TN contractors speak up, detail corruption in awarding of contracts by Chennai corporation

"The rest of us have no work. If we ask questions we don't get paid at all or worse, we are threatened," one contractor tells TNM.
TN contractors speak up, detail corruption in awarding of contracts by Chennai corporation
TN contractors speak up, detail corruption in awarding of contracts by Chennai corporation

On August 10, 47-year-old Ramachandran, a contractor who has worked with the Chennai Corporation for over 15 years, filed a petition against the civic body in High Court. He alleged lack of transparency in the process of awarding tenders and his effort to expose this 'corruption' was spurred by the fact that major road laying contracts were to be announced in five days.

"They were going to announce tenders for bus routes and storm water drains worth crores. And as a contractor who works largely on roads, I was aware that measures will be taken to give this work on to applicants favoured by the government and the corporation officials. So I decided to take a precautionary measure," says Ramachandran. According to contractors, the project to be given was massive and consisted of multiple packages worth Rs 20 crore each. Each package consisted a cluster of 100 bus route roads (BRR) or storm water drains (SWD). The budget of BRR was set at Rs 400 crore while SWD was set at Rs 390 crore. "The rest of us wouldn't stand a chance. They had a well-oiled mechanism to shut us out," he alleges.

Close to 70 Class A contractors who worked with the government were watching Ramachandran's battle carefully. While some contractors have benefited from this ‘biased’ system, most were victims who had not mustered the courage to speak up.

And two days later it became clear why, when Ramachandran withdrew his case hurriedly, despite the court's previous observations making it evident that justice was on his side.

"The corporation officials threatened me," he alleges. "They said that if I went on with the case, they would send the Tamil Nadu pollution control board to my tar factory and shut it down. If they did that, my whole livelihood would have been at stake. I took back the case and suffer silently with other contractors, as corruption rules over competence when giving out contracts," he adds.

So how do they suppress these contractors?

According to three contractors who spoke to TNM under the condition of anonymity, problems in applying for tenders began in 2014. John, a major contractor whose family has been taking up road laying contracts from the corporation for over 20 years, says that the current administration has alienated most contractors.

"After SP Velumani took over as Municipal Administration minister, associations were formed with select contractors who did the bidding of the minister, even as he used his own benami firms to usurp large tenders. There are close to 10 companies that dominate the scene right now. Three to four close to Velumani get all the contracts. The others who are part of the association receive a percentage of the contract to ensure they don't apply for it," he alleges.

According to contractors, former public work department officials and Arappor Iyakkam, which is an anti-corruption NGO, there are three ways in which the system is rigged.

Challenge 1: Machinery certificate

The first challenge is applying for the tender itself. Contractors are required to submit a document called a 'machinery certificate' along with the other information they upload online.

"It is actually this machinery certificate which I used as the basis of my case in court," says Ramachandran. The certificate is given by corporation officials after an inspection conducted deems that you have the necessary equipment and infrastructure to carry out the tender requirements. "The officials - the principal chief engineer and the superintendent engineer will flatly refuse to give you a certificate. The court had verbally told them to grant me one but I withdrew the case fearing repercussions. I never got the certificate," he admits.

Two other contractors independently verified this claim. A former official privy to the inner workings of the PWD confirmed to TNM that this practice of having to submit a machine certificate every time could be avoided.

"When a contractor has been regularly taking up similar projects, there is no need for them to get a certificate every time. There could be a yearly certificate issued and annual reviews conducted," he says.

Is this a manufactured impediment? "Yes, it is unnecessary," he agrees.

Challenge 2: Demand draft submission

The second hurdle set in place is the submission of a demand draft. Usually for a project worth Rs 30 lakh, a month is given to submit the demand draft to the Head of the Department. The cut off time is 3 pm on the last date.

"By the time they give us the machinery certificate, we will be rushing to submit the demand draft. But no officials will be present to collect it. If we post it, they will say it never came. And if we somehow manage to meet him, there will be efforts to block us from submitting draft - that is, men will be standing in front of the collection box, preventing us from dropping in the drafts," says John.

In fact in July 2014, this contractor wrote to then-Deputy Commissioner of Public Works Department Vijay Pingale outlining the issue. The mail talks about how he had uploaded the e-tender to the corporation's official tender website. And on July 25, he went to the office to drop off the demand draft.

"But some people were standing near the tender and they were not allowing us to drop our EMD demand drafts for the work which we participated through e-tender. They are favouring some particular contractor who they want to get work. This is a big loss to the Chennai Corporation. Please do some necessary action against these kind of malpractices," according to the mail.

But according to sources, just a week later, Pingale received transfer orders from the corporation's public works department and was moved to the Industries Department. And with Pingale departure, any hope of fairness in awarding contracts, was gone too.

"When Pingale was the DC, even if the other officials refused to take demand drafts, he would take them if we had a legitimate reason to explain the delay," says the former official. "He had suggested that the demand draft too should be submitted online to prevent any corruption. But it was never carried out," he adds.

Challenge 3: Specification scam

The third and final roadblock to other contractors is the 'specification scam' that has been recently reported widely in the media. An investigation by news channel Times Now said that Minister Velumani awarded government contracts relating to various municipalities and corporations to the companies owned by his brother and close aides. Reports say that he allegedly allowed these companies to bid for the same tender, thereby flouting tender rules. Companies named included, P Senthil & Co, KCP Engineers Private Limited, Constromall Goods Private Limited, Vardhan Infrastructure, Constronics India and Aalayam Foundation Private Limited.

Jayaram Venkatesan, Convenor of Arappor Iyyakkam, pointed out that Varadhan has received seven out of the nine major contracts from the corporation this year, all in a questionable manner

Varadhan Infrastructure is headed by Sundari Krishnakumar who is Chandraprakash’s mother. Chandrapakash in turn is part of the management for Constromall, Constronics India and Aalayam Foundation. He works closely with the relatives of SP Velumani.

"The Chennai Corporation tweaks the tender specification to match the experience and infrastructure that these favoured companies have. For example, they put out a tender in September 2017 for 302 staff nurses. They said that those applying had to have done a similar job for a tender worth Rs 5 crore. Varadhan Infrastructure did not qualify for this. So they stopped the entire process. And then re-issued the tender in January 2018 by which time Varadhan had completed a job worth that amount. Now Varadhan applied for this job along with four other companies. None of them were technically qualified for this as they demanded a turnover of Rs 20 crore for the company. But Varadhan still got the contract. It is an obvious case of fraud," explains Jayaram.

In fact from January to September this year, John alleges that till 2014, politicians would employ goondas to block contractors from submitting demand drafts.

"But now corporations officials do the job," he says. "On September 24, there was a tender for 'construction of bridge across puzhal surplus water canal' at Barma Nagar main road. A clarification meeting was held for this. There were four attendees - two companies linked to the minister and two companies from the Chennai Corporation Contractors Association. The rest of us received no intimation about the meeting," he alleges.  

Blow to fair competition

According to Arappor, the efforts to monopolise these contracts is huge blow to the concept of 'fair competition.’

"By accepting only certain companies and claiming they fit into necessary specifications, the government is forced to go by their terms," he explains.

Contractors allege that the quotations made are at least 20% more than the actual value of the tender.

"It is the actually the government which is making a loss. But this makes sense," says Pachaiyappan, a contractor who spoke to TNM. "On an average, at least 18% of the tender value is given as bribe to the minister and authorities," he claims.

Three contractors that TNM spoke to confirm that the share which is lost to bribes is 18%. And while the 'cut' received by corporation officials and the association varies in their accounts, one amount remains the same.

"Minister Velumani receives 10.5% of the value of the tender," they all confirm.

But even as the coffers of officials and politicians allegedly fill, contractors claim their turnover has drastically reduced.

"The rest of us have no work. If we ask questions we don't get paid at all or worse, we are threatened. From Rs 15 crore in 2010, my company's income has dwindled to Rs.60 lakh a year now," says John. “We still haven't been paid for the work we did after the 2015 floods but if we ask for it, they will threaten to not pay at all."

(All contractor names changed to protect identity)

Related Stories

No stories found.
The News Minute