Indian Embassy in Washington DC awards annual maintenance contract to a dubious firm, pays Rs 136.55 lakhs

New Delhi: The Comptroller and Auditor General (CAG) of India  has found that the Embassy of India, Washington DC, has made  irregular payment of Rs 136.55 lakh by awarding annual maintenance contracts of IT equipment to a dubious firm.

The auditor also learnt that there was no credible evidence of service delivery for which payment was made indicating weak internal controls.

General Financial Rules (GFR) 2005 stipulate that invitation to tenders by advertisement (open tenders) should be used for procurement of goods or services, the cost of which has an estimated value of Rs 25 lakh or above. Advertisement should be published at least in one national daily and the website of the organization. Audit scrutiny of records of Embassy of India (Mission), Washington DC for the period January 2014 to February 2015 revealed (March 2015) that the Mission did not invite open tenders in the following two cases though the value of work was more than Rs 25 lakh in each case. Further, in both the cases the work was awarded and the payment was released to a firm, whereabouts of which were not verifiable:

Annual Maintenance Contract of two servers and 16 desktops at Consular Section: The Mission sent proposal (February 2012) for annual maintenance of two servers installed in Consular wing (HP Proliant ML370G5) purchased in August 2007 to the National Informatics Centre (NIC), New Delhi which advised (March 2012) for onsite comprehensive warranty of servers. It was noticed in audit that the Mission simply obtained quotation from three firms viz., M/s Advance Technology Concepts (M/s ATC), M/s Geeks Everywhere and M/s Geeks Rx instead of inviting open tenders and constituting tender evaluation committee as per provisions of GFR. Audit observed that no bidding document was sent to the vendors specifying the requirements of the Mission. Audit also found from the quotations obtained by the Mission from the above firms that two firms were having the same address. Internet search in respect of the third firm in Audit revealed that the firm by this name did not exist at the address mentioned in the quotation. The amount of US$ 4,47011 quoted by M/s ATC was considered lowest and the contract was awarded to them on 23 April 2012.

Audit further noticed that even though M/s ATC was an IT Company, it neither had any website of its own nor could it be contacted through email printed in the invoices received. There were no copies of certificate of incorporation, Federal tax id number, IT security certification, qualification of the service engineers of M/s ATC. The sign-in sheets submitted by M/s ATC routinely indicated two visits per month to the Mission without details or signature of the service engineer who actually visited the site. There were no records of entry details of service engineers of M/s ATC in the Embassy premises. In the absence of evidence of procedure followed for rendering requisite services by M/s ATC, services offered by them remained unverifiable. An amount of US$1,56,450 (Rs 97.94 lakh12) was paid to M/s ATC (May 2012 to March 2015) towards the AMC of two servers and 16 desktops. The price of two servers purchased in August 2007 was US$6,118. Thus the present cost of annual maintenance of servers works out to 705 per cent 13 of the price of the servers which is exorbitant. Further, it was noticed that Ministry had accorded sanction in August 2012 to incur an expenditure of US$ 53,640 for AMC for two servers and 16 Desktop computers for one year i.e., 2012-13.

However, the Mission continued to incur unauthorized expenditure of US$4,470 per month for the period April 2013 to March 2015 totalling US$1,07,280 i.e. Rs 67.16 lakh without the sanction from the Ministry (November 2015).

Procurement of the equipment for connectivity (CISCO ASA5510) and onsite support

National Informatics Centre (November 2012) issued guidelines for automatic Black List-updation for decentralized visa issuance sites wherein necessary equipment for connectivity to Indian Missions in Immigration, Visa and Foreigner’s Registration & Tracking (IVFRT) Project were to be procured on urgent basis by the Missions with five years comprehensive warranty and onsite support. Audit observed that the Mission obtained quotations from three firms viz., M/s ATC, M/s New York Business Systems and M/s IGH Digital for procurement of the equipment for connectivity (CISCO ASA5510) and onsite support without following the required open tendering process for obtaining and evaluating bids though the value of procurement of service was US$1,57,270.86 i.e., Rs  98.45 lakh. There was no record to indicate the date on which the quotation from M/s ATC was received. The contract was awarded (November 2013) to the lowest bidder M/s ATC for supply of equipment for Rs 11.77 lakh (US$18,670.86) and for onsite support at the rate of Rs 1.43 lakh (US$ 2310) per month for five years. Audit also observed that Mission had paid Rs 11.77 lakh towards purchase of equipment in September/October 2013 and Rs 26.84 lakh towards onsite support from November 2013 to March 2015. There were no sign-in sheets for the services rendered and no entry details of service engineers of M/s ATC in the Embassy premises for carrying out onsite support of the CISCO systems.

In the absence of these details the maintenance service rendered by M/s ATC remained unverifiable. It was further noticed in audit that the Ministry of Home Affairs had given sanction for onsite support for one year from April 2013 to March 2014 and no further sanction had been issued by the Ministry after 31 March 2014. However, the Mission incurred an expenditure of Rs 17.51 lakh for onsite support after March 2014 to March 2015 without any sanction which was unauthorized (November 2015). In response to above audit observations, Mission stopped the payments to M/s ATC for both the contracts after March 2015.

As regards audit observations of the firm having no proper email id, the Mission accepted that there had been no response from that firm since March 2015. Mission further stated (October 2015) that at the instance of audit it had constituted a standing committee for purchases and issued strict instructions for adherence of GFR provisions and CVC guidelines. As regards audit observation on exorbitant payments to M/s ATC, the Mission stated that it was not technically equipped to evaluate the pricing of the contract and that the contract was awarded on the advice of NIC. The reply is not acceptable as only technical advice was sought from NIC and the agency was not involved for evaluation of quotations. As regards audit observation on lack of evidence for service delivery, the Mission replied that one local employee who was the point of contact for the vendor failed to make log entries while taking the vendor inside the Embassy. After the matter was pointed out in audit, the Mission has outlined the security protocols for adherence.

Further, the Mission could not provide the details of service engineer/s who visited the Mission for maintenance and certificate of incorporation, Federal tax id number, IT security certification of M/s ATC. Existence of the firm to which payments were made and delivery of services therefore, remains unverifiable.

“Thus, the Mission failed to follow transparent, competitive and fair procurement process as required under GFR provisions which resulted in award of contracts to a dubious firm and consequent exorbitant payments of Rs 136.55 lakh. Further, the expenditure of Rs 84.67 lakh incurred on AMC of servers, desktops and networking equipment was not sanctioned by the Ministry and hence unauthorized”, the CAG report states.