An evaluation framework for public procurement processes

by Karan Gulati and Anjali Sharma.

Governments require and use goods and services to operate their machinery and deliver schemes and programs to their constituents. However, self-production cannot meet this need for goods and services. As a result, governments rely on public procurement. However, India does not have an optimal public procurement system. Tenders often undergo modifications, the government incurs significant debt due to payment delays, competition is limited, and contract execution is frequently delayed. Procuring entities also tend to favour large private companies by setting eligibility criteria that exclude small and medium-sized enterprises or providing them with private information that offers a competitive advantage.

Given this experience and the limitations of existing literature, integrating international and best practices can facilitate strategic evolution and ensure that the Indian public procurement system is conducive to achieving broader objectives of efficiency and effectiveness in public resource allocation. By methodically aligning with these practices, India can foster a competitive market environment, attract better vendors, and achieve effective and sustainable procurement outcomes. Specifically, such methodological alignment can help establish an evaluation framework with clear benchmarks and indicators that enable the measurement of procurement processes across departments, identify systematic weaknesses, and explore opportunities for reform.

In a new TrustBridge Rule of Law Foundation Working Paper, we propose "An evaluation framework for public procurement processes" that recognises the government's dual role as the state and a market participant throughout the procurement life cycle and can be deployed to evaluate public procurement across sectors and procuring entities. It contributes to India's growing field of evidence-based literature and policy interventions. Based on the UNCITRAL Model Law on Public Procurement, OECD Recommendations of the Council on Public Procurement, the World Bank's Benchmarking of Procurement, FIDIC, ADB, and NEC standard contracts, and relevant literature, the evaluation framework includes the following benchmark:

• Transparency
• Integrity
• Documentation
• Capacity

• Timeliness
• Negotiation
• Monitoring
• Dispute resolution

It divides these benchmarks along two axes. The first pertains to the role of the procuring entities, either as (i) the state or (ii) a market participant. The second pertains to procurement stages: (i) pre-award to award, (ii) award to completion, and (iii) completion to payment. For instance, as the state, procuring entities must ensure transparency before awarding a tender. To evaluate transparency, the framework assesses whether procuring entities publish procurement plans, which aids in planning and reduces the need for emergency procurement. It also evaluates whether the entity conducts pre-bid consultations, which are beneficial for identifying suppliers early in the process.

To assess the effectiveness of the framework, we evaluate the procurement processes of the National Highways Authority of India (NHAI), India's largest public procuring entity, with tenders worth over 3,70,000 crore rupees (USD 44.5 billion). Its parent ministry, the Ministry of Road Transport and Highways, accounts for over half of India's capital expenditure on procurement. This operational experience should have endowed NHAI with expertise that reflects a spectrum of procurement processes and methodologies. Furthermore, the government's focus on infrastructure development, especially in road transport, underscores the NHAI's role as a driver of public procurement by the Indian state. Thus, evaluating NHAI can provide insights into public procurement processes in large-scale procuring entities and the efficacy of our framework.

Through this first-of-its-kind and illustrative evaluation, we identify several areas for improving India's public procurement system, thus optimising the allocation of public resources, curtailing opportunities for rent-seeking, and fortifying public trust. This includes better estimation of project timelines, improving the role of independent monitoring, and conducting performance evaluations. It also highlights that procuring entities need to enhance transparency not just in their operational processes but also in their data collection and reporting practices. These results validate the efficacy of our evaluation framework. Its comprehensive nature, encompassing a range of benchmarks, allows for a detailed evaluation of public procurement processes. Its application to NHAI demonstrates its potential to evaluate and improve procurement processes across procuring entities.

Extending this evaluation framework is essential to building on this foundational work. The task now involves evaluating other large-scale procuring entities. This endeavour is about identifying areas for improvement and understanding the patterns that define public procurement processes. The insights from this work can inform policy-making and catalyse systemic improvements, contributing to enhancing and refining the public procurement system.

References

Anirudh Burman and Pavithra Manivannan, Delays in government contracting: A tale of two metros, Leap Blog, 23 December 2022.

Anjali Sharma and Susan Thomas, The footprint of union government procurement in India, XKDR Working Paper No 10 of 2021.

Charmi Mehta and Diya Uday, How competitive is bidding in infrastructure public procurement? A study of road and water projects in five Indian states, Leap Blog, 29 March 2022.

Karan Gulati and Anjali Sharma, An evaluation framework for public procurement processes, TrustBridge Rule of Law Foundation Working Paper No 4 of 2024.

Prasanta Sahu, Forget stimulus, clear your dues: Rs 7 lakh crore unpaid dues to industry by central govt depts and PSUs, Financial Express, 8 September 2020.

Shubho Roy and Anjali Sharma, What ails public procurement: an analysis of tender modifications in the pre-award process, Leap Blog, 26 November 2020.

Yugank Goyal, How Governments Promote Monopolies: Public Procurement in India, The American Journal of Economics and Sociology, 26 November 2019.

The authors are researchers at the TrustBridge Rule of Law Foundation. We are grateful to Akshay Jaitly, Renuka Sane, Charmi Mehta, and participants at the Joint Field Workshop on Public Procurement for their valuable comments. Views are personal.

Rethinking innovation policy in India: amplifying spillovers through contracting-out

by R. A. Mashelkar, Ajay Shah, Susan Thomas.

Independent India valued science and rationalism at an early stage of social and economic development. The objectives of building the scientific temper and harnessing the power of science and technology were clearly articulated, for example, in the 1958 Science Policy Resolution. These objectives pertain to improvements in the people, in the society. 

The practical aspects of government expenditures on innovation, and the construction of organisations doing frontiers work, emphasised government organisations. The government used taxpayer resources, built science organisations, hired scientists as civil servants, and developed capabilities within these organisations

In a new paper, Rethinking innovation policy in India: amplifying spillovers through contracting-out, we reopen the objectives of innovation policy in India, applying modern knowledge of public economics and public administration to obtain fresh insights.

We start at the foundations of innovation policy, with new clarity on the questions of why (what motivates state intervention in innovation?), what (in what areas should government intervention into innovation take place in India?), how (what mechanisms should be used when spending public money?) and how much (at what point do the incremental gains to society equal the incremental costs).

The market failure that motivates this field is the problem of spillovers, where the full gains from innovative activity by one person are not captured by her, leading to systematic under-investment into innovation by her. There is a case for public expenditure, where taxpayer resources are spent on innovation, but the expenditure needs to be done in a way that induces spillovers into the society.

We undertake four detailed case studies: the US National Aeronautics and Space Administration (NASA), the US National Institutes of Health (NIH), innovation policy in French defence procurement and CSIR's New Millennium Indian Technology Leadership Initiative (NMITLI). In each case, we understand how tradeoffs are made between `make' and `buy'. Make involves building state organisations, scientists as civil servants. Buy involves contracting-out innovative activities into the society, to private firms and particularly to high-spillover sites of universities and research organisations (whether public or private).

While doing more contracting-out is appealing from the first principles of innovation policy -- the purpose is to obtain greater capabilities in the society, not in the state -- there are many difficulties in implementation. We suggest the strategy for implementation which involves (a) Changes to the GFR; (b) Changes to the founding documents of government innovation organisations; (c) Changes to procurement rules and internal process manuals; (d) Resource planning for a gentle reform trajectory; and (e) a sketch of the required project planning.

Many elements of innovation policy in India have been moving in a similar direction. Three recent initiatives should be pointed out. The Union Interim Budget of 2024-25 envisages a Rs.1 trillion fund that would be channeled to research and innovation in the private sector. The `National Research Foundation' has been setup with a law that came to force on 5 February 2024. The K. Vijay Raghavan Committee report, submitted in early January 2024, has important ideas on improving the working of DRDO. There is a harmony between the philosophy of these three moves, and the ideas of this paper. Conversely, the detailed work of this paper can be useful in translating these initiatives from concept to implementation.

R. A. Mashelkar, FRS, was Director General of CSIR. Ajay Shah and Susan Thomas are co-founders of XKDR Forum.

Offshore wind in Tamil Nadu: from potential to reality

by Akshay Jaitly, Charmi Mehta, Renuka Sane and Ajay Shah.

Foundations

The world of renewables is comprised primarily of solar and wind. Of these, solar electricity suffers from the limitation of dwindling away in the evening, at precisely the time at which electricity demand rises. This makes wind particularly important. There is a good deal of onshore wind generation in India. What is different and potentially superior about offshore wind?

1. Wind speeds tend to be higher offshore than on land. A wind turbine operating at a wind speed of 24 kph can generate twice as much energy as a turbine operating at a wind speed of 19 kph (American Geosciences Institute, 2023).
2. The wind offshore tends to be more consistent, with higher power capture for a greater number of hours per day.
3. Onshore wind requires land resources. Offshore wind is built in the open sea where land rights are cheaper, and it is easier to go to bigger blades.
4. Offshore wind does not impose noise pollution upon the human population.

These benefits, of course, come with a problem, that construction of windmills in the high seas is more difficult when compared with building on land. Windmills are best placed at locations with high wind. Figure 1 shows that Tamil Nadu is a hot spot for offshore wind in India. It is interesting to notice that Sri Lanka is also a hotspot for offshore wind (Figure 2).

Figure 1: Wind speeds off the Indian coast

Source: India Wind Potential Atlas (NIWE, 2019).

Figure 2: Wind speeds off Sri Lanka.

Source: Technical Assessment by World Bank, IFC and ESMAP (2020).

There is an analogy between offshore wind in Sri Lanka, and hydel resources in Nepal and Bhutan. Given the correct arrangement of foreign policy (Subramanian, 2023), the Indian private sector can possibly play a leadership role in building electricity generation in Sri Lanka, as has been the case with Bhutan.

Putting these facts together, there is an important natural resource in Tamil Nadu, and its vicinity, through which vast renewable electricity generation can become possible, given the correct configuration of policies and state institutions that create conditions of investibility. We can dare to hope that very large offshore wind generation can take place off the coast of Tamil Nadu, which would attract energy-intensive firms to operate in the region, and enabling sale of electricity into locations far from Tamil Nadu.

Public economics for offshore wind

We can imagine an uncoordinated rush by the private sector to venture out into the seas and put up wind turbines. They would jostle with each other to build on the best sites. Each wind turbine would have to face the problem of transmitting energy to the mainland. There are three areas where policy makers can be useful:

1. Ownership of the sea-bed and property rights: In a world without clarity on property rights, the private sector would experience conflicts when building wind turbines. There is a negative externality as multiple construction projects which are physically near each other impose a certain amount of chaos upon each other, and the presence of a windmill diminishes the energy production of nearby windmills.The sea-bed should be treated as a scarce natural resource, akin to the electromagnetic spectrum. There is a role for the state in establishing property rights, and auctioning off ownership of the sea-bed to private persons. The coercive power of the state would be used to create property rights for private persons, following which private persons would trade in blocks of sea-bed (akin to transactions in privately owned land or on the electromagnetic spectrum), and the government would enforce against encroachment. The negative externality problem during construction can be addressed by modified property rights which decongest each construction site for the construction period, by expanding the notion of property rights associated with each geographical location, to exclude other persons for the period of construction.
2. Economics of transmission: Each wind turbine would have to face the problem of transmitting energy to the mainland. Every generation company would benefit from more convenient access to high capacity transmission lines. There is a natural monopoly problem in the transmission infrastructure - it is likely that a single transmission company will emerge within each geographical area. There is merit in using state power to coerce this firm on open-access rules (so it cannot deny transportation to any private person) and on price regulation.
3. Data as a public good: The government can add value by spending taxpayer money to construct a dataset on wind speed and releasing this into the public domain. This activity involves no use of coercive power, other than the coercion that undergirds taxation. The government would merely release data on a website as a public good, and in no way preclude private persons from expending resources to create data on their own. For the government released data to be credible, it would have to be collected by trusted agencies, experienced in offshore wind data collection; the role for the government should be one of only contracting-out the construction of the data.

While electricity in India is largely a state subject, the sea-bed falls under the union government jurisdiction through Article 297 of the Indian Constitution through which the Parliament has enacted the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. Thus we can envision a two-part policy story for offshore wind, where the union government auctions off blocks of sea-bed, and the state government deals with everything connected with electricity. Once the energy reaches landing stations at the shore, it is just ordinary electricity and fits into the mainstream electricity market exactly as with onshore wind turbines.

How the Indian journey has unfolded

The union government has decided that offshore wind production will commence in Gujarat and Tamil Nadu. A union government agency named the National Institute of Wind Energy (NIWE) plays an important role in this field including that of being the designated counterparty for contracts. It plays a expansive role, akin to an offshore wind central planner. Transmission will be run by a union government PSU, the Power Grid Corporation of India Limited (PGCIL). No role is envisaged for state governments.

In 2018, NIWE published its first tender for an offshore wind block auction off the Gujarat coast. However, it did not receive bids and consequently had to be called off after multiple extensions (Deshpande, 2021). Since 2022, the Union Government has released (i) a national Strategy Paper for the Establishment of Offshore Wind Energy Projects and (ii) a draft tender for Sea bed leasing for offshore wind energy projects which pertains to locations off the coast of Tamil Nadu. These releases help improve policy predictability.

The proposed contracting model

Project costs in offshore wind are high, particularly in contrast to developing renewable energy plants onshore. Costs also vary as per the depth of waters and distance from shore. Operating offshore wind turbines involves higher maintenance requirements (Koch, 2012). First movers face higher costs on account of uncertainty and the inevitable mistakes.

NIWE has proposed three alternative contracting models in its strategy paper. Model A is for projects where surveys and assessments have been completed, and the site is ready for development. Model B is model A without viability gap funding ("VGF?). Model C is a fully bundled model with end-to-end responsibility placed upon the project developer, including site identification. The tender released (for the sea bed off the coast of Tamil Nadu) follows model A (NIWE, 2023). Table 1 summarises this proposed contract design.

Table 1: Risk-responsibility allocation across proposed offshore wind contracting models

Factors	Risks/responsibility	Model A
Government support	Bridging financing gaps	VGF (Union; unallocated)
	Transmission charges	Waived
Strategic and commercial risks	Identifying sites for offshore wind farms	Gov (Union)
	Site assessment surveys	Gov (Union)
Local factors	Transmission infrastructure	Gov (PGCIL)
	Evacuation of power	Gov (PGCIL)
	Licenses	Private
	Power offtake guarantees	None

Site characteristics have a substantial impact upon the prospective return on equity. The MNRE/NIWE supplies its assessment of each site. A careful examination of the data released by MNRE/NIWE is required. Potential developers may invest significant time and resources in constructing private sector data if there are limitations in the government-released data.

The selected bidder must set up the turbines offshore and connect each turbine to the offshore agglomeration facility (which will be constructed and managed by PGCIL). While the model mentions accessing VGF from the union government, the mechanism is not adequately spelled out. Is this policy strategy conducive to investibility?

i. Site selection and exclusivity:

Site selection is best done by potential wind farm developers. Developers face the consequences of, and are best placed to take decisions on sites when faced with a certain amount of data. They will commission the creation of additional data optimally. Under Model A, sites have been selected by NIWE. We expect that serious developers will construct their own datasets and may chafe at the locations pinned down by NIWE.

The next issue is that of exclusivity. Developers like to have a certain exclusive period, where no other construction takes place, in order to reduce the complexities of coordination across multiple construction projects. The exclusivity period for the sea-bed is set to five years, with a maximum extension of one year. The average time taken to set up a mid-size offshore wind farm, globally, is four years. In India, this is likely to attain a higher value (MOSPI, 2023).

Auctioning the exclusivity period itself can be a way to decide what a 'sufficient' period should be. In countries where confidence in offshore projects has been high, auctions are witnessing site tenures being awarded based on an auction in which the highest bidder wins the site (Exeter, 2022). For example, the Round 4 auction for sites (held in 2021) in England and Wales saw the highest bidder paying Euro 1bn upwards in option fees, payable annually (for ten years) for exclusive sea-bed rights on an 8 GW of offshore wind.

ii. The problem of transmission:

In offshore wind contracts in Northern Europe, the evacuation infrastructure for the electricity is generally created by the developer (and in some cases such as in the UK, later carved out and sold to a third party) or contracted out (separate from the offshore windfarm contract) to a private transmission service provider. Under Model A, this function has been assigned fully to the state-owned transmission company - PGCIL. PGCIL has no prior experience in developing transmission for offshore wind and it carries the burden of being a public sector organisation.

Whether managed by PGCIL or some other firm, regulation is required so that future developers are provided access to non-discriminatory evacuation infrastructure and services, perhaps using common carrier principles. While one block / site is up for auction today, numerous offshore plants will come up in the future in close vicinity. There may be shortages or exorbitant pricing of transmission, particularly in the absence of non-discriminatory access.

In addition to the risks from power evacuation, risks from unscheduled downtimes can induce losses, and contract terms will determine who bears this risk. For example, in Germany, the costs of curtailments/incapacities were transferred to the consumer. In contrast, costs remained with the project owner in China despite their lack of control over the risk (Gatzert, 2016). The government's decision to manage the complete evacuation responsibility may prove problematic in the event that higher transmission losses or shutouts imposes important risks upon the developer. If the preference is for power evacuation to be managed by PGCIL, contractual provisions on liquidated damages must adequately cover for downtimes that are not caused by the fault of the developer and other transmission losses.

iii. Regulatory burdens

Unlike transmission and distribution, power generation has no market failure problem. It is hence important to envisage a contract design that harnesses private sector expertise, without added layers of government involvement. At present, establishing an offshore wind farm will require a set of seventeen different clearances and licences from a host of ministries, including the prerequisite of block approval from the Ministry of Defence. Seven of the seventeen clearances are necessary even before one can make a bid, and the rest are post-award. The sector also includes a specific licensing regime that extends to how new offshore assets connect and interact with the grid. This requirement for multiple permissions detract from the vision of property rights in the hands of a private person.

Further, approvals and no-objection certificates may be required from State Governments for transmission and evacuation infrastructure-related provisioning and any other clearances as may be legally required to establish and operate offshore power plants - as in the case of oil and gas pipelines (NIWE, 2022a, NIWE, 2022b).

It might be useful to consider if some project-related (as opposed to bidder related) approvals can be obtained ahead of time and made part of the bid package. This will reduce risk for bidders and may lead to more attractive bids.

Lastly, as with any nascent industry, policy and regulatory frameworks are likely to evolve and change over time - and existing concessionaires should be contractually protected from this through adequate 'change in law' and 'change of scope' provisions.

Under the present policy strategy, offshore wind generation requires the firm to have a high level of government engagement, and exposure to policy risk. This problem may encourage foreign firms to find local partners and enhance the required rate of return, i.e. hamper investibility.

iv. The role of the union government:

The present policy strategy suggests a offshore wind industry that is run out of the union government. This vision will sit uneasily with the primary role of the state government in electricity regulation and the electricity business once the energy hits the shore. Since vessel availability and transport infrastructure are critical to offshore wind farm development and often contribute to delays, cost overruns ((Koch, 2012), and litigation, the State's port infrastructure can be adapted to facilitate project management. Proximity of the Thoothukudi port to the proposed site is an advantage, and logistics facilities such as (i) storage areas for component assembly and manufacturing, and (ii) berth infrastructure can be developed to support upcoming offshore wind plants (Auroville Consulting, 2022). Such thinking is downplayed in a union-dominated policy process.

Assessing the outlook

Our analysis suggests that there is a considerable gap between the natural resource potential for offshore wind in South Asia and its tangible translation into RE capacity. The sea-bed lease tender was released in September 2023 with a deadline of 28 November 2023. In our knowledge, no bids have emerged.

Electricity is a concurrent list subject under the Indian Constitution, with both the union government and the state government having the right to make law over aspects of the sector. Sea-bed jurisdiction appears to clearly lie with the union. It would make sense to rely on the state government to a greater extent.

There are significant manufacturing and transportation challenges associated with the bulky parts of offshore wind facilities. Both Tamil Nadu and Gujarat are strong in manufacturing, and are natural sites where a private industry could develop that will undertake this manufacturing, and play a role in offshore wind sites hundreds of kilometres away.

The arguments presented earlier in this article show that thinking from first principles, the role of the state in this field is (a) Establishing property rights with auctions of chunks of sea-bed, including a special kind of exclusivity during construction; (b) Ensuring open access and price regulation for the natural monopoly of transmission; (c) Possibly adding value by constructing and releasing a robust dataset with wind speed. There is merit in evolving the policy strategy towards these three pillars.

References

American Geosciences Institute. 2023. What are the advantages and disadvantages of offshore wind farms?, National Academy of Sciences.

Deshpande, T. 2021. Why India's Offshore Wind Energy Potential Remains Untapped, IndiaSpend. 26 November 2021.

NIWE. 2023. Strategy for Establishment of Offshore Wind Energy Projects, Ministry of New and Renewable Energy, Government of India. September 2023.

Koch, C. 2012. Contested overruns and performance of offshore wind power plants, Construction Management and Economics, 30:8, 609-622.

Infrastructure and Project Management Division, Ministry of Statistics and Programme Implementation. 2023. Quarterly Report on Mega Projects.

Laido et al. 2022. Impacts of Competitive Seabed Allocation for Offshore Wind Energy, University of Exeter. April 2022.

Gatzert et al. 2016. Risks and risk management of renewable energy projects: The case of onshore and offshore wind parks, Renewable and Sustainable Energy Reviews, Volume 60. July 2016.

Auroville Consulting. 2022. Unlocking Offshore Wind in Tamil Nadu. Sustainable Energy Transformation Series.

Subramanian, A. 2023. Answers in the offshore wind.The Indian Express. 23 March 2023.

Akshay Jaitly and Renuka Sane are Co-founder and Research Director, respectively, at TrustBridge Rule of Law Foundation; Charmi Mehta and Ajay Shah are Research Associate and Co-founder, respectively, at XKDR Forum.

Delays in government contracting: A tale of two metros

by Anirudh Burman and Pavithra Manivannan.

A state entity undertaking a procurement exercise must meet prescribed timelines throughout its procurement pipeline. Delays in one or more milestones adversely affect all parties involved: the procuring entity (increase in expenditure beyond the budget and disputes), the contracted vendors (uncertainty and delays in payment) and the public (delays in utilising public goods and services). At the outset, we recognise that the indicator of a successful procurement exercise are multi-fold: achieving required quality, adhering to timeline and limiting spending gap. Our approach employs the lack of delays as the indicator of a successful procurement exercise.

In a recent article, we examined the extent to which DMRC's (the Delhi Metro Rail Corporation) competence in timely project execution was borne out by data. We found that (a) DMRC is able to meet the Government of India's and its own stipulations in two stages of its procurement process, that is, contract award and vendor payments; and (b) In spite of this exemplary performance, DMRC has faced delays in overall project implementation that have gradually increased over time. This article seeks to understand the underlying factors that potentially contributed to DMRC's prompt performance in its procurement process.

It is not possible to understand DMRC's success in isolation. Instead, we analyse it relative to its predecessor, the Calcutta metro-rail system (Calcutta metro). The Calcutta metro was India's first metro-rail system to be implemented. It was plagued by delays and cost overruns. Such a comparative analysis of a successful public project to one that fared worse in execution is revealing. First, it shows the learning curve of the state in building capacity to execute public projects. Second, it helps to understand what works and what does not, when a state entity conducts a procurement exercise. The analysis can serve to provide valuable feedback in procurement reform policies.

Delays in execution of metro-rail systems

Formerly, the Ministry of Railways was responsible for the construction of mass rail services, including metro-rail systems in metropolitan cities. The Ministry undertook the construction of the Calcutta metro in 1971. In 1986, the Government of India (Allocation of Business) Rules, 1961 was amended to shift the responsibility of the urban transport system to the Ministry of Urban Development (now the Ministry of Housing and Urban Affairs). In contrast to the Calcutta metro, the construction of the Delhi metro-rail system (Delhi metro) was undertaken by the Ministry of Urban Development as the nodal union ministry. The role of Railways was limited to providing technical assistance.

We study the annual reports of the Delhi metro and the Parliamentary Public Accounts Committee Reports (1981; 1989; 1992) on the Calcutta metro, to estimate overall delays in both these projects. We source this data from the website of DMRC and the Parliament of India, respectively. Our data consists of six time periods during which there was significant procurement of works. The data includes the date of completion and submission of the detailed project report (DPR), the date on which the project received Union Cabinet approval, the date of commencement of works, the scheduled date of completion of the project, and the actual date of completion of the project, in part and full. These are presented in Table 1 below, as a timeline of events for the first line of the Calcutta metro and the first phase of the Delhi metro.

Table 1: Timeline of events

Event	Calcutta Metro Line-1	Delhi Metro Phase-1
Completion of Detailed Project Report (DPR)	1971	1995
Project sanction	1972	1996
Project commencement	1978	1997
Scheduled completion	1978	2005
Partial commission (one section)	1984	2002
Project completion (fully operational)	1995	2006

We find that the gap between estimated and actual date of completion is a little more than a year for the Delhi metro. This gap was close to two decades for the Calcutta metro. Further, the lag between the date of sanction of the project to the date of commencement of works for the project is wider for the Calcutta metro (4 years) than for the Delhi metro (about a year).

This suggests that, from 1971 to 1995, there appears to be much improvement in the way procurement was undertaken for Indian metro-rail systems. We posit that the Delhi metro's success was shaped by the challenges faced and the experiences gained in implementing the Calcutta metro. Our analysis attributes learnings from the Calcutta metro to the following structure and list of processes adopted by DMRC: its institutional design, its financing and revenue models, global transfer of technical know-how, and expertise of its early leadership. In the subsequent sections we analyse how each of these features enabled the Delhi metro to avoid inordinate delays.

The institutional design of the procuring entity

What motivated the institutional design of DMRC? To answer this we look at various Parliamentary Committee reports, CAG reports and literature on the subject. Our review suggests that there were three main institutional constraints faced by the Ministry of Railways in implementing the Calcutta metro.

1. The lack of coordination with the West Bengal State Government and the local agencies in Kolkata. There were delays in land acquisition, problems in utility diversions such as transport, water and sewage, and detection of uncharted utilities after commencement of works. These instances had a direct impact on the contracting process, such as frequent interruptions of works, revisions to scope of work, and change in construction methodology (Public Accounts Committee, 1981).
2. Frequent changes and vacancies within the Ministry of several important personnel such as the General Manager and Chief Engineer. This was due to the administrative process of the Ministry. The Railways had to follow the conditions laid down by the Appointment Committee of the Cabinet with respect to retirement, superannuation and promotion (Public Accounts Committee, 1981). This resulted in loss of experience and expertise within the procuring entity.
3. Inadequacy of financial powers delegated to the General Manager. From the year 1974 to 1982 the General Manager had the power to sanction tenders up to Rs. 1 crore only. This was increased to Rs. 2 crores in 1983 and Rs. 5 crores in 1985. This limited power of the General Manager meant, approvals for sanctions of higher value tenders had to be received from the Railway Board. This procedure was time consuming and caused delays in finalisation of contracts by up to 3 years (Public Accounts Committee, 1989).

We speculate that the above constraints prompted the authorities undertaking the Delhi metro project to adopt a different approach. The Calcutta experience provided two guides for the organisational structure of DMRC. One, to build institutional capabilities for executing a metro-rail system outside the Ministry of Railways. Second, to have a separate corporate entity with independent decision making authority. Thus, DMRC was set up with two distinguishing features which worked in its favour: It was formed as a limited liability company under the Companies Act, 1956 and the ownership of the entity vested equally in the Union and the State Government. The board of directors of DMRC constituted representatives from the Union Ministry of Urban Development, Department of Transport of GNCTD and the Delhi Development Authority. Such an institutional arrangement, by aligning incentives for all the stakeholders, enabled better coordination with the local government and ensured that the management had the backing of both the State and the Union Government. Further, functional directors appointed for distinct functions such as, project and planning, works, electrical, finance, business development and the like, had sufficient powers delegated to them under the Schedule of Powers (CAG, 2008). This facilitated quick decisions in expenditure approvals, qualification of bidders, finalisation and acceptance of contracts. Finally, the long tenure of key personnel such as the Managing Director, enabled the organisation to retain domain experience and expertise.

Financing and revenue models

For prompt execution and sustenance of any infrastructure project, timely flow of funds is essential. Metro-rail systems are capital-intensive projects. The Calcutta metro was fully funded by the Ministry of Railways. One of the main reported reasons for delay in the project was lack of funds and improper utilisation of allocated funds. Up until 1980, the Railways had not fully utilised the funds allocated for the project. Further, for subsequent years, sufficient funds were not made available for the construction. This resulted in shortage of raw materials, such as steel and signaling equipment, and delayed payments to vendors (Standing Committee on Railways, 1993; Public Accounts Committee, 1981). For the DMRC project, the Calcutta experience prompted the authorities to explore other avenues for funding such as, equity, external agency loans, subordinate loans from centre and state, property development revenue and central government grants. Most significant was the official development assistance (ODA) loan from the Japan International Cooperation Agency (JICA). Nearly 54-55 per cent of the first three phases of the DMRC projects was funded by JICA as a low-interest and long-term concessional loan. The funding pattern for each phase of the project sourced from the DMRC website is as set out in Table 2. Smooth flow of funds into DMRC enabled timely payment to vendors and ensured that the project was not delayed due to uncertainty in financing.

Table 2: Funding pattern for DMRC projects

	Phase I	Phase II	Phase III
JICA loan	60%	54.47%	48.57%
Equity from GoI	14%	16.39%	10.04%
Equity from GNCTD	14%	16.39%	10.04%
Loans from Union/States	5%	6.56%	13.39%
Grants from States	-	0.59%	10.62%
Property Development	7%	5.59%	7.34%

Another lesson came from the fact that the Calcutta Metro was not financially viable (Singh, 2002). The traffic earnings were inadequate to cover the operating expenses of the metro-rail system. This not only burdened the exchequer in the form of subsidies but also affected the public as the fare per trip that was charged had to be increased to sustain operations (Public Accounts Committee, 1989). Decrease in cash flow meant stalling of procurement of raw materials, and delays in payments to vendors.

The financial crunch faced by Calcutta Metro encouraged DMRC to generate revenue through non-conventional sources. DMRC adopted the examples of well-performing international metro-rail systems and sought to increase its non-farebox revenue. Table 3 below shows the revenue model of DMRC for 10 years (FY2011-FY2020) obtained from its annual reports. Revenue from traffic operations is categorised as fare-box revenue and revenue from real estate, consultancy and external projects are categorised as non fare-box revenue.

Table 3: DMRC Revenue Model (as percentage of total revenue)

Description	Fare revenue	Non fare revenue
FY20	65.49	34.51
FY19	62.92	37.08
FY18	55.22	44.78
FY17	45.69	54.31
FY16	53.35	46.65
FY15	60.34	39.66
FY14	55.74	44.26
FY13	62.93	37.07
FY12	65.74	34.26
FY11	65.05	34.95

On an average 58.49% of DMRC's revenue is from traffic operations (fare-box revenue) and 41.51% of the revenue is through other sources (non-fare box revenue). This is in line with international practice. For instance, the non-farebox revenue of some of the better performing metros in the world (in terms of ridership and network length), such as London, Singapore and Hong Kong, ranges from 25-60% of its total revenue. DMRC's capacity to source funds and remain financially viable has helped it to make timely payments to its contractors, repay its debts, and expand its network line.

Human capacity and technical know-how

Building human competence within the government is paramount to do procurement well. This includes both functional as well as technical competence. In India, the technical know-how to build metro-rail systems was lacking. The Calcutta metro was the first ever underground railway project undertaken in India. Despite this, global tenders were not invited for construction of the work. Neither the construction firms in the country nor the Railway Administration possessed the experience to construct underground structures for a rapid transit system. The lack of expertise led to frequent abandonment of works and changes in scope of work, resulting in huge financial implications in addition to time overruns (Public Accounts Committee 1989 and 1992). Thus, when the idea of a metro-rail system in Delhi was born, the need to rope in personnel with prior expertise and experience, such as, B.I. Singal and E. Sreedharan, was recognised.

Mr. B.I. Singal was the former Director General of the Institute of Urban Transport and the then Managing Director of RITES (Rail India Technical and Economic Service). Mr. Singal came in with 11 years of experience in the planning and building of some of the finest metro-rail systems in the world, such as the Hong Kong MTR (known for completing the project within time and budget) and Taipei metro-rail network. RITES prepared the feasibility study on building a metro-rail system for Delhi. Mr. Singal made sure that his RITES team had a few professionals who had previous experience of working with the Calcutta metro. Mr. E. Sreedharan, the first Managing Director of DMRC, had served as the Chairman and Managing Director of Konkan Railways. He brought in his domain experience of working with the Railways as well as the management experience of heading an autonomous entity. Studies document some effective practices adopted by Singal and Sreedharan which we speculate had an impact on the organisation's procurement practices. They insisted on independence in decision making, speed, and global exchange of knowledge and expertise (Ashokan, 2015; CPI, 2017). This resulted in creation of DMRC as a separate legal entity and in transfer of Japanese technology and know-how in building metro-rail systems.

After the failed attempt at indigenisation by the Calcutta metro, the authorities felt the need to tap in to global expertise for the Delhi metro project. In addition to funding from JICA, Japanese Consultants were also brought on board. This ensured transfer of foreign technological knowledge, skills and expertise to DMRC. DMRC engineers developed technical skills such as tunneling technologies, and functional skills such as management ethos, and value for time from their Japanese counterparts (Onishi, 2016). This enabled DMRC to build in-house capacity, which now helps other metro-rail networks in the country.

Discussion

Our work shows how the Indian state attempts to achieve better outcomes by identifying lessons from its past shortcomings. The challenges faced by the Calcutta metro shaped the Delhi metro's institutional design, financial structure, and human resource competence. Our article highlights the importance of these three factors in enabling desirable procurement outcomes.

A key insight from our analysis is that these factors do not work in isolation. Autonomy in decision making, efficient and experienced personnel, adequate financing, and right institutional choice are all inter-operable and go hand in hand. If a procuring entity seeks to realise better outcomes, procurement reforms must not merely pick the lowest hanging fruit of these factors. Instead, a sector-specific approach of studying the past experiences must be employed to act as feedback into future projects. Our research provides a framework to assess such past successes and failures, and demonstrates the potential of deploying such research.

References

Public Accounts Committee, Fifty-fifth Report, 1981, Hundred and Forty-second Report, 1989 and Ninth Report, 1991.

Standing Committee on Railways, Second Report, 1993 and Thirty-fourth Report, 2007.

Comptroller and Auditor General of India, Report No. Performance Audit 17, 2008.

Pavithra Manivannan, Lessons from the Delhi Metro, Business Standard, July 2021.

Anirudh Burman and Pavithra Manivannan, Timeliness in government contracting: Evidence from the country's largest metro-rail network, The Leap Blog, August 2022.

Yumiko Onishi, Breaking Ground: A Narrative on the making of Delhi Metro, JICA, 2016.

Centre for Public Impact, The Construction of the Delhi Metro, November 2017.

Saurabh Singhal, Non Farebox Revenue for Metro - A Global Perspective, Business World, May 2022.

The International Association of Public Transport (UITP), World Metro Figures, 2018.

M.S. Ashokan, Karmayogi - A biography of E. Sreedharan, Penguin, 2015.

Anirudh Burman is an Associate Research Director and Fellow at Carnegie India. Pavithra Manivannan is a Senior Research Associate at XKDR Forum and Chennai Mathematical Institute.

Learning by doing and public procurement in India

by Aneesha Chitgupi, Abhishek Gorsi, and Susan Thomas.

Introduction

State objectives can feature a mix of `make' (i.e. build an organisation, recruit people) vs. `buy' (i.e. contract to a private person for the same task). While private persons are, in general, more efficient than a comparable government organisation, the `buy' pathway is not a panacea when there are bottlenecks in state capacity to contract. Understanding how to achieve capacity in government contracting is one of the critical components of the overall question of enhancing state capacity in India.

How has this tradeoff evolved over time? Generally, when contracting capabilities go up, the fraction of work that is contracted-out goes up. Chitgupi and Thomas (2022) find that the government procurement spending has been at a steady 17 percent of the total expenditure across multiple years, which suggests a lack of movement on contracting capabilities.

What about cross-sectional variation in contracting capability between spending units? Sharma and Thomas (2021) finds that procurement expenditure varies significantly across ministries in 2016-2017, with a few ministries accounting for the larger share of procurement. This would, of course, largely reflect differences in the nature of their work.

In this article, we obtain insights into contracting capabilities by examining procurement under-spend across ministries and across time. We recognise that state capacity in procurement includes multiple dimensions: achieving a targeted level of quality at the minimum cost and on time. Our question is a more basic one about whether the spending happens at all. It requires a certain level of contracting capability in order to actually achieve the budgeted procurement expenditure. We then consider the role of learning by doing in procurement.

An insight in the field of state capacity is that it is extremely sticky; changes to state capacity arise only slowly (Kelkar and Shah, 2022). State capacity emerges from the organisation design (mandate, governance, organogram, processes, the feedback loops of accountability mechanisms). Repetition of the same task, over and over, under the influence of accountability mechanisms, induces the slow process of building capability. By this reasoning, we hypothesise that state entities which procure on a sustained basis will build the organisation design and capacity to doing procurement efficiently, and vice versa. The lack of sustained procurement activity will then predict procurement underspend.

Approach

In previous work, we developed the methodology to estimate the fraction of procurement in the accounts reported in the Detailed Demand for Grants (DDG) document published by a ministry. The DDG for a given year reports two sets of numbers by item head: the amount budgeted for the year, the amount actually spent two years previously. So, the DDG in 2016 for (say) the Ministry of Health and Family Welfare will report the budgeted amounts for 2016, as well as the amount spent in 2014. These are reported by item head, and allows us to calculate the actual amount spent but with a lag of two years.

For our current analysis, we calculate what was budgeted and what was actually spent on procurement, across ministries and across years. We use these to estimate the procurement spending gap for the ministry as:

100 x (actual procurement spend - budgeted procurement) / budgeted procurement

A negative spending gap has the ministry spending less than planned. If procurement capacity is the dominant factor driving the ability to procure, then we would say that a ministry with good procurement capacity will have a procurement spending gap close to zero. Further, if the learning-by-doing hypothesis holds, then those ministries that budget consistently for procurement will have built procurement capacity, and be able to show procurement spending gap close to zero.

Other than procurement, a ministry spends on operational expenses like salaries and pensions, and on grants-in-aid and schemes. These do not depend upon specialised capacity as with the contracting capacity required in the case of procurement spending. As a benchmark, we also calculate the total spending gap as the difference between the actual and budget total spending of the ministry, as a fraction of the total budgeted spending. We use the total spending gap of the ministry to benchmark their overall spending capacity.

We calculate the total spending gap of the ministry as:

100 x (actual total spent - total budgeted) / total budgeted

For our analysis, we do the following steps:

1. Estimate the amount of procurement expenditure for each ministry for each year for which we are able to obtain the DDG. We use this to identify which ministries have consistently higher fraction of their expenditure in procurement.
2. Estimate the procurement under-spend for each ministry across different years.
3. Examine whether there is a link between the ministries with a higher fraction of procurement expenditure and a relatively lower procurement under-spend.

Data

We collect the DDG published by the ministries of the Union Government to estimate the procurement and total spending gaps. The estimation procedure described in Sharma and Thomas (2021) requires the object head wise expenditure to be disclosed in the DDG. This level of information has been consistently disclosed across all ministries (other than for the Railways ministry which has a more complicated accounting structure) from 2014-2015 onward. The latest available DDGs are from 2020-2021.

There remains challenges in accessing the DDGs reliably for all the Union government ministries. In our exercise, we are able to locate the DDGs consistently from 2014-15 to 2020-21 for 10 ministries: Civil aviation, Coal, Environment, Finance, Health and Family Welfare, Home Affairs, Housing and Urban Affairs, Rural Development, Road Transport and Highways and Law and Justice.

For seven of these ministries, the DDGs contain ministry level object head wise expenditures directly. For three ministries, we had to sum up the expenditures across department DDGs. These include: the Ministry of Finance which is the sum of Economic affairs, Financial services, Revenue, Expenditure, and DIPAM. The Ministry of Health & Family Welfare is the sum of Health & Family Welfare, and Health Research. The Ministry of Home Affairs (MHA) covers Home Affairs, Cabinet, Police, and 8 departments for the UTs. The expenditure of Home Affairs, Cabinet and Police make up 74 percent of the MHA expenditure. In our analysis, we report the procurement expenditure for the MHA as the sum of these three departments, and do not include the UT departments in the analysis.

All rupee values used in these calculations are adjusted for inflation using the CPI index. The spending gaps are calculated for each year, from 2014-15 to 2018-19.

Is there a link between consistent procurement and lower procurement under-spend?

We organise our findings into three figures, where each is in the form of a heat map. In these graphs, each row is a ministry, where the values going from left to right are those for 2014-2015 to 2018-2019. The deeper / stronger the colours, the higher the values. In all three figures, the order of the ministries stay the same: in descending order of estimated procurement expenditure in 2014-2015. The ministry with the highest procurement spending is on top.

In Figure 1, we present the estimated procurement spending of the 10 ministries. The Ministry of Road Transport & Highways had the highest estimated procurement spending (in Rs. billion) in 2014-2015, and the ministry of coal had the least. There is large variation in the procurement spend across the 10 ministries, as described in Sharma and Thomas (2021). Ministries such as Coal and Rural Development spend less than Rs. 1 billion on procurement and have consistently done so over last 5 years. Ministry of Road Transport & Highways is the top procuring ministry followed by Home Affairs, of which Department of Police is largest procurer. There is more variation across the years for the remaining ministries. For example, the ministry of Health & Family Welfare shows an increased estimated procurement expenditure in 2017-2018 compared to other years in this period. The Ministry of Law & Justice has a steadily increasing procurement expenditure during this period.

 

Figure 1: Estimated procurement expenditure by ministry, 2014-15 to 2018-19

 

Figure 2 presents the estimated procurement spending gap from 2014-15 to 2019-20. Green stands for positive values (which is over-spending or under-budgeting). Red stands for negative values (which indicates under-spending or over-budgeting). Except for a few years, most ministries tend to under-spend. The exception is the Ministry of Road Transport & Highways, which is also the top procuring ministry.

 

Figure 2: Estimated procurement spending gap (%) by ministry, 2014-15 to 2018-19

Figure 2 also shows a sharper amount of under-spending towards the latter part for some of the ministries. These include Finance, Civil Aviation, Rural Development and Coal. This contradicts the proposition that procurement capacity is systematically increasing over time.

These ministries also have a lower fraction of procurement in their spending. These ministries are less likely to develop procurement capacity. Among ministries with similar procurement spending patterns, the Ministry of Environment appears to be building procurement capacity, with a procurement spending gap closer to zero.

Lastly, Figure 3 presents the spending gap for total expenditure for these ministries across time. There is much more capacity among the ministries in managing to spend their overall budgets. Most of the heat-map shows colours mapping to values closer to 0. In fact, there is more evidence of over-spending than under-spending compared to Figure 2. The ministries of Finance and Rural Development have more instances of over-spending in their overall spending, while these are ministries which have estimated procurement under-spend.

 

Figure 3: Total spending gap (%) by ministry, 2014-15 to 2018-19

Alternative explanations

Underspend can be driven by other compulsions also. In a public choice theory worldview, state organisations would give the highest priority to wage and pension expenditures, and sacrifice procurement expenditures when faced with formal or informal budget constraints. This makes procurement budgets the most vulnerable to sudden cuts.

However, this argument should apply equally across all ministries. In fact, the ministries which do higher amounts of procurement should be the prime target for mid-year budget cuts. This argument predicts that under-spend should take place roughly everywhere, and maybe to a greater extent in the high-procurement ministries. The evidence, however, shows that under-spend is more prevalent in low-procurement ministries.

Discussion

The main finding of this article is that ministries that tend to procure consistently, tend to have smaller procurement spending gaps. This is consistent with the idea that there is learning by doing, where doing procurement on a sustained basis gradually creates organisational capability for procurement.

If the key claim of this article is true -- that there is learning by doing in procurement -- this has a few interesting implications. In a department where there is low experience with procurement, the early years where procurement work begins will work poorly. In such a department, procurement under-spend is likely, with consequential failures in public expenditure programs and budgeting. In a department with low experience with procurement, a sudden jump in the procurement budget is likely to be associated with failure to spend. If the political leadership decides to push up the procurement spend of a department by three times, it would make sense to (a) increase the budget by only 20% and (b) initiate a capacity building program for procurement capability within that department.

Procurement is an expertise. No government organisation can sporadically do this well. It is an expertise which can be built, albeit over many years. In any government organisation, people and processes can be organised to focus on this expertise, and to devote time and effort on the entire pipeline of government contracting. The process of developing this capability can be accelerated by bringing in people with this specialised expertise. Strengthening the entire life cycle is required to successfully spend budget amounts. But this is only the beginning of success in procurement where government can contract to deliver quality projects efficiently, on time and at low cost.

References

Aneesha Chitgupi and Susan Thomas. The make vs. buy decision of the union government, The Leap Blog. September 10, 2022.

Vijay Kelkar and Ajay Shah. In service of the republic: The art and science of public policy. Second edition, 2022.

Shubho Roy and Anjali Sharma. What ails public procurement: an analysis of tender modifications in the pre-award process, The Leap Blog, November 26, 2020.

Anjali Sharma and Susan Thomas. The footprint of union government procurement in India, XKDR Working Paper 10, November 2021.

Aneesha Chitgupi is a Research Fellow at XKDR Forum, Abhishek Gorsi is a doctoral candidate at the IGIDR and Susan Thomas is a Senior Research Fellowe at XKDR Forum and a Research Professor of Business at Jindal Global University. We thank Josh Felman, Sudha Krishnan, Ajay Shah and Anjali Sharma for feedback and comments.

Timeliness in government contracting: Evidence from the country's largest metro-rail network

by Anirudh Burman and Pavithra Manivannan.

Introduction

Infrastructure projects in India are plagued by delays (MOSPI, 2022). Proposed explanations include failures of government contracting for public procurement (Singh, 2010, Sinha and Vatsa, 2021, etc.). In this article, we measure delays in the procurement process of the largest metro-rail network in the country -- the Delhi Metro Rail Corporation (DMRC) -- which is considered a successful project. It fares well on global ranks on some parameters such as network length and ridership. The early phases of this metro rail project have been lauded for timeliness in execution and contract payments (Expenditure Management Commission, 2016).

We look at two distinct datasets to obtain a birds eye view and a procurement-oriented view of the delays in DMRC. We find that DMRC is prompt in stages of the contracting processes for which we are able to find evidence, but that the overall project implementation suffers from time overruns. We put this knowledge together to obtain insights into government contracting.

Our approach

As with contracts drawn between any two counterparties, government contracting is a pipeline that runs through four phases (Mehta and Thomas, 2022): (I) Contract specification and design, (II) Contract tendering and award, (III) Contract management and (IV) Contract closure. Flaws in government contracting shows up as inefficiencies in public procurement such as delays in infrastructure projects, which in turn, results in cost overruns, loss in revenues, vendor dissatisfaction and lack of competition when government wants to procure, and ultimately, deprives the public of the intended benefits.

We use three data-sets to understand the timeliness of government contracting in DMRC projects.

1. A data-set of the time taken by the various DMRC projects, sourced from the CapEx database published by the Centre for Monitoring Indian Economy (CMIE).
2. A data-set of tenders awarded by DMRC, hand-constructed from the 'Contracts Awarded' section of the DMRC website;
3. A data-set of payments made by DMRC, hand-constructed from the 'Vendor Payment Details' section of the DMRC website and from an RTI application.

The first data is sourced from the CMIE CapEx database. The CapEx database records the date of significant events for each project. We collect data for the three operational metro networks constructed by DMRC, that is, Phase 1, 2 and 3. This data-set consists of project level information such as, the date of announcement of the project, initial completion date, actual completion date and time overruns.

The second dataset is a hand-constructed data-set consists of tender level information for awarded contracts of DMRC, such as the department calling for tenders, nature of work, date of publication of Notice Inviting Tender (NIT), date of issue of letter of acceptance and value of the contract. This data-set covers this information for 892 tenders for a period of 5 years (2016-2020). DMRC categorises these tenders into 7 heads: Civil and Architecture Works, Electrical Works, Operations and Maintenance, Rolling Stock, Track Works, Signalling and Telecom and Property Development.

In addition, we categorise the contracts for IT services and housekeeping works as 'Miscellaneous' and the procurement done by DMRC for other metros in the country as 'For Other Metros'. The highest number of contracts were awarded for Operation and Maintenance works (623) and the least for Rolling Stock (2). Table 1 shows the typology of procurement undertaken by DMRC during our study period.

Table 1: Typology of DMRC Procurement

Category	2016	2017	2018	2019	2020	Total
Civil and Architecture Works	17	28	9	15	9	78
Electrical Works	5	1	3	5	13	27
Operations and Maintenance	0	65	167	200	191	623
Rolling Stock	0	0	0	2	0	2
Track Works	12	2	0	1	3	18
Signalling and Telecom	8	1	0	0	3	12
Property Development	0	5	3	10	5	23
Miscellaneous	4	14	23	8	13	62
For other metros	5	7	17	8	10	47

Our second hand-constructed data-set consists of monthly bill payment status of DMRC. Pursuant to government communication (vide D.O.18(18)/IFD/2019 dated 05.11.2019), DMRC uploads its monthly vendor payment details on its website since December 2019. This data gives us periodic information about the bill submission date and the bill payment date of DMRC vendors. Since the website does not archive its data we obtained our data partly from the DMRC website and partly vide an RTI application made for this purpose. Our data-set consists of 20,654 bills for the period between November 2019 to August 2021. The payment period is unknown for about 1,550 bills in our data-set, which we discard in our analysis.

We restrict our study to benchmark DMRC's performance against the timelines prescribed by its internal guidelines (DMRC Procurement Manual, 2016 and General Conditions of Contract, 2019) and the Central Government procurement guidelines (General Financial Rules, 2017 and the Manual for Procurement of Works, 2019). We do not employ a comparative analysis with other procuring entities for two reasons: One, availability of data in government portals such as the CPPP (Central Public Procurement Portal) and websites of the procuring entities are often sparse and sporadic. Second, a deeper understanding of the fundamental functioning, internal rules, processes and organisational structure of each entity is required for a meaningful comparison and it warrants a separate study.

Findings: Time overrun in DMRC project implementation

In the CapEx data, we are able to see that, between 1995 to 2021, there were three projects announced, implemented and completed by DMRC. These are the Phase 1, Phase 2, and Phase 3 lines. These have been operational from 2006, 2011 and 2021 respectively. From this data, we are able to locate various timelines for all three phases, including the date on which the Phase was announced, to the date on which they were completed and commissioned for public use for fully operational metro lines. We calculate the time overruns as the difference between the date projected initially as the completion date for a Phase and the date on which it was actually completed and operationalised. These are presented as project delays in Table 2.

Table 2: Project delays (in months)

Phase 1	15
Phase 2	32
Phase 3	102
Source: CMIE Capex Database

Findings: Timeliness in contract award by DMRC

High-income countries, countries with greater political accountability, and countries with greater economic freedom process public works procurement in a more timely manner (Djankov and Bosio, 2020). Each of these countries does infrastructure procurement following its own regulations to award contracts. In India, works procurement is guided by the Manual for Procurement of Works, 2019. According to Clause 5.6 in this manual, the time taken by Ministries and Departments from the date of opening the tender to the date of awarding of contract is 90 days.

We estimate the actual time taken by DMRC to award tenders (Table 3). This is calculated as the time taken from the date of opening of the tender to the date of issuing of the acceptance letter. We find that, on an average, DMRC takes 91-92 days to complete the tendering process.

Table 3: Time taken to award tenders (in days)

Year	No. of tenders	Average time taken
2016	51	101
2017	123	98
2018	222	103
2019	249	81
2020	247	89
Average	178	92

Findings: Timeliness in making vendor payments by DMRC

Payment delays are endemic in public contracts in India. DMRC has sought to avoid payment delays by including provisions for both interim and final payments within its Procurement Manual and General Conditions of Contract, 2019 (GCC). Depending on the type of contract, payments may be made at different stages of the procurement cycle. At Clause 11, the GCC provides for set timelines for the scrutiny of invoices and payments to be made by the procuring entity:

• Interim payments: A contracting firm may apply to the respective project engineer of DMRC requesting for an 'interim payment certificate'. This certificate will be issued based on achieved milestones or prescribed payment schedule in the contract, if any.
1. Within 21 days of the request, the project engineer must issue the interim payment certificate specifying the amount due to the contractor.
2. DMRC is mandated to make 80% of the certified payment amount within 7 days of issue of the certificate.
3. The balance 20% is to be made within 28 days of issue of the certificate.
• Final payments: Once the project engineer certifies that the contractor has completed all his obligations related to a particular work, the contractor is entitled to apply for a 'final payment certificate' with the required supporting documents.
1. Within 28 days of receiving this request, the project engineer must issue the final payment certificate stating the final amount due.
2. DMRC is mandated to pay the amount certified in the final payment certificate within 56 days of issue of this certificate.

We look at the vendor payments data-set of DMRC to analyse the adherence to these timelines. We find that, on an average, DMRC takes about 4 days to clear its dues from the date of submission of the bill by the vendors (Table 4). For the data-set in our study, the maximum days taken by DMRC to make its payment is about a year.

Table 4: Time period for clearance of dues (in days)

Year	No. of bills	Average time	Median time	Minimum time
2019	1326	5	2	0
2020	9887	4	3	0
2021	7891	4	4	0
Total	19104	4	3	0

Payment delays by public sector enterprises in India to their vendors far exceeds their procurement values (Manivannan and Zaveri, 2021). We find that DMRC is an outlier in terms of maintaining payment discipline to its vendors, and in adhering to the timelines provided in its GCC.

Discussion

The public discourse on government infrastructure procurement focuses on delays and time overruns being an indicator of poor government contracting. In this article, we have analysed the capability of a procurement-intensive public sector enterprise to keep up with its timelines in two stages, that is, in contract award and payments. We find that DMRC takes about 3 months to award a contract, and about 4 days to clear its payment dues to vendors. Regardless of this exemplary performance on awarding contracts and paying vendor dues, we also find that the overall project implementation by DMRC failed to meet scheduled timelines to complete. All three phases took a longer time than originally expected. In fact, we observe that the overall project time delays increased from the Phase 1 project to the Phase 3 project.

Executing infrastructure projects on time has been a continuous concern and challenge in India. Our analysis about DMRC timeliness in awarding contracts and in making payments provides evidence against the popular perception that public projects are delayed due to delays in decision-making by the public authorities and their inability to make timely payments. Instead, we speculate that these are because of other factors for overall project delays, some of which could be misaligned allocation of scope and risk in procurement contracts and poor contract management. A deeper analysis into each project, procurement practises, financial and institutional structure of DMRC may help in understanding the reasons for its timely performance in certain procurement processes and the potential causes of time overruns. These learnings can then be adopted by other procuring entities to achieve better procurement and project outcomes.

References

Ministry of Statistics and Programme Implementation Infrastructure and Project Monitoring Division, 434th Flash Report on Central Sector Projects, January 2022.

Ram Singh, Delays and Cost Overruns in Infrastructure Projects: Extent, Causes and Remedies, Economic and Political Weekly, Vol 45, No. 21, May 2010.

PC Sinha and Ananys Vatsa, Delays in Project Completion in India, Indian Journal of Projects, Infrastructure and Energy Law, January 2021.

Erica Bosio and Simeon Djankov, Timely procurement of public works, World Bank Blogs, February 2020.

Department of Expenditure, Ministry of Finance, General Instructions on Procurement and Project Management, October 2021.

Expenditure Management Commission, Recommendations of the Expenditure Management Commission, December 2015.

Department of Expenditure, Ministry of Finance, Manual for Procurement of Works, 2019.

Delhi Metro Rail Corporation Ltd., General Conditions of Contract, November 2019.

Pavithra Manivannan and Bhargavi Zaveri, How large is the payment delays problem in Indian public procurement?, The Leap Blog, March 2021.

Charmi Mehta and Susan Thomas, Identifying roadblocks in highway contracting: lessons from NHAI litigation , The Leap Blog, July 2022.

Charmi Mehta and Diya Uday, How competitive is bidding in infrastructure public procurement? A study of road and water projects in five Indian states , The Leap Blog, March 2022.

Anirudh Burman is an Associate Research Director and Fellow at Carnegie India. Pavithra Manivannan is a Senior Research Associate at XKDR Forum and Chennai Mathematical Institute. We thank Susan Thomas for valuable comments and discussions.