327 2502328 1926329 576 INR 5.04
Devices Crore
Servers 38330 106331 83332 23 INR 31.55
Lacs
9.6.3 Potential losses due to such extra procurement aggregate to INR 5.04 crore333 for network
devices and INR 31.55 lacs334 for servers as per data provided by the Technology FA. We
have been informed that these invoices pertaining to excess billing by TCIL have been
withheld and will not be paid by the OC. However, the reasons for such over-billing by TCIL
and failure of OC to check this aspect earlier have not been provided.
9.7 Summary and conclusions
9.7.1 Sourcing of contracts by the OC through a third party, TCIL, in the manner was without
much justification. This created opportunity for potential misconduct on the part of TCIL
due to the following.
327
Copy of LoI attached in Annexure 9.20
328
Copy of TCIL report sheet attached in Annexure 9.21
329
Copy of NMS report sheet attached in Annexure 9.22
330
Copy of LoI attached in Annexure 9.23
331
Copy of TCIL report sheet attached in Annexure 9.24
332
Copy of NMS report sheet attached in Annexure 9.22
333
Our comparative analysis of actual vs billed – Annexure 9.25
334
Our comparative analysis of actual vs billed – Annexure 9.26
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For procurement of items such as printers and copiers, OC paid a 9% commission when
the technology FA itself had more than 75 employees apart from various “consultants”
and there was a full-fledged procurement FA in OC.
The third party vendor, TCIL, issued contracts through a chain of sub-contractors without
going directly to the actual supplier of products. This again caused a cost loading at each
level of sub-contracting the burden of which was borne by the OC.
There were some clear indications of misconduct in awarding contracts
AGCL were disqualified for a technicality by TCIL under the contracting terms whereas
they actually supplied the goods to the winning bidder. Procurement could have been
made from them in the first instance.
A2Z appeared to have access to inside information as they had knowledge of them being
the single bidder, while the deadlines were extended multiple times.
9.7.2 The probable misconduct on the part of TCIL officials involved in the contracting for IT
projects that led to irregularities in the award of the contracts cannot be ruled out and
warrants further investigation.
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10 Chapter 10: Games Management System
The contracting process for this critical and priority area was started very late and followed
an unduly restrictive prequalification process to limit competition. OC had to pay
approximately five times the price for similar services offered in Melbourne Games by the
same vendor. The senior management (Chairman, COO, Head Technology FA) are
accountable for the delay and avoidable excess expenditure of approximately INR 17 crores
over what was spent for similar work at CWG Melbourne 2006.
10.1 Background
10.1.1 The OC awarded the contract for provision of Games Management System at
Commonwealth Games, 2010 to Gold Medal Systems (GMS) on 22 March 2010335. Games
Management System is a software system required for the purpose of administration of
games and managing various aspects related to the actual conduct of the games such as
accreditation, games staffing, transport, scheduling of events, etc.
10.1.2 The contract to GMS was agreed at a contract value of INR 21 crore 336. The key aspects
related to the award of the contract are provided in the table below.
Table10. I: Overview of the contract
Contract Games Management System Services
Contractor M/s Gold Medal Systems
Contract Date 22 March 2010
Contract Value $4,672,669 / INR 21,02,70,105
Details of Work
Providing a software system with the following modules
Accreditation
335
Refer Extract from GMS Contract: Annexure 10.1
336
Refer Fees and Payments Schedule: Annexure 10.2
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Workforce Management and Information Systems
Workforce Scheduling
Arrivals and Departures/Protocol
Details of Bids Received
Gold Medal Systems, Inc. (Canada)
MSL Software (Spain)
ProtaTECH India Solutions Pvt. Ltd. (India)
View Point Technologies, Canada
Details of Bidders Qualifying Pre- Only one bidder qualified in the pre-qualification, i.e. Gold
qualification Round Medal Systems. Hence the technical and commercial bids of
only this vendor were opened.
10.1.3 The OC received 4 bids in response to the tender issued by them. A brief chronology of the
key events in the contracting process are set out in the table below.
Table 10.2: Chronology of tendering process for Games Management System
Date Particulars
Proposal sent to Finance Committee by Sujit Panigrahi ADG (
2 September 2009
Technology) for Examination and Clearance
9 October 2009 Publication of RFP
Last Date for Bid Submission & Opening of Bids for pre-qualification
4 November 2009
evaluation
16 November 2009 Technical Bid Evaluation
24 November 2009 Queries on Technical Bid sent to Gold Medal Systems
27 November 2009 Response to Technical Bid Queries received from Gold Medal Systems
3 December 2009 Opening of Commercial Bid
11 December 2009 Evaluation of Commercial Bid
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18 December 2009 Commercial Bid Clarifications from Bidder
Email sent by Negotiation Committee for clarifications to Gold Medal
30 December 2009
Systems
31 December 2009 Response from Gold Medal Systems to Negotiation Committee
2 January 2010 Meeting of the Negotiation Committee
17th Meeting of OC Finance Committee: where it was noted that Gold
7 January 2010
Medal Systems bid ‘not unreasonable’
15 January 2010 17th EB Meeting: Approval of Gold Medal Systems Offer
18 January 2010 Issue of Letter of Intent
March 22, 2010 Contract Signed for $4,672,669 / INR 21,02,70,105
10.2 Potentially restrictive bidding
10.2.1 It has been noted that although 4 vendors submitted their bids in three parts (pre-
qualification, technical and financial), 3 of them were rejected in the pre-qualification stage
itself337. Thus there was only 1 vendor whose bids were evaluated from a technical and
pricing perspective. This vendor, GMS, was ultimately awarded the contract with no
comparative technical or pricing evaluations.
10.2.2 One of the vendors, View Point Technologies, was disqualified for not submitting the soft
copy of prequalification bid, processing fee, and EMD. The criteria that led to the
disqualification of the other two vendors (MSL Software and ProtaTECH India Solutions) in
the pre-qualification stage were related to lack of relevant previous experience as per the
eligibility criteria.
10.2.3 According to the requirements of the RFP only vendors who had provided services at
specific events were eligible338. On comparison of the potential vendors who would be
eligible against the criteria, the following can be noted:
337
Refer Pre-qualification Evaluation: Annexure 10.3
338
Refer Eligibility Criteria in RFP: Annexure 10.4
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Table 10.3: Relevant events per the prequalification criteria and the vendors that primary GMS
supplier339
Event Primary GMS Supplier Participation in D2010 GMS Tender
Asian Games, Doha SsangYong Information Did not bid
2006 and Communications
Corp. (SICC)340
Olympics Games, Atos Origin341 Did not bid
Beijing 2008
Commonwealth Gold Medal Systems All three vendors participated via single bid
Games, Melbourne (GMS), GMT, Certain through GMS (with a MOU). GMS
2006 Software [Three submitted a tender for the entire scope of
vendors were engaged work that actually formed separate
to provide different contracts in Melbourne.
components]342
10.2.4 From the above, the following key issues emerge.
In reality, based on the OC’s restrictive criteria, there would be only three possible
vendors343 who would have been eligible in the pre-qualification stage
However, the OC still proceeded with an open tender with such criteria knowing fully
well that the population of eligible vendors was restricted to the three vendors above.
Two of the vendors who would have been eligible did not submit a bid, and hence, this
resulted in a non-competitive situation for GMS.
339
Based on the secondary research performed on the information available in public domain
340
Refer News Article on Ssangyong: Annexure 10.5
341
Refer News Article on Atos Origin: Annexure 10.6
342
Refer Annexure 10.7
343
Refer Extract from Minutes of Negotiation Committee regarding GMS Providers: Annexure 10.8
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The three other vendors who actually submitted bids were rejected, one for non-
submission of required documents, and the others on the basis on non-conformity with
the prequalification criteria.
It is not evident, if the OC made any attempts to contact or solicit bids from the other
vendors to provide a level playing field or fair competition between vendors.
10.3 Same vendor paid approximately 5 times more than Melbourne
10.3.1 As noted above, GMS also provided similar services at the Melbourne 2006 games. It has
been noted that as per the vendors own submissions in price negotiations, the costs for
GMS for D2010 were 5 times greater than Melbourne as explained in the table below. In
rupee terms, the differential amount aggregates to INR 17 crores.
Table 10.4: Comparison of GMS cost for Commonwealth Games at Delhi to the cost at Melboune.
Source: Evaluation of GMS Commercial Bid344
Particulars USD Conversion INR
Amount spent on GMS : CWG Melbourne 2006
(approx) 921,654 45 41,474,430
Amount Contracted for GMS : CWG Delhi 2010
(USD 4797669 – Cash Discount USD 125000) 4,672,669 45 210,270,105
Excess cost at D2010 over M2006 3,751,015 45 168,795,675
10.3.2 Amongst others, GMS justified the reasons for such an astronomical increase in the costs as
follows345.
“Increased risk” of submitting a “fixed bid contract” and increased “reputation risk due to
tight delivery timelines”.
Requirement of “Rapid development” due to “less time”.
344
Refer Evaluation of commercial bid on 11 December 2009: Annexure 10.9
345
Please refer to the Letter from M/s Gold Medal Systems dated 13 January 2010: Annexure 10.10
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10.3.3 From the reading of available documents, it is evident that the process for initiating this
contract started only in September 2009 with just a year left for the games. The final
contract was awarded in March 2010 with only 6 months left for the games. In contrast, the
time available to the vendor in Melbourne was 18 months346. The Technology FA (of whom
the Games Management System was a major component) was identified as critical and a
priority area in the General Organizational Plan347 (GOP Ref: Page 102) of OC in 2007.
Therefore, the late start of the contracting process for Games Management System was
inexplicable. Such delay can be seen to directly result in monumental increase in costs
claimed by the vendor.
10.3.4 Further, this situation undeniably gave the vendor an upper hand in the price negotiation,
particularly since it was the only bidder left after pre-qualification stage. This is evident from
the facts mentioned below.
Mr. V.K. Verma (DG), in his note dated 24 December 2009, stated that “…For reasons,
which now need to be documented, persistent delays and inadequacy in the Functional
Area of Technology over the last two years has seriously handicapped the Management
now with virtually no option…The Technology FA was in the charge of VK Gautam, the
COO and the Executive Board of the OC as also the CGF have, on several occasions,
expressed their concern and stricture for persistent under-delivery in this area till late-
348
October this year when the Functional Area was transferred from his control. ”
In their letter to the Negotiation Committee dated 31 December 2009349, Gold Medal
System gave the OC an ultimatum, saying“…With only nine months remaining many of
the issues which were in ‘critical’ state at the time of making the offer are already in
‘crisis’ stage due to the ever advancing timelines. Issues in this stage require far more
dedicated time and resources to resolve than the identical issues do when time is
available. Again, M2006 had twice as much time to deal with arising issues, allowing for
a much more effective deployment and support method…Any delay longer than this, and
346
Refer Brian Nourse’s Note dated 15 December 2009: Annexure 10.11
347
Refer Page 102 of GOP: Annexure 10.12
348
Refer Note by VK Verma dated 24 December 2009: Annexure 10.13
349
Refer Response from Gold Medal Systems to Negotiation Committee dated 31 December 2009: Annexure 10.14
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we have very grave concerns and may have to reluctantly decline the offer since the
timelines at this stage will not permit any good and responsible GMS provider to deliver
an excellent product…”
The decision to accept the offer made by Gold Medal Systems was made during the 17 th
Meeting of the Executive Board of the Organising Committee (held on 15 January 2010).
Following is an extract from the minutes of this meeting, where the OCFC minutes
pertaining to GMS were discussed350: ‘…The (OC Finance) Committee also noted that M/s
Gold Medal Systems had given a clear ultimatum in their mail dated 31 December 2009,
stating that in case the acceptance of their offer was not conveyed within 7 days, even
they might not be able to undertake the work later. This left no option to the OC which
was already at a critical stage as far as technology was concerned. As a matter of fact,
the Committee also noted that one of the factors leading to the high costs was the short
time of 9 months available for the installation of the system. In the circumstances,
notwithstanding the fact that the present bid was relatively high, there was no option
but to accept the same so that the OC was in a position to deliver the Games properly…’.
Brian Nourse (Consultant ,Technology), in his evaluation note on GMS dated 15
December 2009351, stated that “…The M2006 tender process was conducted early and
was considered highly competitive, allowing a wide range of vendors to submit
proposals…’; and indicated that these were some of the factors that proved
disadvantageous to the OC of CWG 2010 in terms of pricing.
10.4 Role of Tristar Enterprises
10.4.1 During the commercial bid clarification meeting held on 18 December 2009, M/s Gold
Medal Systems, nominated M/s Tristar Enterprises as their local India partner who assumed
the role of permanent contact. The association of OC with M/s Tristar Enterprises and its
key personnel is not beyond suspicion as can be noted in the chapter 9 and chapter 24 of
the report.
350 th
Refer Minutes of 17 Executive Board Meeting: Annexure 10.15
351
Refer Brian Nourse’s Evaluation Note on GMS: Annexure 10.16
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10.5 Summary and conclusion
10.5.1 It is evident that restricted sourcing and significant delays resulted in a contract that was
INR 17 crores more than (and 5 times over) the previous contract executed by the same
vendors for predominantly the same scope of work at Melbourne Games 2006.
10.5.2 It is evident that the OC did not take adequate measures to contact the appropriate vendor
population and went about wasting time by issuing an RFP under open tender, even while it
set a highly restrictive criteria which would allow only three bidders to qualify. It is not
surprising that the other vendors, who were ineligible ‘ab-initio’ were rejected at the pre-
qualification stage itself.
10.5.3 The entire contracting process resulted in only one vendor being evaluated on technical and
commercial aspects. Decisions were taken at a crisis stage, when delivery was the
predominant concern, resulting in no capacity of the OC to negotiate with the vendor.
10.5.4 The delay brought on huge, unwarranted financial expenditure, which could have been
avoided, had there been adequate time to conduct proper negotiations. The responsibility
for such delays is directly attributable to the Chairman and his team of senior management
in Technology FA, and COO who failed to monitor the progress of critical areas identified in
the GOP and failed to ensure that contracting process starts in a timely manner.
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11 Chapter 11: Games Village Master
Caterer
The contract for games village catering resulted in a complicated sequence of events
wherein it took 1 year from the time the EOI was issued till the contract was awarded. At
each stage, it was very apparent that as per the evaluations and assessments of the OC only
one vendor appeared eligible for this contract. Due to significant time delays, the OC put
itself in a situation where they were forced to accept apparently unidirectional terms and
conditions imposed by the vendor that caused significant additional costs and delays. The
adverse terms were approved by the Chairman OC under ‘emergency circumstances’ even
though there was a view within the OC’s FSC that the RFP process was ‘vitiated’ and ‘scope
obverted’. There were measurable increments in costs towards Part A of the RFP owing to
the conduct of OC officials at every stage. Even the final tendered cost went up by INR 8.58
crores during negotiations after the bid was received. The rationale of time delays was
repeatedly used by various OC functionaries throughout the process as a justification for cost
increases, which was attributable solely to their own actions.
11.1 Background
11.1.1 The Catering FA was responsible for providing catering services during CWG. The scope of
work primarily included providing catering at the Commonwealth Games Village (‘CGV’), all
competition and non- completion venues. All the venues including CGV were divided into
11 packages, each package representing a venue or a group of venues. The Package 9
represented CGV.
11.1.2 The package 9, games village catering (CGV) contract (which constituted the biggest catering
contract by value), was processed by OC through a period of nearly 12 months with an
avoidable extra cost of approximately INR 9 Crores and ‘fire fighting’ to meet the crisis
caused by extreme delays. Initially the RFP contained two parts: Part A- for catering and
Part B for the kitchen equipment and installation. As the first RFP was cancelled and the
second RFP ran into trouble due to various reasons, OC had to procure the same services in
four parts ( catering, purchase of equipments, airfreight of the same and installation and
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purchase of certain additional equipment) causing all-round increase in cost and additional
work due to repeated tendering. This section of the report discusses the contracting process
for package 9, the games village catering – CGV.
11.1.3 The timelines involved in this contract for Package 9 (CGV) are as follows:
Table 11.1:
Date Particulars
June 2009 Release of EOI for all 11 packages including the games village
25 vendors responded out of which 7 were disqualified
10 out of remaining 18 vendors applied for this package.
Only 4 were selected for issuance of RFP and others were disqualified.
These four were:
Global Infusion Group (Applied for all packages)
Sodexo (Applied only for this package)
Delaware North (DNC) in partnership with Taj Sats (Applied only
for this package)
ITDC Limited (Applied for packages other than 9)
June 2009 Constitution of panel for advising and deciding on master catered for all
tender packages. The panel included COO, ADG (Finance), DDG
(Procurement), Catering Consultant, Catering FA- 2Team members.
October 2009 Issuance of RFPs
November 2009 Review of RFPs. Only one vendor responded to RFP:
DNC (no EMD provided as per the requirements of RFP)
December 2009 Note from Chairman stating that in absence of EMD, bid of DNC should be
cancelled and the retendering should be carried out.
January 2010 Informal opening of Commercial bid of DNC.
February 2010 Retendering of RFP without release of EOI.
March 2010 Revaluation of technical bid submitted. Two bidders responded namely:
M/s Delaware North (Partners: Taj Sats, PKL London, BMR – Chartered
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Accountants).
M/s IRCTC (Partners : Xtreme Consulting PvLtd, PKL London, SGS)
(PKL) common partner in both the consortiums.
935 marks awarded to DNC compared to 644 to IRCTC.
26 March 2010 Opening of commercial bid.
30 March 2010 to 19 DNC expressed its inability to provide the services since PKL
May 2010 (Consortium partner) does not intend to participate in the project.
High level team sent from OC on 14 April 2010 to Melbourne to
negotiate with DNC.
DNC informs OC that there should be a direct contract between PKL
and OC regarding purchase, shipping and installation of kitchen
equipment. OC agrees to the proposal.
Chairman states that only five months are left for the games. No time
for a second retendering, therefore change scope of work in RFP.
20 May 2010 Approval by CEO/Chairman of the revised cost and intimation to DNC
Final award of contract to DNC for catering for this package.
11.2 Flawed budgets and the conduct of OC officials
11.2.1 A summary of the revisions made in the budgets352 for catering for CWG 2010 is set out
below.
Table 11.2:
Date of budget/ Amount allocated Amount allocated Reasons/Justification for
revision towards Catering (In towards Package the revision
INR Crores)353 9 CGV (In INR
Crores)
352
Refer to the section on budgets for additional details.
353
This includes budget for entire catering at CGV and all venues (competition and non-competition venues).
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Date of budget/ Amount allocated Amount allocated Reasons/Justification for
revision towards Catering (In towards Package the revision
INR Crores)353 9 CGV (In INR
Crores)
9 April 2007 67 33.07 Not applicable
November 2009 63.33 33.07 Budgets as approved by
Government of India
24 June 2010 116.8 75 The budget amount
includes re-
(Includes Re-
appropriation of
appropriation of
approximately INR
budget towards
53.50 Crores.
catering)
Increase due to huge
cost quoted by the
vendor for services to
be provided under
package 9 (CGV).
Substantial delays by OC
in finalization of the
vendor for catering at
CGV including
retendering of RFP.
11.2.2 From the above, it is evident that huge increase of catering budget (INR 75 Crores from INR
34 Crores) for the CGV in 18 months was mainly caused by reckless delays, as documented
by OC, and failure to adhere to rules and OC Chairman’s order for cancelling the tender.
Evidently, the revalidated budget appears to be a baseless exercise as seen from the
subsequent increased budget. The increase in the final budget was based on rates quoted
by the vendor in single bid situation, rather than on a well informed and properly validated
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estimate by OC management. The final budget figure was arrived as a compulsion due to
the failure to control delays and pressure to deliver the mandatory catering at CGV at any
cost. The Chairman appears to be mainly responsible for the escalating delay resulting in
cost increase while the senior management in OC, the Catering FA was responsible for
failure to adhere to rules in processing the tender and norms of prudence.
11.3 Inconsistencies at the EOI stage
Not distinguishing between CGV and ‘other’ catering
11.3.1 The EOI released on 4 June 2009 referred to packages 1 to 11 which included all
competition, non- competition, training venues and CGV( ‘package 9’)354.
11.3.2 From a reading of the scope of work in the EOI, it is evident that the criticality and importance of the
catering at CGV, which was most crucial for the conduct of games was not adequately highlighted as
was warranted in such a situation. Given that the requirement was for ‘obligatory catering for
355
approximately 8000-10000 athletes on a 24/7 basis’ and the expenditure was significant, the
clubbing of the CGV with other venues at EOI stage without appropriate emphasis and detailed
information was seemingly imprudent and appears to be a failure despite the association of highly
reputed consultant who were to provide expert inputs to OC officials.
Short listing resulted in a very small eligible vendor base
11.3.3 While the Catering FA invited responses to all packages in the EOI, ultimately they used
these responses to issue the RFP for the CGV package only. This indicates total lack of
clarity on the part of Catering FA which might have led to limited understanding of EOI
participants on the full scope and extent of services requested.
11.3.4 In view of the above, it is very much possible, that had the scope of work on the CGV been
explained in a detailed manner in the EOI, the eligible vendor base may have been broader.
It is pertinent to note that the process from the start to the EOI till the issuance of the RFP
lasted 6 months and resulted in the RFP being issued to only 4 vendors.
354
Refer Annexure 11.1.
355
Note written by Mr. Vijay Kumar Gautam (COO- OC).
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Fifth Report of HLC – Organizing Committee
11.3.5 The OC received 25 responses to the EOI for all packages. Of this, seven parties were
disqualified on account on applying as sub contractors. Of the rest, 10 parties applied for the
CGV package of which six were disqualified on non fulfillment of various eligibility criteria as
laid under EOI. Consequently, there were only 4 respondents356 to whom the RFP was
issued on the basis of the pre-qualification of the EOI.357
11.3.6 We noticed evidence of conflicting views within the senior OC officials regarding the issue of
RFP for all packages. Mr. V.K. Verma, DG Catering was of the view that RFP for CGV be
released first as CGV was ‘most critical’. However, Mr. Vijay Kumar Gautam (COO-OC) was
of the view that RFP for all packages should be released immediately as timeframe for
settling of one RFP is long. In the end, the RFP was issued for the CGV package only. 358
11.4 Delays and mismanagement at the first RFP stage
Delays in forming appropriate committees
11.4.1 The RFP for package 9 (CGV) was finally issued on 3 October 2009 after a gap of 6 months.
Further, the OC also prolonged the formation of the evaluation committee for opening of
the commercial bid till December 2009359.
Only a single bid received
11.4.2 Based on the RFP issued to four parties short listed under the EOI, only one vendor (DNC)
responded to the RFP. This suggests that the processing of EOI and the RFP was
mismanaged and resulted in restrictive response to the RFP rather than ensuring a healthy
competition to bring down cost while providing best quality360.
356
The four respondents to whom the RFP was issues were DNC, Sodexo, Global Infusion Group and ITDC Limited.
357
Refer Annexure 11.2.
358
Refer Annexure 11.3.
359
Refer Annexure 11.4.
360
Refer Annexure 11.4.
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Fifth Report of HLC – Organizing Committee
Violation of RFP terms
11.4.3 DNC did not provide EMD of INR 30 Lakhs along with their bid submission which was a
prerequisite according to Clause 3 of Section II- Instructions to bidders of the RFP. A
technical evaluation of DNC’s bid was carried out on 10 December 2009 and the vendor was
awarded 939 marks out of 1000 on the assumption that EMD might have been submitted as
part of the commercial bid.
11.4.4 The evaluation committee361 recommended that commercial bid of DNC be opened duly
condoning the non-submission of EMD362. However, the guidelines of the RFP clearly stated
that if the vendor was technically disqualified, commercial bids should not have been
opened.
11.4.5 The commercial bid of DNC363 was opened on 11 December 2009 by the technical
evaluation committee on verbal instructions of Chairman, Suresh Kalmadi as per
explanation provided to us by the OC. Further, clause 29 of RFP stated that the bidders
whose technical bids do not meet the minimum qualifying marks or whose technical bids
were considered non-responsive to the RFP requirement, their commercial bids will be
returned unopened. In this case, due to the failure to submit EMD, the offer of DNC was
technically invalid and the commercial bid of DNC should not have been opened364.
11.4.6 The Chairman, Suresh Kalmadi, issued an order dated 12 January 2010 wherein he stated
that in absence of EMD, he was left with no option but to disqualify the bid received from
DNC and that the OC should carry out a re-tendering exercise for catering at CGV. It should
be noted that this order released a little over one month after the result of technical
evaluation critically delayed the retendering even further365. From the records provided,
reasons for delay by the Chairman could not be ascertained.
361
The committee consisted of Jiji Thompson (OSD), M Jeychandran (JDG-F&A), Ajay Grover (consultant), Surjit Lal (DDG-
procurement) and Ram Mohan (DDG- Legal).
362
Refer Annexure 11.4.
363
It is pertinent to note that the rates quoted by DNC in their commercial bid were found by the OC to be approximately
2.5 times higher than the budget available for catering at CGV.
364
Refer Annexure 11.5.
365
Refer Annexure 11.5.
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11.4.7 It is pertinent to note that on one hand, Chairman instructed and approved the opening of
the commercial bid and on the other hand issued an order for re-tendering of the contract.
Further, the non submission of EMD could have been treated as a remediable defect in view
of single bid received for this contract and the OC could have further negotiated with DNC
to avoid delays. It is also worthwhile to mention, that at that stage itself, the cost quoted by
DNC was approximately 2.5 times more than the cost budgeted by the FA366.
Basing decisions on’ in-house’ legal opinions
11.4.8 A review of notes by Jiji Thompson (OSD-Catering) on 6th and 13th January 2010 suggests
that the OC was made aware that that a decision towards re-tendering (including issuance
of EOI and RFP) in January 2010 would lead to further delays in finalization of a vendor for
this FA as the vendor might take approximately 3-4 months to complete installation of
equipments at the CGV367.
11.4.9 The note also stated that it took approximately six months to arrive at the evaluation of RFP and
further delays might have ‘disastrous consequences’. Further, the OSD (Catering) suggested that the
matter be referred to OC Finance Committee, Finance Sub- Committee and EB since the commercial
bid has been opened upon verbal directions of the Chairman368.
11.4.10 The Finance FA, in this regard, stated that referring this matter to the committees is not
called for and that a legal opinion be obtained and this matter should be decided internally
within OC369.
11.4.11 A ‘legal opinion’ was provided by Mr. Ram Mohan, DDG (Legal) that stated that the OC was
within its rights to call for a re-tender. It may be noted that Mr. Ram Mohan does not have
a law degree and hence his opinion cannot be strictly termed a legal opinion. In this regard,
there is no evidence that consultations were made with any of the numerous legal
consultants and firms retained by the OC370.
366
Refer Annexure 11.5.
367
Refer Annexure 11.5.
368
Refer Annexure 11.5.
369
Refer Annexure 11.5.
370
Refer Annexure 11.6.
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Additional delays caused by OC’s conduct
11.4.12 The evaluation committee approved the decision for re-tendering on 28 January 2010. It
was decided that an EOI will not be issued for the purposes of re-tendering and the RFP
would be released in its current form without any changes as already approved by Finance
sub - committee371.
11.4.13 A final decision was taken around 1 February 2010 for an open tender apart from informing
the 4 companies short listed earlier. By now approximately 2.5 months had elapsed since
last RFP submitted was rejected372.
Summary
11.4.14 In summary, the OC lost 8 months from the first time the EOI was issued till the re-tender in
February. These delays are attributable to factors that arise from:
The clear inability of the OC to determine and communicate detailed scope of the work;
and
The potential overrides of OC Rules and procedures in the tendering process.
11.4.15 Why the commercial bids of the vendor were opened on the verbal orders of the Chairman
even when one of the technical criteria under RFP was not met, is not determinate. In the
absence of any documented reasons, it is possible that this was done to provide legitimacy
to an enhanced budget requirement as the vendor had quoted approximately 250% more
than the current budget at that time. Further, the difference between the cost as quoted by
DNC in their second bid was higher by approximately INR 7 Crores compared to the first bid.
This can be clearly attributed to delays caused by OC due to retendering.
11.4.16 The entire process of pre-qualifying vendors on the basis of EOI criteria was useless as it
resulted in an issue of the RFP to 4 vendors and ultimately the response from a single
bidder. The very fact that a sole bid was received itself indicates the failure of the process.
11.4.17 Further, the vendor (DNC) who submitted the bid violated one of the requirements of the
RFP (submission of EMD) and should have been rejected outright. However, it took the OC
371
Refer Annexure 11.7.
372
Refer Annexure 11.7.
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and its various functionaries almost 2.5 months to take a view on the ineligibility of the
vendor (which was apparent on the day the technical bid was opened) and reach the
decision to re-tender.
11.5 Inconsistencies in the selection of DNC as the final vendor
11.5.1 After the issue of the second RFP, DNC were selected as the final vendor for provision of
catering services at the CGV on 20 May 2010. The contract value was finalized at
approximately INR 67 Crores373.
Inconsistencies in vendor evaluation
11.5.2 In response to the re-tendering, DNC and IRCTC were the only vendors who had submitted
their bids as separate consortiums. IRCTC was however disqualified by the OC374.
11.5.3 In determining the evaluation conducted by the OC, it was noted that IRCTC had also
responded to the initial EOI and was disqualified even at that stage for not meeting the
eligibility criteria as stated in the EOI. It was further noted that some of the criteria
expressed by the OC in disqualifying IRCTC the second time were not tenable in the light of
information available. Consequently the decision of OC evaluation committee to disqualify
IRCTC on such inconsistent grounds seems to be flawed. These inconsistencies are as
follows.
The evaluation committee expressed that IRCTC and any of its consortium partners do
not have the core competence in terms of catering services and neither of its partners
had experience of being a master caterer. In this regard, it was noted that the
consortium partner of IRCTC was PKL who were also the consortium partners of DNC.
Thus the lack of experience of consortium partners which was expressed as one of the
373
This was an increase of approximately 2 times of the budget initially estimated for this package within the functional
area.
374
Refer Annexure 11.8 for details on rejection of the IRCTC bid.
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reasons to disqualify IRCTC was acceptable for DNC even though one of the consortium
partner in both cases was PKL375.
The evaluation committee contended that the entire kitchen design and construction
plan submitted by DNC and IRCTC were similar. They contended that as DNC had
submitted similar plans in the earlier bids, they should be given the “benefit of doubt”.
In this regard, it was noted that PKL were involved with both IRCTC and DNC consortiums
which would have resulted in the similar plans submitted but this was considered
detrimental to the qualification of IRCTC.
Lack of engagement with IRCTC
11.5.4 In March 2010, DNC informed the OC that PKL who was their consortium partner had opted
out of the project. They expressed that under these circumstances it would not be possible
for them to provide services. They also expressed that in this case, OC should start
negotiating with the next bidder. However, there is no evidence that the OC engaged with
IRCTC or made determination on the impact on costs if PKL were to pull out of both DNC
and IRCTC (and kitchen equipment contracted separately). It may be mentioned that the
IRCTC were rejected at the technical stage itself and their commercial bid was never
opened376.
Significantly increased costs and led to additional tendering work
11.5.5 Even after OC received intimation from DNC that would not be able to provide services, they
continued to engage in discussions and negotiations with DNC. In this regard, in April 2010,
they sent a ‘high level team’ comprising of Jiji Thompson (OSD-catering), Ajay Grover
(Catering -Consultant), Sharayu Almelkar (Director Catering), to Melbourne, Australia to
‘sort out issues’ with DNC along with David Payne, consultant (Catering).
375
It is pertinent to note that, at a later date, DNC wrote to OC stating that since PKL does not intend to participate in the
project, OC should open negotiations with other bidder. This clearly suggests that even DNC was heavily dependent on PKL
for eventual delivery of catering services at CGV.
376
Refer Annexure 11.9.
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11.5.6 During the negotiations and meeting in Australia, the following were the key conditions
agreed by OC on the basis of DNC’s representations377.
Fixed components of the project cost were agreed to be made variable due to
uncertainty in finalization of the contract by OC and limited time constraints. These
components were labour, operating expenses, project reserves. Consequently, the OC,
in effect, brought in an element of variability in costs in discussions with the vendor as
against to the fixed price contemplated under the RFP for these services.
OC would deal directly with PKL to purchase kitchen equipment. OC thus, in effect,
agreed that PKL would be the only provider for kitchen equipment. The decision was
also taken that OC would buy the equipment as compared to hire earlier as PKL had
expressed their inability to provide these on hire. It may be mentioned that this led to
PKL being appointed as the supplier for kitchen equipment on a single tender basis
possibly on the influence exerted by DNC at that stage.
The design and construction of the kitchen including the installation and commissioning
would now be the responsibility of the OC. The OC will execute these through local
vendors. The OC thus now took on responsibilities much more than that envisaged
earlier and committed resulting in further costs being incurred in relation to engaging
local vendors.
Red flags raised by OC committees
11.5.7 The FSC in their meeting dated 19 April 2010 questioned the decision of OC to purchase the
equipment from PKL rather than procure it on rental basis with DNC. The finance sub-
committee stated that this development occurred after the bid was received and ‘vitiates’
the entire process. The OC explained to the finance sub-committee that CGV was one of the
most critical elements for a successful CWG and that with six months left before the games,
the project would be at a risk if the process of contracting with a vendor for catering at CGV
is not set in motion378.
377
Refer Annexure 10.
378
Refer Annexure 11.11
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11.5.8 The members of Finance Sub-Committee pointed out that a great deal of time was lost since
the first tender was floated and that there were multiple gaps and inconsistencies such as
adoption of multiple elimination process, lack of clarity during technical evaluation and
contents of proposal thereby making the present proposal of the OC to appoint DNC not
supportable379.
Additional cost burdened on the OC
11.5.9 The matter for engaging DNC was put up for approval of Finance sub –committee again on
22 April 2010 and the sub-committee stated that after reviewing the reports and status of
the proposal, the proposal to buy kitchen equipment from PKL and agreement with DNC
only for catering was not tenable as it ‘obverts the scope of RFP and vitiates the process’.
However, Jarnail Singh, CEO and other OC officials380 informed FSC that keeping in mind the
timelines, scouting for alternate vendor was not possible and using provision of clause 31 of
the RFP, OC decided to vary scope and award part A of the RFP (catering services) to DNC381.
11.5.10 The approval to contract with DNC was issued by the Chairman, Mr. Suresh Kalmadi, under
Clause (3) of the Financial and Administrative Guidelines of OC keeping in view ‘the
criticality and urgency of the matter382’.
11.5.11 The direct impact of the above decision was that the cost quoted by DNC (for catering only)
in the re-tender increased by approximately INR 8.58 crores383 as explained in the table
below.
379
Refer Annexure 11.11.
380
These OC officials included V.K Verma (DG -OC), Sudhir Mittal (SDG -OC), (OSD -F&A) and KUK Reddy (ADG -F&A).
381
Refer Annexure 11.11.
382
Clause (3) under the Financial and Administrative guidelines of the OC can be invoked under emergency circumstances.
Refer Annexure 11.12.
383
It is pertinent to note that the increase in cost of INR 9 Crores was after removal of Part B from the scope of work of
DNC.
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Table 11.3
Particulars Amount (In Remarks
INR Crores)
Amount quoted by DNC upon Amount quoted by DNC for catering
re-tendering: and for kitchen design and equipment
in the re-tender
Part A (catering)
58
Amount finally contracted with Final cost approved for catering based
DNC384 on negotiations with DNC (refer para
66.58
11.5.6 above)
(Only for Part A)
Increase in costs 8.58
11.6 Summary and conclusions
11.6.1 The argument of time delays resulted in a convoluted sequence of contracting wherein it
took 1 year from the time the EOI was issued till the contract was awarded. To summarize,
the following were the key points in the contracting process.
The EOI process resulted in only 4 parties qualifying for the issuance of the RFP.
In response to the RFP only 1 party, DNC, submitted a bid
The technical bid of DNC was non-compliant with the RFP conditions on absence of EMD.
However, on the verbal orders of the chairman, their commercial bid was still opened, in
violation of rules.
It took the OC 2.5 months to reject the bid of DNC (which they knew was deficient on the
day the technical bid was opened) and issue a re-tender.
The re-tender also resulted in only 2 parties (IRTC and DNC) submitting a bid.
IRCTC’s bid was rejected on various technical grounds, some of which as explained in the
section above, may not be tenable.
384
Refer Annexure 11.13.
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DNC was thus awarded the contract at a higher price compared to the bid for previous
RFP based on IRCTC’s rejection and was the sole vendor whose commercial bid was
opened.
DNC then informed the OC that they would like to withdraw from the contract. This
caused OC to commence intense discussions with DNC including flying a team of officials
to Australia.
Based on negotiations with DNC, OC took various decisions that caused increased
financial implications (such as variable costs for certain components in the DNC contract,
purchase versus hire in relation to equipments from PKL etc)
The terms were approved by the Chairman OC under ‘emergency circumstances’ even
though there was a view within the OC’s finance sub-committee that the RFP process
was vitiated and scope obverted.
11.6.2 Thus, apart from the fact that the budgets prepared and presented by the OC were incorrect
right from inception, there were measurable increments in costs owing to the conduct of OC
officials at every stage. For example, even the final tendered cost in the re-tender by DNC
went up by INR 8.58 crores during negotiations after the bid was received. The rationale of
time delays was repeatedly used by the Catering FA and the Chairman throughout the
process as a justification for cost increase, which actually, was attributable solely to their
actions.
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12 Chapter 12: Games Village Catering -
Kitchen Equipment
As in the case of the games village catering contract, the argument of time delays was used
by the OC to justify a contract at a higher cost with detrimental terms and conditions. The
extreme dysfunction was obvious as the various committees seemed to provide ‘rubber
stamp’ approvals. The failure of OC to identify and contract in time led to a situation where
the vendors potentially dictated terms to the OC resulting in many one sided contract
conditions detrimental to the OC’s interests. OC suffered avoidable additional cost of INR
3.7 crores for procuring equipment as against hiring (as was contemplated initially) apart
from additional costs of INR 9.5 crores on installation and procurement of local equipment
as discussed separately.
12.1 Background
12.1.1 The supply of kitchen equipment was originally included in the games village catering
contract385. At the time when the RFP and tendering processes of the games village catering
contract commenced in June 2009 there was no intention on the part of the OC to split the
games village catering contract in parts and all procedures were concentrated towards
identifying a vendor who would act as a master caterer and be responsible for both catering
and equipment.
12.1.2 The OC finally ended up splitting the Games Village Catering contract in two parts which led
to the genesis of a separate contract for kitchen equipment. The Catering contract was
awarded to DNC and the kitchen equipment supply contract was awarded to PKL (as
discussed in this section). Consequently, the tendering process, background, chronology
and sequence of events for the kitchen equipment contract mirrors that of the Games
Village catering contract as discussed in the section above.
12.1.3 The following key issues are pertinent from a background perspective.
385
The original games village catering contract was in two parts; Part A that was for catering and Part B that was for
Kitchen equipment supply and installation.
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PKL was the consortium partners of both DNC (who were awarded the catering contract)
and IRCTC (whose bid was rejected on technical grounds).
In March 2010, when DNC were notified by the OC that they were selected for the
catering contract, they expressed that PKL has decided not to participate in the contract
due to various concerns (that are discussed in the ensuing paragraphs of this section).
DNC informed the OC that they would take up only the catering portion of the contract
and that the OC should negotiate with PKL directly for the kitchen equipment part.
OC executed a separate contract with PKL with many principle changes from the initial
RFP386 that included “buy” versus “hire”, air lifting equipments, only “supply” versus
“supply and installation” decisions, etc.
Consequently, the contract was split between DNC and PKL and the OC negotiated with
PKL directly for awarding the contract towards purchase of equipments.
12.2 Situation of a “single tender” sourcing
12.2.1 The convoluted process followed for the tender related to the games village catering
contract resulted in a situation where PKL were the only vendor left with whom the OC
could engage for the supply of kitchen equipment.
12.2.2 Further, there is evidence that there was enormous pressure exerted by DNC to appoint PKL
for the supply of equipment citing various reasons which included among others the
following387.
PKL was the only consolidated source of kitchen equipment supply in the world that has
the inventory to cater for such large and prestigious events.
DNC was not comfortable working with equipment supplied by any vendor other than
PKL as all resources, staff and menus were planned in accordance with information
(designs and working patterns) supplied by PKL to DNC.
386
Revision was in accordance with Section 31 of RFP.
387
Refer Annexure 12.1.
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PKL had equipped the kitchen to cater to 2500 meals per hour keeping in mind the
international cuisines, temperature control, food safety and nutrition requirements.
PKL has been involved in setting up and supplying of kitchen equipments to major
international sporting events. Further, they have the equipment variety and volume and
are a consolidated source of kitchen equipment to cater to such a large event.
12.2.3 Given that there was no time left to issue another RFP or engage with other vendors for
either the catering contract or kitchen equipment, the OC succumbed to demands of both
DNC and PKL and spilt the contract between catering and kitchen equipment. Thus in
respect of kitchen equipment contract, there were no evaluations or negotiations
conducted separately with any other vendor.
12.2.4 The OC was thus reduced to a stage where sourcing had to be conducted from PKL
exclusively that in many ways led to the award of this contract on a single tender basis. Had
the OC originally conducted this as a separate contract, it is possible that it may have been
able to obtain a broader base of suppliers and conduct appropriate negotiations in this
regard.
12.3 Role of various OC committees
12.3.1 The proposal to award the kitchen equipment contract to PKL was approved by various
committees of the OC. The decisions taken by these committees that led towards awarding
of the contract suggests an apparent acceptance of the ‘helpless’ situation the OC was put in
by its senior functionaries.
EMC
12.3.2 The EMC noted that keeping in mind “the absence of recommendations by the FSC, criticality
of the situation, extensive delays and for successful conduct of the games”, the OC should
purchase the equipment from PKL.
12.3.3 The EMC also approved in-principle the proposal for appointment of local/international
consultant and an agency for installation and demobilization of the equipment on turnkey
basis and procurement of some equipment locally within India.
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12.3.4 EMC advised to engage a qualified engineering expert388 to inspect the equipment in
London and that a high level team may go to London to finalize the modalities of the
purchase.
12.3.5 Lastly, EMC observed that EB should be informed on re-appropriation of budget and
Ministry of Youth Affairs and Sports should be approached for approval of revised budget389.
EB
12.3.6 The EB authorized the EMC to take a final decision on purchase of equipments from PKL at a
cost of GBP 1,270,378 as per the conditions in the purchase order dated 30 April 2010 390.
FSC
12.3.7 It is pertinent to note that no recommendation was made by the FSC with respect to
purchase of equipment from PKL. It is highly surprising that a committee that had key
financial oversight did not provide any recommendations given the peculiar circumstances
under which the contract was awarded.
12.4 Substantial increase in costs through a fundamental change in conditions (purchase
vs. hire)
12.4.1 The original tender requirement was that the OC would require the equipment to be hired
from the vendor. However, the contract finally executed with PKL was on terms that the OC
purchased the equipment from PKL instead of the provision to hire equipment that was
contemplated earlier.
12.4.2 Such purchase versus hire cost the OC an additional expenditure of approximately INR 3.7
crores391.
388
Mr. Ajay Grover (a non engineer catering consultant) was sent to London for inspection of equipments purchased from
PKL.
389
The revised budget (re-appropriation towards catering FA) was approved by the Ministry of Youth Affairs and Sports.
390
Refer Annexure 12.1.
391
Refer Annexure 12.1.
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The cost quoted in the commercial bid towards Part B: Kitchen Equipments and
Installation by DNC was INR 21 Crores.
This included INR 5 Crores towards cost of hiring equipments from PKL.
However, the cost towards outright purchase of the equipment was identified as INR 10
crores and was finally agreed with PKL at INR 8.7 crores (GBP 1,270,378).
Thus, the increase in costs due to the purchase versus buy decision was INR 3.7 crores.
12.4.3 While it was stated by the OC that the extra cost would be recovered through the sale of
equipment after the games, it is pertinent to note that till the date of this report, (Mid
March 2011) the equipment has neither been bought back by PKL nor otherwise disposed
off by the OC.
12.5 Agreement to terms potentially detrimental to interests of the OC
12.5.1 The OC did not enter into an agreement with PKL for purchase of equipments. Further, the
OC had issued a Purchase order dated 30 April 2010 amounting to GBP 1,270,378 which was
accepted by PKL on 3 May 2010 which defined terms and conditions of the sale and other
information392.
12.5.2 It was noted that a number of terms were potentially detrimental to the interests of the OC
and appeared, prima facie, to be dictated by the vendor given the ‘emergency situation’
created by the OC. Some of these are as follows.
Full advance payment with no retention
12.5.3 The OC agreed towards complete payment to the vendor before delivery of kitchen
equipment at the CGV premises. It is surprising that the OC paid the amount in full before
delivery as against requesting for a credit period from PKL. Additionally, OC did not hold
back any part of the payment as retention money.
12.5.4 Consequently, the OC appeared to agree on one-sided payment terms with the full payment
remitted to the vendor in advance. Further, coupled with the fact that the OC did not hold
392
Refer Annexure 12.2.
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any retention money, the OC lost all safeguards in case of any delivery defaults by the
vendor393.
Warranty/guarantee
12.5.5 There were two kinds of equipment that PKL were to supply under the contract, new and
previously used. PKL refused to provide any warranties/guarantees for any previously used
equipment. This proposal was accepted by the OC. Consequently, the OC knowingly took
on a risk for the non-performance on any pre-used equipment supplied by PKL without any
mitigation or recourse to the vendor.
Buy Back of Equipment
12.5.6 The OC was to give first offer for buy-back of the equipment to PKL. Further, any such buy-
back would be subject to an onsite inspection by PKL. It is pertinent to note that no steps
have been taken on the buyback of the equipment till the date of this report.
Training of technical staff in Singapore
12.5.7 OC agreed to training of its technical staff for design and construction of kitchen equipments
in Singapore where PKL was carrying out installations for another customer rather than to
make PKL agree for conducting trainings at CGV which might have been more beneficial for
technical staff to resolve issues apart from serving legacy considerations394.
12.6 Additional cost through local sourcing
12.6.1 Given that PKL were engaged only for the supply of kitchen equipment, the OC had to take
considerable steps to identify and execute contracts with vendors for packing, mobilization,
installation, commissioning, maintenance, demobilization and procurement of support
equipments that was not covered by PKL.
393
PKL provided a bank guarantee equivalent to the amount as per the first payment milestone (15%). In a response to a
query by HLC, the OC has stated that “most imports are against 100% advance or irrevocable LC thus guaranteeing the
vendor realization of his full payment”.
394
It is pertinent to note that no one from OC eventually went for the technical training in Singapore.
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12.6.2 The OC had to budget an additional increase in the cost due to the additional scope of work
that came out of PKL’s refusal to participate in installation activities as contemplated under
the original tender.
12.7 Additional travel expense incurred towards conducting negotiations with PKL
12.7.1 The OC incurred an additional expense amounting to approximately INR 7.70 Lakhs towards
travel of three officials to London to finalise the deal with PKL in the month of April 2010.
This expense would have been entirely avoidable had contracting been appropriate and
timely395.
12.7.2 Further, review of an email communication between John Lade (Consultant) and various
officials of OC suggest that two396 out of the three individuals who were sent for discussions,
Mr. Ajay Grover (catering consultant) and Mr. Jiji Thompson (Special DG) ) did not possess
the requisite knowledge on catering (design and construction of main dining). Therefore
their travel appears to be unjustified397.
12.8 Material overrides of the approval process
Issuance of Purchase order and transfer of funds to PKL before approval by EMC
12.8.1 The OC issued the purchase order to PKL on 30 April 2010 after obtaining the Chairman’s
approval. This was accepted by PKL on 3 May 2010. Further, the OC issued instructions to
the bank to transfer approximately 50% of the total contract value to PKL on 17 May
2010398. This matter of issue of purchase order and approval to transfer funds to PKL was
disclosed to the EB, when its approval was sought for the purchase. The apparent disdain
with which the purchase order was issued to the vendor much before approval from
395
Refer Annexure 12.3.
396
It is pertinent to note that one of these two individuals was Mr. Ajay Grover (Catering Consultant and then moved in a
new role as OSD - Catering).
397
Refer Annexure 12.4.
398
Refer Annexure 12.5.
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EMC/EB indicates that OC management was desperate to seal the deal without waiting for
approval of the competent authority. However, EB, unaware of the fact that purchase order
was already issued authorized EMC in their meeting on 11 May 2010 to take a decision on
purchase of kitchen equipment from PKL. Further, EMC in their meeting held on 14 May
2010 approved the same which was ratified by EB in their meeting dated 18 May 2010 399.
12.8.2 Thus, it appears that the OC management considered obtaining approvals from its
governing body the EB, a mere formality and that there was no question for appointing a
vendor other than PKL for this procurement. The issuance of a purchase order much before
approvals shows the clear disregard of the OC officials towards their own procedures and
authority matrix even in full view of the disparate and exceptional nature of this transaction.
Non involvement of Finance sub- committee
12.8.3 In the EB meeting dated 18 May 2010, Mr. Girish Chaturvedi (SDG- Finance) and Mr. Jiji
Thompson (SDG) stated that the right procedure would be to take PKL proposal to the FSC
for its consideration and then bring it to EB for approval. However, Mr. Jarnail Singh (CEO-
OC) pointed out that since the EB in its last meeting dated 11 May 2010 authorized EMC to
take a decision in this matter and then obtain Chairman’s approval under powers vested to
him as per Clause 3 (C) of Financial and Administrative Guidelines of the OC and then refer
to EB for ratification, there was no need for taking this matter to FSC. The matter was
further deliberated upon with EB commenting that “in this frightening scenario, the EB has
no other option but to ratify decision taken by Chairman”. Further, the decision to buy
equipments from PKL was approved keeping in mind the criticality of the entire
operations400.
12.9 Summary and conclusions
12.9.1 The total failure of OC to make timely purchase of games village catering services was the
sole reason for the additional costs incurred by OC in the kitchen equipment contract as
explained above. These arose primarily out of the following.
399
Refer Annexure 12.6.
400
Refer Annexure 12.7
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The failure of OC to identify and contract with a vendor other than PKL led to a situation
where the PKL (and the catering vendor DNC) were to potentially dictate terms to the
OC.
The self inflicted helplessness of the OC that resulted in accepting many one sided
contract conditions that appear to be detrimental to its interests such as absence of
warranties on some of the equipment and full advance payment.
OC suffered avoidable additional cost of INR 3.7 crores for procuring equipment versus
hiring (as was contemplated initially). The OC may be able to recover some of this if the
equipment is resold. However the prospect of such resale is remote at this point of
time.
The consequence of outright purchase as against the hiring as was earlier contemplated ,
imposed further burden for commissioning and installation of the equipments. Further,
these equipments have not found a buyer till the date of this report and it appears that
it will eventually be written off as junk equipments.
12.9.2 As in the case of the games village catering contract, the argument of time delays was used
by the OC to justify a contract at higher cost with extremely detrimental terms and
conditions to the OC. The way the contract was approved and justified within the OC is also
indicative of the extreme dysfunction within the OC as most of its committee seemed to
provide ‘rubber stamp’ approvals as against exercising proper judgment and diligence.
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13 Chapter 13: Games Village - Kitchen
Equipment Installation
The review conducted has indicated significant and material departure from policies and
procedures of contracting and potential misconduct in awarding of the contract to
Constellation Projects. Further, certain important ‘eligibility criteria’ under the RFP were
overlooked to favour the vendor during the technical evaluation. The OC acted in a manner
contrary to proper governance norms and took decisions assuming that the consent of the
approving authorities could be taken for granted. The selection of vendor was vitiated due to
an apparent conflict of interest as the consultant in this area had a direct financial interest in
the selected vendor.
13.1 Background
13.1.1 Following the conditions imposed by DNC and PKL in relation to Games Village Catering as
mentioned in chapter 11 and 12, the OC engaged Constellation Projects, a vendor based in
Delhi for the installation of kitchen equipment supplied by PKL, project management and
procurement of certain additional equipments. Due to the delays in finalizing vendors (DNC
and PKL) for catering and supply of equipment, the need for engaging a vendor for these
services was recognized at a very late stage and consequently the process for initiating a
tender commenced only towards end of April 2010, while the kitchen was to be made
operational by August 2010 and the equipments from PKL were to be delivered by July
2010.
13.1.2 A brief chronology of the events related to the award of the contract to Constellation
Projects is as follows.
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Table 13.1: Chronology of events:
Date Particulars
April 2010 Approval for release of RFP for appointment of kitchen equipment
installer and project management for CGV.
10 days time provided for prospective bidders to reply
Lowest bidder to be considered
May 2010 Release of RFP
June 2010 Proposal received from the following bidders:
Continental India Private Limited
Inox Barq Private Limited
Constellation Projects
June 2010 Evaluation of technical bids. The following parties were found to be
responsive bidders:
Inox Barq Private Limited
Constellation Projects
June 2010 Opening of commercial bid.
Constellation found to be lowest bidder.
June 2010 Negotiations with Constellation Projects carried out and two LOIs
awarded.
July 2010 Contract signed between OC and Constellation.
13.1.3 The contract was awarded to Constellation Projects at a final value of INR 9.50 crores which
included approximately INR 5.7401 crores towards installation and project management
charges and balance INR 3.8 crores towards supply of additional equipment402.
401
The OC has informed us that the breakup of INR 5.7 Crores into installation charges and project management was not
required to be submitted by the vendor under the terms and conditions of RFP as this was a turnkey operation. Further, it
is pertinent to note that this amount is approximately 65% of the cost of equipments purchased from PKL, London.
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13.2 Additional delays on the issue of the RFP
13.2.1 Due to the paucity of time, the OC decided not to release an EOI for this procurement.
Further, the approval for release of RFP was given on 24 April 2010 and a time period of 10
days was provided to the prospective bidders to submit their responses to the RFP403.
13.2.2 However, the RFP was finally released approximately one month later on 31 May 2010. It is
inexplicable that on one hand the OC was justifying a limited time of 10 days for a response
to the RFP and on the other hand they wasted more than a month in issuing the RFP
document. As explained in the ensuing sections only 3 vendors submitted responses to the
RFP. It is quite possible that such significantly reduced timelines have resulted in a limited
response to a tender of such a nature404.
13.3 Biased evaluation ostensibly to favor a preferred vendor
13.3.1 In response to the RFP, the OC received only three responses from the vendors namely:
Continental India Private Limited
Inox Barq Private Limited
Constellation Projects (Aster Technologies Private Limited as consortium partner)
13.3.2 The technical bids were opened by the OC on 10 June 2010 in the presence of
representatives of all three parties by a ‘committee’405 constituted for this purpose. The
committee rejected the bid of Continental on the basis of its technical evaluation. The
committee further recommended that the commercial bids of Inox and Constellation
Projects should be opened as they had cleared the technical qualification stage 406.
402
It is worth mentioning that Constellation Projects reluctantly agreed to this price and wanted an assurance that the
agreed payment schedules will be honored.
403
Refer Annexure 13.1.
404
Refer Annexure 13.1.
405
The members of the technical evaluation committee were Jiji Thompson (SDG- Catering), Sanjiv Mittal (JDG-
Procurement), Ajay Grover (Consultant and Head- Catering) and KUK Reddy (ADG- F&A).
406
Refer Annexure 13.2 and 13.4.
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13.3.3 While the committee rejected the bid of Continental on the basis of non-fulfillment of
certain technical criteria, it appears that in a number of items the committee overlooked
non-fulfillment of criteria in the case of selected vendor namely; Constellation Projects.
Consequently, there appears to be an apparent bias by the committee and its members
towards Constellation Projects. A summary of the key issued noted are as follows.
Table 13.2
Form Number (RFP) Remarks407
Form I (Bidder Profile) Requirement: Certification of incorporation.
This certificate was not provided either by Constellation
Projects or its consortium partner Aster Technologies Private
Limited.
Form III (Employees Requirement: Certificate by Company Secretary or Statutory
Strength) Auditors certifying number of employees on permanent payroll
in India as at 31 July 2009.
Requirement: Existing HR organizational structure and
management levels followed by the company.
These were not provided by Constellation Projects; however,
the committee awarded them marks against fulfillment of the
criteria.
Form V (Experience – Requirement- Minimum five years relevant corporate
Kitchen Design, experience in the business of sale and services of imported
construction and project kitchen equipment, installation and commissioning and project
management) management.
The four experiences as detailed by Constellation Projects
relate to the period 2007 to 2010 which constitute only 3
years and not 5 as the criteria required. Also, the information
provided by Constellation Projects was not in the format
required by OC under the RFP.
407
Refer Annexure 13.3 & 13.4
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Form Number (RFP) Remarks407
Form VII Requirement: Full company name, List of directors, principal
shareholders, issued share capital, paid up capital, directors
and officers liability insurance, group corporate structure
Constellation Projects was not a company. While they self
disclosed their structure as a partnership, they did not furnish
any evidence of the same. Further, a list of partners, capital
contribution, and insurance details was also not provided by
Constellation Projects.
Form VIII (Executive Requirements: Relevant Experience
Summary) Constellation projects did not summarize the names of
projects/clients they worked on.
Requirement: Demonstration of project financial control and
management
Constellation projects did not provide any information
pertaining to the above.
Requirement: Demonstration of technical quality and expertise
Constellation projects stated that they have carried out very
‘high quality jobs’ as ‘can be seen from pictures attached’. On
a perusal of these pictures, it can be seen that these merely
represent equipments and not of any installation work carried
out by them.
Requirement- Innovative Industry solution that will enhance
the standard of the service delivery
Constellation Projects stated that ‘it will have an eye on the
delivery dates and will offer optimum details’.
It is unclear why marks were still awarded to the bidder in
spite of such an ambiguous statement made by them which
was accepted by the committee.
Form IX (Management Requirement: The respondent must provide timeline chart
experience and showing the start dates of all the project team based in Delhi
throughout the planning period.
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Form Number (RFP) Remarks407
Technical competency) Timeline was not provided by Constellation Projects.
Requirement: The bidder must be able to provide details that
the project team leader has strong background in managing
large projects equivalent in size and scale to the catering
services required at CGV.
The details of the projects conducted by Constellation Projects
were all related to hotel/restaurant projects which do not
seem to be equivalent to the size and scale of catering at CGV
Form X (Contracting Details regarding sub contractors, sub consultants, contractors
Third Parties and to be provided.
Suppliers) Constellation Projects stated that “Due to paucity of time, we
have not been able to select our partners as yet. The Process
will take another week”.
However, it is unclear how the Evaluation report furnished by
the committee states that details have been submitted and
subsequently marks awarded even though the vendor asserts
that they have not provided the details.
Form XI (Project Plans Details of various project plans including kitchen design and
and Appendices) construction plan and scope of work.
Constellation Projects did not provide information pertaining
to the following mandatory information as per the RFP:
Preliminary concept designs with legends
Work schedule
Appendix 1
Appendix 5
However marks were awarded to the vendor.
Form XIV Bidder should provide certificate from statutory auditors
stating its turnover for the last financial year which should be a
minimum of INR 15 Crores.
Constellation Projects along with their consortium partner
reported a sales turnover of INR 22.34 Crores during 2009-10.
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Form Number (RFP) Remarks407
However, this was not certified by statutory auditor of the
bidder or the statutory auditor of its consortium partner.
Further, Constellation Projects and its consortium partner have
their sales register showing total sales made during 2009-10.
However, it is pertinent to note that the sales register shows a
‘debit’ balance instead of a ‘credit’ balance408. Consequently,
it appears that false documentation may have been provided
by the vendor to meet the turnover criteria409.
13.3.4 The OC provided responses to the remarks as stated in the table above. The responses
clearly suggest that due to paucity of time, the focus of the OC was to get some reputed
company to carry out the installation work and owing to such a situation, it appears that
certain critical requirements of RFP were overlooked410.
13.3.5 It is evident from the table above that Constellation Projects did not conform to certain
important criteria mentioned in the RFP; however they were still qualified in the technical
round. It is also extraordinary to note that the evaluation committee documented and
rated information provided by the vendors (as in the case of certain requirements under
Form X and Form XI of the RFP as above) when the vendor had submitted in response to the
RFP that they were unable to submit these. It appears that the technical evaluation was not
carried out as per the ‘eligibility criteria’ mentioned in the RFP.
13.3.6 An analysis of the commercial bid of the rejected vendor Continental indicates overpricing in
the bid submitted by Constellation and thus may provide the rationale for the potential
collusion between the OC management and the selected vendor. Further, there were no
408
Refer to Annexure 13.4 for an extract of the sales register.
409
Definition of a debit balance: The amount that a business or an individual owes a lender, seller or factor. (Source:
Investorwords.com. Further, a debit balance in the sales register indicates a debit balance.
410
Refer Annexure 13.5 for details of the responses by OC.
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benchmarks available with the OC to assess the reasonableness of rates quoted by the
vendor.
13.4 Issue of LOI before approval from competent authorities 411
13.4.1 The Letter of Intent was issued to the vendor on 18 June 2010. However, the approval of
appointment of Constellation Projects was obtained from the OCFC and by the FSC only on
22 and 23 June 2010 respectively. Further, issuance of LOI before such approvals was not
brought to the notice of OCFC and FSC in these meetings412.
13.4.2 Further, the FSC while approving the appointment of the vendor noted the following:
Upon informing the committee that a representative of Constellation has already been
sent to PKL to save time, the committee stated “this amounted to tacit approval to M/s
Constellation’s bid by OC”.
It also noted that “Repeated instances had come to notice wherein executive action had
preceded approvals of the appropriate committee on the plea that time was short. Such
action in anticipation of approval is irregular; moreover, it presumes that approvals are
proforma and routine. Such is not the case”.
13.4.3 The above clearly suggests that the OC management considered obtaining approvals from
appropriate committees and sub-committees as a mere formality and indulged in flagrant
violation of the established procedures and protocols and disregard of authority.
13.5 Conflict of interest between the ‘consultant’ and the vendor ‘Constellation
Projects’
13.5.1 The EMC vide its meeting dated 24 April 2010 decided to appoint a consultant for
installation of kitchen equipment. In this regard, a search committee413 was appointed
411
Refer Annexure 13.6.
412
The OC has informed us that since the LOI was issued with the approval of CEO and Chairman, its issuance was not
informed to OCFC and FSC in the respective meeting.
413
The members of Search Committee were: Jiji Thompson (SDG), NP Singh (JDG-Administration) and Ajay Grover
(Consultant).
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which in its meeting dated 7 May 2010 interviewed four potential candidates for the post of
consultant and appointed Mr. Sunil Khanna as the consultant414.
13.5.2 Mr. Sunil Khanna started his services with OC on 24 May 2010 and resigned on 13 June 2010
and was thus engaged by the OC for less than one month. His reason for resignation, as
mentioned in the note for legal advice was his and his family’s ‘shareholding’ in
Constellation Projects415.
13.5.3 It may be mentioned that the RFP was notified by the OC on 31 May 2010 and technical
evaluation was conducted on 10 June 2010, which coincides with the period Mr. Sunil
Khanna was engaged as a consultant for this scope of work. It has been assumed that as a
consultant he was required to be actively involved in preparation of RFP and technical
evaluation.
13.5.4 A legal opinion was sought by Jiji Thompson, Special DG Catering, on whether Mr. Sunil
Khanna‘s role constituted a conflict of interest and if it “vitiates the tendering process”. The
legal opinion was provided by Mr. Ram Mohan, DDG (Legal) which stated that as “Mr. Sunil
Khanna’ s role was limited to only as a Technical Consultant, and since he was not associated
or involved in the evaluation process of the bids, the tender process does not, in any manner,
get vitiated”. It is pertinent to note that Mr. Ram Mohan, DDG Legal, does not hold a law
degree and as such his opinion cannot be considered a legal opinion.
13.5.5 One of the responsibilities/role of the consultant as per his personal file was “24*7 very
close coordination between Head of Catering OC, PKL UK, DNC Australia, DDA and GL Events
the project management vendor/s for the project implementation”416. In view of this
responsibility, the noting and legal opinion made above appears erroneous and misleading.
13.5.6 Given the above, the engagement of a consultant who had a direct financial interest in the
selected bidder constitutes a clear conflict of interest. One can only perceive the vitiation
and total compromise of the contracting process that was achieved by the OC through the
following.
414
The OC has informed us that Mr. Sunil Khanna did not disclose his relationship with Constellation Projects at the time of
his appointment with OC as it was not required under his terms of appointment.
415
Refer Annexure 13.7.
416
Refer Annexure 13.7.
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Awarding the contract to an entity in which the consultant had a financial interest;
Simultaneously engaging a consultant who might have complete and absolute insight
into information critical for the selection of the vendor.
Engaging the conflicted consultant at the exact time the RFP was issued and till such
time the technical evaluation was completed.
Obtaining erroneous and misleading legal opinion to justify such flawed decisions.
13.6 Terms and conditions detrimental to interests of the OC
13.6.1 Acceptance of certain terms and conditions as a part of the supply agreement between the
OC and Constellation/Aster Technologies which were potentially prejudicial to the interests
of the OC were observed. These are as follows.
Specific Warranty or guarantee clause: Constellation did not provide and the OC did not
request for warranties/guarantees as part of the contract. Consequently, the OC
knowingly took on a risk for the non-performance without any mitigation or recourse to
the vendor.
Buy Back of Equipment: The OC should have tried to negotiate a buy back clause for
these equipments (cold rooms, gas accessories, fire suppression systems, ducting, fans
and other accessories). This was not done and consequently these equipments sourced
locally continue to remain in the possession of the OC.
13.6.2 Acceptance of such conditions, prima facie, demonstrates the inability of the OC to conduct
sourcing in an appropriate manner.
13.7 Summary and conclusions
13.7.1 Quite similar to the defects in the games village catering and supply of kitchen equipment
contracts, significant and material departures from procedures and apparent misconduct in
the award of the games village installation of kitchen equipment contract was observed. In
the case of the contract awarded to Constellation Projects, it is pertinent to note the
following.
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The evaluation committee assisted by Ajay Grover (Consultant and Head- Catering)
overlooked missing information and other inconsistencies in the bid documents of
Constellation Projects and thereafter chose to clear the vendor from a technical
perspective. In this regard, the committee proceeded to award marks to the vendor
even on criteria where the vendor had expressly stated that information cannot be made
available. The evaluation conducted by the OC had a very strong bias to the vendor.
It appears that the decision to select the vendor was taken at an operational level and
the FA and other functionaries considered approval of the OCFC and FSC as a formality.
From the fact that LOI was issued to the vendor before the approvals were sought, it is
difficult to avoid a conclusion that governing bodies like OCFC and FSC’s approval was
taken for granted.
There is clear evidence of a conflict of interest along with a high probability that it was
misused to award the contract to a preferred vendor. A consultant who had a financial
interest in the bidding company was engaged a week before the RFP was notified and
resigned a week after the technical evaluation was conducted. An in-house “legal
opinion” was sought by the Catering FA from a person who was not technically qualified
to provide a legal opinion. The opinion obtained in this fashion, that there was no
conflict of interest in fact, vitiates the entire contracting process.
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14 Chapter 14: Venue Catering I
The review conducted has indicated significant and material departure from policies and
procedures of contracting and potential misconduct in awarding of the contract to M/s
AFP Manufacturing Co (P) Ltd. Certain important ‘eligibility criteria’ under the RFP and
Procurement Manual were overlooked to select the vendor during the technical
evaluation. The OC acted in a manner contrary to proper governance norms and took
decisions at the last minute resulting in additional cost, delays and serious delivery issues.
14.1 Background
14.1.1 The catering FA was responsible for providing catering services during CWG. The scope of
work primarily included providing catering at the Commonwealth Games Village (‘CGV’), all
competition and non- completion venues. All the venues including CGV were divided into
11 packages, each package representing a venue or a group of venues. The Package 9 was
for CGV.
14.1.2 The EOI was issued in June 2009 for all 11 Packages including Package 9 (CGV) which was
finally awarded to DNC. The RFP for the remaining packages which included training and
competition venues was issued in December 2009. This section of the report pertains to
awarding of contract for supply and distribution of food packets to workforce and security
personnel at various venues excluding CGV.
14.1.3 A brief chronology of the events related to the award of this contract is as under.
Table 14.1: Chronology of events
Month Particulars
June 2009 Release of EOI for all packages (1 to 11) including CGV
25 vendors responded out of which 7 were disqualified
December 2009 Release of RFP
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Month Particulars
July 2010 Release of second RFP for Supply and distribution of food Packets for
work force and security personnel
7 days time provided for prospective bidders to reply
Lowest bidder to be considered for negotiations
Aug 2010 Responses received from the following bidders:
M/s Graviss Hospitality
M/s Bikaner wala
M/s AFP Manufacturing Co (P) Ltd
M/s Gazal Catering
M/s Gateway Hospitality.
M/s Fast Trax.
M/s The Crystals
Aug 2010 Evaluation of technical bids. The following parties were found to be
responsive bidders:
M/s Graviss Hospitality
M/s Bikaner wala
M/s AFP Manufacturing Co (P) Ltd
M/s Gazal Catering
M/s The Crystals
Aug 2010 Opening of commercial bid.
M/s AFP Manufacturing Co (P) Ltd found to be lowest bidder.
Aug 2010 LOIs was awarded to M/s AFP Manufacturing Co (P) Ltd
14.1.4 The Letter of intent417 (LOI) was finally issued to M/s AFP Manufacturing Co Private Limited
(‘AFP’) on 18 August 2010 for a value of INR 8.75 cores towards the supply and distribution
of food packets to work force and security personnel deployed at different venues which
included competition and training venues.
417
Refer Annexure 14.1.
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14.2 Inconsistencies in EOI and first RFP stage
14.2.1 The EOI was issued in June 2009 for all the packages (1 to 11). Around 25 vendors
responded to the EOI out of which 7 vendors were disqualified at the EOI stage itself.
14.2.2 The OC Vent ahead with the RFP for package 9 (CGV) in the month of October 2009 and the
remaining packages were put on hold considering the criticality of package 9. The RFP for
the remaining packages was finally released in December 2009 approximately after a gap of
five months from the date of issue of EOI. Further, vendors submitted quotations in the
range of INR 70-80 Crores.
Delays and mismanagement at the first and second RFP stage
14.2.3 A review of the RFP issued for remaining packages reveals that the service levels required
for various package was not explained clearly in the scope of work section. The scope of
work was defined in relation to area (in sq. meters) under each venue rather than the
approximate number of persons that would be consuming food under each venue. Further,
tender package 5 (Thyagraj Stadium) was used as the base model rather than plans for each
venue being used for defining the scope of work418. This clearly displays lack of detailed
planning on the part of catering FA towards venue packages. The defective RFP possibly
contributed to the excessive cost quoted by the vendors.
14.2.4 The OCFC in its meeting dated 1 June 2010 noted that “there was a mismatch in the number
of persons to be served vis-à-vis the expenditure on the food items to be served per head in
different tender packages. Further, there were considerable differences between the
number of person based on which RFP was floated and the number of persons as were now
confirmed by sports functional area. The committee also recommended that CEO and DG
should hold a meeting with head of all functional areas for obtaining actual number of
persons for the purpose of computation of expenditure for this purpose. The selected
catering contractors should also be invited in the meeting to explore the possibility of
reduction in expenditure for catering arrangements in various venues in view of considerable
418
Refer Annexure 14.2.
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reduction in scope of work”. This clearly shows flawed planning and budgeting on part of OC
towards this functional area even when just 4 months were left for the games419.
14.2.5 Further, a note from Jiji Thompson (SDG- Catering) dated 26 June 2010420 stated that the
Chairman convened a meeting on 22 June 2010 with the senior management of OC to
discuss the catering arrangements for venue packages 1 to 8421 due to paucity of funds
available with catering FA and to review the service levels and number of people to be
served. This position of Chairman seems to be surprising considering OC was not clear of
the number of exact requirements under catering funtional area and thus it appears that
shortage of funds was a result of flawed planning and budgeting. This coupled with release
of RFP in December 2009 when the exact service level requirements were not determined
by OC resulted in vendors submitting quotations amounting to INR 78 Crores422 against the
available budget of INR 26 Crores423 for this scope of work.
14.2.6 On 25th June 2010424, a meeting of senior management was called by CEO and a decision
was taken to cancel the entire tender process and to appoint IRCTC on a nomination basis.
The EB in its meeting dated 27 June 2010425 approved the cancellation of the entire RFP
process and directed OC to enter into negotiations with IRCTC to provide catering services
for all venues packages except package 9 on a turnkey basis. Further, the EB directed OC to
resubmit the detailed proposal with justification for appointment of IRCTC to EB through
OCFC and FSC.
14.2.7 A review of the “consolidated note on Tender Packages 1 to 11 except 9” 426 signed by Jiji
Thompson (SDG- Catering) reveals that IRCTC was approached to provide quotes for
providing catering services for all venue packages. Further, IRCTC quoted approximately INR
419
Refer Annexure 14.3.
420
Refer Annexure 14.4.
421
Package 10 & 11 were merged with packages 1 to 8.
422
Refer Annexure 14.4 (Page 8).
423
Budget as left for venue packages 1 to 8 after reducing amount budgeted for CGV.
424
Refer Annexure 14.4.
425
Refer Annexure 14.4.
426
Refer Annexure 14.4 for the contents of this note.
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24.20 Crores for all venue packages except 1 and 4. It also states that the quote of IRCTC is
very reasonable compared to the earlier cost quoted by vendors which amounted to INR 78
Crores. This note also requested Chairman’s decision on awarding the contract to IRCTC
based on the quote submitted by them. Further, the Chairman conducted a meeting with
representatives of IRCTC on 15 July 2010427 to negotiate the rates offered by IRCTC and it
was agreed that a letter with revised service levels will be issued to IRCTC. This resulted in
IRCTC providing a fresh quote of INR 43.83 Crores for all venue packages. Mr. Jiji Thompson
(SDG-Catering) suggested that an LOA should be issued to IRCTC due to the paucity of time
with the OC and placed it for approval. However, the Chairman through an order conveyed
and signed by Jarnail Singh (CEO-OC) on 22 July 2010 annulled the decision of EB by
cancelling the entire tendering process, stating that the offer of IRCTC was not acceptable
and ordered for floating a new RFP (retendering) separately for workforce, volunteers and
other categories428. This decision of Chairman created a disparate situation for OC and
short-circuiting of procedures ultimately leading to selection of an incompetent vendor.
14.2.8 The revised RFP was floated on 24th July 2010 and a period of 7 days was provided to
prospective bidders to respond to RFP. The RFP was issued in seven cities in India and on
the OC’s official website. Due to the paucity of time, the OC was not able to follow clause
4.1 of the procurement manual issued in April 2010 which states that an open tender should
be floated allowing 4 weeks for prospective bidders to respond and if required, a global
tender to attract foreign vendors to respond429.
14.2.9 It appears that the limited release of tender coupled with only one week time period
provided to the vendors resulted in a very small number of eligible vendors. The OC
received responses from 7 bidders namely Graviss Hospitality, Bikanerwala, AFP
Manufacturing Co (P) Limited, Gazal Catering, Gateway Hospitality, Fast Trax and The
Crystals.
427
Refer Annexure 14.4.
428
It cannot be commented if this order was actually given by Chairman as the signatures were not found on the order.
429
Refer Annexure 14.5.
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14.3 Inconsistencies in selection of AFP as the final vendor
14.3.1 The technical evaluation committee430 in its meeting dated 2 August 2010 evaluated the
bids received from all seven vendors. The bids received from two vendors namely; Gateway
Hospitality and Fast Trax were rejected on certain technical grounds and the technical
evaluation committee recommended opening of commercial bid of the remaining five
vendors431. The bid of AFP was found to be lowest (L1) and the vendor was finally
shortlisted for providing this service432.
14.3.2 In determining the evaluation conducted by the technical evaluation committee, is appears
that AFP Manufacturing did not fulfill certain important technical criteria. The
inconsistencies in the bid433 submitted by AFP are as under:
AFP only provided an abstract of its audited profit and loss account rather than the
complete audited financial statements as per the requirements of RFP. Further, the
financial statements of its consortium partner; M/s Coordinators was also not provided
by AFP while submitting its financial information434.
As a proof of credentials, the vendor provided work orders in the name Ekta Shakti
Foundation (one of the group companies of AFP Manufacturing Co Pvt Ltd 435) for supply
of mid day meals to various MCD schools. It appears that this was the only relevant
credential supplied by AFP towards fulfilling the criteria of having relevant experience of
providing catering services.
AFP provided Hazard Analysis and Critical Control Point certificate (‘HACCP’ certificate)
as required under the RFP. However, scrutiny of the certificate reveals that it was issued
to AFP towards manufacturing of namkeen, snacks and bakery products. Further, the
430
The members of the technical evaluation committee were Sanjiv Mittal (JDG- Catering), V.K. Saxena (ADG- Revenue),
KUK Reddy (ADG- F&A) and Sharayu Alemelkar (Director- Catering).
431
Refer Annexure 14.6.
432
Refer Annexure 14.7.
433
Refer Annexure 14.8 for technical bid of AFP.
434
The submission of audited financial statements of the consortium partner does not appear to be a mandatory
requirement under the RFP.
435
AFP did not provide any documentary evidence regarding Ekta Shakti Foundation being one of the group companies of
AFP.
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vendor provided another HACCP certificate towards catering services upon site visit by
commercial evaluation committee to AFP’s site office on 8 August 2010436. It is pertinent
to note that the HACCP certificate relevant to the scope of services was provided post
evaluation of technical bid of the vendor by the OC.
Further, AFP did not provide certain information as required by the “Notes” in the RFP.
However, the same was not explicitly requested by OC at any stage of the evaluation.
14.3.3 It is evident from the above mentioned points that AFP did not conform to certain criterion
mentioned in the RFP; however they were still qualified in the technical round.
14.4 Agreement to terms potentially detrimental to interests of the OC
14.4.1 The OC issued letter of intent (LOI) to AFP for supply of food packets on 18 August 2010
amounting to INR 8.75 Crores. AFP accepted the LOI on 24 August 2010 which defined
terms and conditions of sale and other relevant information. This was issued pursuant to
approval by FTC, Chairman and EB437. It is pertinent to note that hardly six weeks were left
by then for the start of the games.
14.4.2 It was noted certain terms and conditions in the LOI438 were potentially detrimental to
interest of the OC and appeared, prima facie, to be a lapse on part of the OC. These are as
under:
The OC did not enter into a formal contract with AFP thereby exposing itself to risks
normally associated with procurement on the basis of LOI. This appears to be in
violation of clause 14 of RFP which clearly states that “the contract will be signed with
the eligible bidder within 7 days of issue of letter of acceptance beyond which period
non-execution would form sufficient grounds for cancellation of the offer and forfeiture
of EMD”. Further, it was also a violation of the Financial and Administrative Guidelines
436
Refer Annexure 14.9.
437
Refer Annexure 14.10.
438
Refer Annexure 14.1 for LOI.
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which state that any contract of a value of more than INR 10 Lakhs has to be signed as a
contract439.
An advance of 30% of the contract value was provided to the vendor against which the
vendor provided a bank guarantee of 10% of contract value. A provision of 10% of the
contract value appears to be in violation of part (a) of clause 8 of RFP which states that
“Advance payment of not more than 15% of the contract value would be given by the OC
on submission of bank guarantee of equivalent value”. This led to approximately 20% of
the contract value or approximately INR 1.75 Crores being paid to vendor as unsecured
advance.
14.5 Delivery of poor quality food leading to additional costs
14.5.1 On review of certain selected emails440 as provided by catering FA, it appears that AFP was
not able to provide food packages in accordance with the standards as expected by OC.
Further, there were various delivery issues in terms of quality, hygiene standards of the food
supplied. A letter officially sent by Special Commissioner of Police (Administration), Delhi
Police to Jarnail Singh (CEO-OC) needs special mention as it, among other things, states “A
kitchen of AFP lacks proper hygiene and cleanliness, where no sampling and checking of food
is done by the representatives of PFA. The quality of food provided to various venues is not
up to the mark and regular complaints are being received from various venues regarding
delivery of stale food”. Evidently, OC was stuck with a caterer, who failed to deliver quality
food while the games had started.
14.5.2 The failure of AFP to provide quality food packages to various venues led to a catastrophic
situation within the OC and a decision to procure food packages from 19 local vendors and
certain other small vendors was taken on 13 October 2010 by the Fast Track Committee441
and was further approved by the Chairman442. This led to an additional cost of
439
Refer Annexure 14.1.
440
Refer Annexure 14.11.
441
The members of the fast track committee were Jarnail Singh (CEO-OC), G.C. Chaturvedi (SDG-F&A), Sanjeev Mital (SDG-
Catering) and KUK Reddy (ADG-F&A).
442
Refer Annexure 14.12.
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approximately INR 6.71 Crores towards procurements of food packages from these
vendors443.
14.5.3 Further, AFP has been paid INR 1.69 Crores towards its full and final settlement444. This was
approved by the payment review committee on 23 December 2010. However, the OC could
have further reduced the amount on account of the following; Clause 4.35 of procurement
manual which states “Where deficiencies in delivery of contracted goods / services have
potential of impacting severally the smooth conduct of games, a penalty up to 10 % of the
contracted value shall be imposed. Such penalty charges shall be deducted from the
payments due to suppliers”. Considering that the services provided by AFP were found to be
deficient in nature, the OC could have deducted INR 87.50 Lakhs (10% of contracted value)
as penalty charges and should have only paid INR 81.50 Lakhs to AFP. Thus, an opportunity
to save further costs on this contract was lost by OC.
14.6 Summary and conclusions
The technical evaluation committee qualified AFP by overlooking critical information
that was not provided by AFP and other inconsistencies in the bid documents submitted
by AFP. Further, there appears to be a clear negligence on part of OC officials who
carried out the site visit at the premises of AFP as they failed to identify quality and
hygiene issues at the facility as can be evidenced from various emails reviewed later. In
this regards, it appears that the committee proceeded to qualify a vendor who had not
provided certain information and had serious delivery issues.
The decision by the OC with the apparent consent of the Chairman and CEO to cancel
the offer of IRCTC barely two months prior to start of the games pushed OC to an
emergency situation curtailing its options. Further, the selection of an incompetent
vendor, evidently under pressure of time cost OC heavily in terms of reputation in a
critical area and increased financial burden.
443
Refer Annexure 14.13. This payment excludes advance of INR 1.79 Crores which was paid to the vendor at the start of
the contract.
444
Refer Annexure 14.14.
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This coupled by flawed planning and budgeting led to severe shortcomings in meeting
delivery requirements related to a critical area and additional cost amounting to
approximately INR 6.71 Crores incurred by OC.
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15 Chapter 15: Venue Catering II
The review conducted has indicated that OC was not able to muster a good response to
the RFP due to paucity if time. Further, the technical evaluation conducted appears to be
biased towards certain vendors as non- submission of important information and
potential incorrect disclosures by a vendor was overlooked. This is clearly a significant
and material departure from policies and procedures of contracting and potential
misconduct in awarding of the contract to M/s Graviss Hospitality, M/s Seven seas
Hospitality and M/s IRCTC. Further, high rates quoted by the vendor who was common in
CWG 2010 and Pune games was ignored for negotiation thereby lending doubt to the
integrity of contracting process.
15.1 Background
15.1.1 The catering FA was responsible for providing catering services during CWG. The scope of
work primarily included providing catering at the Commonwealth Games Village (‘CGV’), all
competition and non- competition venues. All the venues including CGV were divided into
11 packages, each package representing a venue or a group of venues.
15.1.2 The EOI was issued in June 2009 for all 11 Packages including Package 9 (CGV) which was
finally awarded to DNC. The RFP for the remaining packages which included training and
competition venues was issued in December 2009. This section of the report pertains to
awarding of contracts for catering services at all lounges in competition and training venues.
15.1.3 A brief chronology of the events related to the awards of the contracts is as under.
Table 15.1: Chronology of events
Date Particulars
June 2009 Release of EOI for all packages (1 to 11) including CGV
25 vendors responded out of which 7 were disqualified
December 2009 Release of RFP
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Date Particulars
July 2010 Release of Second RFP for caterer for catering services at all lounges
in all competition and training venues.
Aug 2010 Responses received from the following bidders:
M/s Fast Trax. ( For cluster 1)
M/s IRCTC (For cluster 2,3,7,8)
M/s Graviss Hospitality (P) Ltd. (For cluster 1)
M/s Seven Seas Hospitality (For cluster 1,2,4)
M/s Kwality caterers (For cluster 1 & 8)
Aug 2010 Evaluation of technical bids. The following parties were found to be
responsive bidders:
M/s IRCTC.
M/s Graviss Hospitality
M/s Seven Seas Hospitality
Aug 2010 Opening of commercial bid and rounds of negotiation with
M/s Graviss Hospitality for cluster 1 & 6
M/s Seven Seas Hospitality for cluster 3,4,5,7 and 8
M/s IRCTC for Cluster 2.
Aug 2010 LOIs was awarded to M/s Graviss Hospitality, M/s Seven Seas Hospitality
and M/s IRCTC.
15.1.4 The Letter of intent445 (LOI) was issued on 20/08/2010 to Graviss Hospitality (P) Ltd at a final
value of INR 5.94 cores, for cluster 1 and 6, Seven Seas Hospitality at a final value of INR 6.29
Crores (clusters 3, 4, 5, 7 &8) and IRCTC at a final value of INR 1.70 Crores (cluster 2)
towards the catering services for lounges at different venues for both competition and
training venues.
445
Refer Annexure 15.1
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15.2 Inconsistencies in EOI and First RFP stage
15.2.1 The developments leading to the cancellation of the first RFP has been discussed in chapter
14 of this report. This report discusses the developments post the issue of revised RFP in
July 2010 for catering services at venue lounges both for competition and training venues.
15.2.2 The revised RFP was floated on 24th July 2010 and a period of 7 days was provided to
prospective bidders to respond to RFP for lounges to be served under each venue446 (for
both competition and training). The RFP divided all venues into eight clusters for both
competition and training venues.
15.2.3 The RFP was issued in seven cities in India and on the OC official website. It appears that
due to the paucity of time, the OC was not able to follow clause 4.1 of the procurement
manual issued in April 2010 which states that an open tender should be floated allowing 4
weeks for prospective bidders to respond and if required, a global tender to attract foreign
vendors to respond447.
15.2.4 It appears that the limited release of tender coupled with one week time period provided to
the vendors resulted in a very small eligible vendor base. The OC received responses from 5
bidders namely Fast Trax, Graviss Hospitality, IRCTC, Seven Seas, and Kwality Caterers.
15.3 Inconsistencies in technical evaluation of two vendors namely; Graviss and Seven
Seas
15.3.1 The technical evaluation committee448 in its meeting dated 4 August 2010 evaluated the
bids and rejected the bids of M/s Fast Trax and M/s Kwality Caterers on the basis of the
technical evaluation. The committee449 recommended that the commercial bids of
remaining three bids should be opened.
446
Refer Annexure 15.2
447
Refer Annexure 15.3
448
Refer Annexure 15.4
449
The members of the technical evaluation committee were Sanjiv Mittal (JDG – Catering), V.K Saxena (ADG- Revenue),
KUK Reddy ( ADG F & A) and Sharayu Alemelkar ( Director Catering).
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15.3.2 In determining the evaluation conducted by the technical evaluation committee, is appears
that Graviss Hospitality and Seven Seas Hospitality did not fulfill certain important
technicalcriteria. The inconsistencies in the bid submitted by Graviss Hospitality450 and
Seven Seas Hospitality451 included the following:
M/s Graviss Hospitality (P) Ltd
HACCP certificate was provided in name of its consortium partner (Seasons catering
Services Private Limited. Further, the company failed to provide a PFA certificate.
The company also failed to furnish details evidencing that it staff/employees are
certified by appropriate authority on being healthy and free from any contagious
disease.
M/s Seven Seas Hospitality (P) Ltd
HACCP certificate was provided in name of its consortium partner (Goel Foods). Further,
the company failed to provide a PFA certificate.
The company also failed to furnish details evidencing that it staff/employees are certified
by appropriate authority on being healthy and free from any contagious disease.
The company failed to furnish the documentary evidence to support its claim for having
experience of supplied snacks for about 5,000 meals in a day continuously for at least 7
days to any organization government or private. The bidder in response provided 7
catering contracts entered into with various parties and each covering guests exceeding
5000 people. A phone call made to one of the customers452 of Seven seas to
verify/enquire the number of guests serviced by the vendor revealed that the number of
guests serviced by seven seas towards this customer were approximately 300 against
5,500 as mentioned in the contract between the vendor and the customer. This suggests
that the vendor did not have any prior experience of servicing 5,000 meals and possibly
fabricated the documentation required to be submitted towards this criteria.
450
Refer Annexure 15.5 for relevant extract of technical bid of Graviss.
451
Refer Annexure 15.6 for relevant extract of technical bid of Seven Seas.
452
Refer Annexure 15.6 for the contract between Seven Seas and the customer as provided to us.
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15.3.3 The above clearly suggests that the technical evaluation committee overlooked information
not provided/inconsistent with the requirements of the RFP and qualified two vendors who
possibly should have been disqualified on non-submission/fabrication of documentation to
meet eligibility criteria.
15.4 Commercial evaluations ostensibly to favor Graviss Hospitality
15.4.1 On opening of commercial Bids for all 8 clusters, it was noted that none of the technically
qualified vendors applied for Cluster 5 and cluster 6 and only one bid was received for
cluster 3, 4 &7. Further, cluster 1 & 2 was bid for by only two bidders each. The committee
noted that in situation of a single bid, RFP needs to be re-tendered. However, keeping in
mind the criticality of this area and the paucity of time, negotiations should be conducted
with the respective parties. Subsequently, negotiations were conducted with these three
parties and contracts for Cluster 1, 2 & 4 were awarded to Graviss, IRCTCT and Seven Seas
respectively. Further, the committee requested the three vendors to resubmit their revised
bids for remaining cluster as the cost quoted was high. The committee eventually cancelled
the bids of these vendors for remaining clusters in view of high cost quoted and requested
for a snap bid from these three vendors within 24 hours. Based upon L1 received in snap
bids, contracts for the remaining clusters were finally awarded to the three technically
qualified vendors453. It was noted that Graviss to whom the contract for cluster 1 & 6 was
awarded was also the vendor for providing catering services at the opening and closing
ceremonies and workforce at the Pune Youth Commonwealth Games 2008. Further, two
members of the commercial evaluation team454; KUK Reddy (ADG-F&A) and Sharayu
Almelkar (Director-Catering) were also part of the technical and commercial evaluation
committee455 for catering FA at the Pune Games where the contract to Graviss was
awarded.
453
Refer Annexure 15.7
454
The members of the commercial evaluation committee were Sanjiv Mittal (JDG – Catering), V.K Saxena (ADG- Revenue),
KUK Reddy ( ADG F & A) and Sharayu Alemelkar ( Director Catering).
455
The members of Technical and Commercial evaluation committee in Pune Youth Common wealth Games 2008 were
Mrs Vrinda Gangolli (Ex Principal MSIHMCT, Mrs Kumud Gulati (Ex Officer Food & Accom. TMTC , KUK Reddy ( DDG
Finance), Ms Sharayu Almelkar (Project officer Catering).
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15.4.2 The menu and the level of constituents for opening and closing ceremonies at the Pune
Games and for cluster 1 and 6 at CWG 2010 was found to be similar barring a few items
within each specific menu and constituents. However, the rate per head quoted by Graviss
for CWG 2010 was found to be higher for each constituent similar to the constituents in
Pune Games The details of the same is as under:
Table 15.2: Cluster1- (Opening and Closing ceremonies)
Name of Constituents Rate Per Head in Pune Rate per Head in Excess Rates
2008 Delhi 2010 Charged at Delhi
2010
Opening & Closing 500456 1,360 860
Ceremonies (Games
Families)
Opening & Closing 350 680 180
Ceremonies (VIP’s)
350 1,360 860
Media & Technical Officials 250 600 100
Rates as obtained from LOI with Graviss for CWG 2010 and as per financial bid for Pune Games457.
456
Pune Games did not provide specific rate for Games families. We have assumed the highest rate charged (VVIPs) in
Pune Games towards Games families.
457
Refer Annexure 15.8.
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Table 15.3: Cluster6- DU (Rugby and 11 Training Centers)
Name of Constituents Rate Per Head in Pune Rate per Head in Excess Rates
2008 Delhi 2010 Charged at Delhi
2010
AVM (Athlete Venue Meals) 1,660 4,500 2,840
Technical officials 1,660 4,500 2,840
Rates as obtained from LOI with Graviss for CWG 2010 and as per financial bid for Pune Games458.
15.4.3 Further, the number of persons catered to in Pune Games for the above constituents were
less than the number of persons catered for CWG 2010 for the similar constituents. This
clearly suggests that economies of scale were not considered by the OC while negotiating
with the vendor and instead contract were awarded simply on an isolated L1 basis without
proper comparisons. This lack of proper contracting coupled by the fact that two of the
members in the technical and commercial evaluation committee were common for CWG
2010 and Pune Games suggests an apparent bias towards the vendor Graviss.
15.4.4 EB in its meeting held on 19 August 2010459 accorded its approval for the appointment of
these three vendors at total cost of INR 13.93 Crores which was finally approved by
Chairman OC on 20th August 2010. Further, additional Scope of work460 amounting to INR
36 Lakhs was awarded to Graviss Hospitality towards serving meals for 10 days to Athletes,
team officials and Technical officials in cluster 1 which was approved by CEO on 22nd
September 2010.
15.5 Agreement on terms potentially detrimental to interest of the OC
15.5.1 The OC issued letter of Intent (LOI)461 to Graviss Hospitality, Seven Seas Hospitality and
IRCTC for catering services at all lounges in competition and training venues on 20 August
458
Refer Annexure 15.9
459
Refer Annexure 15.10
460
Refer Annexure 15.11
461
Refer to Annexure 15.1
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2010 amounting to INR 13.93 Crores. This was issued pursuant to approval by FTC,
Chairman and EB. It is pertinent to note that hardly six weeks were left by then for the start
of the games. The breakup of the contracts awarded is as under:
Table 15.4: Breakup of LOI issued for venue lounges
Cluster Name of Vendors Amount (in INR Crores)
Cluster 1 M/s Graviss Hospitality 5.20
Cluster 6 M/s Graviss Hospitality 0.74
Cluster 2 M/s IRCTC 1.70
Cluster 3,4,5,7 and 8 M/s Seven Seas Hospitality 6.29
Total 13.93
15.5.2 It was noted that certain terms and conditions in the LOI issued to all three vendors were
potentially detrimental to interest of the OC and appeared, prime facie, appear to be a lapse
on part of OC primarily due to the paucity of time. These are as under:
The OC did not enter into formal contract with Graviss Hospitality, IRCTC and Seven Seas
Hospitality thereby exposing itself to risks normally associated with procurement on the
basis of LOI. This appears to be in violation of clause 12 of RFP462, which clearly states
that “the contract shall be signed with the eligible bidder with in 7 days of issue of LOI of
acceptance beyond which period; non execution would form sufficient grounds for
cancellations of the offer and forfeiture of EMD. Further, it was also a violation of the
Financial and Administrative Guidelines which state that any contract of a value of more
than INR 10 Lacs has to be signed as a contract.
An advance of 60% of the contract value was provided to the Graviss against which the
vendor provided a bank guarantee of 5% of contract value. A provision of 5% of the
contract value appears to be in violation of part (a) of clause 8 of RFP which states that
“Advance payment of not more than 15% of the contract value would be given by the OC
462
Refer Annexure 15.12
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on submission of bank guarantee of equivalent value”. This led to approximately 55% of
the contract value or approximately INR 3.26 Crores being paid to vendor as unsecured
advance. Further, an advance of INR 25 Lakhs (70% of 36 Lakhs) was also paid to the
vendor without any bank guarantee against this amount. Also, the bank guarantee
provided by Graviss expired on 5 November 2010 against the stipulated date of 30
November 2010 as required by clause 1.5 of RFP463.
An advance of 60% of the contract value was provided to the IRCTC against which the
vendor provided a bank guarantee of 10% of contract value. A provision of 10% of the
contract value appears to be in violation of part (a) of clause 8 of RFP which states that
“Advance payment of not more than 15% of the contract value would be given by the OC
on submission of bank guarantee of equivalent value”. This led to approximately 50% of
the contract value or approximately INR 85 Lakhs being paid to vendor as unsecured
advance464.
An advance of 60% of the contract value was provided to the Seven Seas against which
the vendor provided a bank guarantee of 10% of contract value. A provision of 10% of the
contract value appears to be in violation of part (a) of clause 8 of RFP which states that
“Advance payment of not more than 15% of the contract value would be given by the OC
on submission of bank guarantee of equivalent value”. This led to approximately 50% of
the contract value or approximately INR 3.14 Crores being paid to vendor as unsecured
advance465.
The OC through making payment of unsecured advance to the three vendors exposes
itself to risks against which no risk mitigation was carried out. Further, OC violated clause
6 of RFP466 stating the terms of payments narrates that “Advance Payment of not more
than 15 % of the contract value would be given by OC on submission of BG of equivalent
value”. Also, acceptance of bank guarantee of 5% from Graviss against 10% from other
two vendors appears to be a clear example of bias towards a particular vendor.
463
Refer Annexure 15.13
464
Refer Annexure 15.14
465
Refer Annexure 15.15
466
Refer Annexure 15.10
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15.6 Summary and conclusions
15.6.1 The OC by releasing the second RFP at a very late stage could not muster a strong response
thereby resulting in a very limited number of vendors applying for the contract. Further, the
technical evaluation committee overlooked certain information that was not provided by
the vendor thereby allowing a potentially non-qualified vendor to qualify the technical
evaluation. The evaluation conducted by the OC appears to have a strong bias towards the
shortlisted vendors.
15.6.2 Further, the OC did not negotiate on the rates quoted by the vendor who apparently had
quoted far lower rates in Pune Games for similar menu and constituents. This coupled by
the fact that two of the members evaluating this vendor in CWG 2010 and Pune games were
common suggests a convoluted process of contracting. Further, bias towards a vendor in
terms of lowering the requirement for a bank guarantee suggests that the contracting for
catering services at venue lounges was ineffective and fractured to a large extent.
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16 Chapter 16: Ceremonies – Aerostat
Awarding and monitoring this contract could have been done in a more economical way to
avoid undue benefits to suppliers. Opportunities to reduce costs were not availed which
resulted in wasteful expenditure of INR. 2.9 crores as consultancy charges for an abandoned
concept; INR 6 crore for a decision to not utilize a component taken 20 days before the
games; INR 1.4 crores not recovered from the supplier for not providing ‘flying crew’. There
was inadequate diligence to identify alternate suppliers; placing blind reliance on
‘international consultants’; agreeing to terms and conditions that gravely exacerbated risk
to the OC for non-performance of equipment in a turnkey project. etc.
16.1 Background
16.1.1 Creative Director, Bharat Bala, Event Management Firm M/S Wizcraft and International
Consultant Mr. Ric Birch were appointed by OC for preparing the concept & theme of
opening and closing Ceremonies. Initially it was decided to design a trench and foundation
for a pavilion/bandstand in the centre of the field (Jawaharlal Nehru Stadium). This concept
was later abandoned and a new concept of deployment of “Aerostat” was approved.
16.1.2 Aerostat was a helium-filled balloon which would be suspended over the field of play. This
would provide a 360 degree surface for video projection of graphics and also a large
number of mirrors that would reflect lighting that will be required during the opening &
closing ceremonies.
16.1.3 A brief chronology of the key events relating to the award of contract to K-Events is set out
in the table below.
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Table 16.1: Chronology of Events
Date Particulars
16 October 2009 Recommendation for appointment of Mark Fisher as consultant for Band
Stand/Pavilion
20 October 2009 Appointment of Mark Fisher approved by GOM
9 December 2009 GOM decision to abandon the concept of band stand/pavilion
3 February 2010 Chairman OC, approved note for awarding contract for aerostat on Fast
Track Mechanism without RFP
4 February 2010 Enquiry made by consultant to K-Events for design and supply of aerostat
12 February 2010 K-Events responded with Cost details and timelines for supply of aerostat
15 February 2010 Concept of Aerostat presented to GOM
18 February 200 Chairman OC presentation to GOM on Aerostat and K-Events
appointment approved by GOM on single offer basis
19 February 2010 Dr Lalit Bhanot, SG, OC accords principle approval for appointment of K-
Events
22 February 2010 Negotiation Committee approves the appointment of K-Events
26 February 2010 Draft Agreement sent to K-Events for review & approval
3 March 2010 & 6 Proposal for appointment of K-Events discussed in Finance Sub-
March 2010 Committee OC
8 March 2010 Executive Board approved appointment of K-Events
18 March 2010 Contract entered between K-Events & OC for Euros 5.8 Million (Approx
INR 36 crores)
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16.2 Wasteful Consultancy Charges due to change in concept of Opening & Closing
Ceremonies:
16.2.1 Creative Director, Bharat Bala vide letter467 dated 16.10.2009 to Chairman, OC
recommended appointment of Mark Fisher as consultant for design and construction of
Pavilion/Trench and Bandstand which was the original concept for opening & closing
ceremonies
16.2.2 Group of Ministers (GOM) in their meeting dated 20.10.2009, approved, based on
recommendation of Creative Director, Bharat Bala, the appointment of Mark Fisher for
compilation of design for a trench and foundation for pavilion/bandstand in the centre of
the field (Jawaharlal Nehru Stadium). Total fees agreed for Mark Fisher amounted to INR 2.5
crore (plus applicable taxes).
16.2.3 It is surprising to note that OC did not conduct any negotiations with the consultant Mark
Fisher and agreed to all terms and conditions of the consultant even in view of the
significant consultancy charges to be paid. As per minutes of meeting of GOM dated
02.12.2009, total cost for construction of Bandstand/Pavilion was estimated at INR 80 crore
excluding fees for consultancy charges.
16.2.4 However GOM during their meeting468 dated 09.12.2009 decided not to proceed further in the
construction /implementation of the Pavilion/Band Stand on the following ground:“Since 800 tons of
steel is estimated to be used in the construction/implementation of the Pavilion/Bandstand. There
are serious safety, security and technical, approval considerations, including the time taken in
procurement, calling bids, award of work etc. The opening ceremony should be produced without the
construction of the proposed Pavilion/Bandstand. In addition, the GOM notes the potential jeopardy
to the athletic track and turf on account of the movement of heavy machinery in and out of the
stadium for the opening ceremony. The potential damage would place considerable risk on delivery
of the athletic events.”
16.2.5 It was also decided that “Engagement of Services of Mark Fisher is linked to the design of the
Pavilion/Bandstand. As the Pavilion/Bandstand is not be to constructed, the services of Mark Fisher
on this account is not necessary”
467
Letter from creative director to Chairman OC recommending appointment of Mark Fisher – Annexure 16.1
468
GOM meeting dated 09.12.2009, decided to change the concept for opening/closing ceremonies – Annexure 16.2
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16.2.6 It was extraordinary to note that aspects related to safety, security, approvals and time lag
for procurement of material and awarding of work had not been considered at the time of
approval of concept of construction of Pavilion/Band Stand. It appears that the reason to do
away with construction of Pavilion/Bandstand was basically paucity of time available and
demonstrates inadequate planning done for Opening & Closing ceremonies by OC.
16.2.7 However, the consultant Mark Fisher had already been paid469 his consultancy charges
amounting to INR 2.9 crore for the abandoned concept as discussed above. The amount of
INR 2.9 crore represents profligate expenditure that arose out of decisions taken at a very
late stage.
16.3 Inconsistencies in contracting and award of work to K-Events
16.3.1 A new concept of “Aerostat” in place of the abandoned proposal of Bandstand designed by Mark
Fisher was placed before the GOM on 15.02.2010 and was duly approved. A note470 approved by
Chairman OC dated 03.02.2010 was found on record clearly mentioning that OC had no background
to scope of work, or details of design or suppliers of aerostat and was not in a position to issue RFP.
Based on these ground the recommendation awarding the contract for procurement of “Aerostat”
on Fast Track Mechanism was approved.
16.3.2 In the meeting of GOM held on 18/02/2010, Chairman OC informed that the estimated cost
of aerostat project471 would be about US $ 8.1 million on single offer basis. He also
mentioned that this cost would be over and above the cost of ceremonies already indicated.
16.3.3 In meetings of Negotiation Committee472 constituted by the Chairman, OC dated
22/02/2010 & 23/02/2010, it was mentioned that “International Consultant and Event
Management Firm made efforts to find out about the companies who would be willing to
deliver the customized aerostat in such a short time. However as is the practice
internationally, most of the companies work on a larger time frame and therefore they are
not willing to take up this project. In order to produce such a customized Aerostat, which will
469
Details of payment to Mark Fisher – INR. 2.9 crores – Annexure 16.3
470
Detailed note recommending not to issue RFP for aerostat – Annexure 16.4
471
Bid from K-Events with cost details – Annexure 16.5
472
Refer MOM of Negotiation Committee dated 22.02.2010 – Annexure 16.6
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be one of its kind only M/S K-Events on the recommendation of International Consultant (Mr.
Ric Birch) responded to send OC a formal proposal”.
16.3.4 On a review of minutes of the meeting of Finance Sub-Committee for OC the following was
observed :
In meeting dated 03/03/2010 it was mentioned that due to paucity of time and
requirements of high standards of skill & expertise, for the specially customized proposed
aerostat for Delhi 2010, assistance was sought from the International Consultant and the
Event Management Firm, who have been mandated to source potential suppliers. It was
decided by OC not to issue RFP.
In meeting dated 06/03/2010 it was mentioned that 23 firms spread over USA, UK,
China, Germany, Australia, Ireland and India had been contacted for the aerostat. Of
these, 3 expressed initial interest. Similarly 15 firms for reflecting mirrors, 1 for tape, 8
for Helium Gas and 5 for Anchors were contacted, however given the criticality of time
and customization required only M/S K-Events supported by Lindstarnd Technologies,
agreed to undertake a turnkey project.
16.3.5 Executive Board473 in its meeting dated 08/03/2010 passed the resolution for appointment
of K-Events for productions, installations and management of Aerostat for the opening and
closing ceremonies as per the proposed terms and conditions. It was again emphasized in
meeting that due to paucity of time, high degree of professional expertise required and
customization involved, only K-Events agreed to undertake this turnkey project.
16.3.6 From the chronology of events and recordings in minutes of meetings of Finance Sub
Committee and Executive Board it is evident that:
OC was not interested in making enquires on its own or issue RFP to find a suitable
supplier of Aerostat and they appeared to be completely relying on the International
Consultant & Event Management Firm.
No details of RFP letters or email enquiries made to various suppliers by consultants
were made available. It could not be validated which suppliers expressed interest;
473
MOM of Executive Board Meeting passing resolution for appointment of K-Events for supply of aerostat – Annexure
16.7
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whether any negotiations were done by OC or the consultant with those suppliers; the
price quoted and other terms and conditions discussed. Further no regret letters or
letters from other supplier on the ground of shorter time frame were also found on
record.
The decision for not issuing the RFP was based on advise of International Consultant (Mr.
Ric Birch), Event Management Firm which appeared to portray a picture under which K-
Events emerged as the only supplier available in world who could complete this work as
a turnkey project within the available time frame.
It is interesting to note that documents474 substantiating that K-Events was working with
Mr. Ric Birch for past 5 years on several projects were found on record. Consequently, it
is likely that there was a bias towards selection of K-Events for supply of Aerostat.
16.3.7 It should also be noted that resolution to appoint K-Event was approved by Executive Board
OC on 08/03/2010, however Lalit K Bhanot, Secretary General, OC vide letter475 dated
19/02/2010 wrote a letter to K-Events mentioning that “The organizing Committee agrees in
principle to the Aerostat being a part of opening and closing ceremonies, subject to the
discussion on the contract during your forth coming visit to Delhi next week. The same would
become part of the contract after following necessary procedure”. Further, Jarnail Singh,
CEO, OC vide letter476 dated 26/02/2010, confirmed appointment of K-Events and agreed to
a timeline for signing the contract. Thus, it is evident that the decision to appoint K-Events
had already been taken much before the proposal was taken to the EB and Finance Sub-
committee. This shows utter disregard for the role of oversight and approval committees
and further corroborates the observation that approval of such bodies were taken for
granted by OC functionaries.
16.4 Conflict of interest- Due diligence on the supplier
16.4.1 It was surprising that the Consultant who identified the supplier was also entrusted with the
responsibility for carrying out due diligence on them. A reference was also made to Indian
474
Letter from K-Events mentioning 5 year old relationship with Ric Birch – Annexure 16.8
475
Letter from Lalit Bhanot to K-Events – Annexure 16.9
476
Letter from Jarnail Singh to K-Events – Annexure 16.10
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Embassy in Italy through email correspondence dated 05/03/2010, however this was done
after in principle contract was awarded to M/S K-Events.
16.4.2 Further no documents were forthcoming for any analysis of rates or justification of rates
quoted by supplier. It was observed that OC largely appeared dependent on advice of
International Consultants and Event Management Firm who depicted a picture that K-Events
was the only supplier in the world who was ready to design and construct the aerostat. As
there is no justification or explanation available for the rates, there is no evidence that what
the OC paid was comparable or in line with market rates. Further, though there was an
evident close relationship between the International Consultant, Ric Birch, and the K-events,
it is surprising that the OC did not initiate any secondary level checks to ensure that this
position was not misused by either the consultant or the supplier to the detriment of the
OC.
16.5 Inconsistencies in representations
16.5.1 In meeting of Negotiation Committee477 constituted by the Chairman, OC dated 22/02/2010
and 23/02/2010, it was discussed that “An option of hiring of such a device should be
evaluated as such a device would have negligible or no legacy value, however it was
brought that for making the Opening & Closing Ceremonies d spectacular & world class,
would warrant customizing the device in order that it fit the bill of ceremonies function of
Delhi 2010. This aerostat being one of its find such device would not be available off the
shelf anywhere else in the world”. Consequently, the Negotiation Committee appeared to
simply make a statement that the device would not be available off the shelf without any
evidence that a due diligence was done or attempts were made to validate their assertion.
16.5.2 Further it was misrepresented that purchase of aerostat was within the limits of bill of
ceremonies, as in contrast to this Chairman OC himself acknowledged in the GOM
meeting478 dated 18/02/2010 that “The estimated cost of aerostat would be about US $ 8.1
million project on single offer basis and this cost would be over & above the cost of
ceremonies already indicated”.
477
Refer MOM of Negotiation Committee dated 22.02.2010 – Annexure 16.6
478
Details of MOM of GOM meeting dated 18.02.2010 – Annexure 16.11
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16.6 Ignoring legacy considerations
16.6.1 There were no legacy considerations documented or recorded anywhere by the OC in the
records made available.
16.6.2 Further, according to contract clause 24 of Schedule 2 of agreement479 entered between OC
and K-Events it was mentioned that adequate training would be provided by K-Events to
Delhi CWG Officials for use of Aerostat post CWG games. However no records were
forthcoming of such training being provided to Delhi Government officials.
16.7 Inadequate testing for airlift of Aerostat before its dispatch from point of
manufacture
16.7.1 As per the Schedule 2 (Scope of Work) and Schedule 3 (Fees & Payment) of Turnkey Project
Agreement480 entered upon by Organizing Committee and K-Events dated 18th March 2010
“Inspection to be done by 4 to 6 officials from Delhi 2010 at the point of manufacture of the
aerostat outside India and a total of 25% of the total payment was to be made after the
aerostat test in the UK”.
16.7.2 According to the above terms, the final testing of Aerostat was conducted by K-Events in
presence of OC representatives on 17th and 18th August 2010. However as per the project
report481 on test conducted it was mentioned that “Test to airlift the aerostat would not
happen due to adverse climatic conditions, inclement weather and strong winds. Hence the
OC team were not able to see the Aerostat air borne and thus OC team was not in a position
to comment on its feasibility & fullest capacity”
16.7.3 Thus it is evident that feasibility of airlift of aerostat was not tested, which was the core
purpose for which aerostat was proposed for opening & closing ceremonies and for which 5
people from the OC traveled to the UK.
479
Extract from contract between OC & K-Events – Annexure 16.12
480
Extract from contract between OC & K-Events – Annexure 16.12
481
Details of the Project test report – Annexure 16.13
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16.7.4 Further it was also evident that the 25% payment amounting to INR 8.81 crores was
released to K-Events event though aerostat was not tested at the point of manufacture as
expressly documented in the contract.
16.8 Payments made without submission of Bank Guarantee and Insurance
16.8.1 As per Clause 11.6 of the contract agreement482 between OC & K-Events, a Performance
Bank Guarantee (PBG) amounting to 10% of contract value (Approx INR 3.6 crore) was
required to be submitted before making any payment. It was observed that advance of 20%
(Approx INR 7.2 crore) was made to K-Events without submission of PBG. Executive Board in
its meeting dated 08/03/2010 exempted K-Events from submission of any Bank Guarantee
on the basis of references received from 3 reputed banks regarding the credit worthiness of
the vendor. However no such reference letters were found on record.
16.8.2 As per Clause 32 of the contract agreement between OC & K-Events, following types of
insurance documents were required to be furnished by K-Events after payment of 1st
Milestone (20% advance payment):
Public Liability Insurance (Approx INR 25 crores)
Professional Indemnity Insurance (Approx INR 2.5 crore)
Product Performance Insurance (Approx INR 36 crores)
16.8.3 It was observed that 2nd, 3rd & 4th milestone payments483 were released to K-Events without
submission of Professional Indemnity Insurance & Product Performance Insurance. Such
payments amounted to approx INR 20.03 crores. All these payments were made as special
waivers duly approved by Chairman OC484, vide Letter dated 19/07/2010 where it was
mentioned that “Despite non fulfillment of contractual obligations by M/S K-Events in
respect of non-furnishing of Insurance Policies, special waivers have been given in order to
ensure that the project proceeds on time”
482
Extract from contract between OC & K-Events – Annexure 16.12
483
File note, detailing special approvals accorded for waiver – Annexure 16.14
484
Letter authorized by chairman, OC approvals for non submission of insurance policies – Annexure 16.15
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16.8.4 From above it evident that OC appeared submissive to the demands and conditions of K-
Events. Vendor dictated its own advance and payments terms, even without submission of
the critical Insurance documents, the payments were released to vendor giving an undue
advantage to vendor. Further, the absence of insurance documents and PBG would have
gravely endangered the OC in the event of unsuccessful performance of the underlying
equipment.
16.8.5 Executive Board485 in its meeting dated 16/04/2010 approved a proposal that submission of
“Bank Guarantee for advances and Performance Bank Guarantee for execution of contract
may not be required for International/Domestic Consultants/Experts/Artists since these
persons are of International/National repute and their payments are released in stages
based on certification of work by the Functional Area”.
16.8.6 The waiver of submission of Bank Guarantee/PBG increased the risk on OC leaving no re-
course action available in case of default by any such suppliers. Approval of such a proposal
was thus complacent and arbitrary in nature. It is likely that such decision was taken to give
an undue advantage to some of preferred suppliers and consultants working for OC.
16.9 Incurring expenses on behalf of the supplier, K-events with no recovery
16.9.1 As per the letter486 from K-Events dated 17/02/2010, it was requested that:
The Delhi 2010 OC, shall provide two business class return airfares from Milan, Italy to
Delhi in accordance with a schedule to be mutually agreed between K-Events & OC
The Delhi 2001, OC shall provide Hotel Accommodation in Delhi of five star standard at
Lalit Hotel, Imperial Hotel, Oberoi Hotel or Sheraton Hotel and shall pay for all costs of 2
rooms for duration of the visit by K-Events Representatives
16.9.2 The purpose of aforesaid meeting was to sign contract with OC and it was observed that
tickets & accommodation was arranged by OC for K-Events representatives. This is
inexplicable as the vendor was expected to pay for its journey to sign the contract and OC
485
MOM of Executive Board meeting – Annexure 16.16
486
Letter from K-Events for meeting in Delhi – Annexure 16.17
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should not have taken any obligation to meet such costs. There could be no justification of
OC bearing such expenses.
16.10 Contractual savings by K-Events not considered for subsequent changes to design &
theme of Opening & Closing Ceremonies
Component “Sausage” of Aerostat was not used while ceremonies
16.10.1 A project report was submitted by K-Events on 12/04/2010 detailing that Aerostat will
consist of two major components:
The “Torus” – elliptical shaped tube 12m in diameter measuring 80m long and 40m wide
and internal volume of approx 18,000 cum. A cable net is attached to the underside of
the Aerostat to support approximately200 mirrors, each of which has a diameter of 2.4m.
There is a decorative “skirt” around the outside of the torus. There is a series of 36
hanging points on the underside of the Torus to support the 36 drummers who will be
deployed at the beginning of the opening ceremony and a 25m long truss will be
suspended beneath the “Sausage” which contains 4 off “Scenic” winches which may be
used to raise and lower a combination of scenic items & performers”
The “Sausage” – cylindrical shaped 36m long with a diameter of 12m and an internal
volume of approx 3,600 cum. It sits inside the “Torus” along with centerline and is
attached to the Torus with a series of cables.
No break up of material/design/construction cost of major components was detailed in
contract or any details were provided by K-Events.
16.10.2 In a mutual decision between OC and K-Events487 vide note dated 09/09/2010 (20 days
before the opening ceremony) it was decided that “Sausage” would be removed completely
and would be carefully packed away and handed over to OC after the closing ceremony
along with the rest of the aerostat. Following were the reasons mentioned for non usage of
“Sausage”
487
Detailed note for non usage of “Sausage” dated 9 Sept 2010 – Annexure 16.18
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“Sausage” was introduced in order to provide the additional buoyancy in centre of the
aerostat for scenery while the 36 drummers were lifted by the Torus, since drummers
(Flying crew) have been cut from the show there is no need for the additional buoyancy.
The quality of projected images will benefit from the increased stability of the Torus that
the elimination of the Sausage will provide.
16.10.3 It is not clear why the decision to abandon the use of “Sausage” was taken just at the anvil
of the games and after OC had already incurred expenditure running into crores of rupees
procuring the equipment under ‘emergency’ situations. In this regard, the following issues
are especially evident.
Such a decision taken after the design and construction was already finalized indicates
uninformed and unprofessional decision making. Substantial costs could have been
saved on design, engineering and construction of “Sausage” if its usage was challenged
at the time initial design and drawings were approved by OC lead by team of
‘International Consultants’.
One sixth of the total cost of Aerostat was attributable to “Sausage” and a timely
decision would have led to a savings of approx INR 6 crores (1/6 of the total contract
value of INR 36 crore). However as per computations done by OC, cost488 of INR 1.71
crores has been determined as cost to be deducted for non utilization of Aerostat, since
“Sausage” in deflated condition has been handed over to OC so no deduction is made on
account of material & other components cost. It is extraordinary that the OC downplays
the cost incurred and represents a loss of INR 1.71 crore, when in reality, the entire cost
of INR 6 crores resulted in an equipment component that was not used at all in the
ceremonies, with full knowledge and approval of the OC.
It also becomes questionable whether all these aspects mentioned for non utilization of
“Sausage” were considered while testing was conducted at point of manufacture in UK
during August 2010. No such considerations/comments for additional buoyancy were
detailed in testing report.
488
Computation by OC for non utilization of Sausage – Annexure 16.19
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Non utilization of Flying Crew during the Ceremonies
16.10.4 As per the Schedule 3 of contract entered into between OC and K-Events, a total of INR3.58
crore was towards Flying & Rigging, the detailed break down was as under:
Table 16.2:
Flying and Rigging Euros INR
Scenic Rigging Winches 178,125 10,687,500
Power Distribution 94,875 5,692,500
Winches Feight 88,650 5,319,000
Scenic Rigging Crew 157,516 9,450,960
Flying Rigging Crew 77,045 4,622,700
596,211 35,772,660
16.10.5 A letter dated 19/07/2010489 by Chairman OC, mentioned that “Even though a turnkey
contract has been entered into with M/S K-Events for supply of aerostat states that scope of
work includes all rigging and flying equipment and manpower, yet we at OC are quite
aware that this lends itself to several interpretations. We all too would like to have the
flying artistes both on the periphery as well as on the inner circle along with the raising of
the scenic pops”.
16.10.6 However in a meeting490 dated 28 July 2010, it was unanimously decided that flying of
performers should be dispensed with due to following reasons:
When flying performers, the safety of the Aerialists and adjacent performers is
paramount. Any accident of injury would generate negative publicity and risk spoiling the
positive image of the commonwealth games.
Insufficient time at JLN stadium for ensuring safety of flying performers as the Aerostat is
expected at the end of August and its setting up itself would take 10 to 12 days.
489
Letter from Chairman OC – Annexure 16.20
490
Meeting for non usage of Flying crew – Annexure 16.21
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Aerostat has been designed and engineered to withstand wind speeds in excess of
10m/sec the various scenic elements and any performer flying would fall victim to the
weather at much lower wind speeds. The huge investment required to deliver performer
flying would then be completely wasted and the expectations not delivered
The impact of having only 10 performers flying would not create the desired effect for
they would be lost under the huge aerostat and the flying performers would be visible
only as small pecks
16.10.7 It is questionable that why these safety issues were not considered at the time of design and
construction of the Aerostat, the grounds on which use of flying performers have been
rejected, it demonstrates that Internal Consultants, OC representatives and designer were
not able to address these issues and highlight remedies. Due to this, theme of flying
drummers was dropped.
16.10.8 It should be noted that no deduction was made from the payments made to M/S K-Events,
even though company would had a saving of approx INR 1.4 crore due to non utilization of
flying & scenic crew as detailed above.
16.11 Summary and conclusions
16.11.1 From the review of the entire contracting and execution process, it is evident that the OC
officials did not handle the awarding and monitoring contracts in adequately professional
and well informed manner and this could have resulted in undue benefits to suppliers.
Opportunities to reduce costs were not availed and on the contrary there was significant
wasteful and avoidable expenditure. This summary arises from the following key points:
The decision by GOM to do away with construction of Pavilion/Bandstand came too late
with the consequence of wasteful expenditure of INR 2.9 crores paid as consultancy
charges for its design, a concept that was abandoned.
Delay caused due to the late decision to abandon the Bandstand created a situation
where OC officials were left with very little time and opportunity to making enquires on
their own or issue RFP to find a suitable supplier of Aerostat. However, they completely
replied upon the information and experience of International Consultant & Event
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Management Firm in stead of developing their own inquiries to make informed
decisions..
The decision to not issue an RFP was solely based on advice of International Consultant
(Mr. Ric Birch), and Event Management Firm (Wizcraft) which portrayed circumstances
under which K-Events emerged as the only supplier available in the world, who could
complete this work as a turn key project within the available time frame. OC officials
should have seen the implication of the relationship between the consultant and the
supplier K-Events for past 5 years on several projects. In view of these facts a likelihood
of a bias towards the vendor cannot be ruled out.
In principle agreement/confirmation to K-Event for design, technical implementation,
manufacture and project management of the aerostat by Lalit K Bhanot, Secretary
General, OC vide letter dated 19.02.2010, even before the proposal was recommended
by Finance Sub-Committee or approved by EB, rendered the approval by the EB to a
formality for the legitimacy of a decisions already taken by OC senior functionaries.
The fact that aerostat was approved to be shipped even without testing of airlift of
Aerostat, gravely endangered the feasibility and capacity testing. Payments released to
K-Events even without submission of Insurance documents based on special waiver
approved by Chairman OC was an undue advantage to supplier.
Timely decision on design for finalization of aerostat would have helped exchequer save
approx INR 6 crores as component “Sausage” was not used during games.. It is not clear
why all these aspects mentioned for non utilization of “Sausage” were not considered in
testing report while testing was conducted at point of manufacture in UK during August
2010.
Savings would have been made by supplier due to non utilization of flying
drummers/crew but no deduction was made from contract value. Approx INR 1.4 crore
was saved by K-Events, on this account thus giving undue advantage to supplier.
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17 Chapter 17: Ceremonies – Art Director
17.1 Background
17.1.1 For the production and delivery of opening and closing ceremonies a contract was required
for Art Director and Production Designer and for Scenic workshop Construction works. After
issue of separate RFPs for the two works, contract for both works was given on a single
tender basis to the same vendor (Omung Kumar) who was strongly recommended by the
Creative Director, EMF and International Consultant.
17.1.2 A brief chronology of the key events relating to the award of contract in respect of
Searchlights, Lightings and Lighting Designer is set out in the Table 1 below.
Table 17.1:
Date Particulars
20.03.2010 5 Nominations made by Wizcraft, Ric Birch and Bharat Bala for the
work of Art Director and Production Designer for opening and
closing ceremonies.
Omung Kumar was strongly recommended by Creative Director, Event
Management Firm (EMF) and International Consultant and he was
asked to submit a quotation.
06.04.2010 RFP issued on 27.03.2010 for Scenic workshop construction
cancelled
12th April’2010 Revised scope of work sent to Omung Kumar including the work for
scenic workshop management and construction company
17th April’ 2010 Revised offer received from Omung Kumar in 2 parts-
-Fees as creative Art Director and Production Designer- INR 1.48
crore
-Charges in percentage on the cost of producing, manufacturing
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and delivering the art and scenic props- 20%
26th April’2010 Negotiation by the negotiating committee consisting of :
6th May’ 2010 ADG ( F& A)
ADG ( Procurement)
SDG (C&C)
Representative of Wizcraft
14th May’ 2010 List of props was sent to the vendor asking for a single quote for
both works of Art Director and Production Designer and production
of art and scenic props.
Quotation of INR 20 crore received from the vendor.
25th May’ 2010 Reduced list of props sent to Omung Kumar ( due to changes in
creatives)
23rd June’ 2010 Revised proposal of INR 13.10 crore received for reduced list of
props.
25th June’ 2010 Further negotiations held by the negotiating committee comprising
of :
ADG ( F& A)
DDG ( Legal)
DDG ( C& C)
Representative of Wizcraft
FTC approved contract price of INR 11 cores plus taxes plus cost of
business class air tickets on Air India (max of 48).
9th July’2010 Date of Contract awarded to Omung Kumar for opening Ceremony.
19th August 2010 Decisions of FTC ratified by EB in 24th meeting held on 19.08.2010
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29th September’ 2010 Date of addendum to contract for opening ceremony amounting to
INR 1.45 crores plus taxes (approved in FTC meeting held on 3rd
September’2010)
10th October’ 2010 Date of contract for closing ceremony amounting to INR 4.04 Crores
plus taxes (approved in FTC meeting held on 16th and 26th
September’2010)
17.2 No Quotations were asked for Construction of props
17.2.1 Wizcraft, International consultant and Bharat Bala recommended 5 nominations for
potential vendors for the work of Art Director and Production Designer for opening and
closing ceremonies. Of them, Omung Kumar was strongly recommended by Wizcraft,
International consultant and Bharat Bala in FTC meeting held on 20.03.2010 491. Therefore
initially quotation was asked only from Omung Kumar. But as the RFP for the scenic
workshop was scrapped (discussed in the following paras) due to high value of bids and
Omung Kumar was having his own workshop, scope of work for Art Director and Production
Designer was merged with the work of scenic workshop management and construction.
Accordingly Omung Kumar was asked to make a new quote for increased scope of work on
12th April, 2010. Omung kumar was finally contracted for both the works without inviting
fresh quotations for the scenic props fabrication. As a result the same vendor was awarded
two works492 without any effective competition.
17.2.2 The earlier RFP for scenic workshop management and construction of workshop and scenic
fabrication did not include props fabrications. The clauses 19.3.5 and 19.3.6 of RFP493 asked
for the different quote for workshop Construction and for fabrication of props. According to
the flow chart given under clause 19.3.6494, Agency for workshop construction would send
quote for scenic fabrication to Wizcraft and IPD (Indian Production Designer), based on the
491
Refer Annexure 17.1
492
Two works include work of Art Director and Production Designer for the production and delivery of the ceremonies and
the scenic workshop management and construction
493
Refer Annexure 17.2
494
Refer Annexure 17.2
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drawings etc provided by IPD. Then such quote would be reviewed and approved by
Wizcraft and IPD and OC would send the agency a purchase order for the same.
17.2.3 Therefore the vendor for construction of workshop was to be finalized and then finalists
would be sent quote for the props to be made according to the designs of Production
Designer. As the RFP for Workshop Construction Company was scrapped on 06.04.2010495
(as approved by FTC on 14th April, 2010496) due to high price bids no quotation was asked for
the fabrication of props.
17.2.4 It thus appears that as a consequence of improper planning by OC officials and Wizcraft,
497
around 4 months were wasted (Jan 2010 – April 2010) in respect of setting up of a
separate workshop or using an existing workshop. Further, without searching for potential
vendors for fabrication of props, the work was given to Omung Kumar who was initially
nominated only for the work of Art Director and Production Designer. In the 3 months gap
between the date of cancellation of RFP for scenic workshop and actual date of awarding
the contract to Omung Kumar (06.04.2010 to 9.07.2010), a comparative price for the
contract for fabrication of props could have been obtained through tendering process.
17.3 Delays in finalization of contracts for Opening and closing ceremonies
17.3.1 It is relevant to note that the concept and theme for opening and closing ceremonies was
presented in the GOM meeting held in September’09 and December’09. But various scenic
elements and props were finalized and contracted in September’2010498 and
October’2010499 for opening and closing ceremonies respectively. Hence it took 10 to 12
months in finalizing the props for the ceremonies. Further this left OC without appropriate
time to negotiate the price quoted by the vendor or to make market rate comparison. Table
2 below shows the delays in the tender processing:
495
Refer Annexure 17.3
496
Refer Annexure 17.3
497
Idea of scenic workshop construction and management was initiated in Jan 2010.
498
Refer Annexure 17.4
499
Refer Annexure 17.4
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Table 17.2:
S. Starting Date Ending Date Delays ( in
No months)
1 Concept and theme for opening Addendum to the contract for 12
ceremonies was presented in the GOM Opening Ceremony-29.09.2010
held on 11.09.2009
2 Concept and theme for closing Contract for closing ceremony- 10
ceremonies was presented in the GOM 10.10.2010
held on 20.12.2009
3 Nominations for Art Direction and Finalization of Original Contract 3.5
Production Designing in Fast Track (for Art Direction & Production
meeting- 20.03.2010 Designing and Scenic
Workshop)- 09.07.2010
4 Finalization of Original Contract (for Art Changes proposed to the 2.5
Direction & Production Designing and existing scope of Work in
Scenic Workshop)- 09.07.2010 respect of opening ceremony
very late. Addendum to the
contract for Opening
Ceremony-29.09.2010
5 Date of cancellation of RFP for Scenic Finalization of Original Contract 3
Workshop- 06.04.2010 (for Art Direction & Production
Designing and Scenic
Workshop)- 09.07.2010
6 Date of cancellation of earlier RFP for Contract for closing ceremony- 6
Scenic Workshop- 06.04.2010 10.10.2010
17.4 Major reduction on account of reduced list of items
17.4.1 The cost reduction achieved by OC, in respect of the contracts awarded to Omung Kumar for
opening and closing ceremonies was mainly on account of curtailed scope of work as
discussed below:
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Initially the vendor made separate proposals for Art Direction and for Scenic Workshop.
After the second negotiation meeting held on 6th May, 2010 and the discussion between
EMF and FA (ceremonies), he quoted the lumpsum amount of INR 20 Crore for both
works.
It has been observed that out of the total reduction of around INR 9 crore, INR 7.50
Crore were reduced on account of reduction in scope of work and changes in creatives
for the scenic workshop. On the basis of such reduced list500, vendor made a new
proposal of INR 13.10 Crore on 23rd June 2010 (i.e. after reduction of INR 6.90 crore).
After negotiation price was further reduced by INR 2.10 Crore (out of which 0.60 crore
was on account of reducing number of train compartments).Therefore reduction of
INR7.5 crore (INR 6.90 crore plus INR 0.60 crore) related to reduction in list of props to
be fabricated by the vendor.
The quotation of INR 1.45 crore (i.e. INR 0.76 crore for puppets plus INR 0.69 crore for
changes in the existing props of opening ceremony) made by the vendor was not
reduced.
In respect of closing ceremony, the price demanded by the vendor was marginally
reduced by reducing the scope of work as shown in Table 3 below.
Table 17.3:
Name of Segment Quotation Contract price Diff
received
Agni and Music of Universal Love 3.89 Crores 3.70 Crores 0.19 crores
Countdown and Vande Matram 0.34 crores 0.34 Crores -
Total 4.23 Crores 4.04 Crores 0.19 Crores
500
Refer Annexure 17.5
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17.4.2 It appears that Stage canopies with folded mechanism, costing INR 19.73 lakh and Lectern,
costing INR1 lakh (aggregating INR 21 lakh) as per quotation, were not included in the final
contract. Therefore it may be concluded that reduction of INR 0.19 Crores in this contract
was achieved by excluding the above mentioned two items.
17.5 List of props to be fabricated for the opening and closing ceremonies was not
efficiently made
17.5.1 The BOQ for the opening ceremony was not made properly. After entering into the contract
with Omung Kuamr for opening ceremony on 09.07.2010 a requirement of additional props
like cable hangar brackets with accessories were identified501. Contract for these
equipments were entered into with another vendor.
17.5.2 Further, there was delay in proposing changes and additions to the existing Scope of Work
in respect of opening ceremony for which contract was entered into with Omung Kumar on
09.07.2010. Bharat Bala and Shyam Benegal suggested some changes to the existing props
and additional puppets for the Opening Ceremony to Omung Kumar after their visit to the
Ceremonies Production Workshop on 3 – 5 August 2010. Omung Kumar in turn proposed
some of the suggested changes with cost and other without cost (i.e. to be adjusted in the
original contract price only).Total price for the changes and additions as approved by the
Fast Track Committee on 3rd Sep 2010 was INR 1.45 Crores plus Taxes. The Addendum to the
contract for Opening Ceremony regarding changes and additions to the props was entered
into with Omung Kumar on 29th September, 2010, only a few days before the Opening
ceremonies OC had no option to negotiate price for such changes/ additions due to the
shortage of time.
17.6 Some of the props of ceremonies were not used at all
17.6.1 It has been found that some of the props valuing INR 3.04 crore contracted for opening and
closing ceremonies were not used at all.
501
Refer Annexure 17.6
261
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6 out of the total 16 puppets were not used as all 14 (2 out of 16 were used in
rehearsals) puppets could not be adjusted on the stage. The price of 6 puppets
aggregates to INR 0.28 Crores502.
Further in respect of closing ceremony, props valuing INR 2.76 Crores503 were not used in
the Ceremony. The unused props are kept unpacked (see photographs attached 504).
17.7 Some of the items as per contract not provided by the vendor
17.7.1 According to the calculation made by OC, items amounting to INR 1.74 Crores505 were not
received in respect of opening and closing ceremonies. The total amount includes the price
of the props ( including rehearsals props) amounting to INR 1.44 Crores relating to the
Opening Ceremony and INR 0.30 Crores pertaining to value of vehicles used as props whose
ownership was not handed over by the vendor to OC. The value of same has been decided
to be deducted by OC from the last installment amounting to INR 1.75 Crores payable to the
vendor.
17.7.2 The props amounting to INR 1.44 crores not provided by the vendor were not used in the
ceremonies. This means that such items/ props were not actually needed for the
ceremonies and the BOQ was not prepared accurately.
17.8 Other issues
Single Tender issued while nomination for 5 firms was in hand
17.8.1 Wizcraft suggested for a single source in respect of the work of Art Director and
Construction of workshop to produce and create props, in the FTC meeting held on 18 th
502
Refer annexure 17.7 for the calculation done considering price as per addendum to contract for opening ceremony
503
Calculation of the value of loss was done after considering prices of individual props/items as per the quotation made
by supplier (Refer Annexure 17.8) as lumpsum contract price of INR 4.04.crore was given in the contract for closing
ceremony.
504
Refer Annexure 17.9
505
Refer Annexure 17.10
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Fifth Report of HLC – Organizing Committee
March’2010506. The FTC committee disagreed with the same and recommended that limited
tender should be issued for the above mentioned work.
17.8.2 However, Bharat Bala, Ric Birch and Wizcraft argued that RFP could not be issued and
suggested names for consideration of FTC. FTC took into consideration the names along
with their profiles as suggested by the Creative Director, EMF and International Consultant
in its meeting held on 20.03.2010507. In the meeting Wizcraft, Ric Birch and Bharat Bala
strongly recommended the nomination of Omung Kumar. Even though there were 5 options
with OC including Omung Kumar, no RFP was issued to all and quotations was asked from
Omung Kumar. If Limited tender was issued to the 5 nominations, competitive prices could
have been received by OC.
17.8.3 It is pertinent to mention that Omung Kumar was engaged in other projects with Wizcraft
like project of ‘Kingdom of Dreams’508. Recommendation of this vendor by Wizcraft may be
seen in this context. Therefore they had clear commercial and business relation before
Omung Kumar was recommended by Wizcraft, International Consultant and Creative
Director.
No other option but to work on terms of a vendor
17.8.4 Omung Kumar refused to provide flag poles costing INR 1,56,700 plus taxes vide its letter
dated 14th July,2010509 on the ground that the changes suggested by Bharat Bala on the
props was to be redone by Omung Kumar several times.
17.8.5 In consequence flag poles were purchased from another vendor. As there was not much
time left for the ceremonies, OC could not do anything other than engaging another vendor
for such items.
506
Refer Annexure 17.11
507
Refer Annexure 17.1
508
Refer Annexure 17.12
509
Refer Annexure 17.13
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Fifth Report of HLC – Organizing Committee
No stock entry for the props purchased for rehearsals of ceremonies at the Rehearsal Ground
17.8.6 While verifying the Delivery Challans maintained at JLN Stadium in respect of props received
from the vendor, it was found that some of the challans510 were on account of rehearsal
props transferred from rehearsal ground to JLN Stadium. This means Rehearsal Props were
directly supplied from the scenic workshop at Chattarpur to the rehearsal ground.
17.8.7 However, no stock entry procedure was followed in respect of props received in and
transferred out of the rehearsal ground. The stock register maintained by the Logistics
department was in respect of props received at the JLN Stadium from the workshop and
rehearsal ground. Therefore it is not known what all props were transferred from the
Chattarpur workshop to rehearsal ground and then from rehearsal ground to JLN stadium.
No Insurance was taken for the props
17.8.8 Wizcraft indicated that no insurance was required for the props and scenic elements as once
the goods are handed over to OC for rehearsals followed by shows, it would ultimately
become the responsibility of OC. Therefore, no insurance clause was inserted in the
agreement entered into with Omung Kumar511.
17.8.9 It is noticed from the Delivery Challans that materials/ props sent by Omung Kumar started
arriving from 11th September’2010 at JLN stadium and these were kept at the stadium
without any insurance cover till the date of opening and closing ceremonies. This was an
unacceptable risk.
Returning of entire Stage Material to OC was doubtful
17.8.10 The challans512 for delivery of Material/ Props at the stadium were bearing dates after the
closing ceremony duly signed by the vendor. Ceremonies FA clarified that challans were in
respect of returning of the stage material of the Opening Ceremony that were taken away
by the vendor in the confusion that the stage was not a property of OC. But after the matter
was cleared that the stage was under the ownership of OC as per the contract, the same
510
Refer Annexure 17.14 for few copies of challan
511
Refer Annexure 17.15
512
Refer Annexure 17.16
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Fifth Report of HLC – Organizing Committee
was returned to OC after the closing ceremonies. As per the contract, price charged by the
Vendor for the stage was INR 1.85 Crores.
17.8.11 According to the Ceremonies FA, the stage while being taken out by the vendor, was cut
into pieces (as per the issue voucher dated 04.10.2010513). But when returned to the OC it
was not in same number of pieces and cut into more pieces (challans for the date after the
closing ceremony was in respect of these pieces only) and Wizcraft was responsible for
verifying the same. No certificate or report from Wizcraft is available with OC certifying that
the whole stage was returned to OC.
17.9 Summary and Conclusions
17.9.1 A vendor who was initially nominated to work as an Art director and Production Designer
also got the contract for scenic props fabrication due to the convoluted process of
contracting. In view of the commercial relation already existing between the vendor and the
event management firm, the selection process for the vendor appeared to have been
influenced by the event management firm.
17.9.2 Due to extensive delays in contracting for opening and closing ceremonies, OC had to
contract the work at rates asked by the vendor. It was left with no time to check and
confirm if quotations by the vendor were comparable with the market rates.
17.9.3 A result of preparing an extravagant BOQ, as seen from unused and unsupplied items was
that OC took upon itself a non recoverable loss of INR 3.04 cores.
513
Refer Annexure 17.16
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Fifth Report of HLC – Organizing Committee
18 Chapter 18: Ceremonies – Lighting and
Searchlights
18.1 Background
18.1.1 Special lightings and searchlights were required for opening and closing ceremonies at the
JLN Stadium and proper light effects for the Aerostat which was procured from M/s K
Events. The FA (ceremonies) was tasked with the opening and closing ceremonies and
procurement of the facilities relating to ceremonies.
18.1.2 On the recommendations of International Consultants including Technical Director, Mr.
Piers Shepperd, Lighting Designer, Mr. Durham Marenghi, International Consultant, Mr. Ric
Birch and Creative Director, Mr. Bharat Bala, two limited RFPs were issued to the companies
nominated by the Technical Director and event management firm, wizcraft in respect of
hiring of supplier for providing Turnkey solution for Searchlights and Lightings at JLN
Stadium.
18.1.3 While the RFPs were issued for Searchlights and Lightings separately, OC ultimately awarded
contract to one vendor for a combined package for searchlights, lightings and Lighting
Designer at the insistence of the vendor. The equipments finally contracted were different
from the BOQ made earlier by the Lighting Designer and viability of the rates was not
assessed as number of items of equipments and item wise rate of equipments were not
obtained by OC.
18.1.4 A brief chronology of the key events relating to the award of contract is set out in the Table
18.1 below.
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Fifth Report of HLC – Organizing Committee
Table 18.1:
S.no Date Particulars
1 30th April, 2010 Limited tender issue to 5 companies nominated by Piers
Shepperd and M/s Wizcraft in respect of each of the
following:
1. Turnkey Solution for Searchlights at JLN Stadium
2. Turnkey Solution for lighting at JLN Stadium
2 Submission of bids Following vendors responded to the RFP:
Searchlights:
1. Syncrolites, USA
2. A+O technology GmbH, Germany
3. PRG, Belgium
4. BeiAO Events, China
Lightings:
1. Neg Earth Lights, UK
2. Agora ' srl, Italy
3. PRG Belgium.
4. BeiAo Events, China
3 17th May 2010 Opening of technical bid
4 Meeting I- 19th Technical evaluation
May’2010- Meeting II- 25th
& 26th May’2010-
5 28th May’2010 Opening and evaluation of commercial bid
6 4th June’2010 Re- Evaluation of Technical Bids in respect of Searchlights
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S.no Date Particulars
7 9th June 2010 Negotiations with PRG which was decided as L1 in both the
above cases.
8 9th June 2010 Proposal of Combined package comprising Searchlights,
Lighting and Lighting Designer was received from PRG.
9 17th & 18th June 2010 Approved in the Fast Track Committee at a combined package
of $ 3.5 million or INR 16.46 crores for lighting, Searchlights
and Lighting Designer.
10 27th June 2010 Approval in EB for combined package for Searchlights and
Lighting and Lighting Designer
11 9th July 2010 Contract awarded to PRG for combined package
18.1.5 The OC officials, International consultants and event management firm, involved in the
tendering process are given in the Table 18.2 below:
Table 18.2:
Name Designation
Searchlights: Mr. J N Mittal- DDG (A/cs)
Technical Evaluation Committee: Ms. Purnima Pendse- DDG (C& C)
Commercial Evaluation Mr. Surjit Lal- DDG (Logistics)
Committee:
Mr. R P Gupta – ADG (Venue Operations), OSD (GV)
Lightings:
Mr. J N Mittal- DDG (A/cs)
Technical Evaluation Committee:
Ms Sujata Ayer- Director (C&C)
Commercial Evaluation
Mr. J N Mittal- DDG (A/cs)
Committee:
Ms. Purnima Pendse- DDG (C& C)
Negotiation Committee:
Mr. Surjit Lal- DDG (Logistics)
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Fifth Report of HLC – Organizing Committee
Communications with various Mr. R P Gupta – ADG (Venue Operations), OSD (GV)
consultants, EMF etc
Mr. J N Mittal- DDG (A/cs)
Ms Sujata Ayer- Director (C& C)
Mr. Sanjiv Mittal- JDG – Procurement
Mr. R P Gupta – ADG (Venue Operations), OSD (GV)
Mr. Ram Mohan- DDG (Legal)
Mr. Bharat Prasad- (DDG- F & A) appointed by SDG (F&A)
Ms. Indu Anand- Convenor (C&C)
Mrs. Shovna Narayan- SDG- (C& C)
M/s Wizcraft Event Management Firm (M/S Wizcraft)
Involved in nominations suggested for Searchlights and
Lightings, making budget estimates and participating in all
negotiations meetings.
Mr. Piers Shepperd & team Technical Director, Ceremonies
Suggested nominations for vendors for searchlights and
Lightings alongwith Wizcraft
Mr. Durham Marenghi & Team Lighting Designer, Ceremonies
Involved in preparation of Lighting Design and BOQ for both
Searchlights and Lightings
18.2 Inefficient evaluation of Technical Bid
18.2.1 The Table 18.3 below shows the marks given to the bidders after evaluation of their
technical bids514:
514
Refer Annexure 18.1 & 18.2
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Fifth Report of HLC – Organizing Committee
Table 18.3:
Name of the bidder Points given out of 60
Searchlights:
Syncrolites, USA 48
PRG Belgium 48
BeiAo Events, China 13
Lightings:
PRG Belgium 60
Agora Srl 39
BeiAo Events, China 10
18.2.2 It is noticed from the evaluation sheet515 and the points given under each clause for the
tender for searchlights and lightings that technical evaluation done was not fair (Tables 18.4
& 18.5)
Table 18.4: Searchlights
Bidders and marks Clauses as per the Findings
given requirement
Maximum Marks: 10 The bidder should have Marks were given to PRG though PRG did
minimum annual Turnover not provide the Turnover for last five
Syncrolites, USA: 10
of $ 5000000 USD and years and only provided the financial
PRG, Belgium: 10
should have been registered statements of Procon Multimedia AG for
515
Refer Annexure 18.1 & 18.2
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Fifth Report of HLC – Organizing Committee
BeiAo Events, China: 7 for at least 05 years. the period ending December’2009.
Procon was acquired by PRG in December
1) Company’s Size and
2009 through the Subsidiary of PRG.
scale
Consolidated Financial Statements of
2) Past performance of
Procon were showing net loss of Euros
the Company
6794 for the year ending December,
3) Current
2009516.
Commitments
PRG was nominated and also issued the
4) Financial Capability
RFP. So financial statements of PRG was
of the Company
required to be submitted for the period
5) Company Structure as per the RFP clause mentioned above.
Therefore 0 marks should have been
given to PRG under this clause.
Maximum Marks: 25 List of Equipments that will As per clause 23.2.3 of RFP517 the
be supplied to satisfy equipments listed in the scope of work
Syncrolites, USA: 25
technical brief or offer valid were the preferred choice of the Lighting
PRG, Belgium: 18
alternative equipment designer. Alternative fixtures could be
BeiAo Events, China: 5 suggested by suppliers but must be
capable of satisfying the principle
technical requirements of the lighting
designer.
Both PRG and BeiAO events mentioned
alternative equipments518 but in tech
evaluation, BeiAO got 5 marks and PRG
got 18 Marks out of 25 marks.
According to Durhum, systems proposed
by BeiAo and PRG were identical i.e. 4.5
Kw Gel Scroller Searchlights and 4 Kw
516
Refer Annexure 18.3
517
Refer Annexure 18.4
518
Refer Annexure 18.5
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Fifth Report of HLC – Organizing Committee
HMIs with gel scrollers. Thus PRG was
favoured.
Equal marks should have been given to
PRG and BeiAO.
Maximum Marks: 5 Details of OH+S No marks were given to PRG, Syncrolites
documentation certificates and BeiAO in respect of this parameter
Syncrolites, USA: (No
and procedures though:
marks given)
Syncrolites519 had provided testing
PRG, Belgium: (No
reports/certificates and procedures as
marks given)
required in the bids.
BeiAo Events, China:
PRG520 had provided only the procedures/
(No marks given)
control measures for using the
equipments and no certificates and report
were found with its bid.
BeiAO521 also provided the certificate of
Registration from WSC (World standards
Certification Centre).
Therefore marks on that basis should
have been given to all the bidders.
However, PRG and BeiAO Events were
given 5 and 2 marks respectively, out of
the maximum marks in respect of lighting
contract, on the basis of same documents
as provided in respect of Searchlights522.
519
Refer Annexure 18.6
520
Refer Annexure 18.6
521
Refer Annexure 18.6
522
Refer Annexure 18.1
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Fifth Report of HLC – Organizing Committee
Table 18.5: Lightings
Bidders and marks Clauses as per the Findings
given requirement
Maximum Marks: 10 The bidder should have Full 10 marks were given to PRG though
minimum annual Turnover PRG did not provide the Turnover for last
PRG, Belgium: 10
of $ 5000000 USD and five years. Instead of furnishing its
Agora Srl: 3
should have been registered financial statements, PRG provided the
BeiAo Events, China: 1 for at least 05 years. financial statements of Procon
Multimedia AG for the period ending
6) Company’s Size and
December’2009. Procon was acquired by
scale
PRG in December 2009 through the
7) Past performance of
Subsidiary of PRG.
the Company
Moreover, the consolidated Financial
8) Current
Statements of PRocon were showing net
Commitments
loss of KEuros 6794 for the year ending
9) Financial Capability December, 2009523.
of the Company
As PRG was issued the RFP financial
10) Company Structure statements of PRG should have been
submitted as per the clause mentioned
above.
Therefore 0 marks should have been
given to PRG under this clause.
The other bidder Agora Srl got 3 out of 10
marks though on verifying the financial
statements of Agora Srl, it was found that
Agora fulfilled the conditions524.
Maximum Marks: 10 List of Equipments that will Full 25 marks were given to PRG
be supplied to satisfy
After comparing the list provided by PRG
523
Refer Annexure 18.3
524
Refer Annexure 18.7
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Fifth Report of HLC – Organizing Committee
PRG, Belgium: 10 technical brief or offer valid alongwith the technical bid with the list
alternative equipment given under clause 23.3 of the RFP525
Agora Srl: 3
issued for Lightings, it was found that PRG
BeiAo Events, China: 1
had suggested one alternative
equipment526 namely, Marting MAC Wash
XB( 192 units) in place of Clay Paky Alpha
Wash 1500 LT ( 192 units).
18.2.3 From the above tables it appears that Technical Evaluation in respect of both Searchlights
and Lightings were not done impartially. If the technical marks were properly given it is
possible that contract for one/both work would have been awarded to vendors other than
PRG especially in case of searchlights where both Syncrolites and PRG got 48 marks out of
60 and PRG quoted just $5900 less than the estimated cost.
18.3 Lighting Designer’s views not considered in evaluating the technical bids for
searchlights
18.3.1 The clause 23.2.3 of RFP states that the equipments listed in the scope of work are the
preferred choice of the Lighting Designer. Alternative fixtures can be suggested by suppliers
but they must be capable of satisfying the principle technical requirements of the Lighting
Designer.
18.3.2 Reviewing of a mail from Durham, the Lighting Designer on 26th May 2010 527 it was noticed
that he was not satisfied with such alternatives and he mentioned that neither PRG nor
BeiAO qualify on the technical bid as they both failed to fulfill a Principle Technical
Requirement that of using Dichroic colour filters which will not melt in the unique
application that we require, that of uplighting the Aerostat. PRG also Offered 4.5 KW search
lights rather than the 7 Kw Searchlights specified which would mean far more units being
placed on the Field of Play. Further it states that the systems proposed by PRG and BeiAO
are a lot simpler, appropriate and less expensive.
525
Refer Annexure 18.8
526
Refer Annexure 18.8
527
Refer Annexure 18.9
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Fifth Report of HLC – Organizing Committee
18.3.3 However, the Technical Evaluation meeting held on 25.05.2010 and 26.05.2010528 ignored
the comments of Lighting Designer and bid of PRG was justified by Technical Evaluation
Committee on the following reasons:
PRG provided alternative equipment as per clause 23.2.3 of RFP.
PRG is a world leader in providing lighting equipments and successfully provided lighting
equipments for events of the size of the CWG.
It has been pre selected by technical experts which means they are capable to do the
necessary work.
18.3.4 Though PRG provided alternative equipments as per terms of RFP only but according to such
clause, such equipments were required to satisfy the principal technical requirements of the
Lighting Designer. As explained earlier the Lighting Designer was not satisfied and PRG got
qualified on other considerations.
18.4 Small difference in the rates quoted by PRG and the Estimated Cost
18.4.1 Commercial bids quoted by PRG was USD 17,94,100529 and the estimated cost in respect of
searchlights in line with budget prepared by Wizcraft was $ 1.8 million USD530.
18.4.2 It is likely that if the bid of PRG was properly evaluated at technical Evaluation stage,
Syncrolites would have strong possibility of emerging as T1 (They were both awarded 48
marks out of the maximum marks of 60 in the technical round). In that case the techno
commercial bid evaluation would have opened other possibility. The errors in evaluation
appeared to have tilted the balance in favour of PRG.
18.5 Equipments contracted were different from the BOQ in the RFP
18.5.1 It was noticed that most of the equipments contracted531 from PRG in respect of lightings
and searchlights were different from equipments listed with the RFP532. During negotiation
528
Refer Annexure 18.1
529
Refer Annexure 18.10
530
Refer Annexure 18.11
531
Refer Annexure 18.12
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Fifth Report of HLC – Organizing Committee
a lumpsum price for combined package was made by PRG but OC did not ask for the BOQ
including price of each equipment from PRG. Therefore no market rate comparison could be
done for these items quoted by PRG. Due to this erroneous procedure OC had no
opportunity to assess if there was over charging of prices for these equipments.
18.5.2 Further justification of the numbers of equipments mentioned in the contract cannot be
assessed as equipments were provided by PRG without BOQ, rates and designs. PRG
provided quotation for $ 3.5 million or INR 16.46 crores in lumpsum including the cost of
Lightings, Searchlights and Lighting designer and team.
18.6 Other Issues
Limited Tender issued against the advise of open tender by FTC
18.6.1 Fast Track Committee gave its approval on 14th April 2010533 for issuing open tender in
respect of Lighting and Searchlights on the recommendations of Wizcraft. But on the
insistence of international consultants ( Piers Shepperd (Technical Director), Durham
Marenghi ( Lighting Designer), Ric Birch, Bharat Bala), limited RFP was issued on 30th April’
2010 to companies nominated by Piers Shepperd and Wizcraft in respect of both Lightings
and Searchlights separately. According to international consultants, Aerostat needed special
lights requirements and there were very limited numbers of companies worldwide that have
the capabilities and experience to supply, install, maintain, operate and remove this high
end projection system.
18.6.2 It was likely that the consultants wanted to work only with a supplier with whom they
worked earlier in disregard of the scope of economy as was achievable through open
tender. In this situation there was a possibility of influencing the selection of vendor and
allowing uneconomical rate, at the insistence of the international consultant.
532
Refer Annexure 18.4 & 18.12
533
Refer Annexure 18.13
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Fifth Report of HLC – Organizing Committee
Re- evaluation of Technical Bids not done in respect of Lightings
18.6.3 Though the Lighting Designer (Durham Marenghi) suggested and SDG, C & C advised to re
evaluate the technical bids in respect of Video Projection, Lightings and Searchlights 534, it
was noticed that technical re-evaluation was done in the case of searchlights only. CEO
approved a new committee for re- evaluating the technical bids of Searchlights with Mr.
Sanjiv Mittal (JDG – Procurements/OSD), Mr. Jeychandran (OSD), Gp. Capt. KUK Reddy (ADG
– F & A), Mr. Ram Mohan (DDG- Legal) and Ms Indu Anand (Director- C& C). Of them only
three members were present in the meeting held on 04.06.2010 to re- evaluate the
technical bids, namely, Mr. Sanjiv Mittal ( JDG – Procurements/OSD), Mr. Ram Mohan (
DDG- Legal) and Ms Indu Anand ( Director- C& C). These members did not appear to have
competence for technical evaluation. The incorrect technical evaluation as mentioned in
Para 1.2 earlier was not noticed by this committee who also apparently did not consider the
comments of Durham. They again qualified PRG based on so called fresh technical
evaluation535.
Vendor was dictating terms to OC
18.6.4 Negotiation committee in its meeting held on 09.06.2010536 observed that a combined
package would be a better option in terms of commercial viability and also easier for
contract related process. It is to be noted that suggestion of combined package was given by
PRG only. Moreover it is seen from the minutes that PRG adopted a strong position in
course of negotiation and proposed to reduce cost only on its own terms. For example PRG
made following condition for the reduction in prices quoted by them:
Reduced cost if the equipments are taken from their current stock available rather than
from PRG subs or other vendors.
Scope of work with unidirectional specifications for at least 30% for the products
reflected the inflexibility of the lighting Designer and thus could lead to a higher cost for
the entire project.
534
Refer Annexure 18.14
535
Refer Annexure 18.15
536
Refer Annexure 18.16
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Fifth Report of HLC – Organizing Committee
It could provide theirown Lighting Designer that could assure harmony between the
designing and related procurement for lighting for the show.
Overall cost of the project could be reduced if a combined package of Lighting, Search
lights and lighting designer as PRG is also a best bidder in lighting. Total cost would be $
4 million USD.
Amount of performance bank guarantee may be reduced to the extent it had furnished
performance bank guarantee of 2.5 % of contract value in other contracts.
Requested for relaxation in terms of payment.
18.6.5 It may be seen from the above that the vendor was not ready to change the equipments
suiting the technical requirements of lighting consultant but proposed its own lighting
designer and to ensure supply of its own equipments.
18.6.6 The vendor’s suggestion that the lighting designer equipments would increase the cost was
not found correct. The unit rate of the equipments suggested by Syncrolite and PRG with
their bids in respect of searchlights, were compared and unit cost of PRG works out higher
than that of Syncrolite. The same is reproduced in the table 6 below:
Table18. 6:
Serial No. PRG, Belgium Price per Syncrolite, USA Price per Difference
Unit unit (in INR)
A B A–B
1 Strand Par 4Kw HMI 2750 Philips arena vision 1286.25 1463.75
2 Biglite 4.5 8300 Syncrolite SXB- 7/3 7717.5 582.5
3 Hagenbach and Grill
MagMax 1300
Syncrolite Arena
Hagenbach and Grill colour Colour changer 1800.75
Dark Vader Shutter 2100
Total 2400 599.25
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Fifth Report of HLC – Organizing Committee
4 Biglite 4.5 8300 Syncrolite Mx4 5659.5 2640.5
18.7 Summary and Conclusions
18.7.1 The technical bids were not evaluated properly and the suggestions of the Lighting Designer
in respect of Searchlights were ignored by the OC authorities.
18.7.2 The vendor dictated terms once it was qualified in both the bids. OC accepted the
equipments and a new lighting designer at the quoted rate of the vendor and overlooking
BOQ made by the Lighting Designer.
18.7.3 Negotiating Committee of OC could not negotiate the individual rates of equipments with
the vendor and achieved some reduction in rate only after accepting the combined package
for lightings and searchlights offered by the vendor. As OC did not obtain the basis and rates
of the equipments actually contracted, it was in no position to reduce cost based on analysis
of rates for individual items.
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Fifth Report of HLC – Organizing Committee
19 Chapter 19: Ceremonies – Wizcraft
19.1 Background
19.1.1 In the first meeting of the Group of Ministers dated 02/07/2009 for reviewing the progress
of Commonwealth Games it was decided to take on board, Bharat Bala, Shyam Benegal,
Javed Akhtar and Prasoon Joshi in addition to other members of the OC, to shortlist the
International Consultants and Event Management Company.
19.1.2 Event management firm (EMF) was required to organize, produce, coordinate, direct,
manage, execute and deliver Opening & Closing Ceremonies of Commonwealth Games 2010
Delhi to be held at the Jawaharlal Nehru Stadium, New Delhi in 2010 as per first class
international standard. It was required to work with the Creative Director, the Creative Core
Group, the International Consultant and OC to fully develop the creative theme and core
elements of the Ceremonies for D2010.
19.1.3 A brief chronology of the events relating to the award of contract to EMF is set out in Table
19.1.
Table 19.1:
Date Particulars
12th September 2008 Publication of EOI
18th October 2008 EOI received from 14 firms
22nd June 2009 Evaluation of EOI
5 firms shortlisted
24th July 2009 Issue of RFP
1st August 2009 2 corrigendum issued with RFP
3rd August 2009
6th August 2009 Opening of RFP
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Fifth Report of HLC – Organizing Committee
Evaluation of Technical Bids
Opening and evaluation of commercial bids
Evaluation of Techno Commercial bids
7th August 2009 Commercial Negotiations with Wizcraft
14th October 2009 Report by Group of Officers after review of RF P
5th November 2009 Report by negotiating committee on the observations made by Group of
Officers.
6th November 2009 Approval for initiating further action regarding EMF selection by Jarnail
Singh, CEO
6th November 2009 Issue of LOI to wizcraft
1st December 2009 Contract entered into with Wizcraft
7th to 13th September Re negotiations in respect of Agency charges
2010
20th September 2010 Approval of Agency Charges in FTC meeting
21st September 2010 Approval of Agency charges in 26th EB meeting
24th September 2010 Addendum to contract with Wizcraft in respect of Agency Charges
19.2 Irregularities in the Selection process
Delay in Evaluation of EOI
19.2.1 An EOI was issued by OC on 12/09/2008 for award of work to a reputed event management
organization to produce, organize, coordinate and manage Opening and Closing Ceremonies
of Commonwealth Games 2010 Delhi on turnkey basis for response by 03/10/2008. After 18
days of the issue of this EOI, a corrigendum was issued on 30/9/2008537 where the condition
of turnkey basis was withdrawn and date of response was changed to 18/10/2008.
537
Refer Annexure 19.1
281
Fifth Report of HLC – Organizing Committee
19.2.2 In response to the EOI, 14 firms responded and five firms were shortlisted on 22/06/2009
for issue of RFP. Processing of EOI took 8 months and the RFP was issued on 24/07/2009. It
was noticed that evaluation of EOI could not be done within reasonable time as MYAS
ordered for postponing the evaluation of EOI on 15.12.2008 giving the reason that there are
some pending issues relating to ceremonies. Finally on evaluation of RFPs, Wizcraft was
selected.
Associations between International consultant, Event Management Firm and other
Consultants even before the EOI was published
19.2.3 Review of the response received from Wizcraft , in respect of the EOI , revealed that in
respect of the eligibility criteria 2f538 where the bidder was required to provide documents
in respect of well developed back-end infrastructure and international contacts and
associations with some of the world’s best event infrastructure and creative companies,
Wizcraft furnished eight letters of consultants539( Table 2) . These letters showed that:
Most of these letters were addressed to Mr. Ric Birch, International consultant
appointed by OC for Delhi 2010 Games
All these letters except one have same content and common narrations.
Most of these letters bear the same date i.e. 1st June 2008.
538
Refer Annexure 19.1
539
Refer Annexure 19.2
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Fifth Report of HLC – Organizing Committee
Table 19.2:
S. No Name Of the Consultant Date of letter Letter addressed to
1 Andrew Walsh 29.09.2008 Viraf Sarkari
Director- Accolade Director- Wizcraft
2 Mark Fisher- Mark Fisher 01.06.2008 Ric Birch- Spectak Productions
Studio
01.06.2008
3 Richard Hartman- RHA Ltd Ric Birch- Spectak Productions
01.06.2008
4 Stephen Found- Bytecraft Ric Birch- Spectak Productions
01.06.2008
5 Durham Marenghi- Lumitect Ric Birch- Spectak Productions
01.06.2008
6 Piers Shepperd- Stagelink Ric Birch- Spectak Productions
01.06.2008
7 Douq Jack Ric Birch- Spectak Productions
01.06.2008
8 Laurence H. Estrin Ric Birch- Spectak Productions
19.2.4 These letters raise the following issues:
While EOI was published on 12/09/2008, the above mentioned letters appended with
the response to EOI are bearing date of 1/06/2008. It is apparent that Wizecraft and Ric
Birch were aware of the decision to issue EOI and started developing the team of
consultants for this assignment long before even the EOI was issued.
Evidently the letters were written based on the same format developed for the purpose
of this EOI and the consultants were provided copy of these letters for this purpose.
Looking at the uniform content of the letters it will be reasonable to conclude that Ric
Birch and Wizcraft were already in business relations in regard to a potential contract
with OC.
Apparently these consultants were approached by Ric Birch to work with Wizcraft and
Ric Birch as if it was known that Wizcraft was going to be selected as event management
firm.
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Fifth Report of HLC – Organizing Committee
19.2.5 It is noticeable that five of above mentioned consultants540 were appointed by OC on the
subsequent recommendations of Ric Birch and Wizcraft at a total cost of US $ 10,00,173
USD or INR 4.70 crores.
Response to RFP
19.2.6 Analysis of the response of Wizcraft to the RFP indicated the following additional issues:
According to the clause 8.2 (a)541 of RFP in respect of commercial bid, bidder had to
provide, Ceremonies management fees on account of administrative expenses of all the
expertise and support to be engaged in the opening and closing ceremonies to cover all
administrative expenses.
However it is noticed that bidder asked for management fees in respect of manpower
that were employed by Wizcraft542 and asked for additional manpower at the cost of OC.
A scrutiny of the technical bid of Wizcraft, revealed that in respect of management
model543 to deliver the scope of work, Wizcraft had suggested additional manpower
requirements and proposed that the additional manpower was to be hired and paid by
OC.
From the above facts, it appears that while Wizcraft introduceed associations with the
above mentioned 8 consultants in the response to EOI, in its bid in response to RFP, it
projected the requirements of the services of the consultants as additional manpower to
be funded by OC.
A group of Officers set up by GOM on 11/09/2009 for examination of the RFP for the
Event Management Company raised the issue of additional manpower and suggested in
their report dated 14/10/2009 that OC should renegotiate with Wizcraft to make it clear
540
Five consultants comprises of Durham Marenghi (Lighting Designer), Piers Shepperd (Technical Director), Richard
Hartman (Rigging and Staging), Mark fisher ( Production Designer ) and Larry Estrin ( Comms Director).
541
Refer Annexure 19.3
542
Refer Annexure 19.4
543
Refer Annexure 19.5
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Fifth Report of HLC – Organizing Committee
that the additional manpower would be hired by the event management firm itself and
not the OC544.
The negotiating committee545 formed by OC to negotiate with Wizcraft observed in
respect of observations made by the Group of officers that, ‘the issue of additional
manpower was discussed in detail with Wizcraft as to bearing the related cost. However
the firm has not agreed for incurring any cost towards additional manpower, since it is
the responsibility of the OC. The committee is of the unanimous view that all additional
manpower other than the core personnel identified by the event management firm will
be the responsibility of the OC’.
Conflict of Interest in selection process of Wizcraft
19.2.7 Based on the response to EOI, five firms were shortlisted for issue of RFP which was issued
on 24/07/2009 to all the five shortlisted firms for response by 06/08/2009.
19.2.8 A core group constituted by GOM546 (comprising of S/Sri Shyam Benegal, Javed Akhtar,
Bharat Bala , Prasoon Joshi) for selection of the event management firm met on 06/08/2009
to evaluate the creative elements of the proposals received in response to RFP. Technical
evaluation was done for 70 marks (comprising 35 marks for technical element and balance
35 marks for creative element). Creative presentations were made by all the firms. Wizcraft
was decided as T1 with 60 marks out of the maximum 70 marks followed by DNA and
Cineyug with 38 marks each547. Following various stages of evaluation of commercial bids
and price negotiation Wizcraft was selected for award of the contract at a price of INR 21.48
crore.
19.2.9 On 6/09/2009548, members of the core committee (Shyam Benegal, Javed Akhtar, Bharat
Bala , Prasoon Joshi) wrote a letter to the Secretary MYAS confirming their unanimous
544
Refer Annexure 19.6 in respect of letter from secretary, MYAS to OC regarding observations made by group of officers.
545
The comprised Mr. Jarnail Singh, Mr. Shyam Benegal, Mr Bharat Bala, Ms shovna Narayan and Gp Capt KUK Reddy.
Refer Annexure 19.7
546 st
Refer Annexure 19.8 relating to 1 GOM meeting held on 02.07.2009
547
Refer Annexure 19.9
548
Refer Annexure 19.10
285
Fifth Report of HLC – Organizing Committee
support in the selection of M/s Wizcraft International Entertainment Private Limited as the
event management firm. The committee mentioned that they were not involved in
evaluation and negotiation of the commercial bid.
19.2.10 It has been confirmed by the Director of Income Tax – (Inv) II549 Mumbai that two members
of the core group ( Javed Akhtar and Prasoon Joshi) received significant payments from
Wizcraft International Entertainment Private Limited during 2005-06 to 2009-10 for services
rendered by them to the firm (Javed Akhtar – received in 2005-06 INR 5 lakh for Lyrics for
commonwealth games , Melbourne and INR 51 lakh in 2009-10 by Great Indian Nautanki Co.
Private Ltd (a joint venture between Wizcraft and Apra group 550) for Story, Screenplay and
Dialogues for Zangoora play and Prasoon Joshi received in 2007-08 INR 10 lakh for lyrics for
launch of GMR , Hyderabad Airport ,Hyderabad).
19.2.11 Therefore it appears that the technical evaluation of the creative elements, done by the
core group consisting of persons, who had commercial relationship with the vendor, could
not be objective and impartial and was therefore vitiated due to conflict of interest. Records
provided by OC do not indicate that these two members of the Core Group informed
GOM/OC about their previous commercial relationship with Wizcraft.
19.2.12 The overall selection process also has to be considered in the context that Wizcraft was in
commercial relation with OC for CWG Delhi 2010 since long. It was selected as Event
Management Firm in Melbourne Games 2006 and Pune Youth Games 2008. Irregularities
were noticed in these selections as well (discussed in section 19.3).
No Cost reduction achieved by OC
19.2.13 The commercial bid received from Wizcraft was amounting to INR. 21.53 Crore comprising
INR 15.53 for Management fees and INR 6 crores in respect of agency charges (being 15 %
of INR 40 Crores budget of procurements). After negotiation, Wizcraft brought down the
management fees from INR 15.53 crores to INR 5.40 crores and percentage of agency
charges from 15% to 13.84%.
549
Refer Annexure 19.11
550
Refer Annexure 19.12
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Fifth Report of HLC – Organizing Committee
19.2.14 However, it was noticed that due to the increase in budget of ceremonies from INR 106
crores to INR 300 crores and after re negotiations held in September 2010, the agency
charges to be paid to Wizcraft came to INR 16.09 crores as given in Table 4 below.
Table 19.4:
Procurements( INR in Cores) Agency Charges in % of Agency charges in INR
the cost of
procurements
Upto 40 Crores 13.84 5.536
More than 40 to 100 crores 10.50 6.30
More than 100 to 150 crores 8.50 4.25
Total Agency charges 16.086
19.2.15 But it was revealed from the background material551 for the negotiating meeting held by the
re constituted committee in the period from 7th to 13th September 2010 that INR 150
crores was decided by OC on hit and trial basis i.e. calculation of agency charges was done
on the basis of various options of budget like INR 250 crores, INR 200 crores and INR 150
crores with different rates to be applied on procurements.
19.2.16 The final contract amount aggregated to INR 21. 48 Crore comprising INR 5.40 Crore for
Management fees and INR 16.08 Crores as Agency Charges. Therefore it may be concluded
that at the end there was no achievement in respect of cost reduction by the negotiation
committee. Reduction of INR 10 Crores in management fees and agency charges in the
beginning by Wizcraft was covered by increase in Agency Charges to be paid on the cost of
procurements.
Wizcraft was to assist in budget making and was also to be paid on the basis of the same
19.2.17 As per the scope of work defined in the agreement, Wizcraft was required to assist in
budget making and was to be paid on the basis of cost of procurements. It may be seen that
551
Refer Annexure 19.13
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Fifth Report of HLC – Organizing Committee
at the time of appointment of Wizcraft i.e. on 1st December 2009, the total approved
budget was INR 106 crores which was gradually increased to INR 300 crore in June 2010.
However, the capping of procurement budget to INR 150 crores for the calculation of
agency charges was done in September’2010. Therefore it may be possible that Wizcraft,
who was also involved in the negotiations with the vendors in 2009-2010, did not have the
incentive to make efforts to bring down the prices quoted by various vendors.
Bank Guaranttee not provided by Wizcraft within the time limit as specified in the contract
19.2.18 As per Para 11.5a of the contract552, M/s Wizcraft International Entertainment (P) Ltd was
required to submit the performance security in the form of Bank Guarantee within 10 days
of signing of the contract. However, Wizcraft on 5/12/2009 asked for extension of date of
submission of Bank Guarantee. The bank Guarantee was received from M/s Wizcraft on
22/12/2009553.
19.3 Improper Selection process followed in the Melbourne Games 2006 and Pune
Games 2008
19.3.1 Review of the tendering process and related documents for the selection of the Event
Manager for Melbourne Games 2006 and Pune youth Games 2008 revealed that OC
followed an improper selection process that appears to favour Wizcraft over other
competitors. The specifics of the process followed and discrepencies noted are detailed in
the ensuing paras:
Selection of Event Manager for Melbourne 2006
Table 19.5: The chronology of tender process
Date Particulars
28th July 2005 Issue of EOI
552
Refer Annexure 19.14
553
Refer Annexure 19.14
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Fifth Report of HLC – Organizing Committee
5th August 2005 EOI received from 5 Firms
26th August 2005 Evaluation of EOI and 4 firms got selected
5th September 2005 Meeting of Cultural event committee.
Presentations made by 4 shortlisted firms
Committee asked shortlisted firms to present budget estimation for
cultural event
12th September 2005 Meeting of Cultural event committee.
Criteria of past performance followed and Wizcraft short listed on
that basis.
13th September 2005 Approval given in 3rd EB meeting
22nd December 2005 Budget of INR 29.76 crores approved in 4th meeting of EB
(comprising INR 2.49 crores pertaining to management fees and INR
27.27 crores towards production cost and other costs)
3rd January 2006 Date of contract awarded to Wizcraft
19.3.2 It appears that the Wizcraft was selected as the Event Manager for the Melbourne games
without following an appropriate tender processing. From the minutes of the evaluation
committee held on 26/08/2005, it was noted that 4 firms were selected out of the 5 firms
that responded to the EOI.
19.3.3 It was noticed, from the extracts of Cultural Event committee554 meeting minute held on
5/09/2005555, that instead of issuing RFP to 4 short listed firms, the bidders were asked to
present budget estimate for the cultural segment of 20 minutes in Melbourne.
19.3.4 Cultural event Committee in its meeting held on 12/09/2005556 deliberated and decided
that it would be impossible to have any cost estimate in the absence of a specific concept.
554
Members of the committee were : Mr. Rajiv Shrivastava, Mr. A K Mattoo, and Mr. Muthusamy Varadarajan
555
Refer Annexure 19.15
556
Refer Annexure 19.16
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Fifth Report of HLC – Organizing Committee
The committee concluded that the criterion could only be the past performance of the party
in managing similar cultural events in international sports meets. Therefore Wizcraft was
selected on the basis of past performance notably its experience at the Afro-Asian Games
(2003) and ceremony for IOA’s bid at Jamaica for commonwealth games.
Selection of Event Manager for Pune Youth Games, 2008
Table 19 6: The chronology of tender process
Date Particulars
2nd May 2008 Issue of EOI
10th May 2008 EOI received from 2 firms.
Both firms did not meet all the requirements.
16th May 2008 Presentation on Technical bids by both bidders
Wizcraft selected.
27th May 2008 Opening of commercial bid of Wizcraft
5th July 2008 11th EB meeting
EMC was authorized to negotiate and take final decision
regarding commercial terms of Wizcraft
30th July 2008 Commercial negotiations on the basis of which final quotation
was sent by Wizcraft on 5th August 2008
1st August 2008 Date of contract awarded to Wizcraft
5th August 2008 Revised & final quotation from Wizcraft of INR 9.88 crores + INR
1.50 or 15% of total procuring cost ( whichever is lower)
excluding service tax + lodging, boarding and local transport on
actual basis
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Fifth Report of HLC – Organizing Committee
28th August 2008 Quotation by Wizcraft approved in 33rd EMC meeting
Not found from the minutes Ratification by EB
of EB
19.3.5 In response to EOI issued on 2/05/2008, bids were received from 2 firms namely, Alternate
Brand Solutions Ltd and Wizcraft international Entertainment P Ltd. After evaluation of EOI
it was found by the committee that both firms did not fulfill all the requirements as
specified in EOI. ABSL fulfilled 4 and Wizcraft fulfilled 6 conditions out of the total 7
criterion557.
19.3.6 It was noticed that one of the requirements in respect of having annual turnover of INR 125
crores was not fulfilled by both the firms. As it was a crucial conditions set for weeding out
the incompetent firms, the committee should have considered to re invite the tender.
19.3.7 But it was noticed from the available records that Committee instead of re tendering, asked
both the firms to make presentation on technical bids558. After evaluation of the same
Wizcraft got selected and commercial quote of Wizcraft was opened. At the end the
contract was given to Wizcraft at a price of INR. 12.76 crore inclusive of taxes (comprising
INR 11.10 crore towards production cost and INR. 1.66 crores for management fees).
19.3.8 While the vendor submitted its revised bid on 05/08/2008 based on negotiation meeting
held on 30/07/2008, the contract was signed on 01/08/2008 i.e. before the approval of
quotation of Wizcraft in the EMC meeting (28/08/2008).
19.3.9 Besides, though the value of the contract was above the limit of INR 3 crore, it was not put
for approval of EB.
19.4 Summary and Conclusions
19.4.1 The selection of Wizcraft based on the Technical evaluation by the Core Group was vitiated
due to conflict of interest caused by existing commercial relationship of two members of
557 th
Refer annexure 19.17 relating to minutes of the meeting dated 10 May 2008 for evaluation of pre qualification bids
received in response to EOI
558
Refer Annexure 19.17
291
Fifth Report of HLC – Organizing Committee
core group with Wizcraft. Selection of Wizcraft by OC in two earlier assignments (Melbourne
2006 and Pune 2008 games) was marred by favoritism and incorrect procedures.
19.4.2 In view of the long standing commercial relationship of OC with Wizcraft and the procedural
irregularities, the selection of Wizcarft appeared to be pre decided. The reference letters
attached with its response to the EOI raised doubt that Wizcraft was aware of issue of EOI
much before it was actually issued.
19.4.3 OC apparently disregarded the possibility of collusion between the event management firm
and the International Consultant which resulted in appointing of other consultants as
recommended by them. Wizcraft ultimately passed on the cost of the additional manpower
which was supposed to be borne by wizcraft as per the RFP.
19.4.4 The cost reduction of around INR 10 crores during negotiation in respect of management
fees achieved by the negotiating committee was covered by increase in the agency charges
paid to the firm at the end.
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Fifth Report of HLC – Organizing Committee
20 Chapter 20: Cleaning and Waste
Management
The OC awarded substantially the entire work to a single vendor, whose capability and
experience in providing similar services was not proven. The ineffective appointment
resulted in a situation that the vendor was unable to provide the manpower required at the
time of games leading to serious delivery issues. Further, there was no negotiation with the
vendor on prices for a specific component where, by OC’s own estimate, the rates quoted by
the vendor were higher than market rates. This resulted in the potential loss of
approximately INR 1.98 crores as the OC did not engage further with the vendor to reduce
prices. There is also evidence of vendor favoritism as only one vendor was called for a
presentation on ‘instructions of chairman’ in the bid evaluation phase while the other
competitors were not.
20.1 Background
20.1.1 The cleaning and waste management FA of the OC was primarily tasked with activities
related to maintaining cleanliness at games venues. The main area of responsibility of this
FA involved engaging vendors to provide manpower and materials (cleaning supplies,
disposal bins, etc) in respect of cleaning activities. The words “waste management”
associated with this functional area was perhaps a misnomer as waste movement (off site
removal) and disposal activities were carried out by the relevant Delhi Administration civic
agencies and were not under the ambit of the OC.
20.1.2 For the purpose of contracting, the OC divided the venues into packages numbering 1 to 9559
which included competition and non-competition venues and the commonwealth games
village. A brief chronology of the key events relating to the award of these 9 packages is set
out in the table below.
559
Packages 1 to 9 are as follows: Package 1 (JLN Stadium and ceremonies), Package 2 (SPM and Talkatora Stadium),
Package 3 (Yamuna Sports Complex and Central Vista), Package 4 (MDC, IG), Package 5 (Thyagraj Stadium), Package 6
(Rughby (DU) TRG venues), Package 7 (Karni Singh and Kadarpur), Package 8 (Siri Fort and R.K. Khanna Stadium) and
Package 9 (CGV).
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Fifth Report of HLC – Organizing Committee
Table 20.1: Chronology of tendering process for cleaning and waste management contracts
Date Particulars
October 2009 Release of EOI
23 vendors responded
14 vendors were qualified for issuance of RFPs
December 2009 Issuance of RFPs
January 2010 Site visits permitted by Cleaning and Waste Management FA for all 14
qualified vendors.
Submission of bids Six vendors responded to the RFP:
A2Z Management & Engineering Services Private Limited
Sarvatra Integrated Services
Cleanevent International PTY Limited
ISS Integrated Facility Services
IL & FS Property Management Services
Lion Services Limited
February 2010 Opening of technical bid
March 2010 Technical evaluation carried out
March 2010 Opening of commercial bid
July 2010 LOI issued to A2Z Management and Engineering Services Private Limited
(M/s A2Z) towards Package 1 and 3 to 9.
July 2010 LOI issued to M/s Sarvatra towards Package 2
20.1.3 In summary, the entire process from the release of the EOI to the awarding of the LOI took a
period of almost 10 months and resulted in 8 packages being awarded to M/s A2Z and 1
294
Fifth Report of HLC – Organizing Committee
package to M/s Sarvatra. The observations stated under are with respect to the award of
contract to A2Z for packages 1 and 3 to 9.
20.2 Flawed planning and budgeting
20.2.1 There was no expense head budgeted for cleaning and waste management in the initial
budget prepared by the OC in 2007. Through a series of budget revisions, the zero expense
in 2007 grew to INR 31.22 Crores in 2010. A summary of the key revisions summarized from
the budgets of the OC is set out in the table below.
Table 20.2: Revisions to budgets for Cleaning and Waste Management expense
Date of budget/ Amount Reasons/Justification for the revision
revision allocated (In
INR
Crores)560
April 2007 Nil The functional area was not budgeted as an expense in
this budget.
November 2008 5.71 Budget increased due to requirement of cleaning and
(revised estimates housekeeping work required at the Games Village which
by EKS/EY) would have been responsibility of OC.
All other activities such as collection, transportation and
disposal of waste from a common point at the games
village was the responsibility of NDMC/MCD and cleaning
of all venues would be done by Venue owners.
Waste bins etc at the Games village would be provided by
NDMC/MCD.
26 September 2009 11.22 Reasons for revision not available
7 June 2010 31.22 Re-appropriation of budget for approximately 3 times
increase in cost since September 2009 estimate and
approximately 6 times since November 2008
Increased cost reflects the amounts in the tenders
560
Refer to section on Budgets for breakup of budgets into various functional areas.
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Fifth Report of HLC – Organizing Committee
Date of budget/ Amount Reasons/Justification for the revision
revision allocated (In
INR
Crores)560
submitted.
Total cost quoted by A2Z and Sarvatra amounted to INR
24.47Crores.
20.2.2 The above summary indicates the following.
OC did not seem to have any clarity or appreciation with respect to the budgeted cost
involved in cleaning and waste management FA. This is evident from the absence of the
expense head in the initial budget and the frequent re-appropriations in budget amounts
that grew over 5 times from the first time a budgeted amount was provided in
November 2008.
Till a very late stage, the OC was not clear on the complete ambit of its responsibilities
and there was, at minimum, confusion with respect to responsibilities with other
agencies such as the MCD and NDMC and venue owners.
A direct result of these unclear roles and responsibilities was the impact on costs (which
grew from a budget of zero in 2007 to INR 31.22 Crores in 2010) and on time (contracts
for this functional area were finally awarded only in mid 2010 with delivery issues as
discussed in ensuing sections of this report).
20.2.3 The minutes of the meeting of the OCFC dated 23 December 2009561 stated that the total
estimated cost for this functional area would be INR 7.8 Crores562. The minutes also state
that the actual total cost involved would only be known after the commercial bid is opened.
It may be mentioned that one of the most significant revisions made to the budget was the
increase from INR 11.22 Crores to INR 31.22 Crores post opening of the commercial bids as
summarized in figure 2. In this regard, it is extremely surprising that budgets were made
561
Refer Annexure 20.1.
562
The Source for INR 7.8 Crores has not been provided neither is this amount mentioned in any of the budget documents
made available to us.
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Fifth Report of HLC – Organizing Committee
post receipt of commercial bids, with significant and material departures from previous
estimates and without any accompanying logic other than high rates quoted by vendors.
This also indicated the complete break down of planning processes and an apparent lack of
diligence on the part of the OC functionaries to make proper estimates or determinations
and reflect these in their financial estimates that were critical from a decision making
perspective.
20.3 Delivery risks arising from concentration of packages with a single vendor
20.3.1 In accordance with the technical evaluation carried out by the committee 563, five out of the
six vendors qualified for opening of commercial bid. The final determinations were made
based on the lowest price on L1 basis. The ranking of the selected vendors based on their
commercial bids is set out in the following Table.
Table 20.3: Ranking of vendors based on commercial bids564
Package number L1 vendor L2 vendor
1 A2Z ILFS
2 Sarvatra A2Z
3 A2Z Clean Event
4 A2Z ILFS
5 A2Z Sarvatra
6 A2Z Clean Event
7 A2Z Sarvatra
8 A2Z Clean Event
563
The committee comprised of Major M.S. Seetharaman (Director- CWM), Mr. Sudhir Mittal (Special DG), Mr. Sanjiv Mittal
(OSD) and Mr. KUK Reddy (ADG- F&A).
564
Refer Annexure 20.2 and 20.3.
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Fifth Report of HLC – Organizing Committee
Package number L1 vendor L2 vendor
9 A2Z Clean Event
20.3.2 M/s A2Z were awarded 8 of the 9 packages and the balance package (package 2) was
awarded to M/s Sarvatra. The decisions to award these packages were recommended by a
selection committee constituting various OC officials565. It may be mentioned that the Mr.
M.S Seetharaman (Director- CWM) made a number of suggestions/recommendations that
were pertinent from a games delivery and legacy perspective. These were howsoever not
followed through by the FA/selection committee in the final awarding of the contracts. The
OC perhaps should have considered limiting the number of packages to be awarded to a
particular vendor thereby mitigating the delivery risk to a greater extent. The key concerns
raised that were not addressed are set out in the figure below.
Table 20.4: Concerns that were not addressed by concentrating contracts with a single vendor
“Concerns and considerations” by Mr. Ensuing actions
Seetharaman (Director-CWM)
Multiple players should be selected as service 8 contracts were awarded to A2Z contrary to
providers to minimize risk involved and allowing these recommendations.
Indian vendors not having such experience to
work to create a legacy for such future event
management.566 As discussed further in paragraph 1.5.4, A2Z
were unable to provide the manpower for which
they were contracted resulting in a significant
under delivery on contracted commitments with
565
These OC officials were part of a committee constituted upon the orders of CEO to negotiate with the vendor. They
were Sanjiv Mittal (JDG - Procurement), BB Kaura (JDG-Protocol), KUK Reddy (ADG-F&A), A K Kesri (DDG- Secretary General
‘office) and A K Chaturvedi (DDG-CWM).
566
Refer Annexure 20.4.
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Fifth Report of HLC – Organizing Committee
“Concerns and considerations” by Mr. Ensuing actions
Seetharaman (Director-CWM)
an impact on the conduct of the games
The OC should take advantage of the most M/s Clean Event were L2 in 4 packages, however
experienced player in this work and Clean Event contracts were awarded only to L1 vendors and
(the only international vendor) was identified as hence legacy considerations were not built upon
“Numerous Uno” on such services the world in this particular area.
over.
The Quality of services to be provided should be
the emphasis rather than the cost involved while
selecting the service provider.
It was also noted that all 4 Indian vendors did
not have any prior experience in delivery of
services required under this functional area.567
“To have Legacy in our country for future 8 contracts were awarded to A2Z contrary to
handling of events it becomes as a ‘Thought these recommendations.
Provoking consideration’ that we have more
Indian takers and not get pinned down on the
‘Lowest Bid’ which could be taken as an ‘Entry
Gimmick’ by one of the vendor giving quotes for
opening his accounts and books”568.
The overall manpower needed for delivering As discussed further in paragraph 1.5.4, A2Z
service under all packages is approximately were unable to provide the manpower for which
2,500. Further, knowing the service market they were contracted resulting in a significant
quite well, it is not possible for any one single under delivery on contracted commitments with
567
Refer Annexure 20.5
568
Refer Annexure 20.5
299
Fifth Report of HLC – Organizing Committee
“Concerns and considerations” by Mr. Ensuing actions
Seetharaman (Director-CWM)
service provider to bring on board this strength. an impact on the conduct of the games.
This leads us to consider diversity and going for
multiple players in ensuring a sustainable
delivery569.
20.4 Engagement with only a single vendor in the bid evaluation stage
20.4.1 Our review of the documents leading to the awarding of packages indicated that post
opening of commercial bid, while the evaluation committee was deliberating on the
concerns and considerations stated by Director-CWM and a final decision regarding the
vendor had not been taken, A2Z were called in to provide a detailed presentation to the
Evaluation committee on 13 May 2010. The document570 states that this was based on
Chairman’s orders571 conveyed by ADG Games, OC on 10 May 2010. We further noted that
a decision to invite the L1 bidder to clarify their capabilities to deliver the specific packages
was taken in a meeting between Peter Stewart (ADG-Games) and Suresh Kalmadi (Chairman
–OC) on 7 May 2010.
20.4.2 The remaining five vendors that were apparently not called in to provide detailed
presentations included Clean Event (the only international vendor with apparent experience
in delivering these services in a games environment).
20.4.3 The reasons for excluding other vendors from an opportunity to engage in the evaluation
stage are not apparent or documented. Further, the decision to call a particular vendor was
under instructions of the OC Chairman. It appears that the Chairman did not consider the
concerns/considerations placed by Director- CWM and ordered for negotiations with L1
bidder. In view of the above, particularly as only a single vendor was called for
569
Refer Annexure 20.5.
570
Please refer Annexure 20.6 for extract of the minutes of the evaluation committee meeting held on 13 May 2010
571
The copy of the Chairman’s orders conveyed by ADG (Games) on 10 May has not been provided for review.
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presentation and was engaged in discussions in the evaluation phase, the possibility of a
bias or favouritism towards the vendor on the part of OC functionaries cannot be excluded.
20.5 Lack of competence of the selected vendor
20.5.1 The EOI for cleaning and waste management specifically states that any respondent/bidder
eligible for multiple packages should demonstrate that it has an annual turnover specifically
related to cleaning and waste management services of at least INR 10 Crores in each of the
last 3 financial years i:e: FY 05-06, FY 06-07, FY 07-08. In this regard, the following issues
emerge:
A review of the organizational structure in the red herring prospectus issued by A2Z on
30 July 2010 revealed that the company providing Facility Management Services is “A2Z
Infraservices Limited” (One of the group companies under A2Z) and “CNCS”. The facility
management business was transferred by A2Z to A2Z Infraservices Limited in 2008. 572
The certificate of the statutory auditors as furnished by A2Z to OC does not provide
specific revenue figures for A2Z Infraservices Limited. Further, a review of financials of
A2Z does not reveal revenue pertaining to its cleaning business573.
Based on the above, it is not clear whether A2Z, the entity contracted by the OC actually
met the EOI criteria on eligibility.
20.5.2 From a review of the minutes of the evaluation committee dated 13 May 2010, it was
evident to the evaluation committee at the onset that A2Z was unable to understand
specific issues related to providing services574 across multiple venues in a games
environment. The committee also noted lack of previous game time experience of the
vendor.
20.5.3 In order to address issues with relevant game time experience, the minutes of the
evaluation committee dated 13 May 2010 state that A2Z indicated that they would hire
572
Refer Annexure 7.
573
Refer Annexure 7.
574
Refer Annexure 6
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experts with such experience to efficiently deliver the services. In this regard, the following
issues emerge.
The contract between the OC and A2Z does not contain any provisions under which M/s
A2Z were required to provide experts with skill sets to deliver services in the games
environment. Consequently, this constitutes a significant omission on the part of OC
functionaries to rectify a major deficiency identified in the evaluation phase against
which commitments were made by the vendor.
There is no evidence to demonstrate that A2Z actually provided requisite experts with
game times experience promised by them during the negotiation stage.
20.5.4 A2Z were unable to execute actual delivery of services under the contract terms agreed.
The actual deployment of manpower was significantly lower than what was agreed by them
under the contract and venue plans.575 Thus ignoring potential red flags in the vendor
evaluation stage and awarding contract to an entity whose experience and competence in
the field was not on record, resulted in serious repercussions such as improper delivery of
critical services at the time of the games576.
20.6 Failure to negotiate and reduce costs
20.6.1 A LOI was issued to A2Z for Package 1 and 3 to 9 on 16 July 2010 for a final cost of INR 19.30
Crores. This was lower than the cost quoted earlier by A2Z that aggregated to INR 23
Crores.
20.6.2 The cost reduction achieved above aggregating to approximately INR 3.70 Crores was
attributable to scope changes comprising of the following577.
Reduction of service period from 1August 2010 to 18 October 2010 as compared to 1
August 2010 to 31 October 2010 proposed earlier.
Removal of certain items from scope of the services as under:
575
As per the email dated 30 September 2010 from Sudhir Mittal, Special DG, to Jarnail Singh, CEO
576
Refer Annexure 20.8
577
Refer Annexure 20.9
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- Cost of Archery Final- Central Vista of approximately INR 12.53 Lakhs was
removed as archery event was dropped from Central Vista.
- Cost of soap dispensers for all packages amounting to INR approximately 18
Lakhs was removed as these were agreed to be provided by the venue
owners.
- Limiting of the service period by the OC led to a direct reduction in the cost
by INR 93 Lakhs.
- Limiting of the duration of hours to 8 for each resource to be provided by the
vendor also led to reduction in manpower/labour cost amounting to INR 2.45
Crores.
20.6.3 It is pertinent to note that the cost quoted by the vendor for the manpower component
(INR 8 Crores/42% of total cost) was not negotiated for reduction and it appears that the
budget was revised to incorporate the high manpower cost quoted by vendor.
20.6.4 One of the components under the services required to be provided was project cost which
appeared to be directly related to manpower costs. While manpower costs were brought
down due to reduction in the service period, the project cost finally approved did not bear
any decrease on account of reduced manpower cost. This suggests that there was an
opportunity to further reduce costs which was not considered by OC.
20.6.5 In its evaluation, the minutes of meetings capture the ‘market rates’578 for the ‘Manpower
Component’. These market rates were lower than rates quoted by A2Z for the ‘Manpower
component’(For example, the market rate for Supervisor was INR 42 per hour579 and the
rates quoted by A2Z for the same level was INR 69 per hour). However, the vendor refused
to reduce the rates during negotiations carried out on 1 & 3 June 2010 stating that there has
been an escalation in minimum wages by the Government of India post submission of rates
578
We were not been provided with the source of the market rates for manpower as considered by the committee in their
meeting held on 22 April 2010.
579
Rate as considered by the OC’s evaluation committee.
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by them. The vendor also stated that they have quoted the least amount thereby becoming
L1 and as such was not in a position to reduce the rates further580.
Comparison with ‘market rates’
20.6.6 The evaluation committee documents ‘market rates581’ which appear to be lower than rates
quoted by the vendor. On a comparison582 of these rates with those quoted by the vendor,
an opportunity to reduce costs by approximately INR 1.98 Crores583 was lost by the OC as no
negotiations were carried out. It is pertinent to note that there is no information as to the
source and authenticity of these market rates as obtained by the evaluation committee.
20.6.7 In view of the above, a significant opportunity to further reduce costs aggregating to INR
1.98 Crores was lost even though these were clearly in contemplation of the OC at the time
contracts were agreed. This computation is based on rates that the OC has documented in
its own minutes. It is not clear why these opportunities were not availed resulting in
potential overpayments to vendors.
20.7 Other issues
Time delays in vendor finalization
20.7.1 The delays ranging in relation to this contract ranged from approximately 1.5 months to 3.5
months in various stages of the tendering process and total time taken in processing the
contract was approximately 9 months. Thus suggests that the activities were not planned
properly which led to time pressures that also contributed to the non - rationalization of
issues such as those discussed in the sections above.
580
Refer Annexure 20.10
581
The date on which the rates were obtained by the OC have not been provided to us.
582
This comparison excludes market rates for managers as it was not considered by the committee and was not made
available.
583
Refer Annexure 20.11
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Table 20.5
Start Date End Date Delays ( in
months)
Opening of EOI- 21.10.2009 Issue of RFP 24.12.2009 2
Technical bid opening- 02.02.2010 Evaluation of Technical bid- 1.5
16.03.2010
Commercial bid opening-29.03.2010 Awarding of contract to A2Z- 3.5
16.07.2010
Appointment of consultant
20.7.2 The OC appointed Mr. David Payne (“Consultant”) for consultation of catering, cleaning and
waste management at the venues and for providing assistance and guidance to the OC to
achieve international benchmarks. As per the terms of the contract between consultant and
OC , the consultant was required to submit detailed monthly reports of work done and
submit the same along with monthly invoices to specific functional area head within OC (in
this particular case, COO of OC was appointed as the specific functional area head). Further,
on the conclusion of the contract, the consultant was required to submit a report on the
conduct of the catering, cleaning and waste management before end of the contract on 31
October 2010584.
20.7.3 One of the services required to be provided by the consultant under the contract was to
“Review and evaluate tender proposals from bidding companies”. A review of minutes of
various meetings conducted for evaluating various bidders and finalizing the vendor for
provision of services does not indicate the presence or involvement of the consultant in
these meetings. Further, a review of various consulting reports as submitted by the
consultant reveals that the subject of evaluation of tender has been mentioned by the
consultant in reports submitted in May and June but no further details on the specific work
done by the consultant have been provided585.
584
Refer Annexure 20.12.
585
Refer Annexure 20.13.
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Fifth Report of HLC – Organizing Committee
20.8 Summary and conclusions
20.8.1 The above mentioned issues indicate that the OC awarded substantially the entire work to a
single vendor, whose capability and experience in providing the service was not proved, The
OC failed to provide adequate safeguards such as:
Executing specific contract terms on bringing games environment skills that would have
obligated vendors to bring relevant expertise. The possibility that such omission was
deliberate with a view to facilitate the vendor cannot be excluded.
Limiting number of packages that can be awarded to a vendor and thereby increasing
vendor base
Not negotiating with the vendor on prices for specific component when, by OC’s own,
estimate, the rates quoted were higher than market rates
20.8.2 The infective appointment resulted in the situation that the vendor was unable to provide
the manpower required at the time of games leading to serious delivery issues. This
situation was wholly avoidable had OC functionaries themselves adhered to the red
flags/concerns identified by them during vendor finalization.
20.8.3 The role of the OC functionaries involved in the process is against the norms of propriety.
It is not clear why only one vendor which did not have games time experience was called
for presentation based on ‘instructions of chairman’ even though the evaluation
committee was still deliberating on the vendor to be hired.
Red flags on the capability of the vendor as per established evaluation criteria were
ignored
Opportunity to save costs of approximately INR 1.98 crores through negotiations was
lost as OC did not engage further with the vendor in this regard.
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Fifth Report of HLC – Organizing Committee
21 Chapter 21: Games News Service
The contract for Games News Service was initiated at a very late stage as the OC
commenced the tender only 10 months before the games. The contract was tendered twice
due to clear failure of the OC officials to follow laid down procedures and there was evidence
of very restrictive conditions imposed apparently to limit the number of participants. The
RFP was issued twice and each time only one vendor responded who was finally awarded
the contract for INR 9.06 crore. Incidentally, this function was done in-house at the
Melbourne Commonwealth Games in 2006. While on one hand a price reduction was
achieved by reduction in scope of work, on the other hand the OC changed the payment
terms with the vendor (between his price bid, the LOI and final contract) resulting in an
additional expense to the OC.
21.1 Background
21.1.1 Press Operations Functional Area (FA) was responsible for providing all the facilities and
media services to accredited print journalists, photographers and non-right holders to
ensure seamless functioning of the media during the Games. The Press Operations FA’s
objective was to co-ordinate with all other relevant functional areas to ensure “seamless
delivery of services at the Main Press Centre (MPC) and at all Venue Media Centres
(VMCs)”586.
21.1.2 Under this FA, a contract for Games News Service (GNS) was signed on 17 June 2010 587 with
Infostrada Sports (“Infostrada”), a company based in The Netherlands. The key services
required under this contract related to “providing editorial content for the Games
Information System (GIS) including accurate athlete biographies and past performance
statistics, which provides real support time results as well as news, background and
586
Refer Annexure 21.1- Official CWG Website
587
Refer Annexure 21.2 – Agreement between OC and M/s Infrostrada
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Fifth Report of HLC – Organizing Committee
information on the Games”588. The value of the contract awarded to Infostrada was USD
2.06 million or INR 9.06 crore on an exclusive of all taxes589 basis.
21.1.3 A brief chronology of the key events relating to the award of the contract to Infostrada is as
follows.
Table21.1: Chronology of tendering process for GNS
Date Particulars
1 October 2008 Press Operations FA becomes operational
8 June 2009 Appointment Mr. Manish Kumar, Director, Press Operations
23 December 2009 Proposal to issue RFP submitted to various OC employees such as ADG
(Finance), DG (OC), DDG (Legal) and OSD
27 January 2010 Issue of RFP only on the website of OC
30 January 2010 Pre- bid conference
2 parties attended the conference
10 February 2010 Last date for submission of bids
Only one bid received from Infostrada
12 February 2010 Pre- qualification bid opened and evaluated
Bid Opening Committee recommended opening of Technical bid
15 February 2010 Pre- qualification bid compliance report prepared
23 March 2010 Examination of Pre- qualification bid by evaluation committee
Re- tendering recommended
Reduction in bidding time recommended
25 March 2010 Permission for putting on fast track the re-tendering of Games News
588
Refer Annexure 21.1 – Official CWG Website
589
Refer Annexure 21.2 – Last page of the agreement
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Fifth Report of HLC – Organizing Committee
Date Particulars
Service
27 March 2010 Re-issue of RFP
10 April 2010 Last date for submission of bids
Only one bid received from Infostrada Sports
12 April 2010 Opening of Pre- qualification bid
15 April 2010 Technical bid opened and evaluated
16 April 2010 Commercial bid opened and evaluated
Committee recommended formation of Negotiation committee
28 April 2010 Negotiation committee meeting held between Infostrada Sports and OC
25 May 2010 Letter of Intent issued
17 June 2010 Contract with Infostrada Sports signed
21.1.4 In summary, the OC undertook a process spanning a period of 6 months and this involved
repeating the tender process twice. Both times only a single vendor, Infostrada, responded
to the RFP (with no other bids received) and the contract was awarded to them.
21.2 “Lack of expertise” cited to outsource contract
21.2.1 There was no expense head budgeted for Games News service provider under Press
Operations FA in the initial budget prepared by the OC in 2007. 590
21.2.2 Subsequently, in the revised budget submitted for approval to the Ministry of Youth and
Sports Affairs in July 2009, a budget of INR 0.68 crore was estimated for GNS. This estimate
was arrived at by extrapolating the actual amount spent in Melbourne games in 2006 “to a
590
Source: Refer Chapter 2 on OC’s Budget
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Delhi environment”.591 In this regard it should be noted that the games news service in
Melbourne was conducted in-house and not outsourced to anyone592. It was also clarified
in the 12th Finance sub-committee meeting on 19 May 2010 that while estimating the
budget “the fact that OC Melbourne had deployed its own staff for GNS was lost sight of”593.
21.2.3 Given that GNS was provided by an in-house team during the Melbourne CWG 2006 games,
the OC contacted Press Information Bureau (‘PIB’) to undertake the responsibility for
provision of GNS during D 2010. However, PIB declined, citing “lack of requisite
expertise”.594
21.2.4 According to the report provided by the Press Operations FA the Director, Press Operations,
Mr. Manish Kumar, (appointed in June 2009), was of the view that GNS cannot be provided
by an in-house team, on account of “lack of requisite expertise in our country”595 and that an
experienced international agency should be hired. Thus, after almost 16 months from the
date when Press Operations FA was made operational596, a proposal was put up to hire a
vendor for GNS.
21.3 Time pressures created due to delayed contracting
21.3.1 The first proposal for issue of RFP for Games News Service was prepared and submitted by
the FA to the competent authority597 only in December 2009. Due to “conceptual errors” in
the first RFP, the RFP was re-issued resulting in further delays. Thus, the entire process from
the release of the first EOI cum RFP to the awarding of the LOI took a period of almost 6
months to complete.
591
Refer Annexure 21.3 for extract of revalidated budget prepared by E&Y and EKS consortium.
592
Source: Refer Annexure 21.4: As per Brief Report on Press Operations FA – Para 1, Page 1
593 th
Source: Refer Annexure 21.5 – Minutes of the FSC meeting held on 10 May, 2010 – Pt. (v), Agenda item no. 1
594
Source: Refer Annexure 21.4 – Para 5(c), Page 3
595
Source: Refer Annexure 21.4 – Para 5(c), Page 3
596
Source: Refer Annexure 21.4 – Para 5(a), Page 2 The Press Operations FA was constituted in October 2008.
597 rd
Source: Refer Annexure 21.6: Note-sheet dated 23 December, 2009 submitted to Mr. KUK Reddy, ADG (F&A); Mr. VK
Verma, DG (OC); Mr. Ram Mohan, DDG (Legal); Mr. Jiji Thompson, OSD
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21.3.2 Consequently, it is evident that the contracting for such services was relegated to a stage
where an intense time pressure was built up due to the conduct of the OC officials. It is
surprising that firstly the FA realized so late in the run up to the games that such services
were needed and secondly, took another 6 months to finalize a contract even when they
were aware that these were needed.
21.4 Circumventing tender procedures
Restricting EOI/RFP circulation through improper notification
21.4.1 The EOI cum RFP was released on the CWG website on 27 January 2010598 and this
constituted the sole medium to solicit responses. It should be noted that as per the terms
of the financial and administrative guidelines, para 3.7 “An enquiry for seeking ‘Expression of
Interest’ from consultants should be published in at least two national dailies and the web
site of the organisation. The website address should be given in the advertisements”.599
21.4.2 Mr. Manish Kumar, Director, Press Operations, made a note in the proposal sheet on 8
January 2010, stating “The RFP is ready to be put on the website/ to be issued in newspaper.
Being submitted for legal approval”.600 Further, in the same note sheet, on 12 January 2010,
he reiterated “The advertisement for Games News Service Provider RFP is to be given in
national dailies. The content and expense sheet of the advertisement is attached herewith
and same is being submitted for financial concurrence for amount of INR 153,799.24. The
DG has already instructed to release the RFP that was approved in his presence by the
Finance Committee601”.
21.4.3 In spite of being aware of the procedure as mentioned above, the EOI cum RFP was
published only on the CWG website (D2010). The explanation put forward by Mr. Manish
Kumar, DDG602 Press operations, for not adhering to the procedure was “The RFP could not
be advertised in national newspapers since permission was not received on time and ADG,
598
Source: Refer Annexure 21.7 – Archived Tenders on CWG website
599
Source: Refer Annexure 21.8 – Financial & Administrative Guidelines of OC – Pt. 3.7, Page 29
600 rd
Source: Refer Annexure 21.6 – 3/N – Note-sheet dated 23 December, 2009
601 rd
Source: Source: Refer Annexure 21.6 – 4/N – Note-sheet dated 23 December, 2009
602 nd
Source: Refer Annexure 21.9 – Office order dated 22 February, 2010
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Fifth Report of HLC – Organizing Committee
Games Service had suggested that the RFP be made online to avoid delays”603. A direct
consequence of publishing this RFP solely on the website of CWG (D2010) and in
contravention of OC’s own guidelines is that its distribution was restricted.
21.4.4 Further, as the expense in question was only INR 1.5 lakhs,604 the plea that there were
delays in obtaining financial approvals for advertising expense seems frivolous. It may be
noted that the proposal for content and expense for the advertisement was submitted for
financial concurrence on 12 January 2010605 and the RFP was published on the website on
27 January 2010.
21.4.5 Additionally, the proposal for issue of RFP606 stated that, “the expertise of providing GNS is
limited to only a few companies all over the world”. The financial and administrative
guidelines of the OC to be followed in case of procurement of goods607, define the
procedure as following. “Where it is felt that the goods of the required quality,
specifications etc., may not be available in the country and it is necessary to also look for
suitable competitive offers from abroad, the copies of the tender notice may be sent to the
Indian embassies abroad as well as to the foreign embassies in India”. Further, this
condition is also mentioned in the GFR.
21.4.6 Accordingly, since the Press operations FA knew that GNS was a specialized service being
provided by only a few companies all over the world, they could have adopted the above
mentioned procedure in regard to RFP to obtain competitive bids from more vendors. Since
no such action was taken by the FA, it will be reasonable to assume that there was a lack of
inclination of the OC to broaden the potential supplier base and obtain requisite expertise
through fair competition.
Difference of opinion on vendor qualification
603 rd
Source: Refer Annexure 21.10- Minutes of evaluation committee meeting on 23 March 2010.
604 th
Source: Refer Annexure 21.11 – Note-sheet dated 25 March, 2010
605
Source: Refer Annexure 21.7
606
Source: Refer Annexure 21.6 for note sheet dated 23 December 2009.
607
Source: Refer Annexure 21.8 – Para 2.5, Page 22
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Fifth Report of HLC – Organizing Committee
21.4.7 As per the information provided, the pre- qualification bid received from Infostrada Sports
was evaluated twice by two different committees, on different dates with different
recommendations. The details are set out in the table below.
Table 21.2
Date of meeting Committee members Recommendation
12 February Mr. Bharat Prasad, DDG, The committee after scrutinizing
2010 Finance, the relevant documents from
Mr. Surjit Lal, DDG Infostrada Sports found the firm
(Bid Opening
Procurement, qualified in the pre- qualification
Committee)608
Mr. Ram Mohan, DDG, Legal bid.
and The committee, therefore,
Mr. Manish Kumar, DDG, recommended that the technical
Press Operations bid of the firm maybe opened as
per RFP.
23 March 2010 Mr. Sanjiv Mittal, OSD, OSD and ADG, Procurement were
Mrs. G. Kaur, ADG of the view that since all the
(Evaluation
Procurement, procedures for the tender were
Committee)609
Mr. Derek Phillips, Director, not followed resulting in only one
Accredition and GMS bid therefore, the concerned FA
Mr. Manish Kumar, DDG, should re-tender the RFP for GNS
Press Operations by advertising in the national
newspapers.
It was also suggested that the 4-5
known companies in the world
could be contacted to respond to
the bids which would be made
available on CWG’s website.
Further, it was decided that in
view of paucity of time, the
prospective vendor’s could be
608 th
Source: Refer Annexure 21.12 – Minutes of Bid opening committee meeting held on 12 Feb 2010
609
Source: Refer Annexure 21.10
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Fifth Report of HLC – Organizing Committee
Date of meeting Committee members Recommendation
given two weeks time only for
bidding in spite of it being an open
tender enquiry.
21.4.8 The opinions given by the two committees above are completely contradictory to each
other. It is surprising how the bid opening committee on 12 February 2010 recommended
that the proposal to appoint Infostrada be approved even though the evaluation committee
opined that procedures for tender were not followed. The difference of opinion, by
different committees (with one common member) is extraordinary given that the difference
pertains to basic facts related to the tender process and methodology and not overly
complex determinations.
Fast track permission from Chairman not ratified
21.4.9 Due to paucity of time, Mr. Manish Kumar, DDG, Press Operations, obtained permission
from the Chairman, Mr. Suresh Kalmadi to “fast track”610 the re-tendering of the GNS RFP.
According to the letter seeking permission, DDG, Press Operations has requested that time
for bidding be reduced to 2 weeks from 4 weeks as they were “racing against deadlines”.
Further, he cited the reason for re-tendering as “the initial tender was made only online and
not published in the national newspaper”.
21.4.10 It has not been determined whether the permission from the Chairman, has been ratified in
the Executive Board meeting as per the rules and regulations of the OC. Perusal of the
minutes of the EB minutes did not reveal this as an agenda item.
21.4.11 The RFP was re-issued on 27 March 2010,611 in 2 national newspapers and on the CWG
website. The bidding time was reduced from 4 weeks to 2 weeks as per approval from the
Chairman obtained in the manner referred to above.
Inadequate performance security
21.4.12 According to the financial and administrative guidelines of the OC, performance security at
the rate of 5% to 10%612 of the value of the contract should be collected. Accordingly, even
610
Source: Refer Annexure 21.13
611
Source: Refer Annexure 21.7- Official CWG website
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Fifth Report of HLC – Organizing Committee
at 5% of the total value of the contract, the OC should have demanded a performance
security of INR 0.45 crore. However, as per the LOI issued by the OC, duly authorized by the
Secretary General of OC, Dr. Lalit K Bhanot, a performance security of INR 0.05 crore was
demanded from the vendor613. No reason for non adherence with the guidelines was
mentioned or explained. Also, as informed by the Press operations FA, no approval for
demand of less performance security was obtained by the FA or Dr. Bhanot.
The Director was promoted while he short-circuited tender process
21.4.13 It is worth noting here, that even though the tendering of the RFP for GNS was improperly
done in the first instance and there was consequent delay attributable to the Director the
OC, instead of taking action against him for his omissions and commissions, as the Director
Press Operations, promoted Mr. Manish Kumar to DDG, Press Operations in February 2010
with an increase in core salary of INR 8,000 per month.614 The promotion was awarded for
his ability to drive “the FA forward to meet the timelines in the Games”615 which is quite
contrary to fact as explained above.
21.5 Lack of inclination to undertake a “price negotiation”
21.5.1 On the basis of the recommendation of the evaluation committee616 formed to examine the
commercial bid of the GNS, a negotiation meeting was conducted with the vendor on 28
April 2010.617
The vendor made an offer of INR 12.58 crores
This was brought down by 27.95%, to INR 9.06 crore
21.5.2 The members of the negotiation committee were:
612
Source: Refer Annexure 21.8 – Para 2.4, Page 22
613
Source: Refer Annexure 21.14 – Copy of Letter of Intent (LoI) issued to M/s Infostrada Sports
614
Source: Refer Annexure 21.9
615 th
Source: Refer Annexure 21.15 – Notesheet dated 13 January, 2010 by Director (Estt.)
616 th
Source: Refer Annexure 21.16- Evaluation committee meeting on 16 April, 2010. Members: Gp. Capt. KUK Reddy, Mrs.
Gurjot Kaur, Mr. Surjit Lal, Mr. Manish Kumar and Mr. Derek Philips. Mrs. Gurjot Kaur, has not signed the evaluation
committee minutes.
617 th
Source: Refer Annexure 21.17 – Minutes of negotiation meeting held on 28 April, 2010
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Fifth Report of HLC – Organizing Committee
- Mr. M. Jeychandran, OSD. Finance and Accounts
- Gp. Capt. KUK Reddy, ADG, Finance and Accounts
- Mr. Manish Kumar, DDG, Press Operations
- Mr. Derek Philips, DDG, Accreditation and GMS
21.5.3 Analysis of the negotiation reveals the following.
The reduction in total cost was achieved not by price negotiation, but by a reduction in
scope of work. The initial offer made by the vendor was reduced by removing “certain
elements covered in the scope of work” which were in the “nature of adding
enhancement to the quality of the output and not affecting the essential features of the
618
intended output”. The negotiation committee noted that this decision was taken
considering the reduced time available before the games in Delhi and the feasibility of
providing GNS without compromising on the essential output.
Further, the negotiation committee acted under pressure to accept the offer by the lone
vendor as evident from minutes of meeting wherein it was stated that “The Negotiation
committee is thus faced with the most unenviable task of choosing between the options
of either accepting the offer of the firm at the quoted rate, albeit at a perceivably (validly
or otherwise) at a high cost and provide the crucial service to the games or run the risk of
rejecting the offer on the grounds of high cost and jeopardizing the games”.619
21.5.4 It is clear from the above that the contract was awarded to Infostrada with full knowledge
that their rates were high, yet the OC chose to explain it away by citing that not engaging
the vendor would “jeopardize” the games. It is relevant to note that, as explained above,
the delays are directly and exclusively attributable to the conduct of the concerned OC
officials and therefore they are accountable for the high price that was paid to the sole
vendor.
618 rd
Source: Refer Annexure 21.17 – 3 Para, page 1
619
Source: Refer Annexure 21.17 – Last Para, page 2
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21.6 Discrepancies in payment terms resulting in additional costs to OC
21.6.1 A review and comparison of the payment terms in the commercial bid, letter of intent and
contract revealed the discrepancies which have resulted in additional costs to the OC. The
discrepancies and additional costs have been set out in the table below:
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Table 21.3
Particulars Payment terms Remarks
Commercial Letter of Intent621 Contract622
bid620
Total cost Part A: INR Total value of the Payment terms As the Payment
46,500,000 contract: INR 90,640,000 changed to USD in INR changed
including all incidentals, Delhi 2010, shall to USD in
Part B: INR
out of pocket expenses, pay fees contract,
79,300,000
clerkage, etc.) exclusive of all additional
Reduced to taxes, Foreign exchange
INR USD 2,060,000. cost of approx.
90,640,000 INR 0.38 crores
after on payments till
negotiation. date.
Direct Not Witholding tax shall be Exclusive of all Additional cost
taxes mentioned applicable as per DTAA taxes on OC as
between the two withholding tax
countries as per provision is applicable per
of the IT Act. DTAA between
Withholding tax is the 2 countries.
included in the contract
value above.
Indirect Not Service tax shall be Exclusive of all Additional cost of
taxes mentioned applicable as per the taxes service tax of
Service Tax Act and this is approx INR 1.43
included in the contract crore on
620
Source: Refer Annexure 21.17 – page 1
621
Source: Refer Annexure 21.14
622
Source: Refer Annexure 21.2 – Last page of agreement
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value. payments till
date.
21.6.2 It is evident from the above that the final contract terms with Infostrada are very different
from their commercial bid and the letter of intent issued by the OC to them. They were also
compensated for withholding taxes and service charge in India which based on the
payments already made to them aggregate to INR 1.43 crores623. These were reimbursed to
them over and above what was quoted in their bid and the letter of intent. Further, the
contract switched the payment currency from INR to USD. Consequently, the OC incurred
an exchange rate related loss for INR 0.38 crore on payments already made, resulting from
this switch. Had the OC continued to set the contract in Indian rupees as contemplated in
the RFP and the bid, this exchange loss would have been avoided.
21.6.3 The LOI and the contract were signed by Dr. Lalit Bhanot, Secretary General of the OC. It is
not clear from the available records if the changed payment conditions, particularly
payment in USD were duly approved by the EB, which was empowered to approve
expenditure above INR 6 crore.
21.7 Other issues
Management change
21.7.1 On 25 September 2010, through an office order624 from CEO, Mr. Jarnail Singh, Mr. Manish
Kumar, DDG Press Operations was transferred to Sustainability and Environment Functional
Area. In his place, Ms. Manjushree Roy, was appointed as DDG, Press Operations. The office
order does not state any reason for this sudden transfer of Mr. Manish Kumar to another
functional area just 2 weeks prior to the games.
21.7.2 As per the information provided by Ms. Manjushree Roy, Mr. Manish Kumar was removed
from Press Operations due to “management reasons”. We were further informed that
Mr. Manish Kumar, did not hand over any papers pertaining to the FA to Ms Roy and that he
instigated 7 employees from the FA to boycott work. Ms. Manjushree Roy also stated that
623
We understand that Infostrada has not been paid in full. In this regard, this excess expenditure will further increase if
payments to Infostrada made under the old arrangements as entered into by the OC.
624 th
Source: Refer Annexure 21.18 – Office order dated 25 September, 2010
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the papers related to the FA and the GNS contract were handed over to her, after a great
deal of persuasion, only after the games were completed.625
21.7.3 It is to be noted that Manish Kumar’s appointment was in itself not carried out in a
transparent manner. His appointment was first recommended by the Search Committee
comprising Mr. VK Verma, Mr. Lalit Bhanot and Mr. Randhir Singh pursuant to an interview
on 16 September 2008626. However, the offer made by the OC was declined by Manish
Kumar as he already had a better offer in hand and stated that unless the OC was able to
match the same, he would not be able to join 627. Subsequently, a search committee
meeting was held on 5 June 2009 attended by Mr. Lalit Bhanot and Mr. VK Verma where it
was decided to up the offer to Manish Kumar in order to have him on board as Director
(Press Operations). This was approved by the Chairman and as noted, by the Vice Chairman
over the phone and the offer was made on 6 June 2009628. However, what is surprising is
that in an email to Mr. Suresh Kalmadi dated 12 June 2009 recovered through Computer
Forensics629, Mr. Mike Hooper stated that though the COO had been given full authority
over recruitment of foreign hires for certain roles (including Director, Press Operations), and
the same had been discussed at a meeting on the previous day, he had now learnt that
Manish Kumar had been appointed in this role. He mentioned that this was not in his
knowledge or the knowledge of the COO.
21.7.4 Further, another email630 also recovered through Computer Forensics highlights the
inappropriate behaviour of Manish Kumar at the workplace. This email is the resignation
letter submitted by Mr. Gnanapragsam Anthony Mariadass to the attention of Mr. VK
Verma, Mr. Peter Stewart and Mr. Anshul Kwatra. Mr. Tony Mariadass, in this letter, states
that his reason for resigning was the treatment meted out to him by Manish Kumar. He
mentioned that Manish Kumar had personality issues and clashes with individuals in the OC,
625 st
Source: Refer Annexure 21.4 – 1 para, page 2
626
Please refer to Annexure 21.19 - Minutes of the Selection Committee Meeting dated 16 September 2008
627
Please refer to Annexure 21.20 - communication received from Manish Kumar
628
Please refer to Annexure 21.21 - the Minutes of the Search Committee Meeting and Offer
629
Please refer to Annexure 21.22 - email from Mike Hooper to Suresh Kalmadi
630
Please refer Annexure 21.23 - The email from Tony Mariadass
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and he was dragged into the same and told not to attend meetings by these individuals by
Manish Kumar. Manish Kumar had also publicly humiliated him for doing so. He stated that
in this situation, it was not possible to continue working for the OC anymore.
70% of contract value paid prior to commencement of games631
21.7.5 According to the terms of the contract, 70% of the total contract, amounting to
USD 1,442,000632 was paid by the OC prior to the commencement of the games. As per the
payment vouchers prepared by Finance and accounts, the DDG, Press Operations, Mr.
Manish Kumar had certified that the deliverables were as the per contract and thus
payment was processed.
21.7.6 However, as per the successor DDG, Press Operations, Ms. Manjushree Roy, appointed on
25 September 2010, the vendor did not deliver the contracted scope of work. Accordingly,
30% of the contract value has been thereafter held back by the OC for non-delivery by the
vendor.
21.8 Summary and conclusions
21.8.1 It is evident from the review that the services for which contract was made with Infostrada
need not have been contracted out and the work could have been handled in house as was
done in Melbourne 2006. The OC agreed to the price without any effective negotiation of
price with the vendor even while OC officials were aware that the rates at which this was
contracted were higher than what the circumstances would warrant. However, the OC
chose to disregard all concerns citing that the conduct of games would be in question if the
contract was not awarded to the vendor. This contract clearly represents a situation where
the following occurred.
The OC commenced the tender process less than 10 months before the games making
OC vulnerable to aggressive pricing by the sole vendor.
631
Source: Refer Annexure 21.4 – Point 4, Page 2
632
Source: Refer Annexure 21.24 – Ledger sheet from Tally dump.
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The contract was tendered twice as the RFP was issued first time without following the
procedure of notifying it adequately .The tender process took an overall time of 6
months leading to the award of the contract.
The restrictive advertising, done by the OC was indicative of an attempt to avoid wider
circulation and make it exclusive. A direct result of it was that each time the RFP was
issued only one vendor, Infostrada, responded and it was given the contract at their
terms.
The contract rate was brought down by the OC through reducing project components to
fit it within the re-appropriated budget633 and there was no effective reduction in rate.
The very basis for remuneration to the vendor underwent a change between his price
bids, letter of intent issued to him and the final contract. The OC does not have any
documentation on who approved or authorized these changes. As a result the vendor
got the benefit of exclusion of withholding tax and service tax that were inclusive as per
the bid and LOI. Further the base currency was changed from INR to USD. These
together caused a financial burden of at least INR 0.38 crore on the basis of payments
made so far and will increase further if additional payments are made to the vendor.
21.8.2 Changes in favor of the vendor could not have taken place without the collusion of the staff
of OC and senior management. In this regard, the conduct of the following individuals is
expressly noted.
Mr. Lalit Bhanot, Secretary General who signed the LOI and the contract with all these
changes
Mr. Manish Kumar, DDG, who issued the RFP in contravention of the guidelines of the
OC
The bid opening committee (on 12 Febuary 2010) comprising of Mr. Bharat Prasad, DDG,
Finance; Mr. Surjit Lal, DDG Procurement; Mr. Ram Mohan, DDG, Legal and Mr. Manish
Kumar, DDG, Press Operations who approved the bid of Infostrada in violation of the
guidelines.
633
Source: Refer Annexure 21.17- The re-appropriated budget has not been approved by MYAS till date
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The Chairman, who approved the promotion of Mr Manish Kumar DDG for contribution
to games when his actions actually caused substantial delays owing to the re-tender and
eventual payment of extra price.
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22 Chapter 22: Sports Equipment & Surfaces
The review conducted shows that there was potential for misconduct on part of employees
engaged in procurement related activities for sports surfaces. This is particularly relevant as
according to the sports FA’s own data, procurements for some items were made at rates
significantly different than those budgeted. Further, procurement for badminton court mats
was made far in excess of requirements with no reasonable explanation for such an inflated
demand. Brands for most surfaces were pre-determined with restrictive criteria that inhibited
new entrants.
22.1 Overview
22.1.1 The Sport FA was led by Mr. A.S.V. Prasad, Additional Director General (Technical). The
number of employees engaged in this FA was around 300 and comprised a senior team of 9
DDGs and 17 competition managers.
22.1.2 According to the overview provided by ASV Prasad the Sports FA was primarily responsible
for handling the technical aspects related to the games that included following guidelines of
the CGF and the norms of International Federations634. The objectives of this FA included
centralized planning, policy and operational support, planning and implementing the
presentation for all sports.
22.1.3 Initially government planned for the purchase of equipments and surfaces by the venue
owners However, in the CCC meeting held on 19th June, 2009, it was decided that
procurement for SAI venues would be done by OC. Later in the EB meeting held on on 19th
December, 2009, Sports FA was authorized to procure sports equipments for all venues.
Various agencies and committees were actively engaged with the sports FA in respect of
procurement and management of sports equipment and sports surfaces. These included
the following.
634
Please refer to Annexure 1 for the copy of the email with Sports FA overview as provided by Mr. Anand (office of ASV
Prasad)
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Fifth Report of HLC – Organizing Committee
Expert Committee- On 24th May, 2008, Mr. Suresh Kalmadi, constituted an Expert
committee to finalize the selection of sport surfaces and sports equipments for
Commonwealth Games 2010, Delhi. The committee was chaired by Dr. Lalit K. Bhanot,
Secretary General, OC CWG and consisted of representatives from National Sports
Federations, GNCTD, SAI and a representative each from all venue owner agencies635.
Centralised Co-ordination Committee (CCC)- On 14th June, 2008, a CCC was constituted
through a consensus in the meeting held by MoYAS with Chief Minister, Delhi and
Chairman, OC on 9th June, 2008 for finalization of overlays including sports specific
surfaces / equipments taking inputs from the expert committee and also for suggesting
the best modalities for procurement to ensure uniformity, consistency and quality636.
22.2 Incorrect budget estimates
22.2.1 On an overall basis, the total cost of sports equipments for 17 sports was estimated at INR
31.24 crores as reflected in the EFC note for budget approval sent to Secretary, MoYAS by
Mr. Lalit K. Bhanot.637 Against this, we noted that the OC spent an amount of INR 26.66
crores on purchase of sports equipments.
22.2.2 Even though OC was able to procure the sports equipments within the approved budget
there were significant variations in the rates of the items.
92 items were reviewed (out of total of 435 items procured by OC), and substantial
discrepancy in the actual vs. budgeted rates was noted
Out of these 92 rates for 50 items were higher than the estimates. For example, in case
of Hockey Goal Post and Trampoline (Gymnastics), the purchase cost is 50 times and 90
times over the estimated cost respectively638
22.2.3 Thus, it is clear that the budget prepared by OC were inaccurate with respect to the unit
rates. It is a consistent finding that OC’s estimates for rates varied from the actual costs.
635
The detailed list of members is listed in Annexure 22.2
636
The detailed list of members is attached in Annexure 22.3.
637
Please refer to Annexure 22.4 for the EFC note for Sports Equipment budget
638
Please refer to Annexure 22.5 for the summary of rate variations for 50 items out of 92 reviewed
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Fifth Report of HLC – Organizing Committee
22.3 Unapproved and wasteful expenditure on badminton court mats
22.3.1 DDA constructed 26 Badminton courts while only 14 were approved by OC and Venue
Owners in the meeting held on 13th April 2009 under the chairmanship of Secretary (YAS).
On 13th April, 2009, MoYAS circulated the final list of number of surfaces required for each
sport and venue owning agencies639 as per which only 14 surfaces were approved to be
procured for Badminton courts. The Chief Engineer DDA, Shri N.L. Singh stated that 26
courts were constructed as per the direction of OC. This issue has been detailed in the
fourth HLC report on Games Venues.
As per an email dated 9 October 2009, Mr. NL Singh wrote to Mr. Lalit Bhanot seeking
clarification regarding the number of Badminton courts to be developed for CWG. As per
this email Mr. Singh wrote that DDA was asked to procure 26 badminton court mats by
the OC. However, Mr. Singh stated that in the opinion of the DDA, instead of inviting
tenders and procuring 26 court mats, only 18 such surfaces were needed. Mr. Singh
further stated that the balance 8 could be utilized from the procurements made for the
test events640.
Thereafter Mr. ASV Prasad wrote an email dated 20 October 2009 to Mr. NL Singh
stating that “Regarding Yonex synthetic courts BAI feels that the requirement is 26 courts
as 8 brand new courts (5 competitions and 3 warm-up) are required during the games
period.”641
Consequently, DDA went ahead with the procurement of 26 court mats for badminton.
22.3.2 Mr. ASV Prasad, when requested to comment on the reasons for instructing DDA to
construct 26 courts as opposed to 14 approved by MoYAS, provided the following response.
The instructions for the number of 26 court mats issues to DDA as per the email dated
10 October 2009 were “not a directive, but for information only”. Mr. ASV Prasad
639
MoYAS approved final list of surfaces – Annexure 22.6
640
Please refer to Annexure 22.7 for a copy of the email
641
ASV Prasad’s email to Chief Engineer, DDA – Annexure 22.8
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further stated that the DDA never consulted the sports FA and also that the sports FA did
not have any role in the procurement of these court mats642.
Mr. Prasad also stated that the number of 14 mats that were referred to by DDA in the
minutes of the meeting help of 13 April 2009 may be a typographical error643 and the
actual number of court mats required was 18.
22.3.3 In summary, there was a complete disconnect between the OC and DDA on the number of
court mats required despite the clear decision arrived at in discussion with the MoYAS for
procurement of only 14 court mats. Even in the DDA’s own view, the opportunity to use
mats procured for test events was not utilized and thus at best 18 would have been
sufficient. The potential loss caused by such over procurement is INR 70.62 lakh644 if only 14
surfaces would have been procured and INR 47 lakh if 18 were procured. The estimated loss
only includes the cost of court mats and their installation. This does not include the
expenses on part of developing additional portions of the venues for badminton and overall
loss may be much higher than this. For example, Saket Sports Complex which housed 4
Badminton courts was developed at a cost of INR 6.8 crore and was never used. By any
measure, based on the documentation reviewed, there was no requirement to procure 26
court mats.
22.3.4 The conduct of Mr ASV Prasad and Mr. NL Singh directly contributed to wasteful
expenditure in unnecessary purchase of the court surfaces.
22.4 Restrictive Expression of Interest (EOI)
22.4.1 The Expert Committee short listed those surfaces which were “most suitable to Indian
climatic conditions” as certified by respective International Federations and used in
maximum international sporting events.. The CCC also recommended the same surfaces.
The list of selected surfaces along with the criteria for selection was sent by Mr. Lalit Bhanot
to Rahul Bhatnagar, JS MoYAS on 6 Jan 2009645.
642
ASV Prasad’s clarification to HLC for his email to DDA - Annexure 22.9
643
ASV Prasad’s clarification to HLC, dated 24-02-2011 – Annexure 22.10
644
Please refer to fourth HLC report on Games Venues
645
Criteria for selection of sports surfaces and timing system – Annexure 22.11
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22.4.2 An EOI was invited by OC on 21 Feb 2009 for inviting proposals from manufacturers and
suppliers of the sports surfaces. 646
The EOI mentioned that this was for the attention of approved manufactures and
suppliers and those whose name was not included in the list of suppliers/vendors
provided in the EOI.
Such other vendors/suppliers were asked to respond to the OC for consideration for
including their names in the list of suppliers.
The EOI mentioned the qualification criteria and the brands that met these criteria647.
22.4.3 In view of the above and given that the Expert Committee and the CCC spent almost 8
months creating the criteria for selection and pre-selecting vendors, it follows that the short
list was restricted to certain brands that were pre-selected.
22.4.4 It may be mentioned that of the 8 categories for which the EOI was isssued, only in case of
Wooden Surfaces & Lawn Bowl additional brands were identified through this process. It
should be noted that in case of Lawn Bowl OC had not identified any brands that met EOI
criteria.
Table 22.1: Response to EOI and selection/rejection of brands/vendors
# of EOI Selected for
# Sport/Category # of EOI Received
further RFP
1 Athletics 5 0
2 Hockey 5 0
3 Tennis 2 0
4 Lawn Bowl 4 4
5 Table Tennis 1 0
6 Squash 2 0
646
Expression of Interest – Annexure 22.12
647
Please refer to Annexure 22.12 for details
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Fifth Report of HLC – Organizing Committee
7 Wooden Flooring 6 2
22.5 Procurement of gymnastics equipment at higher than L1 quote
22.5.1 In relation to procurement of gymnastics equipment, we noted that the supply order was
not based on the L1 quotation received as summarized below.
Table 22.2
M/s Banfer M/s Gymnova M/s Janssen
Item L1 Bidder
GmbH (France) Fritsen
(INR) (INR) (INR)
(SET 1) M/s Gymnova
(France)
Men Artistic Gymnastics
Equipment
Women Artistic Gymnastics 4,63,68,297.93 4,01,27,393.54 5,51,50,665.28
Equipment
Competition Podium
Magnesium Carbonate
Powder
(SET 2) M/s Banfer
28,55,426.25 59,30,145.34 78,57,464.7 GmbH
Women Rhythmic
Gymnastics Equipment
22.5.2 As evident from the above, M/s Gymnova were the L1 for the set 1 and M/s Banfer were the
L1 for set 2. However, on 27th January, 2010, the bid opening date, Mr. ASV Prasad, JDG
proposed that the entire set (for all the categories) of equipments be purchased from M/s
Gymnova (France).
22.5.3 In this regard, Mr. Jarnail Singh, CEO, in the 21st meeting of OCFC held on 26th February,
proposed that set 1 be procured from M/s Gymnova and set 2 be procured from M/s Banfer
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Fifth Report of HLC – Organizing Committee
GmbH (Germany)648 that was in line with the L1 quotation results. Thereafter a committee
was set up by the CEO to evaluate the award of the contract to a single vendor. The
committee finally determined on 21st June, 2010 that the entire contract be awarded to M/s
Gymnova649. The reason cited was that equipments for all categories in Gymnastics should
be procured from a single supplier to ensure uniformity of brand between men and women.
This resulted in an overall cost escalation of INR 30.75 lakhs over the L1 rates quoted.
22.5.4 In this case, both vendors were duly qualified from a technical perspective, yet procurement
at an inflated rate was made from one of the vendors resulting in the additional expenditure
of INR 30.75 lakhs with a time loss of almost 6 months from the time the bids were opened.
22.6 Summary and conclusions
22.6.1 The review conducted indicates that there was potential for misconduct on part of
employees engaged in procurement related activities. This is particularly relevant due to
the following.
According to the sports FA’s own data, procurements of some items were made at rates
significantly higher than those budgeted. Consequently the budgeting process was
inaccurate and could not be relied upon for making relevant decisions.
Procurement of badminton court mats were made far in excess of requirements with no
reasonable explanation for the inflated quantity. The conduct of both DDA and OC
officials in such unwarranted, unapproved and wasteful procurement warrants
disciplinary action.
Brands for most surfaces were pre-determined. The EOI issued to identify ‘additional
brands’ was enacted but that did not yield in significant additional results as the criteria
were restrictive towards new entrants.
648 st
Minutes of 21 OCFC meeting – Annexure 22.13
649
Copy of the committee evaluation report - Annexure 22.14
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Fifth Report of HLC – Organizing Committee
23 Chapter 23: Procurement of Lanyards
A key issue in the award of the contract for lanyards was that both the vendors who were
short listed in the technical round suffered from deficiencies in their test reports which were
overlooked by the evaluation committee while other vendors were rejected on the basis of
similar inconsistencies in test reports. The contract was finally awarded to a vendor with
limited credentials in the bid document and who appeared to be involved as an ‘agent’ or
‘representative’ for foreign vendors for other contracts awarded by the OC that were
unrelated to this area. Consequently, the award of this contract was on criteria other than
merit of the selected vendor.
23.1 Background
23.1.1 The OC appointed Tristar Enterprises for supply of Lanyards at Commonwealth Games,
2010. The total value of the contract was INR 68 Lakh. The peculiarity of this contract was
the introduction of a technical requirement that resulted in a significant escalation in cost as
compared to normal Lanyards. In this regard, the OC required Lanyards that were fire
retardant up to 800º Celsius, made out of recycled PET650, and that fulfilled certain other
requirements such as ‘anti-microbial properties’, ‘fabric that keeps the skin cool’, and
‘moisture absorbent’. The FA responsible for this procurement was the Accreditation FA
23.1.2 Salient details of the contract are provided in the table below:
Table 23.1: Overview of the contract
Contract Supply of Lanyards
Contractor M/s Tristar Enterprises
Contract Date 05 August 2010
Contract Value INR 68,40,000
Details of Work
Supply of Lanyards that are made of recycled PET and
650
Polyethylene Terephthalate
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Fifth Report of HLC – Organizing Committee
fire retardant up to 800º Celsius.
Details of Bids Received
Tristar Enterprises
Asian Cards
Digital ID Card System
Card Tec (India) Pvt Ltd
MR Technologies
Details of Bidders Qualifying Pre- Only two bidders qualified, Tristar Enterprises and MR
qualification Round Technologies
23.1.3 A brief chronology of the key events relating to the award of this contract is set out in the
table below.
Table 23.2: Chronology of tendering process for procurement of Lanyards
Date Particulars
Last Date for Bid Submission & Opening of Bids for pre-qualification
21 June 2010
evaluation
21 June 2010 Technical Bid Evaluation
5 July 2010 Opening of Commercial Bid
9 July 2010 Evaluation of Commercial Bid
10 July 2010 Meeting of the Negotiation Committee
17 July 2010 Issue of Letter of Intent
5 August, 2010 Contract Signed
23.2 Time delays
23.2.1 Consistent with findings in many other sections, the bid submission and consequent
activities took place only in late June 2010, a few months to the start of the games.
Consequently, this contract was also fraught with the risk of time delay.
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23.3 Inconsistencies in the technical evaluation of bids submitted by vendors
23.3.1 Technical evaluation committee651 selected 2 out of 5 bidders for the Lanyard contract for
further evaluation of commercial bid. An examination of the documents provided reveals
that the arguments set forth by the committee appear biased towards selected vendors.
The table below lays out the names of bidders who were rejected and the reason for their
disqualification as noted by the committee at the time of technical evaluation 652.
Table 23.3: Bidders and the reason for disqualification
Name of Bidder Reason for Disqualification
Asian Cards Failed to submit a test report to prove that the material is
RECYCLED PET
Digital ID Card System Material not REYCLED PET as per test report
Card Tec (India) Pvt Ltd No Undertaking submitted
23.3.2 Based on the review of documents and records provided to us, it is evident that:
Though the RFP did not explicitly state the requirement to submit a test report along
with the bid653, one of the bidders ‘Asian Cards’ was rejected during pre qualification as
it failed to submit the test report. Thus, one of the bidders was clearly rejected based
on criteria that were not clearly included in the RFP itself.
The technical evaluation committee meeting minutes note that MR Technologies
submitted a test report as part of their bid and this formed the basis on which the
vendor was short listed for commercial evaluation. However, no Test Report could be
located in the bid documents of MR Technologies provided to the HLC team. Upon
enquiry OC responded by furnishing a test report from MR Technologies that is dated 29
June 2010 which is 8 days after the technical evaluation of the bids. Consequently, it is
651
Technical Evaluation Committee consisted of Derek Philips, DDG Accreditation, Ratan Bir Kalra, PO Accreditation,
Mahesh Arora, DDG Procurement, Sajith Abraham, PO Accreditation, and Rajat Dogra, PO Accreditation.
652
Refer Annexure 23.1 for technical evaluation committee minutes
653
Refer Annexure 23.2 for the RFP
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Fifth Report of HLC – Organizing Committee
likely that documentation was created after the award of the contract only with a view
to provide legitimacy to the decisions and conclusions already reached by the OC.
The test report submitted by the selected vendor “Tristar Enterprises” is dated June 30
2008 (2 years prior to the submission of technical bid) and is in the name of a Chinese
company ‘Foshan Shi Shunde Qu Beidi Gift & Arts Co. Ltd’.654 This apparently specious
report was overlooked by the technical evaluation committee with no mention in the
minutes which shows a bias that might have resulted in the short listing of the vendor on
technical grounds.
23.4 Lanyard supplied and accepted by OC did not meet RFP criteria
23.4.1 The test report submitted by Tristar Enterprises dated 02 August 2010, as part of their proof
of compliance with RFP specifications prior to the delivery of goods, notes that the material
supplied is FIRE RETARDANT PET LANYARD. The report does not mention that material is
RCYCLED PET655. As mentioned in the section above, one of the vendors “Digital ID Card
System” was rejected specifically as its test report did not specify that the material is
RECYCLED PET.
23.4.2 Given that the technical specification of the Lanyards required it to be fire retardant a
simple test was conducted by trying to ignite the Lanyard656 by using a lighter. The Lanyard
immediately caught fire!
Figure 23.1: Photo of the Lanyard that caught fire
654
Refer Annexure 23.3 for the test report submitted by Tristar Enterprises as part of their bid
655
Refer Annexure 23.4 for the test report submitted by Tristar Enteprises prior to the supply of goods
656
Sample LANYARD provided by OC
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Fifth Report of HLC – Organizing Committee
23.4.3 In view of the above it is likely that technical specifications were made unduly rich with a
view to award the contract to a particular vendor at additional costs with no control on the
actual quality of material supplied.
23.5 Award of a contract to a vendor with suspected affiliations
23.5.1 The contract for Lanyards was awarded to Tristar Enterprises, the selected vendor despite
the inconsistencies noted above. It may be mentioned that even on a general perusal of
their credentials it was noted that they provided only 2 certificates of similar items supplied
by them, none of which were of a scale or value close to the OC’s requirement.
23.5.2 It was also noted that Tristar have been paid approximately INR 1.3 crore in aggregate
through this contract and for certain other procurements made by the OC through them657.
Additionally it was noted that their sister concern GEM International and their key
functionaries A.K. Madan and P.D. Arya were associated with other contracts such as Timing
and Scoring and Games Management Systems as Indian representatives.( Comments on
these two contracts are included in Chapter 9 and Chapter 10)
23.5.3 The involvement of possibly same set of vendors in multiple areas under different names
pointes to a situation in which orders were being cornered by a single group of contractors.
It is likely that the engagement of the vendor above was made on criteria other than their
merit especially in view of their apparently limited experience in supply of Lanyards and
their involvement with other contracts in the OC as agents of foreign vendors.
23.6 Summary and conclusion
23.6.1 The procurement of Lanyard is another example of OC’s crafty manner of acquiring goods
and services for D2010. This contract appears to be marred with indications of misconduct
as is evident from the flawed evaluations that resulted in rejection of some of the vendors in
the technical evaluation phase; likely creation of documents etc.
23.6.2 Further, there is evidence that suggests the involvement of a vendor who appears to be
from a select ‘club’ members of which were engaged with the OC in multiple contracts. The
657
These include contract for Accreditation Cards etc.
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Fifth Report of HLC – Organizing Committee
reasons for appointment were criteria other then merit and there was misconduct on the
part of employees/FA that awarded the contract.
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24 Chapter 24: Expenditure on NDCC
Building Refurbishment
24.1 Background
24.1.1 The FA (Office Administration) in OC was tasked with the responsibility of expansion of
office infrastructure (including additional office space, EF&E and workspace) as per the
functional requirement in the period leading to the games.
24.1.2 In August 2007, Group of Ministers (GOM)658 approved hiring of office space of 1.50 lakh
sq.ft by OC. In response to Chairman OC’s request (October 2007), New Delhi Municipal
Council (NDMC) allotted to OC in November 2007 office space comprising 2nd to 6th floor
of NDMC phase II building (NDCCII) New Delhi measuring 1.37 lakh sq.ft built up area. OC
made arrangements for refurbishing this hired space at its own cost. The project was
implemented in two phases.
24.1.3 The first phase involved selection of an Architectural and Internal designing agency for
preparation of estimates of cost, working drawings and conceptual designs, detailed
working drawings and structural and services designs etc. The mandate of the consultants
also included preparation of tender documents, short listing of contractors, supervision of
work, certifying the quantity and quality of work billed for payment etc.
24.1.4 The second phase involved selection of the firms/contractors for executing various civil
works. A Monitoring Committee was constituted for providing overall supervision on the
execution of project. The main events in the processing of these works are shown below.
24.1.5 Architectural and Internal designing agency
658 th
Annexure 24.1 (Minutes of the Executive Board meeting of OC dated 8 January 2008)
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Fifth Report of HLC – Organizing Committee
Table 24.1:
Date Event
January 2008 RFP issued to 3 firms for selection of Architectural consultant
February 2008 Technical evaluation of proposals completed and M/s MIS
Consortium selected as T1
February 2008 Combined Technical and Commercial evaluation completed
and M/s MIS Consortium ranked first.
June 2008 Selection of Architectural consultant finalized and contract
signed with M/s MIS Consortium
24.1.6 Firms/contractors for executing civil works
Table 24.2:
June 2008 Invitation to bid published in Delhi news papers for execution
of interior works in floors 2nd to 6th
August 2008 Commercial bids of three pre-qualified firms opened and bid
amount of INR 21.40 crore found to be lowest. Completion
period reduced from 6 to 3 months and
September 2008 Negotiations held with all the three firms regarding cost and
period of completion of work.
September 2008 Contracts signed with-
L1 for 3rd and 4th floor
L2 for 5th and6th floor
L3 for 2nd floor
Total negotiated cost for all tenders INR 19.66 crore.
November 2008 Invitation to bid published for execution of interior works in
floors 7th to 9th and financial bids of three pre qualified firms
opened. Amount of INR 8.89 crore quoted found lowest.
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Fifth Report of HLC – Organizing Committee
December 2008 Negotiations held with two pre-qualified firms
December 2008 work for 7th and 8th floor allotted to L1 at cost of INR 6.10 crore
and 9th floor to L2 at INR 2.79 crore for completion within 2.5
and 2 months respectively
December 2008 Invitation to bid published for execution of interior works in 1st
floor and also fabricating furniture for shooting event
January 2009 Financial bids opened
January 2009 Work allotted to lowest bidder at cost of INR 1.73 crore which
included INR 24.69 lakh for supply of shooting furniture. Period
of completion of work :21 days
24.2 Budget provision was given a go by
24.2.1 The work of refurbishing of rented space was started from January 2008 without any budget 659
provision. A provision of INR 12 crore was, however, earmarked in the revalidated budget of
November 2009 for cost of shifting OC office from JLN stadium and refurbishing of the NDCM phase
II building at estimated rate of INR 1000 per sq.ft. The actual cost aggregated to approximately INR
32 crore at the contract award stage. The excess expenditure was met660 out of funds earmarked in
the budget under office space rental.
24.3 Expenditure on office space hired without justification
24.3.1 NDMC offered and OC hired in the first instance 1.37 lakh sq ft and subsequently additional
four floors (ground and 7th to 9th) of the same building of 96 thousand sq. ft. Thus, the total
area hired was 2.33 lakh sq ft.
24.3.2 It is noticed that based on the norm for entitlement of office space for staff in GOI, the
maximum total tertiary space (workstation, desk, storage cabinets etc) that could be
required by OC in the peak period of its staff engagement could be approximately 1.00 lakh
659 th th
Annexure.24.2 (Minutes of the 12 Executive Board Meeting of OC dated 19 Oct 2008 and revalidated budget of Nov
2009)
660 th
Annexure 24.3 (Minutes of the Meeting of EMC dated 13 June 2008)
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Fifth Report of HLC – Organizing Committee
sq ft (50*2000). Hiring of additional 50 thousand sq.ft space (for special requirements)
would have met the requirement of OC for primary and secondary space such as corridors,
walkways, lobbies, meeting/conference rooms and special and temporary staff etc.
24.3.3 However OC acquired 83 thousand sq.ft more than the area that was justified(2.0 lakh sq
ft). But no justification was made available as to why such extra space was required or if OC
hired the additional office space with the approval of GOM or the Government.
24.3.4 It was determined that for the extra space as above , OC had to spend approximately
INR11.40 crore on refurbishing (calculated on the basis of average cost of refurbishing per
sft) and INR 49.80 crore towards rent (@INR 250/sft) for 24 months period.
24.3.5 It appears from the review of records that OC management did not institute a transparent
and normative approach in allocating office space and there was no mechanism to ensure
accountability for acquiring and refurbishing excess office space at tax payer’s money.
24.3.6 A review of this case raised serious issues of governance and wastage of public funds.
24.4 Cost Estimates
24.4.1 The justification and economy of the expenditure of INR 32 crore for carrying out interior
works for 2.33 lakh sq.ft built up area, at an average unit rate of INR 1374 per sq ft was
questionable.
24.4.2 It was noticed in the review that the cost estimates661 for the project were prepared by the
Consultant Architect as and when invitation to bid for a particular work was issued. There
was no record to indicate how the estimated cost was validated in OC. Since the cost
estimate was based on the tenders and commercial offers and the estimates were not
validated on independent review, reasonableness of such estimates could not be assessed.
The Monitoring Committee constituted for providing overall supervision on the execution of
project had also observed662 that rates quoted were on higher side.
661 th th th
Annexure -24.4 (Minutes of the meeting of EMC dated 25 June 2008 and copy of cost estimates ( 7 – 9 Floor)
662 th
Annexure – 24.5 (Internal Note dated 14 Aug 2008 of Mr. Gaurav Duggal (Director)
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Fifth Report of HLC – Organizing Committee
24.5 Executive Board (EB) abdicated its responsibility
24.5.1 The Executive Board of OC was vested with the powers to approve projects estimated to
cost more than 3 crore.( revised to INR 6 crore from March 2010). Works costing more than
INR 3 crore could, thus commence only after the EB.’s specific approval.
24.5.2 In the Executive Board Meeting on 8th January 2008, the EB approved 663 the proposal of
refurbishing the newly hired NDMC II building and further issued a blanket authorization to
Executive Management Committee (EMC) to invite RFP bids/ tenders, approve engagement
of architects and contractors for undertaking the interior works required for the new office.
24.5.3 EMC approved the RFP and award of contract for architectural services to M/s MIS
Consortium and for execution of interior works to six firms during the period June 2008 to
January 2009. The expenditure committed through these contracts amounted to
approximately INR 32 crore though EMC was delegated the power to approve expenditure
up to INR 3 crore.
24.5.4 The EB did not question at any stage the justification for significant escalation of costs and
cost-ineffective use of office space. It is therefore inevitable to conclude that EB failed to
detect the nearly 300 per cent increase in budgeted expenditure. EMC abused the blanket
approval of EB to incur and approve expenditure at a level which was way above its
delegated limit.
24.6 Tender process for selection of consulting architect was flawed
24.6.1 A ‘Request for Proposal’ for interior designing services from reputed consultancy firms and
agencies under two bid system was issued in January 2008 through open advertisement in
Delhi edition of two ;national dailies and CWG website . Considering that the nature of
project work in this case was relatively simple and straight forward, requiring routine level
of expertise and skills for providing flooring, false ceiling, air- conditioning, plumbing,
electrical, fittings, partitioning and fixture etc for the interiors, setting up of very high
663
Refer Annexure 24.1
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Fifth Report of HLC – Organizing Committee
eligibility criteria in the RFP for selection of consultancy work appeared to be lacking
justification as is evident from the following664:
Annual turnover of more than INR 50 million in each of the last three financial years.
Delivery of integrated inter-disciplinary designing works of theme based office interiors
of a minimum of 1.50 lakh sq.ft. area.
Experience of designing at least one office interior as above of INR 100 million.
Experience of minimum 10 years in handling similar projects and having minimum of 25
number of key personnel in multiple areas.
24.6.2 OC received bids from only three665 agencies against this tender. The poor response to
tender could be due to restrictive criteria in the RFP which discouraged wider competition.
Besides, the use of conditions like ‘reputed organization’ in RFP rendered the criteria for
evaluation ambiguous and introduced subjective and arbitrary elements in judging
eligibility.
24.7 Excessive weightage for technical aspect of the bid
24.7.1 A Technical Evaluation Committee (TEC) was constituted for evaluation of technical
proposals. Quality and Cost based selection method with 80:20 weightage666 for quality and
cost was adopted for selecting the consultants for providing ‘Interior designing services’.
Under this method a firm is selected on the basis of highest combined score / marks
awarded on quality of technical proposal and cost. There were no recorded reasons for
determining the relative weights for quality and cost at 80:20. In view of the fact that the
nature of project work was technically of routine nature, the relative weight of 80 percent
for technical quality was unjustified and this could lead to subverting the selection process
and getting on board a preferred vendor. Going by the nature of work to be undertaken,
relative weight assigned to quality of 50 percent would have appeared to be reasonable.
Alternatively contract could have been awarded to the bidder with lowest financial quote of
2.90 per cent as all of the three agencies were declared technically qualified by TEC.
664
Annex – 24.6 ( Extract from RFP)
665
Annex - 24.7 (Technical and Financial Evaluation Report).
666
Annex – 24.8 ( Report of the Technical & Financial Evaluation Committee)
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Fifth Report of HLC – Organizing Committee
24.7.2 The scores/ marks awarded667 to each of the three agencies, is indicated in table below:
Table-3; Financial proposal
S.No Criteria Weightage Minimum Kothari Consortium Consortium
in qualification Associate UTI MIS
Technical score (P) Ltd.
score
1 Project Team and 200 120 180 140 175
experience of personnel
proposed to be
deployed
2 Prior experience of the 300 180 270 220 270
Tenderer;1- Experience
in delivering integrated
inter disciplinary office
interiors designing
works.
ll. Number of years of
Professional experience
in handling such
projects.
3 Overall concept plan, 300 180 220 200 270
design and themes used
by tenderer in past in
best three projects
undertaken
4 Presentation of overall 200 120 125 130 180
perspective of Interior
design taking in to
account international
character & visibility of
OC CWG D 2010
667
Refer Annex.- 24.8
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Fifth Report of HLC – Organizing Committee
5 TOTAL 1000 600 795 690 895
6 Stm = total technical bid 795 690 895
marks of the bid under
consideration
7 SH = Highest total 895 895 895
technical bid marks
amongst all evaluated
bids
8 St= technival bid score = .88 .77 1
( Stm/Sh)
24.7.3 MIS Consortium was ranked T1 based on highest score of 895 out of 1000 marks awarded by
TEC. It appeared that marks awarded against various criteria were arbitrary and not based
on logic or rational methodology.
24.7.4 For example M/s Kothari Associate was awarded668 180 (out of 200) and 270 marks (out of
300) respectively against the criteria – ‘projects team and experience of personnel’ and
‘prior experience.’ Against these two criteria, MIS consortium, the successful bidder was
awarded669 175 and 270 marks. However, against the criteria of overall concept plan,
design, themes and presentation of overall perspective, Kothari Associate was awarded 220
and 125 marks only against 270 and 180 marks awarded to MIS consortium.
24.7.5 The quality of overall concept plan, design and overall perspective will ultimately depend on
the quality and experience of key personnel and their experience and if Kothari Associate
was rated highest on these criteria, the quality of their output should have logically been at
the least, or equal quality if not better. The process of technical evaluation was thus
questionable.
24.7.6 The Technical evaluation committee comprised670 three members’ i.e Commissioner
Planning DDA and two OC employees in charge of Finance and Infrastructure. As two of the
668
Refer Annexure – 24.8
669
Refer Annexure -24.8
670 th
Annex-24.9 ( Office order issued by JDG under No Accommodation / 2008 / Administration dated 30 Jan 2008.
344
Fifth Report of HLC – Organizing Committee
members were not experts with specialization in the area of assignment, there was no
safeguard against manipulation of evaluation of technical proposal.
24.7.7 The financial proposal of the three agencies and combined technical and financial score
awarded to each firm was as indicated in tables below:-
Table-24.4; Financial proposal671
S. No Name of agency Commercial quote Financial score
3.40 per cent of total
1 M/s Kothari Associate 0.85
expenditure
2.90 per cent of total
2 M/s UTI consortium 1.00
expenditure
6.00 per cent of total
3 M/s MIS consortium 0.48
expenditure
Table –24.5; combined technical and financial score672
Technical score Functional score
S. No Name of agency Total score
80% weightage 20% weightage
M/s Kothari
1 80* 0.88=70.4 20*0.85=17.00 87.4
Associate
M/s UTI
2 80*0.77=61.6 20*1.00=20.00 81.6
consortium
M/s MIS
3 80*1.00=80.00 20*0.48=9.6 89.6
consortium
671
Refer Annex -8
672
Refer Annex -8
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Fifth Report of HLC – Organizing Committee
24.7.8 The contract for interior designing consultancy services was awarded to MIS consortium on
the basis of its highest combined technical and financial score of 89.6. The fee payable to
the selected agency was negotiated673 as 4.45 percent of the total expenditure which rate
was determined as the average of lowest financial offer of 2.90% of UTI and highest offer of
6.00% of MIS and contract was signed with the firm on 9 June 2008.
24.7.9 Quality and Cost based system (QCBS) is a competitive process that takes into account the
quality of technical proposal and cost of the service in the selection of consultant agency. As
per the best practices followed under QCBS, cost as a factor of selection is determined for
each case depending on the nature of the assignment.
24.7.10 In view of the restrictive criteria and the flawed QCBS procedure, the selection process was
not above board. This resulted in award of contract at an excess cost on account of
difference between the negotiated rate of 4.45 percent and lowest offer of 2.90 per cent.
24.7.11 The contract signed with MIS Consortium was ‘percentage contract’ without a ceiling on the
total cost on which the percentage would be applied.
24.7.12 It is generally recognized that percentage contracts implicitly lack incentive for economic
design. In this case, undue benefit was extended to the contractor as the percentage basis
of award was open ended and not capped to a fixed ceiling.
24.8 Phase II of the project implementation
24.8.1 This was completed in three phases as discussed below.
2nd to 6th floor674
24.8.2 The work was due for completion within six months. Accordingly, bid was invited in June
2008 for interior works in 2nd to 6th floor of NDMC phase II building (1.37 lakh sq ft built up
area). Of the 14 firms that obtained tender documents, four firms only responded and three
firms were pre-qualified. On 1 August 2008, based on the commercial bids INR 21.40 crore
quoted by Russell Interior was found to be lowest.
673 th
Annexure 24.10 ( Minutes of the EMC meeting dated 4 March 2008)
674 nd
Annexure 24.11 (Minutes of the EMC meeting dated 2 September 2008)
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Fifth Report of HLC – Organizing Committee
24.8.3 Within 40 days of the issue of tender notice, OC management decided 675 on 11 August to
reduce the completion time period of the internal works from 6 Months to 3 months. As L1
reportedly expressed his inability to complete the work in three months period, Monitoring
Committee decided to negotiated the completion period with L-1, L-2 and L-3 decided to
allot the work for 3rd and 4th Floor to L-1, 5th & 6th Floor and L-2 and 2nd Floor to L-3 at
the total negotiated cost of INR 19.66 crore ( INR 1435 /sft). Contracts were signed with
the 3 firms on 16th September, 2008.
7th to 9th Floor676
24.8.4 The notice inviting tender was published In November 2008. Tender document were issued
to 12 firms and of the four firms that responded, three firms met pre qualification criteria
and bid of Ultimate International for INR 8.89 crore was found to be lowest. Work was
awarded to L-1 firm i.e. Ultimate International (P) Ltd. at cost of 6.10 crore and 9th floor to
L-2 firm ( Sharma constructions) at cost of INR 2.79 crore for completion within two and
half months time and two months time respectively. Letters of acceptance were issued to
the firms on 24th December 2008. The unit cost for interior work on 7th to 9th Floor
worked out to INR1400/ sq ft.
1st Floor677
24.8.5 The notice inviting tender was published on 25th December 2008 for 1st Floor of NDMC
building comprising 32810 sq.ft area and also for fabricating furniture for shooting. Out of
the five responses received, financial bid of R.G builders for INR 1.73 crore (unit cost
rs.527/sft) which included INR 24.69 lakh towards supply of Shooting furniture was found to
be lowest and letter of award of work was issued to the firm on 22nd January 2009 with
time of completion of 21 days from the day of commencement of work.
Poor quality of work
24.8.6 Despite appointing an Architectural Consultant and a Resident Engineer for supervising
these works, the quality of work done was compromised/inferior as seen from
675
Annexure 24.12 (Office Notes dated 19-28 Aug 2008)
676 st th
Annexure 24.13 (Minutes of the EMC meetings dated 1 Nov 2008 and 24 Dec 2008)
677 th nd
Annexure 24.14 (Minutes of the Evaluation Committee dated 20 Jan 2010 and note of Dir. Administration dated 2
March 2010)
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Fifth Report of HLC – Organizing Committee
deteriorations that these works had undergone /suffered within one and half years of
construction.678
24.9 Summary and Conclusion
24.9.1 OC hired huge excess space without consideration of use of public funds in economical
manner. The budget was given a go by and EB did not exercise due diligence to contain the
cost escalation resulting from EMC’s decision.
24.9.2 The criteria for the selection of consultant were unduly restrictive and weightage of 80:20
for the technical and commercial evaluation was totally unjustified. This facilitated unfair
selection and higher rate than was justified.
24.9.3 Repeated and separate bidding of the wok of same nature and at same location ensured
that OC did not get economy of scale resulting in unnecessary extra cost.
24.9.4 Rates obtained in competitive bidding were vitiated due to the award of the work on the
basis of negotiations and discussions with the bidders including L-1 and L-2 bidders. As per
rules rates for the L1 only was to be considered.
24.9.5 Splitting work orders and incurring extra expenditure for award of civil work at higher rates
to multiple parties was decided ostensibly to speed up the completion of interior work
within 2-3 months. However these works were actually completed679 with 6 to 8 months
delays.
678
Photographs attached in Annexure 24.16
679 th
Annexure-24.15 (Minutes of the meeting held on 16 March 2009 to review on going interior works)
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Fifth Report of HLC – Organizing Committee
25 Chapter 25: Expenditure on Beijing
Games Observer Program
25.1 Introduction
25.1.1 Observer Programme was included in the proposed revalidated budget of OC sanctioned in
November 2008. Sending the delegation of the Organizing Committee (OC) of Common
Wealth Games-2010 (CWG) to Beijing Olympics (August 2008) was part of this programme.
25.1.2 The following table gives the chronology of events of this programme:
Table 25.1:
S. No Event Date Main Decision
INR 04 crore during 2008
1. Budget by consultant 2008
for 50 persons680
148 hotel rooms were
Booking of hotel
2. July 2007 booked at INR 4.71
accommodation
Crore681.
Decided to send a
delegation from 32
3. EB Meeting 14.08.2007 functional areas for
Beijing Olympic games-
2008682
680
Ref : Annex 25.1: Revalidated budget worksheet
681
Ref. Annex 25.2: Note regarding Study Group & Observer Programme for Beijing -2008
682
Ref:Annex 25.3: Minutes of 9th Executive Board Meeting
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Fifth Report of HLC – Organizing Committee
S. No Event Date Main Decision
165 persons were
4. EMC Meeting 22.07.2008 nominated without any
criteria of selection683
Only 365684 tickets out of
685
3601 tickets were
utilized for witnessing
5. Dates of games 8th to 24th August,2008
games. Thus most
delegation members
gained little experience.
25.2 Observations
25.2.1 A review of this case raised serious issues of governance and willful wastage of public funds.
The Chairman approved a jumbo delegation
25.2.2 The EMC of OC presided over by the Chairman decided (22nd July,2008) to send a
delegation of 165 persons (please refer to paragraph 1.3.5) from different sports disciplines
and functional areas to Beijing Olympic Games ostensibly to gain experience from the multi
sporting event like Olympic games and for utilizing that experience in conducting the
Commonwalth Games-2010. The minutes of EMC indicated no criteria for selection of the
large number of delegation members. This decision was presumably a follow up of decision
(14th August, 2007) by the Executive Board of OC in its (9th meeting) Agenda item No.10)
held on 14th August 2007686.
Budget manipulations
683
Ref. Annex 25.4: Minutes of the meeting of EMC held on 22.07.2008
684
Ref.Annex 25.5: Report on the Beijing Observer programme
685
Ref.Annex 25.6: Reply dated 15.03.2011 of OC
686
Ref. Annex 25.7: EB decided: Officials from all the 32 functional areas, technical experts from the various Games and
Sports, National Sports Federation, stake holders, members of the OC be sent to Beijing Olympus to understand the total
concept of organizing the games of such magnitude.
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Fifth Report of HLC – Organizing Committee
25.2.3 We noticed that the Consultants of the OC (M/S Ernst & Young) in the revalidated budget of
2008 proposed an estimate of INR 04 crore for the visit of 50 persons from OC for Games
Observer programme-2008 Beijing Olympics. As against this an expenditure of INR 8.15
crore687 was reported by OC. A provision of INR10 crore was, however, made in the revised
estimates prepared in November, 2009. No justification for this expanded budget was on
record.
Persons with no connection to games/games management sent for Beijing trip
25.2.4 The delegates visited Beijing in three following batches688.
Table 25.2:
Sr.
Batch No. Date from Date to No. of delegates
No.
1. Ist 08.08.2008 24.08.2008 23
2. 2nd 08.08.2008 16.08.2008 69
3. 3rd 17.08.2008 24.08.2008 69
25.2.5 The list (provided by OC) categories of persons who visited Beijing in this delegation
contained names of persons, some of whom would have no connection with sports or
games management. However, the ostensible ground for their inclusion in the delegation
was that they were members of OC. The following list (obtained from OC records) will
illustrate the point.689
Table 25.3:
Organisazation/committees/sub-committees to
S. No Number
which delegates belonged
1. Chief Minister of a State 01
687
Ref Annex 25.8: Copy of Leger
688
Ref.Annex 25.9:Reply to letter dated 03.03.2011 from OC
689
Ref. Annex 25.10: List of delegated provided by OC
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Fifth Report of HLC – Organizing Committee
Organisazation/committees/sub-committees to
S. No Number
which delegates belonged
2. MP & Mayor 02
3. IOA Member 01
4. Legal Advisors 04
5. Chartered Accountant 01
6. FA Head 01
7. Non specific categories 16
8. NOC/CGA 01
9. OC Officials 18
10. Government officials 12
11. Sports persons 07
12. Photographers/media persons 06
13. Publicity & media sub-committee 07
14. GTCC Sports sub-committee 30
15. Volunteers sub-committee 10
16. Games Village sub-committee 05
17. Green Games sub-committee 01
18. CGA Relation sub-committee 02
19. Transport sub-committee 05
20. Publicity sub-committee 06
21. Protocol sub-committee 08
22. Accommodation sub-committee 02
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Fifth Report of HLC – Organizing Committee
Organisazation/committees/sub-committees to
S. No Number
which delegates belonged
23. Ceremonies & Logistic sub-committee 03
24. Reception sub-committee 03
25. Security sub-committee 01
26. Medical & Health sub-committee 01
27. Corporate Affairs sub-committee 02
28. Commonwealth Youth Games, Pune 04
29. Travel sub-committee 01
Wasteful expenditure on Beijing trip
25.2.6 Scrutiny of the above list would reveal the following issues:
The consultant (M/S Ernst & Young) of OC proposed the visit of 50 delegates to Beijing
Olympic Games. This number (50) of delegates was also mentioned in the sanctioned
budget (Head No.25.11) in the OC Budget Worksheet; but the EMC selected and EB
approved 165 persons for the delegation. EMC minutes give no Justification for selecting
165 persons in excess of the number of delegates proposed by the consultant (161
persons visited). It appears that the expenditure was budget driven and persons'
selection was pre decided and then the delegation size was determined in line with an
inflated budget provision.
Per person average expenditure on this programme works out to INR 5,05,996.
(Calculation based on the expenditure details provided by OC). OC, therefore, wasted
INR 5.61 crore of government funds by sending 111 extra persons.
Totally irrational selection of delegates
25.2.7 The jumbo contingent of 161 persons to Beijing Olympic was an exercise of patronage by
the Chairman as explained below.
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Fifth Report of HLC – Organizing Committee
25.2.8 No recommendations/nominations (except for delegation size and persons nominated for
the Government officials) were obtained by OC before EMC's approval.
25.2.9 Number of OC officials of delegates of different categories/sub-committees varied from 01
to 30. It is not understood as to why large contingent of delegates for OC officials (19),
Government officials (12), photographers (06), publicity (07) protocol (08), non-category(16)
were selected.
25.2.10 It is surprising that the delegation included several legal advisors, accountant and members
of Corporate Affairs sub-committee which could not be conceivably gaining experience in
conducting the games. This was a complete travesty of the propriety.
25.2.11 A large contingent of 19 officials of OC included the Secretary General, Consultant
(Communication), OSD to Chairman, Directors (Chairman Secretariat), Project Officer, ADG
(Finance & Accounts), Advisor (Finance & Accounts), Principal Advisor, Director (Admn), Jt.
DG, (Coordination), etc. We were unable to find justification of sending such officials for
observer programme.
25.2.12 We noted that 16 non-category members (listed below) included in the delegation as
members of the OC, were not representing any sub-committee. It is not clear why they were
included in the delegation.
1 Sh. Zoliana Royte
2 Sh. Durgadas Boro
3 Sh. Dilshad Sheikh
4 Sh. Bashir Ahmed Khan
5 Sh. Binod Dash
6 Sh. Kailash Sharma
7 Sh. Mani Charanmei
8 Sh. Sonjaay Chopra
9 Sh. T.S.Dhillon
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10 Sh. Sekhar Dutt
11 Sh. Rajesh Tomar
12 Sh. Padi Richo
13 Smt. Yashodara Raje Scindia
14 Sh. B.Rocky Bul Hussain
15 Sh. Sanjay Dutt
16 Sh. Rajni Patil
25.2.13 Four Media persons/photographers from Pune were included in the delegation. Similarly
four delegates from Pune belonging to Games Village sub-committee of Commonwealth
Youth Games were included in the delegation. Inclusion of so many persons of these two
categories from Pune was not justified.
Report on the observer programme was of no practical use
25.2.14 The Report mentioned that the observes conducted in-depth study of various facets of
Beijing Olympic Games like city infrastructure, construction of stadia and sports complex,
media centers, security centers, transportation, etc. However, the delegation did not
include persons who were technically qualified to conduct such study. For example, no
delegate from CPWD, who were the main executing agency of the sport stadiums for CWG-
2010, was included in the delegation.690
25.2.15 That the delegation was sent without any coordinated attempt to observe and create a
knowledge base for CWG-2010 was evident from the fact that no specific report of various
functional areas from the delegates was on record and a consolidated report was provided.
Only the SDG (Ceremonies) prepared a separate report on experience and with suggestions.
The Beijing Observer programme was a pleasure trip for most of the delegates
25.2.16 An advance of INR 74.20 lakh was given to IOA (between August 2007 and July 2008) for
game tickets. Of which, an amount of INR 67.16 lakh was spent on purchasing of 3601
690
Ref. Annex 25.11: Tour Report of Beijing Visit by Jt. DG (C&C)
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tickets for the games and 140 tickets for opening and closing ceremonies of Beijing Olympic.
The balance amount of INR 7.04 lac has not been recovered from IOA (March 2011).
25.2.17 The OC provided Games tickets to the delegates for opening and closing ceremonies and for
various events to witness the sports of XXIX Olympic Games.
25.2.18 It is seen that on no day of the games duration the number of delegates for witnessing the
events exceeded 37. As per information furnished by OC of the total 3601 tickets purchased
for the games only 365 tickets were utilized for witnessing the game events. The
expenditure of INR 60.54 lac (on average basis) incurred on the 3236 unutilized tickets was a
waste.
Four meetings were reportedly held in hotels in Beijing on 10th, 13th, 19th and 21
August, 2008 to discuss various issues relating to the games. It was revealed from the
lists of participants of these meetings that 75 persons who were part of this delegation
attended none of these meetings. It is thus clear that these delegates had gone to
Beijing for a pleasure trip. The expenditure of these delegates amounted to INR 3.79
crore (worked out proportionately).
Of the six delegates belonging to Hockey game who had been included in the delegation,
only two witnessed the hockey events for two days as only one ticket for hockey was
provided for two days. None of them attended any of the four above mentioned
meetings held in Beijing.
Ms. Sunaina Kumari, President, Lawn Bowl Federation was included in the delegation.
But no ticket was provided for event of Lawn Bowl. She had also not attended any of
the four meetings held at Beijing. It appears that Ms. Sunaina Kumari daughter of Shri
Randhir Singh, Vice President, OC, who was part of the EMC that approved the
delegation.
Expenditure on the delegation
25.2.19 A few main items of expenditure out of INR 8.15 crore were analysed as discussed below:
Hotel accommodation as per following details was booked in Beijing at a cost of
INR 4.71 crore.
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Table 25.4:
Sr. No. Type of rooms No. of rooms
1. Standard Rooms 104
2. Superior Rooms 16
3. Single Rooms 10
4. Delux Rooms 06
5. Common Rooms 12
Room rent varied from one type of room to another type of room. It was stated that the hotel
accommodation booked by OC was fully utilized. The details of rooms allotted to each
delegate were, however, not made available to HLC to verify the fact that the hotel
accommodation paid for by OC at Beijing was actually utilized by the delegates of OC.
INR 26.16 lakh were incurred on a dinner hosted at Beijing on 11th August, 2008. The
amount was remitted to China World Trade Centre on 7th August 2008. There was a
minimum guarantee of 250 guests in the agreement entered into with the hotel
management. The list of persons who attended the dinner was not made available.
Mobile phone sim cards were provided to 22 delegates at a total expenditure of INR 8.11
lac. Sim cards were provided to the persons some of whom were not the members of
this delegation. Expenditure on telephones at Beijing for these persons by OC was not
justified.
Large number of jackets/T.shirts/blazers were not distributed
25.2.20 In a note dated 1st August, 2008691 put up by Director, Chairman Secretariat to the Director
General asked for sanction for providing one jacket and two T-shirts to 300 delegates.
According to another note dated 31st J692uly, 2008 put up by Director for expenditure
sanction for purchase of blazers @ of INR 2200 per jacket for providing to the members of
IOA family. The sanction was accorded by the Chairman, OC.
691
Ref. Annex 25.12: Note dated 1st August, 2008
692
Ref. Annex 25.13: Note dated 31st July, 2008
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Accordingly 300 jackets and 600 T-shirts were purchased from M/S Shiv Naresh Sports
Pvt. Ltd. @ of INR 500 (per jacket) and INR 175 (per T-shirt) at a total cost of INR
2,80,800 by obtaining three quotations. The fact that 165 persons would visit Beijing
was already known as approved by EMC in its meeting held on 22nd July, 2008. It is not
understood as to why 300 sets of jackets and T-shirts were purchased.
25.2.21 Purchase of 139 extra sets of Jackets and T-shirts resulted in extra expenditure of INR 1.30
lac.The Jackets and T-shirts were supplied by the supplier on 30.07.2008 and were noted as
distributed in one day. It was stated that the remaining 139 sets of jackets and T-Shirts
were distributed to other dignitaries at Beijing. The plea is not tenable as according to the
note mentioned above these kits were purchased for the delegates only. Record showing
distribution of these kits was not available with OC.
25.2.22 102 Blazers were purchased @ INR 2,000 per blazer at a total cost of INR 2.04 lac. It is not
understood as to why the blazers were purchased by OC for providing to the members of
IOA, which is a separate body. These were issued to most of the members of the delegation
and the officials of OC Secretariat who were not the members of IOA. Some blazers were
issued to the persons some of whom were not even members of the delegation sent to
Beijing by OC. There appears to be no justification for issue of blazers when a kit of jacket
and t-shirts was also issued to the delegates by OC.
25.3 Summary and Conclusions
25.3.1 The so called observer programme was an example of reckless exercise of patronage by the
Chairman, who selected many persons unrelated to sports management for a trip to Beijing.
The programme for most of the delegates was mainly a pleasure trip at government
expense.
25.3.2 Out of the total expenditure of INR 8.15 crore, INR 5.06 crore was wasted on sending 111
additional delegates beyond budgeted figures to Beijing. Even the utility of the remaining
expenditure was doubtful as many of the delegates did not witness the games or attend
official meetings.
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25.3.3 The delegates included Accountants, Legal advisors, OC Secretariat staff, political
functionaries, photographers from Pune, members of communication, Broadcasting,
Corporate Affairs, etc. sub committees. There was no justification for their selection.
25.3.4 Large amount (INR 67.16 lac) was spent on purchase of games tickets. But only negligible
number (one to 37) of delegates witnessed the games each day. Some sportspersons or
officials of Sport Federations did not even once witness the game which they were
representing.
25.3.5 List of persons approved by EMC for Beijing Observer Programme (persons at serial
no.9,132,133 and 137 did not appear to have travelled. The name of Shri Gurmit Singh
Sodhi appear twice in the list)
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26 Chapter 26: Other Instances of Adverse
Procurement
Several instances of procurement involving conflict of interest and falsification of
documents were noted in the review. The adverse findings started from the Chairman’s
secretariat, where a conflict of interest was identified which cast a shadow on the
organization. The apparent ease with which incorrect documentation was approved
indicates a significant breakdown of financial oversight and controls. There was no
evidence that in these cases concerned OC functionaries attempted to identify
appropriate vendors to meet the interest of the organization. Given the disregard for
system of control, this resulted in misconduct on part of some OC employees who
created paperwork and obtained “rubber stamp” approvals. Looking at the message
emanating from the top, it is not surprising that such irregularities were noticed in
several cases.
26.1 Background
26.1.1 Apart from the significant procurement in some of the main games related contracts, a
sample of general and administrative expenses incurred and paid by the OC were also
reviewed. It was noted that such smaller and routine procurements showed evidence of
misconduct such as vendor favoritism and falsification of documents to provide legitimacy
to the purchase decision. In certain instances, strong indication of issues such as conflict of
interest and single tender sourcing were also observed.
26.2 Conflict of interest- OSD in Chairman’s Secretariat
Purchase of air tickets for chairman and other from a company owned by OSD to Chairman
26.2.1 It was noted that Mr. Ashok Sahota, OSD to the Chairman, Mr. Suresh Kalmadi, is a Director
of the Alisha Travels Private Limited693 from which the OC made purchases.
693
Refer Form 32 and Form 23AC filed with ROC on 2 September 2009 – Annexure 26.1
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The OC has made purchases of approximately INR 0.38 crores from Alisha Travels Private
Limited OC till date694.
These tickets were mainly purchased for the Chairman of the OC, Mr. Suresh Kalmadi.
Review of the journal vouchers and note sheets prepared by the OC, reveal that tickets
have been purchased directly by the Chairman’s Secretariat or by Coordination FA from
Alisha Travels Private Limited, instead of requesting Office Administration FA to
purchase tickets, as per OC policy.
In these cases, no comparative quotations were obtained from the empanelled travel
agents i.e. M/s Balmer Lawrie and M/s Ashok Travels Private Limited prior to purchase of
air tickets from Alisha Travels Private Limited in some of the cases.
Travel for CGF General Assembly – Gambia – November 2008
26.2.2 As per the Budget estimate prepared, 19 air tickets were to be purchased from either M/s
Balmer Lawrie or M/s Ashok Travels Private Limited, both of which are Government of India
enterprises at the below mentioned price:
Business class ticket: INR 207,687 per ticket
Economy class ticket: INR 144,357 per ticket695
26.2.3 However, 2 air tickets i.e. for Mr. Suresh Kalmadi and Ms. Sangeeta Welinkar have been
purchased from Alisha Travels Private Limited at the below mentioned prices:
Business class ticket: INR 214,332 per ticket
Economy class ticket: INR 148,977 per ticket
26.2.4 These prices are higher than the price offered by M/s Ashok Travels Private Limited 696.
26.2.5 Further, it is surprising to note that the EAC (Chaired by Mr. Lalit Bhanot) approved the
payment to Alisha Travels Private Limited in their meeting on 16 December 2008 697, this
694
Refer Annexure 26.2: Ledger account of Alisha Travels
695
Refer Annexure 26.3: Budget estimate.
696
Refer Annexure 26.4: Journal voucher and invoices
697
Refer Annexure 26.5: Minutes of the meeting of EAC dated 16 December 2008
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decision of EAC is contradictory to their resolution in an earlier meeting (held on 1 October
2008) which required all air tickets are to be purchased from M/s Balmer and Lawrie
through Office Administration FA.
26.2.6 The reasons why only the tickets of Suresh Kalmadi and Sangeeta Wellinkar were purchased
from Alisha Travels and not from Ashok Travels is not clear or documented.
Travel to Ottawa for CGF Executive Board Meeting:
26.2.7 According to budget, tickets were to be purchased from M/s Balmer Lawrie or M/s Ashok
Travels Private Limited. Accordingly, the OC has purchased tickets for all delegates from OC
from M/s Ashok Travels Private Limited, other than the ticket for Suresh Kalmadi.
26.2.8 Suresh Kalmadi’s ticket has been purchased from Alisha Travels Private Limited at a cost of
INR 653,564 for the sector Delhi/ Ottawa/ London/ Delhi. The payment has been approved
by the EAC on 2 July 2008698.
Advance paid to Alisha Travels Private Limited
26.2.9 An advance of INR 600,000 was paid to Alisha Travels Private Limited on the orders of the
Chairman and Treasurer for tickets purchased for OC employees attending the Annual
General Meeting held on 19 October 2008699. Giving advances to vendors for such expenses
constitutes a complete departure from normal contracting terms. There are no instances
where OC paid similar advances to Balmer Lawrie or Ashok Tours and Travels for purchase
of tickets for Chairman. The payment of advance, a departure from the normal practice
shows that Alisha Travels enjoyed a privileged position for some senior functionaries in the
OC and they were awarded purchase orders for air tickets by subverting the procedures.
698
Refer Annexure 26.6: Internal Note for payment approval dated 2 July 2008
699
Refer Annexure 26.7: Internal Note for advance paid to Alisha Travels dated 5 November 2008
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Summary
26.2.10 The above case typifies the low ethical values and decay of governance in the OC that not
only allowed a conflict of interest in the high office of the Chairman but also permitted such
conflict to be used for incurring expenditure related to the Chairman himself.
26.3 Falsification of procurement documents
26.3.1 Some apparent inconsistencies were observed in documentation in a number of individual
procurements made by the OC. On a closer review, a certain pattern/trend was noted in
respect of such procurements. These primarily included the following.
There was no indication of how OC selected vendors from whom quotations were
sought especially as in many of these cases an ‘open tender’ was not issued. Quotations
were instead obtained by the OC from sources that have not been documented or
explained in accompanying documents.
On a review of the comparative quotations, certain apparent inconsistencies and
mistakes in addresses, contact information, common addresses etc were noted which
indicate that these could be falsified.
Site visits to some of the ‘competing’ vendors indicated that these were non-existent or
their addresses could not be located. In some cases, the addresses themselves were
incorrect and in some cases vendors appeared to be operating from residential areas
with no signs of commercial activity. It is extraordinary that the OC somehow managed
to identify and locate such vendors and obtain quotations from them.
26.3.2 These instances indicate that such procurements were not done in a fair and transparent
manner and that employees may have engaged in misconduct in awarding orders for such
procurement. There was clear disregard by OC employees to norms of propriety and it is
clear that they obtained comparative quotations only as a formality. It is also evident that
multiple layers of financial oversight mechanisms and approval procedures seemed to work
to approve all these payments without raising any flags and concerns. It should be noted
that these cases presented below are sample only and based on a limited review of
documents and vouchers at the OC.
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Procurement of Automatic Binding Machine (FA: Venue Development & Overlays, Value
INR 1.8 lakhs)
26.3.3 The quotations for supply of automatic binding machine were submitted by the following
three vendors:
Technocrats Alliance Engg Pvt. Ltd.
First Choice Enterprises Pvt. Ltd.
Bharat IT Services Ltd.
26.3.4 It was noted that the contract was awarded to Technocrats Alliance Engg Pvt Ltd. In
reviewing the comparative quotations of the other vendors, the following issues were
noted.
The address and fax number on the letter heads of both competing vendors (First Choice
and Bharat IT) were the same as shown below
A site visit to the address mentioned above revealed that First Choice Enterprise and
Bharat IT are sister concerns but have since moved from the stated premises 700.
26.3.5 It is very clear that the comparative quotes obtained from Bharat IT and First Choice are in
reality from the same company (given the common addresses) and hence do not constitute
valid quotations. Hence comparative quotations in such cases are a sham. Moreover, binder
cartridges worth INR 45,000 were also procured from the same supplier.
26.3.6 The OC employees who are responsible for this procurement are i) Karan Arora –
Procurement & Overlays; ii) Nikesh Jain – Director (Venue Development & Overlays); iii) A K
Saxena – Jt. D.G. (Venue Development & Overlays)
700
Refer Annexure 26.8: Payment voucher for purchase of automatic binder
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Civil and Electrical Work from M/s Salwan Furnishers (FA: Administration, Amount: INR
3.67 Lakhs)
26.3.7 The OC obtained quotations for supply of Civil and Electrical work from the three vendors.
Salwan Furnishing Co.
Perfect Maintainance Corporation
R.S. Builders Engineers and Contractors
26.3.8 We noted that the contract was awarded to Salwan Furnishing. On reviewing the
comparative quotations, we noted the following.
The address of Perfect Maintenance Corporation and R.S. Builders was the same.
Additionally we noted that there was an attempt made (by putting white fluid) to
disguise the address of Perfect Maintenance and show that it was different from RS
Builders.
On a physical visit to the addresses above, it was noted that Perfect Maintenance
Corporation and R.S. Builders do not exist at the addresses mentioned in their letter
heads.
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Address of: Perfect Maintenance
Corporation
Located at: 144 Phase 1 Gurgaon
Findings
The premises was under construction.
Inquiries did not reveal existence of
the vendor at this address
Address of: Perfect Maintenance
Corporation and R.S Builders
Located at: 5935/4, Hardhian Singh
Road, Dev Nagar, Karol Bagh, New
Delhi
Findings
There was no signboard of RS Builders
or Perfect Maintenance at this address
26.3.9 From the above, it is apparent that the comparative quotations were obtained from the
same company whose actual existence at the stated address at that time could not be
established. Further, it is evident that an attempt was made to falsify quotations by hiding
the house number that linked the two vendors701.
26.3.10 The OC employee responsible for this procurement was Lt. Col. P. Padmakaran – Director
(Administration). After the work was executed, he took post-facto approvals from DG and
Treasurer.
701
Refer Annexure 26.9: Payment voucher for civil and electrical work
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Fifth Report of HLC – Organizing Committee
Procurement of Synthetic Carpets for ceremony at JLN stadium (FA: Ceremonies, Amount
INR 1.25 lakhs)
26.3.11 The quotations for supply of synthetic carpets were submitted by the following three
vendors.
Awesome Brand Products
Peshawar Carpets
G.L. Gobind Pershad
26.3.12 We noted that the while contract was awarded to Awesome Brand Products there were
certain obvious inconsistencies in documentation.
The payment was made to Awesome Brand towards supply of the carpets on 20 Aug
2010 whereas the quotations from the other two parties were received on 21 Aug 2010.
The very fact that comparative quotations were received after the payment to the
vendor was made indicates misconduct on the part of employees involved.
The extract below shows the invoice of Awesome Brand Products dated 20 August
The extract below shows the quotation from Peshawar Carpets dated August 20, 2010
The extract below shows the quotation from DL Gobin Pershad dated 21 August 2010
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It was also noted that the Delivery Challan was dated 21 Aug 2010 whereas the payment
was made a day before on 20 August 2010. This was contrary to the approval from the
legal FA where it was clearly mentioned that payment would be made only post delivery
of goods.
The cheque to the vendor was dated 20 August 2010, i.e. before comparative quotations
were obtained.
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On a physical visit to the addresses of the competing vendors , it was noted that one of
the competing vendors Peshawar Carpets did not exist at the stated address.
1891 Chandni Chowk, Delhi Address of: Peshawar Carpets
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Fifth Report of HLC – Organizing Committee
Located at: 1890/91 Chandni Chowk,
Delhi
Findings
1890 and 1891 are two different
properties adjacent to each other.
1890 is a Central Baptist Church
Primary School whereas 1891 is a
Commercial Complex
1890 Chandni Chowk, Delhi
Inquiries with the occupants of 1891
revealed that there is no such office of
Peshawar Carpets at the above
mentioned address.
26.3.13 It is apparent from the above that ‘comparative’ quotations after already paying the vendor
were added to complete the formality and to provide legitimacy to a purchase order that
had already been executed. The apparent non-existence of a competing vendor or the
incorrect address clearly indicates misconduct on part of employees in obtaining falsified
quotations702.
26.3.14 The employees involved with this are i) Gunjan Khare – PO (Ceremonies); ii) Sujata Ayer –
Director (Ceremonies); iii) Indu Anand – DDG (Ceremonies).
26.3.15 Additionally we noted that the same vendor, Awesome Brand Products, was also awarded
another contract for same type of procurement. The value of that procurement was INR
12.05 lakhs.
702
Refer Annexure 26.10: Payment voucher for Procurement of synthetic carpets for ceremony at JNS
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Procurement of T Shirts, Caps and Ties (FA: Coordination, Amount INR 6.89 Lakhs)
26.3.16 The procurement was related to the supply of Tshirts, caps and ties for distribution to Indian
mission abroad, participants in meetings and various cultural gatherings. The quotations
were submitted by the following three vendors.
Regimental Care
Krishnan International
Shubham International
26.3.17 The contract was awarded to Regimental Care. In reviewing the documents, we noted the
following that ‘Vikas Kumar’ appears as the contact person on quotations submitted by both
Regimental Care and Krishnan International.
The existence of the selected vendor Regimental Care at its stated place of business
could not be verified.
Address of: Regimental Care
Located at: C-6/6485, Vasant Kunj,
New Delhi - 110070
Findings
The address is located at a residential
colony. The existence of the vendor at
the premises is not evident due to the
absence of any signboard, etc.
26.3.18 In view of the above, it is likely that Regimental Care and Krishan International may be
related in view of the common name of the contact person. Further, the address of
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Fifth Report of HLC – Organizing Committee
Regimental Care is in a residential colony with the absence of any apparent signs of
commercial activity at the stated premises. It is not clear how the OC managed to track
down a vendor located in a residential area without any signs of existence of a business and
manage to obtain a quotation from them. This clearly shows that such contracts were on an
‘invitation only’ basis at the sole discretion of the OC and that these indicate likely
misconduct703.
26.3.19 Additionally we noted that the same vendor, Regimental Care, was also awarded a contract
for purchase of Choreographic Bib where again the competing vendors were Krishan
International and Shubham. The value of that procurement was INR 8.71 lakhs. Employees
involved in the award of this contract were i) Shikha Chaudhary – APO (Ceremonies); ii)
Sujata Ayer – Director (Ceremonies); iii) Indu Anand – DDG (Ceremonies); iv) Purnima
Pendse – ADG (C&C); v) Shovana Narayan – Special DG (C&C).
Quotations invited for Publicity Material (FA: Technical, Amount: INR 10.66 lakhs)
26.3.20 The quotations for supply of Publicity Material and the quotations were submitted by the
following three vendors.
BillBoard India
24*7 Executionists
Sign Plus India Pvt Ltd
26.3.21 The contract was awarded to Billboard India. In reviewing the accompanying documents,
the following issues were noted.
The quotation of 24*7 Executionists was handwritten.
703
Refer Annexure 26.11: Payment Voucher for procurement of T-shirts, caps and ties
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Fifth Report of HLC – Organizing Committee
Site visits to the stated addresses of 24x7 did not reveal any apparent signs of their
existence at the address.
Pradhan Market, Mamura, Noida Address of: 24x7 Executionists
Located at: Main Road, Pradhan
Market, Mamura, Sector - 66, Opp Flex
Industries, Noida-201301
Findings
The survey number/ shop number is
not mentioned along with the address
and hence the place of business could
not be located. Local enquiries also
did not indicate the existence of the
vendor.
26.3.22 We have further comments on general procurements made from Billboard that is referred
to in earlier paragraphs.
26.3.23 From the above, it is extraordinary that OC got handwritten quotations from a vendor
located away from the main commercial areas on a ‘selective’ basis. It is not apparent how
the OC managed to track such a vendor and even obtain a quotation from them in this
fashion704.
26.3.24 The employees involved with this procurement were i) ASV Prasad – ADG (Technical); ii) Lt.
Col. P. Padmakaran – Director (Administration); iii) Amrit Mathur – Executive Secretary.
704
Refer Annexure 26.12: Payment voucher for supply of publicity material
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Fifth Report of HLC – Organizing Committee
Quotations invited for Branding of Vehicles for Chairman’s Press Conference held on 31
July 2008 (FA: QBR, Amount: INR 4.78 Lakhs)
26.3.25 The OC for supply of branding TATA vehicles was submitted by the following three vendors.
Positive Images
SS Graphics
Signtific Solutions
26.3.26 It was noted that the contract was awarded to Positive Images. In respect of the
procurement, the following inconsistencies were observed.
The note sheet prepared on 28 July 2008 stated the contract was provided to Positive
Images. However, the quotation received from the other vendor, ‘Signtific Solutions’ was
on 30 July 2008.
The quotation from Signtific Solutions was obtained via email and it does not mention
any address or phone number of the company.
26.3.27 Consequently, receiving a quotation after the procurement was made indicates that the
entire process was invalid and the purpose of obtaining a comparative quote defeated705.
26.3.28 The employees involved in this procurement were i) Capt. Rakesh Singh – Director
(Logistics); ii) Jason Dwyer – Director (QBR).
705
Refer Annexure 26.13: Payment voucher for branding of vehicles for YBR
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Fifth Report of HLC – Organizing Committee
Procurement of Workstation Tables and Fixtures Work (FA: Administration, Amount: INR
1.05 lakhs)
26.3.29 The quotations for supply of workstation tables and fixtures work was submitted by the
following four vendors.
Dream Interiors (who were awarded the work)
Sunrise Projects and Interiors
R.G. Builders
Aditya Constructions
26.3.30 The following observations were made in respect of site visits conducted at the stated
places of these vendors.
Address of: Dream Interiors
Located at: E-599, DDA Flats, Pkt - III,
Bindapur, Dwarka, New delhi – 110059
Findings
A DDA flat with no signs of any active
existence of any business at the
premises
Address of: Aditya Constructions
Located at: 28/A, Jia Sarai, New Delhi
Findings
Private residence with no signs of any
commercial activity
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Address of: RG Builder
Located at: 29, Tarun Vihar
Apartments, Plot No. 3, Sector – 13,
Rohini, Delhi
Findings
Residential apartment complex
Address of: Sunrise Projects
Located at: 17 - WP-477, 1st Floor,
Shiv Market, Wazirpur Village, Ashok
Vihar
Findings
Vendor not located at the stated
address at the time of visit
26.3.31 It is not evident how OC managed to track such vendors and obtain comparative quotations
when these are located mostly in obscure residential areas with no signs of commercial
activity706.
26.3.32 The employees involved with this procurement were i) Arun Kumar Gupta – Resident
Engineer; ii) N.P. Singh – ADG (Admin and Workforce).
Electrical and Data Cable Work (FA: Administration, Amount: INR 15.79 Lakhs)
26.3.33 The quotations for Electrical and Data Cable Work were submitted by the following vendors:
Salasar Decorators (who were awarded the scope of work)
706
Refer Annexure 26.14: Payment voucher for fixing workstation tables.
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Fifth Report of HLC – Organizing Committee
Shree Kusumakar Decoraters
DVS Engineers & Builders
Om Engineers & Decorators
Observations on field visits:
26.3.34 Site visits to the stated place of business of these vendors indicated the following.
Salasar Decorators shares the address with another entity named ‘Baba Constructions’,
also a vendor of OC and these two vendors do not exist at the given address.
Address of: Salasar Decorators/Baba
Constructions
Located at: R-69, Model Town III, Delhi
-110009
Findings
The existence of vendors could not be
verified at this address. The location
of this address is in a residential area
with no signs of commercial activity.
Shree Kusumakar Decoraters and DVS Engineers & Builders do not exist at the
addresses mentioned in their letter heads
Address of: Kusumakar Decorators
Located at: A-38, Ground Floor,
Southend Floors, Sec - 49, Gurgaon
Findings
Located in a residential area with no
signs of business activity at the
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premises
Address of: DVS Engineers
Located at: 1783, Maruti Kunj, Sohna
Road, Bhondsi, Gurgaon
Findings
Private residence with no signs of any
commercial activity
26.3.35 It is not evident how that OC managed to track such vendors and obtain quotations when
these are located mostly in obscure residential areas with no signs of commercial activity 707.
26.3.36 The employees involved with this procurement were i) Arun Kumar Gupta – Resident
Engineer); ii) Capt. KUK Reddy – ADG (F&A).
Procurement of Office Furniture (FA: Administration Amount: INR 1.13 Lakhs)
26.3.37 The quotations for supply of office furniture were submitted by the following three vendors.
Baba Constructions (who were the selected vendors)
SRS Decorators
SS Engineers & Decorators
26.3.38 Site visits to the stated place of business of these vendors indicated the following.
707
Refer Annexure 26.15: Payment voucher for electrical and data cable work
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Baba Decorators shares the address with another entity named ‘Salasar Constructions’,
also a vendor of OC and the existence of these two vendors could not established at the
stated address.
Address of: Salasar Decorators/Baba
Constructions
Located at: R-69, Model Town III, Delhi
-110009
Findings
The existence of vendors could not be
verified at this address. The location
of this address is in a residential area
with no signs of commercial activity.
The existence of SRS Decorators and SS Engineers & Decorators could not be verified at
the addresses mentioned on their letter heads which were located again in residential
areas.
Address of: SRS Decorators
Located at: House No. 2313, Sector -
9, Faridabad
Findings
Located in a residential area with no
signs of business activity at the
premises
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Address of: SS Engineers
Located at: RZK 107, Sagarpur, Delhi
Findings
Private residence with no signs of any
commercial activity
26.3.39 The basis on which the OC managed to identify and engage with such vendors is again not
apparent as they do not have any signs of commercial activity at their stated place of
business which happens to be mostly located in commercial areas. Whether these entities
exist or were in fact shell companies/entities needs to be examined. However, the lack of
diligence on the part of the OC to make efforts to source such goods/services in an
appropriate manner is clearly evident708.
26.3.40 It is likely that this could have been the result of misconduct ranging from vendor favoritism
to bribery, corruption and even fictitious supply as apparently no safeguards were put into
place to control/regulate such sourcing while there was no definition of an eligible vendor
base.
26.3.41 The employees involved with this procurement were i) Arun Kumar Gupta – Resident
Engineer); ii) Capt. KUK Reddy – ADG (F&A).
708
Refer Annexure 26.16: Payment voucher for procurement of office furniture
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Procurement of Blackberry Handset (FA: Technology; Amount: INR 24, 290)
Background:
26.3.42 Even for something as low value as a purchase of a mobile phone, we noted existence of
potential fake quotations from comparative vendors. This again clearly shows the
preoccupation of OC employees with paperwork as against actual diligence done in
obtaining the right products at market prices.
26.3.43 In this case quotations were received from the following three vendors:
Chirag Tel (who supplied the phone)
M/s BT Agencies
M/s Vaishno Electronics
26.3.44 The letter heads of competing bidders appear falsified.
26.3.45 The postal code for M/s Vaishno Electronics and M/s B T Agencies is same whereas the
actual addresses mentioned are in different parts of Delhi and have different postal codes.
None of these business addresses could be traced indicating that the entire procurement
was based on fake documentation709.
26.3.46 The employees of the OC involved in this procurement were i) Lolita Lulla – APO
(Technology); ii) Sujit Panigrahi – ADG (Technology).
709
Refer to Annexure 26.17: Payment voucher for procurement of Blackberry handset
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Fifth Report of HLC – Organizing Committee
26.4 Lack of an eligible vendor base
26.4.1 It was noted that OC has made several payments to two parties namely; Critique
Communications Private Limited and Billboard India Private Limited. These payments
amounted to INR 0.31 crores and INR 1.63 Crores respectively as per the books of account
of OC as provided to us. Billboard has been engaged for a number of activates related to
signage and other such branding related expenditure. Critique has been engaged for
procurements related to printing, press advertisements and publicity material.
26.4.2 A review of the Articles of Association of Billboard India Private Limited reveals Critique
Communications to be one of the shareholders of Billboard India Private Limited. This
shareholding is through Sanjiv Gulati (Director) in Critique Communications Private
Limited710.
26.4.3 From the above, it is evident that companies having common shareholding/ownership were
hired as vendors by the OC. It is surprising that even for such relatively small procurements
OC appeared to have ‘favored’ vendors rather than doing an actual and transparent exercise
to identify an appropriate vendor base.
26.5 Vendor Favoritism- Salwan Furnishers
26.5.1 Apart from an instance explained earlier where we noted that comparative quotations were
falsified to award a contract to Salwan Furnishers, we came across another instance where
it was evident that they were the ‘preferred’ vendors of the OC.
26.5.2 It may be mentioned that Salwan Furnishers are associated with Inder Dutt Salwan (who
appears to be related (as they share the same address as per the Website of the Salwan
Education Trust) to Sushil Dutt Salwan associated with the OC as legal advisor and member,
OC). They both are also associated with the Salwan Trust from which the OC also rented
premises for the stay of consultants at a monthly fee of INR 55,000 per apartment.
26.5.3 A meeting of the Sub-Committee (furniture/interiors and allied works) held on 8 August
2005 to review the progress of the work awarded to M/s Salwan Furnishing Co for supply of
fixtures etc. In that meeting, it was noted that the work of Salwan Furnishing was not on
710
Refer Annexure 26.18: Articles of Association of Billboard India Private Limited as shown on Ministry of Corporate
Affairs database
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track. The representative of Salwan Furnishing explained to the committee members that
due to the civil/electrical work not being done at the site, Salwan Furnishers were not in a
position to complete its work.
26.5.4 Salwan Furnishers then placed the scope of work for the respective civil and electrical work
and after an internal discussion by the committee members, sealed quotations were invited
from contractors including Salwan. It is not clear itself how Salwan were allowed to provide
both the scope of work and simultaneously bid for the contract.
26.5.5 Two of the bids received from M/s Singh Electricals, M/s Economic Construction were
rejected as both these vendors did not possess a valid Tax Identification Number.
26.5.6 The details of the other bids are as follows.
Table 26.1: Electrical Work
S.no Name of vendor Commercials
1 Amar Electricals INR 117,127 + 12.5% VAT (50% advance, work
to be completed in 2 months)
2 Salwan Engineering INR 130,000 + 12.5% VAT (50% advance, work
to be completed in 1 month)
Table 26.2: Civil Work
S.no Name of vendor Commercials
1 R.S. Builders INR 479,318 + 12.5% VAT+ 10% Service Tax
(50% advance, work to be completed in 2
months)
2 Salwan Engineering INR 517,000 + 12.5% VAT (25% advance,
work to be completed in 2 months)
26.5.7 The bids of both vendors namely Amar Electricals and R.S. Builders (L1 vendors) were found
to be lower than Salwan Furnishing. The Committee should have straight way selected the L-
1 Instead the evaluation committee requested vendors to provide an item wise costing.
Both RS and Amar declined to provide such information. The committee thereafter asked
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Salwan to carry out the scope of work and requested them to take these works up at the
cost quoted by the L1 vendors in their bids. Salwan Furnishers accepted the same but in
turn sub-contracted Amar Electricals for both supply of labour for Electrical work711.
26.5.8 Contracting in such a fashion was extremely convoluted and indicates that transactions may
not have been above board. It is surprising how Salwan Engineering were allowed to
establish the scope of work and then bid for the very same scope of work with conflicting
interests. It is further surprising that the L1 vendors on one hand refused to provide details
and on the other hand worked for Salwan Engineering on the same contract. This indicates
that the L1 vendor could perhaps be a front company for the Salwan Furnishers. The OC
employees involved with this procurement include the following i) Mr.A.K. Mattoo –
Treasure, OC; ii) Mr. R.K. Sancheti – ADG (Coordination); iii) Col. P. Padmakaran – Director
(Administration); iv) Mr. Dogra – Director, Athletics Federation of India.
26.6 Lease rent- residential premises
26.6.1 The OC had entered into agreements with owners of 38 flats on lease for the various
periods from 2008 to 2010 for accommodating foreign occupants. The review of the
agreements indicates the following:
In two rental agreements, the notarized stamp date was before the date of lease
agreement which indicates inconsistencies in documentation712.
In six rental agreements, the names and signatures of the witnesses are missing and
in one case, the lessee has also signed in place of the witness713.
In two rental agreements, the date of agreement is before the date of purchase of
stamp paper714.
26.6.2 In one rental agreement715, rent was paid to Salwan Education Trust for renting 5 flats
starting from November 2009 whereas the actual accommodation was handed over in April
711 th
Refer Annexure 26.19: Minutes of Sub-Committee Meeting held on 11 August, 2005
712
Copy of Rental Agreements – Annexure 26.20
713
Copy of Rental Agreements – Annexure 26.21
714
Copy of Rental Agreements – Annexure 26.22
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2010. Further, upon enquiring, we were informed that two of the occupants vacated the
flats as they were not in a good condition and one occupant resigned and hence vacated the
flat. However, the rent was paid to Salwan for 5 flats instead of 2 remaining flats. The
monthly rental per flat was INR 55,000.
26.7 Payment towards email and website hosting
26.7.1 The email and website hosting services for the CWG, Delhi was provided to OC by a PODC
Internet Solutions (‘Vendor’), a vendor based out of Pune. Certain discrepancies in the
purchase order and payments made to the vendor were noted that are detailed below.
The Purchase order was issued approximately one year after the services were awarded
to the vendor. Further, the domain name, registration, website hosting charges and
email hosting charges were paid on 3 May 2007 and 1 January 2008 respectively. Also,
the purchase order pertains to only part of the total payment made to the vendor.716
It was also noted that there was no explicit contract between the vendor and OC for
supply of these services. However, the payments were made by OC on the basis of the
invoices submitted by the vendor.717
The details of the purchase order issued by the OC and issues noted are as follows.
Web Hosting charges (1GB): INR 20,000 per year
Email Hosting charges (20 GB): INR 340,000 per year
The PO did not contain any provision for applicable rates in case of increased email
space or towards a rate for 1 GB space.
The PO was raised after receiving the first invoice and the technical committee also
raised objections on the rates quoted by the vendor. However, it appears that the
evaluation and recommendations of the technical committee were not considered.
715
Refer to copy of agreement between Salwan Education Trust and OC dated 6 November 2009 - Annexure 26.23
716
Refer to copy of purchase order given to PODC internet solutions- Annexure 26.24.
717
It is pertinent to note that only one purchase order was issued by OC for a payment of INR 3,78,000.
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26.7.2 The vendor has been paid a total sum of INR 2,965,320718 from the period 3 May 2007 to
23 August 2010. These payments were based on the computation as under:
The cost for 1 GB was determined as INR 17,000 per year (INR 340,000/20). Further,
since the capacity of the email server was increased to 88 GB from 2009, the
payment to the vendor increased in the same proportion.
The note-sheet dated 25th February, 2010 clearly states that OC needs to verify the
contract/agreement, rate and the work done before payment is released to the
vendor. However, it appears that only one of these three requirements (Work
done/Usage) was fulfilled as vendor provided usage report to OC.
26.7.3 An email communication dated 6 May 2008 between Vinesh Atma (Representative of the
vendor) and Vijay Gautam (COO-OC) was discovered during forensic analysis wherein Vinesh
requested Vijay Gautam for urgent processing of the invoice dated 8 April 2008 amounting
to INR 641,334 towards web and email hosting and domain registration719. This email
exchange requesting payment was thus before the purchase order was placed.
26.7.4 Further, forensic analysis of several emails720 also revealed communications between the OC
and the vendor trying to ascertain the details of the actual services rendered. It was noted
that on 6 September 2008, there was an email communication between Sanjay Chopra
(office of COO-OC) and Sujith Panigrahi wherein a cost comparison of web & email service
providers was shared. The cost comparative states the rates quoted by the vendor to be
extraordinarily high721.
The comparison noted that the rates paid by the OC for email hosting were much higher
than the market rates for similar service.
718
Refer to payment made to PODC internet solutions- Annexure 26.25.
719
Refer to email communication between Technology FA OC and PODC internet solutions-Annexure 26.26.
720
Refer to Annexure 26.26.
721
The vendor quoted INR 1,440,000 for 250 mail accounts compared to INR 228,399 for 1000 email accounts.
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The comparative prepared by the OC concluded that the rates quoted by PODC appear
to be very high722. It is also pertinent to note that the cost of email hosting is not directly
proportional to the capacity required. The details of the comparative are as under:
Table 26.3:
Particulars Amount (in INR)
First Invoice of PODC dated 8/4/2010723 6,41,334
Rates Comparison performed by OC for 20GB email
hosting (per email dated 6/9/2008)
Net4domains (in India) 2,28,399
Impus webhosting VSNL server in India 2,80,000
PODC 1,440,000
Purchase Order
Purchase Order for 20GB email hosting in favor of PODC 340,000
(dated 6/10/2008)
Total Payment to PODC as on 23/8/2010 (primarily 2,965,230
includes charges for emails usage for approximately 500
GB, 2000 email ids.)
Market rates obtained from multiple vendors
Vendor 1: www.net4.in (Market Rates Obtained for 856,500
Business Email hosting service (1000 GB, 1000 Emails) for
five years)
Vendor 2: Mantra Tech Ventures Private Limited 7,000 per month* 60 months =
(Market Rates Obtained for Business Email hosting
722
Refer to comparative statement prepared by OC-Annexure 26.27.
723
Per the email dated 6/5/2008 from Vinesh Athma (PODC) to Mr Vijay Gautam (COO)
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Particulars Amount (in INR)
service (2000 GB, unlimited Email ids) for five years) 420,000
26.7.5 Further technical information was requested by the OC from the vendor which was provided
to OC. There is no evidence to suggest that the same was independently verified by the OC
before making payments to the vendor724.
26.7.6 The above clearly indicates that the rates paid to the vendor were much above market rates
as per the OC’s own computation. However, the work was still awarded to the vendor and
payments made even without basic documentation such as purchase order.
26.8 Potentially false expense claim
26.8.1 Cash Advance was provided to Gp. Capt K.U.K. Reddy, Director (Finance) to meet petty
expenses while on official trip to Melbourne, Australia in March, 2006. An expense of AU$
178 was incurred on 25th March, 2006 and claimed on account of purchase of phone card.
However, on analyzing the supporting documents, it appears that the amount was actually
spent on purchase of a mobile phone (make: Nokia 3120)725.
724
Refer Annexure 26.26.
725
Refer to copy of office note dated 31 March 2006 and invoice- Annexure 26.28.
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26.9 Purchase of air tickets
26.9.1 A proposal for reimbursement of Air tickets for INR 218,211 towards travel of 11 individuals
to Pune, India was approved by Director General and Secretary General. However, the
requirement for submission of the air tickets was waived off without documenting reason
for such waiver. Further, payments have been made to these respective 11 individuals. The
ticket cost for Prof V.K. Malhotra towards travel to Pune is INR 54,970 which appears to be
excessive considering the total cost for 11 individuals is INR 218,211. It is not apparent why
cash was paid to these individuals instead of account payee cheques or bank transfers in
their individual accounts.
26.10 Conflict of interest- Payments to IOA
Background
26.10.1 We noted that a number of payments were made by the OC to the IOA aggregating to
INR 12.62 Crores726 which included the following.
Payment towards the Joint marketing agreement grant of property right – INR 8.75
Crores
Out of pocket expenses paid to the Indian Contingent at the Games Village – INR 2.09
Crores
Renovation of IOA building amounting to INR 4.08 Crores
Rent and maintenance charges amounting to INR 3.33 Crores
Fixed assets purchased and left behind in IOA building amounting to INR 1.95 Crores
Potential conflict of Interest- employment of IOA functionaries
26.10.2 It has been observed that the OC and IOA had common office bearers at senior positions.
Some of the key functionaries along with their designations at both the OC and IOA have
been set out in the table below:
726
Copy of Ledger Account sheet for Indian Olympic Association – Annexure 26.29
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Table 26.4: Common office bearers at OC and IOA
S. No. Name of office bearer Designation – OC Designation – IOA
1 Mr. Suresh Kalmadi Chairman President
2 Raja Randhir Singh Vice Chairman Secretary General
3 Dr. Lalit K Bhanot Secretary General Joint Secretary
4 Mr. Anil Khanna Treasurer IOA, Finance Commission
5 Mr. VD Nanavati Executive Board Member Vice President
6 Mr. VK Verma Director General Associate Vice President
7 Mr. Ashok Sahota OSD, Chairman’s Secretariat Associate Joint Secretary
8 Mr. Mohd. Aslam Khan JDG, CGA Relations & Associate Vice President
Protocol
26.10.3 The above overlap in top management between the organization was a case of conflict of
interest particularly as apart from the IOA the OC also paid INR 1.75 Crore as Interest free
loan to Indian Weightlifting Federation (which has relationships/dealings with the IOA).
Payments under Joint Marketing agreement
26.10.4 According to clause 26 of the Host City Contract, a joint marketing programme for the
commercial exploitation by the OC, of the rights granted by the CGF will be developed by
the IOA, the OC and the Host City subject to the approval of the CGF. The parties to the
Joint Marketing Agreement are as under:
Commonwealth Games Federation
Indian Olympic Association
OC, Commonwealth Games Delhi 2010
Government of NCT of Delhi
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26.10.5 In the Joint Marketing agreement approved by the Executive Board in the 15th meeting held
on 10 September 2009, the OC agreed to pay compensation to the CGA (i.e. IOA) of INR 25
crores, in consideration of the rights granted to the OC and obligations undertaken by the
CGA. Further, INR 5 crores was to be paid to Government of NCT of Delhi also.
26.10.6 During the Executive Board meeting, Mrs. V Ramachandran, Addl. Secretary, Ministry of
Finance, mentioned that the Government of India was already providing funds to the
various National Sports Federations and athletes for training and other facilities. Therefore,
payment of INR 25727 crores to CGA arising out of the Joint Marketing Agreement may result
in overlapping.
26.10.7 It was explained that the “participating team of CGA (IOA) is the property of the IOA and OC
will get sponsorship on their account also, therefore, the amount mentioned above is only to
compensate their loss”. Further, it must be noted that the minutes of meeting do not
provide any basis of arriving at a compensation of INR 25 crores. Considering, that the key
functionaries of the IOA and OC.
26.10.8 As per the revalidated budget prepared, the above mentioned compensation fee did not
form part of the budget as “The OC D2010 and the IOA are in the process of finalising a Joint
Marketing Programme. The value of the same is yet to be finalised and hence has not been
included in the budget of the Organising Committee at this stage”. However, the payment
for INR 25 crores has been approved in the 15 th Executive Board Meeting on 10 September
2009.
26.10.9 It must be noted that the OC was required to pay IOA the entire amount by 31 October 2010
under the agreement. However, the OC has only made a payment of 35% of the total
compensation amounting to INR 8.75 crores.
Out of pocket expenses reimbursed
26.10.10 The OC received a letter from the Treasurer, IOA, dated 20 September 2010 requesting
remittance of INR 2.09 crore for disbursement of pocket allowances to the Indian
Contingent staying at the Games Village during the period 23 September 2010 to 15 October
2010 as decided by Dr. Lalit K Bhanot, Secretary General, OC CWG 2010. According to this
727
Rationale for INR 25 crores not provided.
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letter, the amount had been computed at the rate of INR 1,500 per day per person. Further,
this amount would be paid on the basis of actual stay of the Indian Contingent.
26.10.11 The above mentioned letter was addressed to Mr. AK Mattoo, Treasurer, OC. This letter
was then forwarded for approval to Mr. M Jeychandran, ADG, Finance and Accounts so that
payment to IOA could be processed. As per the notings on letter, Mr. M Jeychandran has
returned the letter to Dr. Lalit K Bhanot, on 21 September 2010, with a query as that “Do we
process what has been agreed so – kindly advise – I was not in the meeting held on 10/9-”.
26.10.12 To the above query, Dr. Lalit K Bhanot, Secretary General, OC, responded:“As OC has taken
the rights of Indian Team. So all expenses involved become OC responsibility. The issue can
be further discussed and resolved”. Subsequently, on 22 September 2010, Mr. M
Jeychandran, ADG, Finance and Accounts, approves the payment and states that the
amount should be debited to the Joint Marketing Programme Head.
26.10.13 The response from Dr. Lalit K Bhanot, Secretary General, OC, is in contradiction of the
explanation provided to Mrs. V Ramachandran, Addl. Secretary, Ministry of Finance at the
time of requesting approval for finalization of the Joint Marketing Programme Agreement.
It was explained at that time that the “participating team of CGA (IOA) is the property of the
IOA and OC will get sponsorship on their account also, therefore, the amount mentioned
above is only to compensate their loss”. Thus, it construes that no further reimbursement of
costs to IOA was warranted under the Joint Marketing Programme Agreement.
26.10.14 On 24 September 2010, the payment proposal was submitted for CEO approval. However,
the proposal was returned with a note from CEO office i.e. “CEO has not seen this proposal
at any stage. He may kindly peruse before taking action on it”.
On 25 September 2010, Mr. Jarnail Singh, CEO, OC, has questioned the basis of such
payment through his note “This expenditure cannot be from OC, but should be either
from Govt or IOA. Needs further clarity”
Dr. Lalit K Bhanot, Secretary General, OC, responded “OC to pay at this stage. The issue
can be discussed later. But the team rights are with OC – so we have to pay this also”.
26.10.15 Subsequently, Mr. Jarnail Singh, CEO, OC, relented and gave his assent to process the
payment but stated that this is a “policy issue, needs to be decided properly. We should
discuss this matter and decide in file. This money to be taken out of and deducted from joint
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Marketing right file payable to IOA and Account branch to note. Since we cannot deny or
delay this, this expense can be paid”. The above note sheet has also been signed off by SDG
and ADG, Finance and Accounts and by Mr. Suresh Kalmadi, Chairman, OC.
26.10.16 Based on the above approval, the OC paid IOA INR 2.09 crores. Out of the total amount
INR 1.56 crores was disbursed to the Indian Contingent via cheques to individual sports
personnel. Balance INR 0.53 crores has been returned to the OC in December 2010.
Renovation of IOA building
26.10.17 An expenditure of INR 4.08 crores was incurred by OC during January –May 2008 on
undertaking civil/ electrical works and purchase of furniture for IOA building. M/s
Renaissance Furniture Pvt. Ltd. was awarded the contract in December 2007 for carrying out
Civil (INR 0.97 crores) and Electrical (INR 0.23 crores) works and supply of furniture (INR 1.69
crores) in IOA building at a total cost of INR 2.89 crores inclusive of taxes and duties. After
the works/ supply was completed, the contractor claimed payment of INR 5.28 crores on the
grounds that it had carried out excess quantities of works and supplied additional items of
furniture on the basis of verbal directions of OC management.
26.10.18 A three member committee of OC employees was constituted in March 2009 to examine
these claims of the contractor. On the basis of report submitted by this committee, EMC
approved728 release of additional amount of INR 1.19 Crores to the contractor. Thus a total
payment of INR 4.08 Crores was made to the contractor against INT 2.89 Crores as per
contract. This adhoc approach and disregard of rules and contractual terms and conditions
was one of the examples of the blatant and brazen favours extended to a number of parties
and contractors.
Rent and maintenance charges for the Olympic Bhavan
26.10.19 We noted that rent, maintenance and electricity, water and other charges were paid for the
Olympic Bhawan for the period 1 January 2008 to 31 October 2009729 as the OC had rented
728
Annexure 26.30 – Minutes of the EMC meeting.
729
Refer Annexure 26.31.
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space in these premises730. These aggregate to INR 3.33 Crores731. Additionally the OC
spent a significant amount of money renovating the IOA Bhawan which resulted in no
benefit accruing to the OC. Such expenditure included furniture and fittings.
Fixed assets purchased and left behind in IOA building
26.10.20 As per the MOU signed, IOA was to reimburse to OC fair value of all furniture and other
equipment left behind by OC. Value of fixed assets amounting to INR 1.95 Crores 732 left
with IOA were neither claimed for adjustment nor adjusted against rent. Besides, OC
shifted to IOA Bhavan on 24th May 2008 but rent was paid for the period January-May 2008
when the building was under renovation.
Summary
26.10.21 It is evident to the above that the payments to the IOA accrued mainly on account of the
relationship of functionaries with the OC. The OC was not obligated to reimburse the
expenditure of INR 1.56 Crores which was clearly an IOA obligation. Further, it is not
evident why the OC not only chose to rent premises from the IOA but also incur substantial
expenditure of renovation etc for premises constituting a long term benefit on the IOA.
26.11 Summary and conclusions
26.11.1 The most significant observation that came out of the review of the sample transactions was
the widespread disregard for propriety in the OC. The quality of the tone at the top can be
seen from the fact that individuals in the Chairman’s secretariat itself were involved in
giving business to their own companies disregarding the established procedures. Seen in the
context of irregularities in major contracts where senior OC functionaries, who were
perceived to be close the Chairman, were directly involved, these above noted deficiencies
indicate a major affliction in many areas of the organization. Such examples of unethical
730
Refer Annexure 26.32 for minutes of EMC meeting confirming the terms and conditions of the MOU entered into with
IOA.
731
INR 3.33 Crores has been computed in accordance with the terms and conditions of the MOU entered into with IOA.
732
Refer Annexure 26.33 for list of fixed assets as per stock register of Adminitration FA in use by OC Staff.
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business practice and conflict of interest cases no doubt affected the work culture and
governance framework of the OC.
26.11.2 It seemed to be an acceptable practice in OC to falsify documentation to provide legitimacy
to decisions to award contracts to specific contractors. The apparent ease within which
such documentation was moved and approved within the organization without raising red
flags indicates the breakdown of financial oversight and controls. It is extraordinary that
comparative quotations were obtained from nonexistent sources in some cases, after
payments/orders were made and this clearly shows the degeneration of controls
throughout the OC.
26.11.3 How the OC ended up obtaining quotations from vendors who did not have any signs of
commercial activity at their stated place of business is surprising, especially as in many cases
open tenders were not issued and the OC made efforts to obtain such quotations from the
“market”. This indicates the utter disrespect and override of the system of control in the OC
which was indicative of likely misconduct on part of OC employees associated with such
procurements.
26.11.4 In functioning in this way, the OC employees and functionaries appeared to work in manner
detrimental to the interests of the organization unmindful of their accountability to spend
public funds with due regard to canons of financial propriety.
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27 Chapter 27: Recruitment
The study undertaken clearly indicates that established policies and procedures related
to recruitment were routinely flouted and many a time this happened at the behest of
the senior functionaries of the OC including its Chairman. It appears that the primary
criteria for recruitment in many cases were other than merit of the candidate.
Instances such as nepotism, favoritism, undue influence in recruitment etc. came up in
the sample cases reviewed. Criteria other than performance were used to compensate
and promote employees at the OC. In some cases, individuals who had faced or were
facing investigation into their acts were recruited for various senior positions.
27.1 Background
27.1.1 The Games Secretariat in the OC had 34 functional areas/ departments to support the day
to day operations. The staffing requirement for these functional areas was prepared by a
workforce consultant (i.e. Ernst & Young and EKS consortium). Each FA had a functional
area head and the staff size had to be relevant to the size and nature of work of the
functional area. The workforce consultant made the initial estimate of the scale of activity
and the staff size. However, quite often these estimates were disregarded while appointing
staff.
27.1.2 The OC recruited staff directly (‘direct recruits’) and through deputation from government
organizations (‘deputation staff’). The OC began with 17 employees in 2005 and had a
maximum of 2,095733 regular staff employees in 2010 during the games. Besides, there
were a large number of short term employees. In April 2010, the Chairman, OC has
approved a policy for part time employment734. A committee comprising Secretary General,
CEO and JDG, Administration and Workforce was constituted to consider the cases of part
time employees.
733
Please refer to Headcount Data provided by the OC: Annexure 27.1
734
Please refer to the Part-time Employment Policy: Annexure 27.2
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Fifth Report of HLC – Organizing Committee
27.1.3 The recruitment manual of OC described the recruitment process and procedures. A
‘Selection/ Search Committee’ used to be set up735 to identify and assess the competency of
the candidates, and to recommend the pay level and allowances for them. Before the
recruitment manual was in place, several staff appointments at senior positions were made
by the Chairman directly736.
27.1.4 The Chairman was vested with power of appointing all categories of staff in games
secretariat737. The Secretary General was the authority to appoint staff up to PO level and
the Chairman from Director and above. The power of recruitment was not delegated by the
Chairman even after the CEO was appointed by the GOI. Several questionable
appointments were made possible due to the unregulated power of recruitment of the
Chairman.
27.2 Unplanned growth in personnel (regular employees)
27.2.1 General Organizational Plan (‘GOP’) prepared by the work force consultants projected the
staffing for the OC. The GOP was first approved in August 2007. Compared to the planned
headcount of 1,316738 as approved in 2007, the actual number of staff swelled to 1897739 in
September 2010.
27.2.2 The following graph shows how the actual number of employees grew as compared with the
projected head count in the GOP, over a period of 3 years commencing May 2007.
735
Please refer to Section C.2 of the Recruitment & Selection Manual: Annexure 27.3
736
Please refer to discussion at the First Meeting of the Executive Board held on 22 March 2005: Annexure 27.4
737
Rule 7 of the Rules & Regulations of the OC, attached to the MOA of the OC: Annexure 5
738
As per data provided by Vivek Raja: Annexure 27.6A
739
As per payroll data for September 2010: Annexure 27.6B
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Fifth Report of HLC – Organizing Committee
Figure 27.1: Comparison with the initial GOP projection on headcount with actual employees
recruited as per MIS data provided by HR
Projected Cumulative Head Count - As per GOP (Excludes Sports)
Actual Head Count -Cumulative (Excluding Sports)
2500
2000
1500
1000
500
0
Sep-07
Sep-08
Sep-09
Sep-10
Nov-07
Nov-08
Nov-09
May-07
Mar-08
May-08
Mar-09
May-09
Mar-10
May-10
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Numbers exclude Sports FA since this FA did not take part in the Projection Exercise. Actual Recruitment in the Sports FA
740
was 167 between May 2007 and Sep 2010 .
Non adherence of the ‘Recruitment plan’ as initially suggested in GOP
27.2.3 The actual head count of the OC was lower than the GOP estimates up to November 2009.
This indicates that estimates /recruitments were not in line with the planned activity level
which led to pressure to fill up vacancies in the later stage. From November 2009 onwards,
the head count increased exponentially way above the number that was originally planned.
Non-adherence to the GOP resulted in pressure building up on the OC to recruit employees
as deadlines for various activities were consistently missed. This led to recruitment of
employees with various issues related to the quality, competence and on-boarding as have
been discussed in the ensuing sections of this report.
27.2.4 Recruitment beyond the approved GOP level needed approval of EB. There was no
evidence that the matter was presented in a comprehensive way before the Executive
Broad for their approval741.
740
Please refer to email received from Vivek Raja: Annexure 27.7
741
No reference to this has been found in the Minutes of Meetings of the Executive Board
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Fifth Report of HLC – Organizing Committee
GOP frequently revised to reflect higher level of work force
27.2.5 The GOP was initially prepared and approved in August 2007. Subsequently, the GOP was
revalidated/ revised at short intervals of time i.e. November 2009, January 2010 and May
2010. These changes, as explained in the figure below, were significant in terms of numbers
and were perhaps indicative of a failure to do proper planning and/or lack of adherence to
plan by the OC.
Table 27.1: Comparison of changes in headcount between various GOP validations and work force
reviews
Particulars GOP Work Force Review Actual
Employees
Approved Revalidated January May September
2007 Nov 2009 2010 2010 2010 – Payroll
sheet
No. of employees742 1,316 1,412 2,886 2,046* 1,897
% increase since GOP
- 7.29% 119.30% 55.47% 44.15%
Approved 2007
% increase since GOP
- - 104.39% 77.83% 36.58%
Revalidated 2009
*2,511-465 (temporary staff) = 2,046
27.2.6 The recruitment plan in the initial GOP did not include important functional areas. For
example;
The OC did not plan for any staff in the venue administration functional area until the
workforce review in May 2010 i.e. 5 months before the games. However, as per the
Payroll sheet for the month of September 2010, 17 employees were paid salary under
this FA.
742
Source: Data provided by Vivek Raja except September Payroll which has been taken from Tally: Please refer to
Annexure 27.8
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Fifth Report of HLC – Organizing Committee
The OC did not have a plan to recruit staff under the sports functional area in any of the
reviews. However, as per the Payroll sheet for the month of September 2010, 148
employees were paid salary under the sports FA.
27.2.7 In some of the following functional areas there was significant difference between the
actual number of employees and number projected per workforce review of May 2010:
Table 27.2: Differences between actual and projected employees under workforce reviews743
Functional area Number of employees
Workforce Actual per payroll Increase
review (May sheet (September
2010) 2010)
Office Administration 38 148 110
Venue Development & Overlays 186 263 77
and Venue Operations
27.3 Overview of personnel files reviewed
27.3.1 350 personal files were reviewed (approx 17 percent of total staff of 2095) on the basis of the
official HR records provided by the OC to assess if the approved policies and procedures were
followed in respect of recruitment practices by the OC. In nearly 39.14% of these cases (137 files)
there was evidence of irregular practices of various kinds raising question about the fairness and
transparency in the overall recruitments made by OC. The observations summarized in this section
are based on information on irregularities that was prima facie available in the files or which could
be ascertained through basic research and information gathering. It is clarified that in no way should
this be construed to mean that the rest of the files were free from irregularities or that the
underlying appointments were regular.
27.3.2 A summary of issues identified is set out in the figure below with further details in the
ensuing sections.
Table 27.3: Summary of issues identified in employee file reviews
743
Please refer to comparison in Annexure 8
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Fifth Report of HLC – Organizing Committee
S.no. Issues No of Cases
1 Favoritism in appointment of candidates 40
2 Appointment of tainted employees 4
3 Rules bent to recruit employees with a questionable
background 1
4 No Evidence of Work Performed by Director on rolls for 21
months 1
5 Undue influence in appointment of candidates 7
6 Mismatch in work experience and educational qualifications 15
7 Improper selection process 40
8 Extraordinary increments in remuneration 4
9 Unjustified/ad hoc promotions 25
Total 137
27.4 Favoritism in appointment of candidates
27.4.1 In 40 cases there was high potential for favoritism in selection/ appointment of candidates
due to following reasons:
Employee was related to officials in the OC
Employee was related to other ‘influential people’ outside of the OC744.
Known “close” associations of the employees with officials of the OC
27.4.2 Some of the cases observed are illustrated in the figure below745.
744
It may be mentioned that, the review is limited to personal files and apparent relations between employees and others.
It cannot be determined whether the influence was unjustly used to secure an advantage to the employee by people
outside the OC
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Table 27.4:
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
Appointed on 1 May 2010.
Uddhav Waman Administrative Employee was
Welinkar Assistant, related to Son of Sangeeta Welinker ADG,
Workforce officials in the Image and Look.
OC Educational qualification at the
Salary: INR
time of appointment was:
27,000 p.m
- Higher secondary school
Qualification: and
HSC; Pursuing - Pursing graduation from
Graduation Pune.
- Worked in OC only for 3
months and drew a salary
of INR 27,000 per month.
Appointed on 18 May 2010.
Pallavi Mohla Administrative Employee was
Assistant, related to Daughter of Wing Cdr Rajiv
Technology officials in the Mohla, DDG Chairman’s
OC Secretariat.
Salary: INR
Selected via walk in interview
27,000 p.m
after one month of
Qualification: B. appointment of her father in
Tech the OC.
She was the only candidate
who appeared for the walk in
interview and was selected.
Daughters of Bhoop Singh
Rajni Singh and Administrative Employee was
745
For Details of all 40 cases of favouritism, please refer to Annexure 27.9 and relevant extracts from the personal files in
Annexures 27.10 – 27.49
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
Rachna Singh Assistant, related to other Private Secretary in
Technology ‘influential the Cabinet Secretariat.
people’ outside They were selected for the
Salary: INR
of the OC same post via walk in
27,000 p.m
interview746 on the same date,
Qualification:
conducted by same search
M.Sc in
committee in the same
Computer
functional area
Science
Salary:
INR27,000 p.m
Qualification:
B.Tech
Appointed as PO on 10
Vivek Raja Director, Employee was
February 2009 at a core salary
Workforce related to other
of INR 45,000 per month and
‘influential
Salary: INR
promoted as Director within 7
people’ outside
45,000 p.m.
months at a core salary of
of the OC
Qualification: B. INR 45,000 per month only.
Tech Son of P K Murlidharan,
Secretary General of Boxing
Federation of India.
Known to the following officials
in OC as per the employee file.
- Leena Jha, Director, Work
Force and
- Lt.Col Shalinder Benjamin
746
Please refer to Annexure 50 for Process and Guidelines for Walk-in Interviews as per Recruitment & Selection Manual
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
Father is Mr. Ashok Lavasa,
Avny Lavasa PO, QBR Employee was
Principal Secretary,
related to other
Salary: INR
Government of Haryana.
‘influential
25,000 p.m
people’ outside As per minutes of meeting of
(core)
of the OC the Selection Committee,
Qualification: applications had been invited
B.A (Hons) for the post of ADG and
Director through
advertisements in the
newspaper and hence the post
of PO was not advertised.
After the selection of only one
candidate out of 15 candidates,
as a Director, the selection
committee after “several
inquiries” also interviewed
Avny Lavasa and selected her
for the position of Project
Officer
Subsequent to her
employment with the OC, her
brother, Abir Lavasa was also
appointed as APO, Venue
Operations.
The last drawn core salary of
Avny Lavasa was INR 35,000
per month and for her brother
was INR 25,000 per month.
On 11 June 2010, the
Shipra Verma Part-time Known “close”
committee for part time
Director, associations of
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
Ceremonies the employees employment recommended
with officials of that Shipra may be appointed
Salary: INR
the OC as Director, Ceremonies on a
40,000 p.m
“part time basis”. They also
Employee was
Qualification:
took cognisance of the fact that
related to
Masters in
she worked as Director,
officials in the
Physical
Chairman’s Secretariat from 2
OC
Education
March 2007 to 31 August 2008.
On 22 June 2010, the
Chairman, wrote to the
Principal of Matreyi College,
requesting an approval to let
Shipra work on a part time
basis with OC. Approval
subsequently received on 30
June 2010.
Shipra’s sister, Shikha Verma
was working with the OC as
Project Officer, Creative
Cultural Events since June 2009
Appointed on 13 August 2008
Lt. Gen (Retd) ADG, Known “close”
per direct appointment made
Ashok Vasudeva Chairman's associations of
by Chairman, Mr. Suresh
Secretariat the employees
Kalmadi.
with officials of
Salary:
the OC Position of ADG was created
INR89,375 p.m
against the specification of the
(core)
General Organisational Plan
Qualification: (‘GOP’) as per order received
Not stated from the Chairman, Mr. Suresh
Kalmadi. Consequently, there
was no open position on the
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
day the appointment was
made.
Mr. Shekhar M Deorukhar was
Shekhar M OSD to Known “close”
a “Senior Goods Guard, in
Deorukhar Chairman associations of
Mumbai Division, Central
the employees
Salary:
Railways” prior to his joining
with officials of
INR22,400 p.m
OC.
the OC
Qualification: Appointed as Officer on Special
Not stated Duty (‘OSD’) to Chairman in
October 2006 on deputation
with extra allowances of INR
18,000 per month.
In February 2011, Mr. Shekhar
M Deorukhar was arrested by
the CBI for his alleged
involvement in the ‘overlays
scam’.
The Chairman wrote to
Chairman, Railway Board for
the release of “Mr. Shekhar
Deorukhar from the Railway
service on deputation to CWG
Secretariat till year 2010” as
“his contribution in the
Secretariat would be an asset
and would contribute towards
the successful conduct of the
Games”
In September 2009, on expiry
of deputation, the Chairman,
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Type of Remarks
employee Functional Area favoritism
Mr. Suresh Kalmadi again sent
requests to the Railway
Minister, Ms. Mamta
Bannerjee and Chairman,
Railway Board for extension of
deputation period as “he has
come to occupy a very crucial
position in my Office and his
departure at this stage would
impact adversely”.
On 15 December 2010, the
Chairman, again wrote to the
Railway Minister for extension
of time up to 30 June 2011 as
“Mr. Shekhar M Deorukhar has
been assisting me for last more
than four years and has been
playing a very important role in
the discharge of my official
functions as Chairman, OC” and
“his departure at this stage
would seriously affect the
assignments which I have
tasked him to complete”.
27.5 Appointment of “tainted” employees
27.5.1 In at least 3 instances, noted by us the Chairman appointed ex-employees from
government/PSU’s at senior positions in disregard of adverse antecedents of such persons.
The adverse information of these persons was available in the public domain. A summary of
these cases is set out in the table below.
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Fifth Report of HLC – Organizing Committee
Table 27.5:
Name of the Designation/ Remarks
employee Functional Area
Appointed on 7 July 2008 as DG based on
V K Verma DG, OC
recommendations of search committee
Secretariat
comprising Randhir Singh, A K Mattoo and V D
Nanavati747. It may be mentioned that Randhir
Singh and VD Nanavati were colleagues of VK
Verma in the IOA748
VK Verma was also an EB member since the 8th EB
meeting held on 21 May 2007, along with all the
members of the search committee749. However
this pertinent fact has not been mentioned in the
search committee minutes.
Accounting records of the OC also show evidence
of reimbursement to VK Verma as Board Member
and Chairman of the Committee of Games
Planning and management as early as 15
September 2007.750 Even this association was not
mentioned in the search committee minutes.
Serious allegations questioning the integrity of V K
Verma during his employment with Air India
remained unresolved. The cases pending against
747
Please refer to Annexure 27.51 for Minutes of the Search Committee Meeting held on 21 June 2008
748
Source: Indian Olympic Association website: Randhir Singh and VD Nanvati are colleagues of VK Verma at the Indian
Olympic Association. Annexure 27.52
749 th
Please refer to Annexure 27.53 for attendees of the 8 Meeting of the EB held on 21 May 2007
750
Please refer to extract from Tally in Annexure 27.54
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Remarks
employee Functional Area
V K Verma related to procurement fraud and
producing fake medical certificates751.
Appointed on 4 December 2009 based on the
R P Gupta ADG, Venue
recommendations of search committee
Operations
comprising Randhir Singh, A K Mattoo and V D
Salary: INR
Nanavati.752
98,500p.m
R P Gupta had ongoing vigilance cases against him
Qualification: in the Indian Railways753.
B.Sc
Engineering
Appointed on 23 July 2009 and subsequently
Nachiketa DDG, Protocol
promoted to DDG within 7 months in February
Kapur754
Salary:
2010.
INR60,000 p.m
According to the note sheet dated 1 February
Qualification: 2010, promotion has been awarded:
MBA and - After his performance has been found to be
Diploma in commendable as “reviewed by Senior
Psychological Authorities”.
Counseling - Further, “in recognition of his outstanding
performance, Senior Authorities have decided
to promote him to the post of DDG, Protocol
and Media Relations”.
Nachiketa Kapur submitted his resignation on 28
April 2010 and requested for release of duties wef
751
Refer attached news article from Indian Express, dated 10 March 2003 in Annexure 27.55
752
Please refer to Minutes of the Search Committee Meeting in Annexure 56
753
Please refer to Annexure 57 for details
754
Please refer to extracts from Personal File of Nachiketa Kapur: Annexure 58
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Fifth Report of HLC – Organizing Committee
Name of the Designation/ Remarks
employee Functional Area
30 April 2010 citing personal reasons. According
to the note sheet, “Mr. Nachiketa Kapur joined the
OC on 23 July 2009 and has not been confirmed as
755
yet”. The Chairman’s approval for accepting
resignation wef 30 April 2010 has been solicited
and received756.
The Appointments Committee of Cabinet (ACC)
issued a memorandum not only disapproving his
previous appointment, but adding that the person
in question “should not be considered for any
appointment of a sensitive nature”757.
27.6 Rules bent to recruit employees with a questionable background
27.6.1 Recruitment rules were comprehensively disregarded by senior officers of OC to recruit a
female employee for Chairman’s Secretariat against a nonexistent post. Further, the
concerned employee engaged in probable improper conduct involving potential violation of
the laws of the land (potential bribery and corruption though not related to the OC) when
working in the Chairman’s Secretariat.
27.6.2 This case came to notice when computer forensics revealed a significantly inappropriate
email communication made through two official computers used by the two employees of
the OC. This email date 2 February 2010 from Ms Malaika Miranda, PO in the Secretariat of
Chairman to Praveen Grover, Director- Treasurers office discussed about 6 construction
755
In response to a clarification sought from OC management, as to how promotion was awarded to an employee whose
appointment was not confirmed, Shri NP Singh stated that the senior authorities found his performance to be
commendable and he was promoted in recognition of the same. Please refer to NP Singh’s response in Annexure 27.59.
756
In a response to a query by the High Level Committee, NP Singh stated that the confirmation process of direct recruit
employees of the OC was discontinued based on verbal instructions from Dr. Bhanot. Annexure 27.60
757
A copy of the order is attached in Annexure 27.61
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Fifth Report of HLC – Organizing Committee
projects across India and the percentage of commission to be paid to government officers
and to the company of the author of the email758.
27.6.3 Investigation revealed that the email ID used for this communication i.e.
malaikamiranda21@gmail.com is the official ID of a company by the name of MAA
Corporation. The company’s website (http://maa-c.com/index.php) shows Malaika Miranda
as the principal consultant of the company759.
27.6.4 Further inquiry by the committee indicated that Malaika Miranda (alias Luen Miranda) was
hired by OC in October 2009 as Project Officer in the Chairman’s Secretariat. There was no
such approved post in the GOP. The address and mobile number of Malaika as per
employment records exactly matches with the details on the website of MAA Corporation. It
appears that this person was engaged in another business or occupation while employed by
the OC which is contrary to the terms of appointment.
27.6.5 Review of employee file revealed several discrepancies.
Workforce records show that Maliaka was interviewed on 1st October 2009 by a
committee of three senior officials of OC (Principal Advisor, ADG (Admin& Work Force) ,
ADG Chairman’s Secretariat) and selected for a position at OC. The minutes of the
meeting mention that only Malaika Miranda appeared for an interview as a walk in
candidate and was selected by the committee760.
Malaika’s application letter to OC dated 1st September 2009, states that as per her
understanding there is a vacancy for a PO in Chairman’s Secretariat761. However, as per
the OC’s workforce records no such position existed at the time of her interview 762.
758
Please refer to Annexure 27.62 for a copy of the email. The email was sent to Praveen Grover, Director in the Treasurers
Secretariat.
759
Please refer to screenshot of the website of MAA Corporation in Annexure 27.63
760
Please refer to Annexure 27.64 for Minutes of the Selection Committee Meeting
761
Please refer to application received from Malaika Miranda: Annexure 27.65
762
Please refer to Annexure 27.66 for Note Sheet from Malaika’s Personal File
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Fifth Report of HLC – Organizing Committee
At the time of her appointment, Malaika gave a declaration to submit the copies of her
education certificates by December 2009763 however the workforce records do not have
any copies of her past education certificates.
Several inconsistencies noted in various letters issued to her at the time of her
appointment suggest creation of documents post-event. For example, her offer letter
was issued after the date of appointment and joining letters. She was issued the
appointment and joining letters on the same day as her interview even though there was
no open position per the GOP.
Table 27.6:
Letter Type Letter Date Date of candidates
Signature
764
Offer Letter 19 October 2009 21 September 2009
Appointment Letter765 1 October 2009 29 September 2009
Joining Letter766 1 October 2009 1 October 2009
Interview Assessment Form767 1 October 2009 Not Applicable
27.7 No Evidence of Work Performed by Director on rolls for 21 months
27.7.1 Lt. Col. (Retd.) Ashok Sharma (Director, Ceremonies) was appointed on 6 February 2008 as
Director, Ceremonies at a core salary of INR 35,000 per month768. He was interviewed by a
Search committee comprising AK Mattoo, Atul Chaturvedi and BS Ojha (Director General) on
4 February 2008. The rationale for selection as per the minutes of the Search Committee
was shortage of staff in Ceremonies functional areas leading to requirement of a middle
763
Please refer to the declaration by Malaika Miranda in Annexure 27.67
764
Please refer to Annexure 27.68 for Offer Letter given to Malaika Miranda
765
Please refer to Appointment Letter Issued to Malaika Miranda in Annexure 27.69
766
Please refer to Joining Letter Issued to Malaika Miranda in Annexure 27.70
767
Please refer to Annexure 27.71 for Interview Assessment Form
768
Please refer to Order dated 6 February 2008: Annexure 27.72
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Fifth Report of HLC – Organizing Committee
level officer769. The following observations were made on further review of the personal
file, raising doubts about the legitimacy of Ashok Sharma’s appointment as an employee of
the OC:
Review of the personal file of Lt. Col (Retd) Ashok Sharma revealed that Shovana
Narayan, JDG, Ceremonies had complained to ADG (Administration), vide note dated 6
November 2009, that she was unaware of the existence of Ashok Sharma 770. Further,
she requested ADG, Administration to make the necessary rectifications in the
Ceremonies expenditure budget head by crediting back the salary cost attributable to
Ashok Sharma under the Ceremonies functional area.
Further, a leave application dated 3 June 2008, contained the following comments from
Randhir Singh, Vice Chairman, OC “As Col Ashok Sharma of OC, is attached to the
Olympic Bhavan the IOA has no objection for his leave application”771.
27.7.2 Clarifications were sought from Mr. NP Singh, JDG, Administration and Workforce with
respect to the above mentioned observations. The response received failed to remove the
shroud of illegitimacy from the observations. Instead it has raised further doubts about the
authenticity of the employment of Ashok Sharma. Some of the appalling responses have
been discussed in the paragraphs below772:
Response received with respect to the appointment of Ashok Sharma states that, “Shri
AK Mattoo, Treasurer (the only member of the Selection Committee available) has shown
his inability to comment upon about the formation of the Selection Committee”. Further,
“The Treasurer has informed that since the Ceremonies functionality was in infancy
stage at that point of time and yet to be fully operational, the services of Lt. Col.
(Retd.) Ashok Sharma were temporarily utilized as an interface between the OC and
the IOA”. The response received is in contradiction to the reason provided by the Search
Committee at the time of his appointment as stated in Para 1.7.1 above.
769
Please refer to Note Sheet from Personal File of Ashok Sharma dated 4 Feb 2008: Annexure 27.73
770
Please refer to Annexure 74 for Note from Shovana Narayanan dated 6 November 2009
771
Please refer to leave application dated 3 June 2008 in Annexure 75
772
Please refer Annexure 76 for the full contents of the response to clarifications sought by the HLC.
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Fifth Report of HLC – Organizing Committee
Response received with respect to the work done by Ashok Sharma at the OC reads as,
“Lt. Col. (Retd.) Ashok Sharma was working under the control of Vice Chairman. Lt. Gen.
(Retd.) Ashok Vasudeva, ADG (Vice Chairman’s Secretariat) has telephonically clarified
that no desktop or laptop was issued to Lt. Col. (Retd.) Ashok Sharma by OC”. “OC was
shifted to NDCC – II building in July 2009 and there is nothing on record to establish that
Lt. Col. (Retd.) Ashok Sharma was allotted any specific work area in NDCC Tower – II.
However, as informed by Lt. Gen. (Retd.) Ashok Vasudeva, ADG (VC Secretariat),
telephonically and also by Shri AK Mattoo, Treasurer, he used to sit in the basement of
Indian Olympic Bhavan”. “The Treasurer has informed that Lt. Col. (Retd.) Ashok
Sharma, Director was given the work relating to the renovation in progress at Olympic
Bhavan”.
27.7.3 It is worth mentioning at this stage that the OC took possession of the Olympic Bhavan on 1
January 2008 and shifted after completion of renovation in May 2008 773. Therefore it is
plausible that Lt. Col. (Retd.) Ashok Sharma was working towards the renovation of the
Olympic Bhavan from February 2008 (i.e. date of appointment) till May 2008. However,
there is no record of work performed/ delivered by him subsequent to May 2008 till
November 2009.
27.7.4 Further, OC shifted out of the IOA building in October 2009774. However, per response
received from Mr. NP Singh, Lt. Col. (Retd.) Ashok Sharma, used to sit in the basement of the
Olympic Bhavan. There is no explanation given about his whereabouts after OC shifted out
of the Olympic Bhavan.
27.8 Undue influence in appointment of candidates
27.8.1 In violation of the principle of fairness and transparency in recruitment, senior officials of OC
including its Vice Chairman participated in the recruitment process for candidates for whom
they issued reference letters. The following issues were noted in such cases:
The OC official referring the candidate was also part of the panel interviewing the
candidate (this defeats the objective of a fair evaluation); and
773
Source: Information as provided by Mr. Amar Singh, Director Administration.
774
Source: Information as provided by Mr. Amar Singh, Director Administration.
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Fifth Report of HLC – Organizing Committee
In most cases the referred candidate was only one candidate who appeared for the
interview in the ‘walk in process’ (which suggests that the entire process may be stage-
managed to provide legitimacy to the recruitment).
27.8.2 A few examples have been enumerated in the table below775.
Table 27.7:
A.1Name of the A.2Referred by/ Closely associated A.3Remarks
to OC employee
A.4Candidate A.5Name A.6Designation A.7
Mr. Randhir Singh provided
A.8 K. Tejinder A.12Randhir A.14Vice
Letter of recommendation for
Singh Singh Chairman, OC
the selection of K Tejinder Singh
A.9 Project Officer A.13
in OC.
Randhir Singh was Chairman of
A.10Salary: INR the Interview panel.
35,000 p.m (core) K Tejinder Singh was appointed
A.11Qualification: as Project Officer in CGA
B.Sc Relations FA having a little more
than one years work experience
as a customer care executive.
This work experience is not
related to the functional area in
which he was appointed.
An article in “Indian Express”
refers to K Tejinder Singh as
Randhir Singh’s nephew.
A.15
VK Verma and Ashok Sahota
A.16Ashok Sahota A.19V.K Verma A.20DG
775
For the complete list please refer to Annexure 27.77 and Relevant Pages from Personal Files in Annexures 27.78-27.84
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Fifth Report of HLC – Organizing Committee
A.1Name of the A.2Referred by/ Closely associated A.3Remarks
to OC employee
A.4Candidate A.5Name A.6Designation A.7
Sahota Verma were colleagues at the Indian
Olympic Association (‘IOA’). Mr.
A.17Salary: INR
Suresh Kalmadi is the President
1,31,000 p.m
of the IOA.
A.18Qualification:
Search committee which
B.A (Hons)
recommended the appointment
of Ashok Sahota as Officer on
Special Duty in Chairman
Secretariat consisted of Mr. V K
Verma, NP Singh and Lalit
Bhanot.
Mr. Ashok Sahota is also the
Managing Director of Alisha
Travels Private Limited, which is
in violation of the terms of the
employment contract776.
It may be mentioned that the
OC has conducted business
dealings with M/s Alisha
Travels777 which also constitutes
a clear conflict of interest in his
conduct.
A.21
NP Singh referred SK Tomar per
A.22S.K. Tomar A.26N P Singh A.27JDG,
application form.
Administration
A.23Project Officer
NP Singh also part of interview
776
Source: Employment contract – Para on Conflict of Interest: “You shall not, during the term of your employment, except
with the written permission of the OC, engage directly or indirectly in any other business, occupation or activity…..”
777
Details of the case of Alisha Travels are discussed in the section on other irregularities.
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Fifth Report of HLC – Organizing Committee
A.1Name of the A.2Referred by/ Closely associated A.3Remarks
to OC employee
A.4Candidate A.5Name A.6Designation A.7
Officer panel which interviewed SK
Tomar.
A.24Salary: INR
Only SK Tomar appeared for the
46,500 p.m
walk in interview and was
A.25Qualification:
selected as Project Officer.
B.A
Brig N B Singh referred Y.P.
A.28Y.P. Bhatia A.32Brig N B A.33Venue
Bhatia per application form.
Singh Administrator
A.29Project Officer
Brig N B Singh also part of
interview panel which
A.30Salary: interviewed Y.P. Bhatia.
INR46,500 p.m Only Y.P. Bhatia appeared for
A.31Qualification: the walk in interview and was
M.A (English) selected as Project Officer.
27.9 Mismatched work experience and educational qualification
27.9.1 In 15 cases, the selected candidates did not possess the functional skills or expertise for
which they were recruited. This assessment has been based on the following criteria:
Criteria A: Mismatch between educational qualification/ experience of candidate and the
Functional area for which candidate was selected.
Criteria B: Higher ratings awarded in the interview assessment form to candidates having
no/ inadequate work experience and/ or poor educational qualifications.
27.9.2 A few examples of cases observed are set out in the figure below778.
Table 27.8:
778
For the complete list please refer to Annexure 85 Relevant extracts from personal files are given in Annexures 86-100
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Fifth Report of HLC – Organizing Committee
A.34Name of A.35Recruited as / A.36Type of A.37Remarks
the Functional Area Criteria
employee
Mechanical engineering graduate
A.38Uma A.40Director, A.43Criteria
with approximately 3 years work
Badve Volunteer A and B
experience as an engineering
Programme
A.39
consultant, appointed as Director
A.41Salary: INR
in the Workforce Functional area.
66,000 p.m
Out of the 3 years, she has 7
A.42Qualification: months experience working for
Mechanical the Commonwealth Youth
Engineering Games, 2008, Pune as a Project
Officer, Recruitment/ Workforce.
However, her interview
assessment form read as follows,
“Due to her rich experience, she
may be paid INR 5,000 over and
above the base of the Directors
salary”. Thus for just 7 months
relevant work experience, she
was not only appointed as a
Director, but also awarded a
higher salary at the Director’s
grade at the time of appointment.
Referred to OC by Sangeeta
Welinkar, JDG, Image and Look,
per application form.
Per minutes of interview she was
selected via walk in interview in
September 2009. However, as
per minutes of Selection
committee held on 15 January
2009, the committee had agreed
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Fifth Report of HLC – Organizing Committee
A.34Name of A.35Recruited as / A.36Type of A.37Remarks
the Functional Area Criteria
employee
to the recommendations of EY/
EKS workforce consultants for
appointment of Pune staff in OC,
which included Uma Badve, to be
appointed as Project Officer,
Administration and Volunteer
Centre.
Appointed as DDG in Chairman’s
A.44Ram A.45DDG, Legal A.48Criteria
Secretariat on 1 December 2007,
Mohan A
A.46Salary: INR
he was also appointed as DDG,
83,190 p.m (core)
Legal
A.47Qualification: - In February 2008 and ,
Post Graduate promoted as ADG, Legal in
Diploma in June 2010 though he does
Personnel not have any professional
Management qualifications in law
Educational qualifications are:
-Arts Graduate from University of
Delhi
- Post Graduate Diploma in
Personnel management
-
Elow Loli appeared for the
A.49Elow Loli A.50Admin A.53Criteria
interview along with 2 other
Assistant (AA) B
candidates.
CEO’s Office
He was given higher ratings in the
A.51Salary:
interview assessment form as
INR27,000 p.m
compared to the other
A.52Qualification: candidates, even though he had
B.Com (Hons) the least marks and no work
419
Fifth Report of HLC – Organizing Committee
A.34Name of A.35Recruited as / A.36Type of A.37Remarks
the Functional Area Criteria
employee
experience as per application
form. The other 2 candidates had
minimum one years work
experience as per their CV.
27.10 Improper selection process
27.10.1 From discussions with various OC employees and review of personnel records, it was
observed that the most commonly followed methods of recruitment were ‘walk in’
interviews. As explained in the course of such discussions, under this process, candidates
with similar experience and credentials were bunched together and interviewed by a search
committee. On the basis of ratings provided by the search committee some of the
candidates would be selected and offers of appointment made to them.
27.10.2 It was observed, however, that in a number of cases, this process was not followed through.
There were only one or two candidates who were ‘presented’ before the search committee
and there was no benchmarking of these candidates against others. Of the sample files
reviewed, 49 instances were noted where only one or two candidates were interviewed by
the committee779 .
27.10.3 Based on the available records and review of significant number of recruitment cases, it
appears that the terming of these interviews as “walk in” may have only been a formality to
provide legitimacy to a recruitment decision that had already been made.
27.11 Creation of documents
27.11.1 Two instances were noted, where it appeared that search/selection committee documents
appeared to have been ‘created’ to apparently ‘regularize’ appointments of candidates. The
details of these cases are as follows:
779
Please refer to Annexure 27.101 for the details on these instances and Annexures 27.102 – 27.141 for relevant pages
from Personal Files
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Fifth Report of HLC – Organizing Committee
Re-using selection committee minutes
27.11.2 The following observations were made in the case of Nachiketa Kapur
The search committee minutes are titled “Minutes of the Selection Committee Meeting
dated 8th December 2008780”
The minutes list 5 candidates which do not include Nachiketa Kapur
The minutes then say “in continuation of the above meeting the committee took another
round of interviews on 16 July 2009…..” which is 7 months after the previous meeting.
Mr. Nachiketa Kapur was recommended for selected in the meeting on 16 July 2009
based on the evaluation of the search committee781.
780
Please refer to Annexure 27.142 for Minutes of the Search Committee Meeting Dated 8 December 2008
781
Please refer to Minutes of Meeting dated 16 July 2009 in Annexure 143
421
Fifth Report of HLC – Organizing Committee
27.11.3 In this regard, it is pertinent to note that as per the original meeting held in December 2008,
Lt Col Shailendra Benjamin had already been recommended for appointment as Director
Protocol.
422
Fifth Report of HLC – Organizing Committee
27.11.4 It this appears that the selection committee formed to evaluate Nachiketa Kapur was a
sham as on that date, a previous appointment had already been made and paperwork was
created to provide legitimacy to his recruitment by a new selection committee. Also please
refer to paragraph 1.5.1 for discussions on the appointment of Mr. Nachiketa Kapur even in
view of this “adverse background”
Wrong benchmarks facilitating inconsistent comparisons
27.11.5 In the case of Avny Lavasa who was appointment as a Project Officer, the following were
noted782.
The selection committee was constituted under the approval of the “chairman”
The Committee was formed to interview candidates for 6 posts including various
Directors, ADG and DDG
Of the 17 candidates invited to “appear before the committee” only 16 came for the
interview
It is mentioned that “additionally, in view of an urgent need to activate the functions
related to the volunteer programme, the committee after several enquiries got an
application of Ms Avny Lavasa who was also interviewed by the commitee….” The
committee recommended her name for appointment of APO (Volunteer Programme).
27.11.6 It is not clear from the above how a committee formed to recruit Directors and above ended
up evaluating the recruitment of an APO. Further, it is also not evident why this candidate
was not evaluated against other APO candidates. It may be mentioned that as set out in
paragraph 1.4.2, Ms Avny Lavasa was related to an “influential person” outside the OC and
hence the possibility that documents were created to provide legitimacy to the recruitment,
cannot be excluded.
27.12 Extraordinary increments in remuneration
27.12.1 Annual increments provided to employees were on average equivalent to 10% of the basic
salary in line with the annual assessment by the Head of FAs.
782
Please refer to Annexure 27.144 for a copy of the Search Committee Meeting minutes
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Fifth Report of HLC – Organizing Committee
27.12.2 In 4 instances out of the sample, it was noted that employees were granted a much higher
increment without adequate supporting/ rationalization. Examples of instances noted are
set out below783.
Table 27.9:
A.54Name of the A.55Designation/ A.56Remarks
employee Functional Area
Appointed as APO on 7 May 2007 in
A.57Deepali Kapoor A.58APO,
Workforce functional area at a core salary
Volunteer
of INR 20,000 per month.
Programme
Training 25% increment in core salary granted on 1
February 2008 within a year of
A.59Salary: INR
appointment.
34,375 p.m (core)
Further, 25% increment granted in October
A.60Qualification: 2008 bringing the core salary to INR 31,250
MBA per month. Subsequently, another
increment of 10% on core salary was
awarded in November 2009, taking the per
month core salary to INR 34,375.
A.61
Appointed in OC on 4 January 2010 at a
A.62Priya Singh Paul A.63ADG,
core salary of INR 75,000 per month.
Communication
66% increment in core salary awarded on
A.64Salary:
19 February 2010 taking the core salary to
INR1,63,500 p.m
INR 125,000 per month.
A.65Qualification: Interview assessment form, educational
MA in Mass qualifications, relieving letter from last
Communication organization not found in personal file.
A.66
Appointed on 2 February 2009 at a core
A.67Vikrant Bhuptani A.68Director,
salary of INR 48,750 per month. Increase
783
Please refer to Annexure 145 for the details on these instances and a quantification of these increments on their
remuneration. Relevant Pages from the Personal Files are attached in Annexures 27.146 – 27.149
424
Fifth Report of HLC – Organizing Committee
A.54Name of the A.55Designation/ A.56Remarks
employee Functional Area
Image and Look in core salary awarded in December 2009
taking core salary drawn to INR 58,750 per
A.69Salary:
month.
INR64,375 p.m
Part of the Commonwealth Youth Games
A.70Qualification:
at Pune, where he has worked with
Post Graduate
Sangeeta Welinkar, JDG, Image and Look.
Diploma
Sangeeta Welinkar has written a
A.71 recommendation letter for Vikrant
suggesting an increment in core salary by
at least INR 10,000 per month which is a
20.5% increment over last salary drawn.
It was also observed that there were no
supporting documents in his personal file
supporting his selection for appointment in
OC.
A.72
Appointed as Project officer on 2 February
A.73Maneck Kotwal A.74Project Officer
2009 based on recommendation of search
and subsequently
committee.
promoted to
Director He was part of the Common Wealth Youth
Games at Pune.
He was given promotion to Director within
A.75Salary: INR
6 months of his joining the OC along with
56,250 p.m
an increment of 29.41% per month core
A.76Qualification: salary. Thus core salary increased from
Diploma in INR 42,500 to INR 55,000 per month.
Communication A.78
Management
A.77
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Fifth Report of HLC – Organizing Committee
27.13 Unjustified/ adhoc promotions
Absence of a promotion policy under the Financial and administrative guidelines784
27.13.1 The Financial and administrative guidelines of the OC do not contain any provisions with
respect to promotion policy for Staff on contract/ Direct recruits. The guidelines only:
Provide for an annual performance assessment of such personnel by the Heads of
Departments; and
Such employees had to serve a probation period of 1 year (later revised to 6 months for
confirmation) and their continuation with the OC would depend upon their “work,
performance and conduct” as assessed by the Heads of Department.
Promotions were pre-decided and was an instrument of rewarding selected few based on
patronage
27.13.2 As informed, there were 67 cases (3.5% of total employees as on September 2010) where
promotions were made during the tenure of the OC. The Financial and Administrative
Guidelines of OC did not contain any provision of promotion or any formal promotion policy.
A majority of the promotions (approximately 70%) were at the position of Director and
above. A summary of promotions by designation is set out in the table below.
Table 27.10:
Designation No. of Promotions
Joint Director General 6
Additional Director General 7
Deputy Director General 17
Director 17
Project Officer 14
Assistant Project Officer 6
784
Source: OC, 2010, Financial and administrative guidelines with amendments as approved by the Executive board in its
meeting held