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

A three-member committee constituted by Lt Governor Anil Baijal has recommended that a Rs 3412-crore, 12-year annual maintenance contract (AMC) for the proposed 1000 low-floor buses awarded by the Delhi Transport Corporation (DTC) be scrapped over “procedural lapses”.

In its report, the committee has stated that the tendering process for the purchase of the buses “suffers from no major infirmity”, however, there have been “deviations from the process” in case of the tendering for the AMC. “While separate bids for purchase and AMC can be justified with a view to get greater competition and a larger number of bids, the efforts made to get more bids is not apparent”.

The committee, formed on June 16, had principal secretary (transport) Ashish Kundra, principal secretary (vigilance) KR Meena and former IAS OP Agarwal as members. Senior Delhi BJP leader Vijender Gupta, who has been demanding a CBI probe into the issue, had questioned the presence of Kundra in the committee since the official reports to Transport Minister Kailash Gahlot.

The DTC had floated separate purchase and AMC tenders for the buses. Initially, it was decided to award a Rs 4265 crore contract for AMC of 1250 buses, however, the number was later reduced to 1000 buses. The purchase order was given to JBM auto and Tata Motors on a 70:30 ratio. The maintenance contract also went to the vehicle manufacturers “as they were expected to mandatorily bid for AMC as well”. However, both the purchase and the AMC were put on hold on June 12.

The committee pointed out that the eligibility criteria in the case of the AMC tender were “too restrictive” and the rates were “far higher” than the ones in the contracts previously floated by the corporation.

“In fact, the eligibility criteria do appear restrictive and defeat the purpose of splitting the bids. The process of discounting for a longer duration contract was not undertaken and only a total cost evaluation was done,” the committee said in its report to the L-G.

On the question of irregularities that vitiated the tendering process, the committee said that since the DTC can only buy low floor CNG buses due to court orders, it has to make do with the market that has very few manufacturers. “Yet, if these deviations had become necessary, DTC should have ensured that they did some kind of reasonableness test of the rates for AMC, especially since the rates were far higher than what they had in earlier contracts. To say that they did not have the expertise is not a good enough response,” the committee said.

“The committee, prima facie, did not come across any material to impute criminal misconduct attributable to any public official. There were only procedural lapses apparently arising out of a bonafide decision-making process. However, a greater effort for understanding the market and a greater degree of due diligence in assessing reasonableness of bids was required compared to what seems to have been demonstrated,” it added.

The Indian Express had reported on June 18 that the DTC’s decision that the AMC contract would kick in before the expiry of a three-year warranty period already embedded in the purchase order for the buses had faced questions during the meeting of the public transporter’s board in November last year.

The committee underscored that the time was right to “take a hard look at comprehensive reforms of the DTC”. The Delhi government had earlier announced that after the induction of the low-floor buses, the total fleet of DTC0 buses currently, which has 376 will increase to 4760. The DTC’s last purchase of new buses was in 2008.

According to the records of the November 27, 2020 DTC board meeting, ‘It was pointed out by the board that since all the buses were covered under the warranty for a period of three years or 2,10,000 km, whichever is earlier…the AMC should start after the warranty period.”

“In this regard, it was clarified that in the AMC rates quoted by the bidders, the items covered in the warranty include only major assemblies/sub-assemblies like CNG engine, automatic transmission, front axle, rear axle, etc. The warranty of the bus does not include the cost of consumables like spark plugs, H.T. cables, filters, fan belts, lubricants, coolants, batteries, tyres, brake pads, brake drums, brake liners, etc required for regular maintenance during operation of buses,” the minutes of the November 27 meeting state.

Incidentally, the warranty conditions stipulated in the tender inviting bids for the buses had stated that for the first three years the companies delivering the buses “will be responsible for any defect or failure of buses or equipment provided in these buses due to defective design, material or workmanship, for a period of three years or operation of buses up to 2,10,000 Kms…The rectification/ replacement of failed components/ equipment will have to be undertaken by the Contractor free of charge at purchaser’s (DTC) workshop/ depot.”