1. It has been observed that divisions exceed expenditure over the allocated fund for the project and in many cases the excess is beyond 100% invariably 15% excess is allowed even without getting the RCE approved hence cost escalation can not be controlled by RPAO.

As per para 2.10 (G) of CPWD Manual Vol.-II, the Audit Officer/Accounts Officer has been authorised to admit expenditure in excess of sanctioned amount upto 15% of the sanctioned amount of rupees one crore whichever is less, unless the scheme or project has been substanitially altered. If the view of AFA-II is accepted, then the provisions under above said para has to be got changed from the competent authority or Controller General of Accounts. The proposed amendment to ibid rule may say that no excess expenditure will be reimbursed by the Audit Officer/Accounts Officer unless these are got approved by the division from the Competent Authority by presenting revised cost estimates (anticipated excess expenditure over and above the sanctioned estimates). This exercise should begin after the completion of ¾ work of the project.

The view that excess expenditure should be admitted by PAO if caused by increase in cost of labour or material during the period is not tenable. It will become difficult for PAO to identify the reasons for increase in labour cost, material cost. For this, the new guidelines had to be made in consultation with DG(RD) & Controller General of Accounts, on the subject. As such, we are of the view that CPWD Divisions may be asked to obtain invariably the approval of the Competent Authority if any excess anticipated over and above of the sanctioned estimates.

2. It has been noticed that cost escalation contributed by any factor is assumed to be leading to excess expenditure on supervision and inspection of the project, hence, by default additional agency charges are also paid. Even though expenditure on supervision and inspection of the project remains the same. This needs to be reviewed.

There is no specific provision in the CPWD Manual Vol. II on the subject of payment of additional Agency Charges on revised cost estimates. As already pointed out that it has been noticed that cost escalation contributed by any factor is assumed to be leading to excess expenditure on supervision and inspection of the project, hence, by default additional agency charges are also reimbursed by PAO. We are of the view that no additional agency charges should be paid if cost escalation factor relates to labour and material and period of execution of projects remains unchanged. If the period of execution is changed, then agency charges have to be reimbursed on the basis of revised cost estimates or on proportionate basis – period earlier allowed – and new time of execution of projects. As Department has to expend extra on supervision and work charged establishment etc.. IF the above view is not accepted, then fresh norms have to be laid on the subject after consulting the concerned parties and CGA.

3. Land Acquisition Estimates.

It has been noticed that expenditure on maintenance of National Highways is primarily consumed by work charged establishments. There are guidelines with respect to new projects on work charged establishment expenditure. It is prescribed that it should not be more than 2% of the project estimate (including contingency). However, no guideline has been prescribed for the maintenance related works.

MOST may be asked to specify the percentage of total expenditure to be incurred on establishment attached to a particular project. This aspect may be specified as a separate unit in the estimates itself. Divisions/PAOs may be asked to restrict the amount to that extent. The persons/establishment of the project may also be well defined (to be engaged) so as to avoid confusion (at a later date) alround. Divisions may also be asked to reflect the expenditure incurred on the establishment of the project separately.