To combat corruption, Karnataka govt caps tender premium at 5%; introduces software to clear bills

In a fresh set of moves aimed at dousing the corruption fire, the Basavaraj Bommai administration has fixed tender premiums (profit-making) at 5% and all public procurement agencies have been asked to put in place a software-driven system to clear bills.

The Finance Department, which reports to Chief Minister Basavaraj Bommai, has issued two circulars carrying instructions, some of which were demands made by the Karnataka State Contractors Association, a body that went public with the '40% commission' charge.

The circulars came days after the government constituted a committee to vet tenders before they are floated.

Tender premium refers to the amount of money a bidder quotes that is higher than the estimated cost of a project. The Finance Department noted that many procurement entities sanctioned tenders with bids 10% or more than the estimated cost.

"In a 2002 circular, the government had said that it preferred cancelling tenders if bidding for a particular tender exceeded 10% of the total cost," the circular noted, while capping the tender premium at 5%. "If any agency has to approve a tender exceeding the 5% tender premium, it should seek clearance from a higher board by submitting written reasons for the excess cost."

This means a tender of Rs 100 crore can be cleared for a maximum bid of Rs 105 crore.

Also, the Association had asked the government to scrap the package system of tender contracts. This refers to breaking up a big project into packages. The government, however, has decided that no package can have works worth more than Rs 1 crore at the taluk-level.

And, the circular cited guidelines of the Public Works Departments that "bills have to be cleared on the first come first serve basis" and "measures should be taken to strictly clear bills on seniority".

The circular also directed officials to form tender inviting and approving authorities at the taluk, district and state levels as per Section 9 of the Karnataka Transparency in Public Procurement (KTPP) Act.

"As per the Rule 21 of KTPP rules, tender should be awarded to the bidder with the Lowest Evaluated Price (L1). There are no provisions to grant works to anyone except L1," the circular pointed out. In case the L1 refuses to take up the tender or is disqualified from taking up works for any reason, the Earnest Money Deposit (EMD) of the contractor will be forfeited and fresh tender has to be invited, it said.