CAG's CWG Audit Report - Chapter - 15 (2011)

8/6/2019 CAG's CWG Audit Report - Chapter - 15 (2011)

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c : : :wl-e..::I:uWorkforce and Other Supporting Activitiesof the Organising Committee

We found serious deficiencies in the award of the workforce consultancy contract to aconsortium of E&Y and EKS. The tendering process was clearly tailored to favour EKS.There were several deficiencies in the contractual clauses, which tended to favour theinterests of the consultant, as well as in the execution of the contract.Wefound that the DCmanaged the workforce in an arbitrary and ad hoc manner; leavingample scope for patronaqe, favouritism and nepotism in the appointment and promotionof officials. Security and reference checks were not carried out for most employees I andcertain employees, whose past records should have rendered them unfit for appointmentin the DCI were nevertheless appointed. Further; the DCwas grossly understaffed till 20091but was grossly overstaffed by September 2010 (with this overstaffing being regularisedpostfacto by the EB).Regarding the Accommodation Functional Areal we found arbitrariness in hiring ofapartments for DC's consultants and employees and one case of potential conflict ofinterest in hiring flats. DChad nominated Ashok Hotel as the flagship hotel for CWG-2010.Though between 155 to 399 rooms were vacant in Ashok Hotel on a daily basis, DC wasinexplicably unwilling to accommodate technical officials in the same hotel where guests/officials were accommodated, and booked accommodation for them in 11other hotels,resulting in infructuous expenditure of Rs.l.15 crore.Wefound 492persons who had not received security clearance were incorrectly listed bythe Accreditation Functional area in the data for the Integrated Security system, whichindicated that the accreditation system was not followed strictly. We also foundprocurement of 1.5 lakh lanyards' at a cost of Rs. 0.68 crore with an inexplicable fireretardant requirement of 800 degrees Celsius.Contracts for venue cleaning services were awarded irregularly I using a cluster-basedapproach, to just two contractors. Restrictive eligibility criteria were applied in a biasedmanner. 8 out of 9 packages went to A2Z Maintenance and Engineering ServicesI whichwas also engaged by DCfor office automation services.Although a separate logistics contractor was hired (with VIK sponsorship], most of theFunctional Areas made separate arrangements. This resulted in information on thelocation and distribution of assets not being available with the DC. The ProcurementFunctional Area was also equally underutilised.Wefound undue favour in awarding the insurance brokerage contract to Marsh/ Trinity,as also in the selective clauses for appointment of insurance companies (which favouredthe interests of Marsh/TrinitYI rather than the DC).

1 A lanyard is a rope or cord generally worn around the neck to carry identity cards and similar objects.

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Chapter 15-Workforce and Other Supporting Activities of the OrganisingCommittee

15.1 Workforce15.1.1 Appointment of Workforce

consultantTo build capable and well-managedworkforce and to define transparent,implementable and appropriate humanresource policies, DC signed an agreementin March 2008 with the consortium of Ernstand Young (E&YS)Pvt. Ltd. and EventKnowledge Services (EKS)for workforceconsultancy services at a cost of Rs. 22.36crore.15.1.1.1 Selection of consultantAs in the case of other contracts with EKS(refer Chapter 9, Para 9.1), we found seriousirregularities in the award of this contract,with clear intent to favour EKS: Global tendering procedures were notfollowed. Instead, in May 2007 DC

floated an EOIwith restrictive clauses

with regard to an annual turnover of Rs.50 crore in foreign currency, andexperience of providing advisoryservices to at least two multi-sportevents of the stature of Olympics, AsianGames or Commonwealth Games.

Only 2 out of four bidders qualified; EKSresponded as an independent entity, andwas found ineligible.

At the RFPstage, DC relaxed the criteria'and issued RFPto three agencies viz.Price Water Coopers, Ernst and YoungPvt. Ltd. and Homes Glen Institute ofTafe, Australia. Only two responded withbids, both of which were technicallyqualified. EKSwas allowed to form aconsortium with E&Y after the EOIevaluation, which ensured its technicaleligibility; the other bidder was PriceWaterhouse Coopers.

2 One year experience in advisory capacity for workforce

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OCtook recourse to the RFPstipulatedcondition of considering only the"technically superior" bidder, andopened only one financial bid - that ofEKS-E&Yconsortium, which wasawarded the work in March 2008. Thisclause in the RFPis against the extantCVCguidelines and GOI rules, and wasevidently put in to ensure that OC couldpredetermine the winning bid.

15.1.1.2 Faulty contract with consultantWe found that the contract with EKS-E&Yincluded many clauses which weredetrimental to the interests of OC: Absence of schedule for delivery of

services: While the contract had adetailed list on deliverables from OC itdid not indicate the deliverables fromthe contractor and associated timelines.

Wasteful expenditure of Rs. 0.31 crorefor compensation structure of OCemployees - The consultant's report oncompensation structure, costing Rs.0.31crore, was redundant, since OC alreadyhad an EBappraved compensationstructure in place since January 2008.Further, OC's compensation structurewas not altered in the light of theconsultant's report.

Preferential terms of engagement forthe consortium member: Instead ofdealing with the lead partner the twopartners of the consortium were paidseparately and in different currencies asper the contract. Rs.7.23 crare was tobe paid to EKSin foreign currency.Separate and higher out of pocketexpenses were also allowed for EKS.They were allowed Rs.2.20 crare for out

of pocket expenses as against Rs.0.69crare to E&Y the lead partner.

Full payment scheduled before thecompletion of work: While the contractwas till 15 November 2010, the finalpayment to the consultant was to bemade by April 2010.

15.1.1.3 Irregularities in executionWe noticed several regularities in theexecution of the contract: Non utilization of output documents:Although the consultant had submitted

73 policy documents (includingFunctional Area operational plans), wefound no evidence of their actual use.Most FAswere not even aware of thetimelines prescribed in theseoperational plans.

Release of payment due tomisinformation: At the time of releaseof a payment instalment In June 2010,when the CEOinquired aboutterminating the contract of EKS-E&Y hewas misinformed by Shri Abrar Hussain,DDG Establishment that the contractwas to end in July 2010 and 90 daysnotice is required to terminate thecontract. He therefore, recommendedthat there was no option but to releasethe payment, which was done. However,for inexplicable reasons, the nextinstalment was not released to EKS.

Non revocation of bank guarantee:Though the consultant failed to deliverthe "Post Commonwealth Games DelhiReport" and two HR reports (costing Rs.2.82 crare as per the commercial bid),OC did not invoke the performance bank

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Chapter 15 - Workforce and Other Supporting Activities of the OrganisingCommittee

guarantee of Rs. 2.23 crore, which wasvalid till 15 November 2010.

Short deduction of lOS amounting toRs. 3.06 Crore: OC deducted income taxof US$ 2.11lakh @ 10 per cent, insteadof 42.23 per cent as applicable to aPermanent Establishment {PE}. Thisresulted in short deduction of incometax of Rs. 3.07 crore.

15.1.2 Arbitrary and Ad hoc Workforcemanagement

While the General Organizational Plan of OCestablished the management structure ofthe OC and had timelines for hiring of staffclearly laid out, we found that the OCwentabout workforce management in anarbitrary and ad hoc manner, leaving amplescope for patronage, favouritism andnepotism.

Figure 15.1 - Excess Appointment of Staff at DC25002000

. . .Q)3 : 15000Q.!:IU 1000~

5000

_ Sanctioned- Actual

261

2007-08 2008-09y A

15.1.2.1 ExcessAppointment of StaffTill 2009, OC lacked critical manpower asper its requirements. However, bySeptember 2010, it had 2066 personnel inposition, against the sanctioned strength of1151. This was regularised post facto by theEBin a meeting held just 12 days before theGames. Incidentally, the proportion ofexcess staff at higher levels wassubstantially higher. There were 40 excesspersonnel at DDG level where sanctionedstrength was 9 and 5 were excess at JOGlevel where sanctioned strength was 2.Further, the posts of DG, JOG,and COOwere equated, facilitating distribution of

2066

1151

E2009-10R

2010-11

perquisites and higher salaries to a largernumber of officials.15.1.2.2 Irregularities in the appointment

of PersonnelThe maintenance of personnel files wasextremely poor, and no files weremaintained in respect of the Chairman,Secretary General, Vice Chairman andTreasurer. Our scrutiny of 191 personnelfiles in the rank of Director and aboverevealed several irregularities: Identification of requirements: The

stipulated process for identification ofrequirements for subsequent

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Chapter 15 - Workforce and Other Supporting Activities of the Organising Committee

recruitment was rarely followed.Further, we could not find positionbriefs, job profile and desiredqualifications in our sample of personnelfiles.

Competitive sourcing of candidates:While OC appointed three recruitmentagencies" for sourcing of candidates, lessthan 5 percent of OC's staff was hiredthrough them. Newspaperadvertisements for recruitment werealso rarely followed. We found that in167out of the 191sampled personnelfiles, only one person was consideredfor the particular post and selected.

Appointment of personnel not havingthe requisite qualifications: EKS-E&Yprepared job descriptions (with roles

and responsibilities), and requirededucational qualifications andexperience for each unfilled position asof 2008. However, OC did not take noteof these job descriptions, and appointedpersons without the requisitequalifications and experience. Wenoticed incomplete or missingeducational and experience certificatesin 175out of 191 personnel files.

Security and Reference Checks: Wefound details of security/ vigilancechecks and reference confirmations inonly 18 and 2 files respectively out of191 files. An illustrative list ofemployees, whose past records shouldhave deterred their appointment in theOC, is given below:

Shri VKVerma: In July 2008, after resignation of the then DG-OC,OCappointed Shri V.K.Verma asDirector General on nomination basis. There was no advertisement or interview for the post, andonly an unsigned single page bio data of Shri Verma was available in the personnel file. Even thedates of employment were not mentioned in the bio-data. While it was indicated that Shri Vermabelonged to the Indian Railways Service of Mechanical Engineers (IRSME), there isno informationregarding his retirement, NOC from his former cadre and re-employment information. Weascertained that there was a vigilance inquiry against Shri Verma, while he was working asCommercial Director in Air India, where he was "warned" for indiscretion and error of judgment.This information was not available in his personnel file.

Shri T.S.Darbari :Well before his formal appointment with OC, Shri Darbari was, in August 2007,part of the evaluation committee for bids of the workforce consultants and was appointed asJointDirector General (Revenue, Marketing and Chairman's Secretariat) in January 2009. There was noevidence of any interview or application from Shri Darbari, and Chairman, OCwas kind enough towrite to his private sector employer for his early release on the very day of his selection by thesearch committee. OC took no action on the numerous complaints received against him fromvarious sources (including MYAS) from February to April 2010. Shri Darbari's services waseventually terminated in August 2010 on corruption charges.

Shri Nachiketa Kapur: Shri Nachiketa Kapur was appointed as Director, Protocol and MediaRelations in July 2009 and further promoted to the rank of DDG. The official had been rejected forthe post of OSDto Minister of State (MOS) for Women and Child Development in February 2008 bythe Appointment Committee of the Cabinet (ACC),which stated that he should not be consideredfor any sensitive posts in future. OChowever employed him, without any verification.

ABC Consultants, Ma Foi Management Consultant, and Team Lease-People Strong Consort ium



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15.1.2.3 Non Disclosure of relatedemployees:While there were no formal records ordisclosures by employees of their closerelatives working in the OC (despiteprovision for such disclosure), OC providedus a list of 35 such cases who had one ormore relatives working in 0C. Such a largenumber of cases, which are easilyidentifiable by OC (without formaldisclosure records), indicates risk offavouritism / nepotism in appointments.15.1.2.4 Fixation of salaryWe found that employees wereindiscriminately granted higher pay at the

time of appointment. OC did not follow theGol rules for considering the pension ofretired Government officers for deduction,while fixing their pay at the time of re-employment.15.1.2.5 Unadjusted advances fromemployeesWe found that employees were allowed toleave the organisation without adjusting theoutstanding loans and advances. Apartfrom a serious internal control failure thisindicated the work environment ofpatronage.

Table 15.1 :Advances outstanding against Employees at the time oj relievingName of the Official Designation Functional Area Loan/advance outstanding afterrelieving from OCMr. Sujit Panigrahi ADG Technology 15,000Vijay Kumar Gautam COO 83,647B.B. Kaura JOG Protocol 69,313Brig Sunil Arya ADG Technology 50,000M. Jeychandran ADG Finance 50,49,652SanjayMohindroo DDG Technology 67,58,578

15.1.2.6 Promotions in the OCGiven the temporary nature of the OC,there was no provision for grant ofpromotions. Nevertheless, OCgrantedpromotions (multiple promotions in someinstances) in an arbitrary and ad hocmanner to some of its employees. Wefound that this was apparently used as aform of patronage: Performance appraisal, which was

supposed to be the basis for promotion,was not available in many cases.

There was no criteria, time frame orprocess for grant of promotions.

7 persons were granted two promotionsin short span of 1-3 years, of which 5were staff associated with CYG-2008,Pune, Chairman Secretariat and DGSecreta riat.

Promotions were granted to certainofficials, despite low ratings by theworkforce consultant of these officials oneducational qualification and experience, assummarised below. Some officials were alsopromoted, despite less than satisfactoryperformance of their functional areas.



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Chapter 15 - Workforce and Other Supporting Activities of the Organising Committee

Table 15.2 :Staff promoted despite low ratings oneducational qualifications and experience

Name of the Official Designation Functional AreaMr. Ram Mohan DDG Legal and Chairman SecretariatDr. G.S. Anand DDG Venue Development and overlaysDr. G.S Bawa DDG Sports and Venue DevelopmentMr. Abrar Hussain Director WorkforceMrs. Indu Anand" PO Ceremonies

15.1.2.7 Cases of Gross Irregularities in Workforce Management

Shri Vijay Kumar Gautam: In September 2007, Shri Vijay Kumar Gautam, lAS (Maharahstracadre) was appointed to the post of COO, which had overall responsibility for the delivery of theGames in addition to certain functional areas. Despite complaints by his reporting officer (ShriVK Verma, DG) about his performance, Chairman OC did not allow him to be replaced. ShriGautam was allowed to proceed on leave from December 2009 for the next 10 months(including the actual Games period) and was relieved from the OC w.e.f. 31 October 2010,while still on leave. Shri Gautam's leave applications were addressed directly to Chairman, OCand not to the DG. Despite his leave spells never being formally sanctioned, he was paid fullsalary for the period.

Shri Manish Kumar: There were several irregularities in appointment and functioning of ShriManish Kumar, DDG Press Operations. Details are already discussed in para 14.1.1

Shri Sanjay K. Mahindroo: Shri Mahindroo was interviewed for the post of Director(Information Services and Network) in May 2009, but appointed as DDG (Information Services-Technology). Approval was obtained for a salary of Rs.60,OOO,but Shri Mahindroo'sappointment letter indicated his salary as Rs. 1,00,000 and his post as DDG(Technology/Marketing).

Wing Commander {Retd.} Rajiv Mohla : Wing Commander Mohla was interviewed in April 2010for the post of DDG (Chairman Sectt.), when he was also holding the post of Secretary in DDA(Sports Complex). He was appointed on 28 April 2010 as DDG (Chairman Sectt.), but continuedto hold both the posts till October 2010.

Ms. Sangeeta Welinkar: Ms. Welinkar joined the OC during CYG-2008, Pune as a coordinator.She was then appointed as DDG for 'Image and Look' in January 2009 by upgrading the post(without EBapproval), and was promoted five months later as ADG 'Image and Look' with theapproval of Chairman. We did not find Ms. Welinkar's qualifications and experience matchingwith her job profile.

She was granted two promotions despite the above low rating



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15.2 Accommodation15.2.1 OverviewThe Accommodation Functional Area wasresponsible for: providing suitable accommodation to

OC employees and consultants as pertheir contracts; and

booking of hotel rooms and otherarrangements for delegates and officials.

15.2.2 Hiring of FlatsOC hired 38 apartments in different parts ofNCRDelhi for its consultants and employeesat a cost of Rs.4.39 crore as rental charges.This hiring was done in an arbitrary mannerwithout any advertisements and prescribingentitlements in terms of maximum rent,area etc. Inexplicably, the selection ofapartments was done by Shri Lalit Bhanot'soffice, despite the existence of a specificFunctional Area for accommodation relatedissues. Further, we found instances of hiringof multiple accommodation for the sameperiod and idle accommodations, withavoidable expenditure of Rs.0.12 crore.Further, as of March 2011, security depositworth Rs.0.60 crore for these flats was stilllying with the property owners, thoughmost contracts had ended in October 2010.

Flats from SalwanEducational TrustIn November 2009, ac entered into anagreement with Salwan EducationTrust for renting five flats for whichac ultimately paid Rs. 0.33 crore.While no details for selection of theseflats were available on record, we

found that the entire process wasdone through Shri Lalit Bhanot'soffice. There is a distinct possibilitythat this process was conductedthrough Shri Sushil Salwan", a legaladvisor of ac pointing to a potentialconflict of interest. Despite knowingthat these flats were lying vacant for asignificant part of the lease period,ac continued to retain them and payrent, resulting in expenditure ofRs0.21 crore towards rent onunoccupied flats.

15.2.3 Booking of hotel accommodationThe Ashok Hotel was nominated as theFlagship Hotel for the CWG 2010 and wasbooked exclusively for accommodatingguests/officials from 29 September 2010 to16 October 2010 at a cost of Rs12.01 crore.Of the 480 rooms provided by Hotel Ashokas many as 155 to 399 rooms remainedvacant on different days during the periodof reservation. During the same period, OCbooked accommodation for InternationalTechnical officers (ITOs) and NationalTechnical Officers (NTOs) with 11 othershotels at a total cost of Rs3.53 crore. As theguest arrival list was firmed up by then, OCcould have utilised at least 100 rooms inflagship hotels to accommodate theITOs/NTOs, thereby saving Rs.1.15 crore.However, for some inexplicable reason, OCwas apparently unwilling to accommodateITOs/NTOs and other guests in the samehotel.

5 He was also a trustee of Salwan Education Trust



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15.3 AccreditationAccreditation Functional Area wasresponsible for issue of accreditation cardsafter obtaining security clearance. Data inrespect of accredited persons was sent bythe DC to ECIL,who was responsible forproviding the integrated security system inall venues. We found that due to GC'snegligence, 492 persons, who did notreceive security clearance, were listed in theECILverified data as on 12 October 2010.This oversight was a serious security flawand indicates that the accreditation systemwas not followed strictly.

Procurement of LanyardsbyOCA lanyard is a cord or rope wornaround the neck to carry the identitycard. Without ascertaining the needfor lanyards for the accreditation card,a supply order for 1.5 lakh lanyardswas placed on Tristar Enterprises" inJuly 2010 at a total cost of Rs. 0.68crore; out of these, 48,040 lanyardscosting Rs. 0.22 crore were neverused. Inexplicably, the lanyardspecifications for fire retardantnessstipulated withstanding temperatureof up to 800 degree Celsius, whereasfor the plastic pouch' (which wouldcontain the accreditation card) therequirement was 110 degree Celsius.We find no utility for such abnormalspecification for the lanyard", exceptto restrict competitive tendering.Incidental ly, Tristar Enterprises, was also the consortiumpartner of Gold Medal Systems who supplied GMS ( Seepara 13.5)

7 for which separate RFP was issuedS Incidental ly, the selected lanyard contained PBDE(Polybrominated diphenyl ether), a chemical banned dueto its harmful effects on the environment and humans.

15.4 Cleaning and wastemanagement

This Functional Area was responsible forcleaning and waste management at venuesand non venues, and also for developmentof an Integrated Waste Management Plan.The initial budget for this work of Rs.11.22crore was increased in June 2010 to Rs31.22 crore.We found that the consultant for cleaningand waste management was appointed onlyin November 2008 and planning for thisaspect was unduly delayed till July 2009.

15.4.1 Contract for Cleaning servicesat Venues

DC took an inexplicable long period of 11months (from October 2009 to August2010) for appointment of cleaningcompanies for providing cleaning services atall competition and non competitionvenues, after dividing them in nine tenderpackages (clusters). Except for tenderpackage two (which was awarded toSarvatra Integrated Services at a cost ofRs.1.02 crore) all the other eight packageswere awarded to A2Z Maintenance andEngineering Services for Rs. 19.30 crore.We found that the tendering process wasdeficient in many ways: There was no justification on record as

to why the package/cluster basedapproach was adopted

The qualifying marks for technicalevaluation were lowered in the RFPfrom that specified in the EOI,purportedly to get more competition.



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The tendering was restrictive as the EOIstipulated an annual turnover,specifically related to cleaning services,of at least Rs5 crore, in each of the lastthree financial years, for one tenderpackage with a seating capacity of up to5000, and Rs.l0 crore for bigger venues.Consequently out of the 23 firms whoresponded to the EOI, 9 firms weredisqualified for not satisfyingprequalification criteria.

We found that the two successfulbidders, A2Z and Sarvatra, also did notfulfil the requirements indicated in theprequalification and technical bidstages, as details of experience were notprovided by both of them. A2Zsubmitted only the certified copy of itsturnover (from which the incomederived exclusively from cleaningservices could not be determined).Clearly the evaluation was not objective.

At the technical evaluation stage whenA2Z, Cleanvent and ISSIntegratedFacility Services did not submit therequired documents, OCcontactedthem to fill in the gaps instead ofrejecting the bids.

While OC consistently maintained duringthe tendering process that multipletenders would not be allotted to thesame vendor, A2Z was finally awardedeight out of nine tender packages.

Undue favour toA2Z Maintenance andEngineering ServicesIt appears that OCwas intent onbenefiting A2Z rather than safe guardingits own interests: During the price reduction

negotiations, the scope of work andperiod was reduced

A2Z was awarded multiple packagesdespite lack of gamestime/international experience,although Director (Cleaning andWaste Management) noted that itwas beyond the capability of onesingle vendor to bring in such a largeworkforce for delivery of service.

Although it was decided in May 2010that A2Z would not undertake anyother contract till its assignment withOCfor CWGis over, OC itself engagedA2Z for office automation work inJune 2010. Thus OCrelaxed thecondition in favour of A2Z.Interestingly, when A2Z had appliedfor another contract of officemaintenance/housekeeping of OC, itwas disqualified. We fail toappreciate why such relaxation wasconsidered important, when therewas no dearth of companiesproviding either cleaning/wastemanagement services or officeautomation service.

A2Z quoted different prices for itemsof same specifications in the tenderpackages allotted to him. OCdid notquestion these inconsistencies, nordid it negotiate for lower rates.

The performance of A2Z was founddeficient and OCstated that adeduction up to Rs.4.53 crore wasbeing considered asalso encashmentof performance guarantee.

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15.4.2 Cleaning services at NonCompetition Venues

Due to deficient planning, the four noncompetition venues - InternationalBroadcasting Centre, Uniform AccreditationCentre, Main Logistics Centre and MediaPress Centre were not covered in the ninetender packages, and a separate tenderingwas conducted in June 2010. A contract forRs.0.98 crore was awarded to an ineligiblevendor (as they did not meet the relevantparameters as given in RFP),as no time wasavailable by then.15.5 LogisticsOCdecided to centralise its logistics workwith a separate functional area. AgilityLogistics was appointed as the logisticservice provider in July 2010, after a sixmonth long tendering processing, at a costof Rs. 12.5 crore less VIK sponsorship ofRs.11 crore. As of March 2011, OC could notprovide details of the VIK services availedfrom Agility Logistics. However, we foundthat 20 out of 34 Functional Areas of OCdid not avail of the centralised logisticservices and made separate arrangementseven for warehousing and distribution ofgoods e.g. OC engaged Buhariwala Logisticsfor the opening and closing ceremonies at acost of Rs0.69 crore. Further since allgoods procured by the OC did not passthrough the centralised logistics section, fullinformation on assets procured by the OC,their location, distribution and retrieval wasnot available.Also, after four months of the closure of theGames, OC has yet to complete physicalverification of stores. Substantial assets arestill lying in the Games Village, MDCStadium and OC Headquarters. OC statedthat they were awaiting instructions from

MYAS.We also found that out of four primewarehouses in the premises of ITPO, OC,JLN and SAl, two were closed in November2010 without any physical verification. Assuch possibility of shortages during transitmovement to OC building and MDC stadiumcannot be ruled out.

15.6 ProcurementA separate Functional Area for procurementwas established to facilitate planning forprocurement of goods and services for theGames and procure goods and services asper defined timelines, locations andquantities. However, this Functional Areawas grossly underutilised and played a verylimited role in OC procurement. Theprocurement manual was prepared only inApril 2010, and was also not complied with.In most cases, though associated withtendering, this Functional Area was notused to make procurement for other areas.In many cases e.g. Image and Look andCommunication, their advice on tenderingwas ignored.No plan for the return and disposal ofsurplus material was formulated till theGames were over. A committee was formedin November 2010 for the disposal ofassets; however, its work is yet to start(March 2011).In cases of procurement through thisFunctional Area, we found someirregularities e.g.: Souvenir items worth Rs.3.51 crore were

lying unutilized as of December 2010,out of which commemorative medalsconstituted Rs.2.64 crore.

Out of 200 laptops purchased in April2010,52 laptops worth Rs.0.27 crorewere lying unutilised.



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15.7 RiskManagement15.7.1 Insurance BrokerAs per the Host City Contract, the OCwasrequired to obtain adequate insurancecoverage in respect of all risks associatedwith the organization and staging of theGames.OC took 15 months to select insurancebrokers:

Table 15.2 : Chronology oj eventsjar selecting oj brokers

i U i : i m t iMarch 2007 EOI issued

January2008

OC signed an agreement with MarshIndia/Trinity Insurance Brokers

Event

June 2007 Evaluation committee recommendedre-tendering, as none of the nineresponses had the desired profile

July 2007 EOI issued again. Criteria revisedfrom experience of five internationalevents to experience of only twoevents.RFPissued to three shortlisted firms- Marsh India, Aon Global Insuranceand JB Boda Insurance.

25 March2008 Two sets of minutes of the TechnicalEvaluation committee, one whereMarsh India was the bidder, andanother where it was shown alongwith partner Trinity InsuranceBroker.

June 2008

Incidentally, the RFPsfor appointment ofinsurance companies for different coversincluded an unusual clause that "All re-insurance requirements will be discussedwith Marsh/Trinity before approachingreinsurance market. All insurancecompanies have to follow guidelines laid

down by Marsh/Trinity with regard to Re-Insurance companies, failing which the bidwill stand cancelled."Further, the RFPalso provided for maximumbrokerage permissible under IRDA rules.Both these clauses appear to have beendesigned to benefit the interest of thebroker Marsh/Trinity.

15.7.2 Insurance for CYG-2008, Pune:For CYG-2008 Pune, OCexecuted threeinsurance policies at a cost of Rs. 1.30 crorewith Reliance General Insurance and ICiCILombard. No records pertaining to thesepolicies were made available for scrutiny.Strangely the insurance cover for 80 OCofficials was taken up to March 2009 (whilethe Games took place in October 2008). InAugust 2009, OC, on the advice of MYAS,decided to opt only for public sectorinsurance companies for insurancecoverage.

15.7.3 Execution of Insurance PoliciesIn September 2009, EBapproved executionof a Comprehensive General Liability policyfor US$ 20 million (Rs. 100 crore). However,on the intervention of Shri Mike Hooper inOctober 2009, OC executed the said policyfor US$ 100 million at a total premium of Rs.2.90 crore. Shri Hooper insisted that OCshould take the insurance for US$ 100million based on the recommendations ofCGF's insurance consultant Marsh", It wasnoted in the EBmeeting that there was aconflict of interest as Marsh was both aconsultant to CGFand an insurance brokerto OC and had a vested interest inShri Hooper even threatened that if OC did not executethe policy for US$100 million, CGF would do so andcharge it to oc.

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increasing the policy amount on account oftheir brokerage commission. Despite EB'sapproval for a limit of US$ 100 million (i.e.Rs.460 crore), OC executed the policy for anenhanced limit of Rs.500 crore resulting inexcess payment of premium of Rs.0.23crore.The management of other insurancepolicies and premiums was faulty on severalcounts: OCtook insurance cover for 25000

volunteers (as against the actual 17667volunteers and for a longer period thanthe volunteers' engagement, resulting inexcess expenditure of Rs.O.11crore.

OC executed insurance policies for QBRpersonnel and equipment during theinternational and national legs of QBR ata premium of 0.84 lakh, although thiswas the responsibility of Maxxam, theQBRconsultant.

10 Incidentally, Shri Jeyachandran submitted a claim for Rs.5 crare (under the directors and officers liability cover)directly to the insurance company after his suspension;details are not available in oc's records.

OCtook insurance cover for directorsand officers liability to protect theofficials from the decision taken in goodfaith, during which process, Shri MJevchandran" falsely informed the CEOthat the EBhad approved a policy forUS$ 25 million. The EBdid not discussthis issue in the above meeting. Further,as recommended by the CEO,theapproval of SFCwas also not taken. OCmade a payment of Rs.1.29 crore in June2010 only on Chairman's approval.In a separate response, Shri Kalmadi (ex-Chairman, OC) disputed the abovestatement and indicated that the EBmembers had, in their meeting on 11May 2010, suggested that OC shouldobtain such Directors & Officers Liability(D&OL) insurance. We do not agree,since the minutes of the EBmeeting of11 May 2010 did not reflect adiscussion, nor a decision, on D&OLinsurance.

CAG's CWG Audit Report - Chapter - 15 (2011)

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