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Part 1: CAG’s CommonWealth Games Report Says Irregularities In Hungama-HT Media, MTNL-HCL-Cisco Contracts

In an Audit Report prepared for submission to the President of India, the country’s Comptroller and Auditor General has pointed towards irregularities in awarding contracts to the HT Media-Hungama Digital Media consortium, saying that the “award of the contract to HT-Hungama was flawed and irregular, with award procedures appearing to lack transparency” . It has also severely criticized state owned MTNL for allegedly colluding with the HCL-Cisco combine, saying that ” the bidding process was tailored to ensure that only the HCL/Cisco team’s financial bid was available, thus eliminating financial competition”, and “the experience stipulation of 60 nodes in a single network was deliberately conceived to limit competition to HCL/Cisco team”. It has also pointed out issues with procurement of computer hardware, Audio & Visual Equipment, Data Cards, IPTV, among others. (via The Economic Times).

Notes from the CAG report (download part 1, part 2, annexures)

MTNL-HCL-Cisco Deal

The CAG alleges that though MTNL was appointed on “nomination basis” in October 2009 for providing telecommunications services for CWG-2010, on the premise that it would follow all norms and procedures for public financial accountability, it was found that the process of awarding the telecommunications services contract was flawed, and did the following:

– More expensive, redundant broadcast networks: The CAG contends that MTNL pushed through the more expensive expensive technical solution (IP/ MPLS) for the Broadcast Video Network and Broadcast Audio Network, which had not been tested in the previous Games and was not acceptable to the Rights Holder Broadcasters (RHBs) from different Commonwealth countries. Thus point-to-point dark fibre solution had to be provided to broadcasters, and “Even Doordarshan made use of dark fibre as its primary solution for its audio/video broadcast requirements, with the IP/ MPLS solution used only for the broadcast disaster recovery site.”

MTNL also did not provide realistic and detailed business plans or strategies regarding the post-CWG market potential for the high speed IP/ MPLS solution; hence a redundant, expensive technical solution.

– Technical requirements were altered to suit HCL/Cisco: The CAG alleges that the technical requirements were altered without adequate justification by MTNL to leave only one technically qualified bidder, the HCL/Cisco
team, by adding the arbitrary inclusion of experience requirement of implementation of 60 nodes in a single network. According to the CAG, no evidence of MTNL/HCL/Cisco actually implementing 60 nodes in a single network in CWG-2010 was found. This resulted in there being no financial competition and, according to the report, “Essentially, MTNL acted as a conduit for placement of a contract, on a back-to-back basis, in a non-transparent manner.”

– Cost was more than 8 times that of Melbourne CWG: The final infrastructure cost of Rs. 270.70 crore (excluding taxes) approved by the Government of India was “more than eight times the estimates of approximately Rs. 33 crore for Melbourne CWG-2006. The contract awarded by MTNL to the HCL/ Cisco team was for an even higher amount of Rs. 387.19 crore.” MTNL has indicated that with HDTV, the bandwidth requirements were 1.6 GB per channel compared to 0.27 GB per channel in SD (Standard Definition), but it says that this “does not affect our audit conclusion as the requirement for HDTV-compatible bandwidth had been known at all stages and appropriately considered by all parties”. CAG also adds that MTNL had not maintained stock registers for the assets procured under the contract from the HCL/Cisco team.

– Airtel’s barter offer not considered: The CWG also points towards an offer from Airtel that was not brought to the notice of the Government of India, wherein, Airtel had offered to provide telecommunications services for CWG-2010 worth Rs 100 crore as the Lead Sponsor, and following an engagement with the Organizing committee, this the offer was changed to Rs. 160 crore (excluding taxes) offset by Rs. 100 crore as sponsorship. In addition, the CAG adds “It is also not understood why Shri Kalmadi and his associates continued to interact with Airtel, even after GoI had taken the decision to engage MTNL on OC’s recommendation and thereafter, MTNL was parallely engaged in selecting a contractor to provide these services.”

Hungama-HT Media deal

The report says that the Organizing Committee failed to consider the need for a Games Time website until as late as June 2010, and it calls the awarding of the contract to HT-Hungama “flawed and irregular”.

– Bidding process issues: The bidding process was completed in two months, and awarded to HT-Hungama at Rs. 2.95 crore in August 2010. The CAG states that global tendering was not followed and only 10 days time was given for responses.

– Conditions relaxed: The RFP’s prequalification condition of past experience in international multisport events was relaxed a day before the final bid submission date, on the grounds that no bidder might qualify. But, the CAG adds that “We have no evidence of this corrigendum being published on the website/newspapers. Three bids from HT-Hungama, HCL Info systems- NDTV Convergence and TCS-Sports interactive were received; interestingly, all three did not have such experience but were termed as technically qualified under the relaxed criteria”

– Deficient documentation: The CAG report states that the documentation from Hungama regarding its consortium with Hindustan Times was deficient, “but was ignored by the technical evaluation committee; Despite complaints that bids were received in loose sheets, unbound and unsealed, Hungama’s bid was accepted; Although Hungama’s commercial bid was L-3 at Rs. 7.94 crore, it was declared L-1 by taking into account a cash discount of Rs. 4.65 crore offered by them. We cannot confirm whether the offer of cash discount was actually received along with the bid. This L-1 bid was reduced further to Rs.2.95 crore after negotiations.”

– Website performance issues: The CAG report states that while there were media reports on the poor performance of the Commonwealth Games website, the documentation at the OC’s end was sparse and unreliable, and “the OC’s vetting of the content hosted on the website was also deficient, as the list of participating nations incorrectly included Korea, Japan, Philippines and even the US.”

The report goes on to add that the archival CD/DVD of the fully functional website, which was to be provided by November 2010, had not been given by the vendor till March 2011, and despite this, the OC failed to encash a performance guarantee of Rs 0.29 crore.

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