General Expenditure

Q.1. Explain the concept of part estimates? Is there any need for Accounts
Office to vet tender schedule? Write in details bringing out the Board’s
order on the subject?

Ans) Part Estimates - In special cases where works are required to be

commenced before the earliest date by which detailed estimates for
the project as a whole could be prepared and sanctioned, part
estimates for sub- works may be prepared.

To enable the commencement of work on such works forming a part of

the project, part estimates for the following sub-works may be
sanctioned progressively by the authority competent to sanction the
detailed estimate for the whole project:

 (i) Preliminary works including final location survey etc.

 (ii) Setting up of project offices and organisation including office
accommodation, construction equipment minimum vehicles and
provision for gazetted and non-gazetted staff etc.
 (iii) Land acquisition.
 (iv) Formation and bridge works for whole or part of the project
where survey has been done and alignment determined.
 (v) Minimum service buildings in case of new line works required to
meet immediate needs of construction organisation and
subsequently required for operation of the project.
 (vi) Minimum residential quarters required to meet immediate
needs of construction staff. The number and location of quarters
should be within the overall requirement of Open Line for operation
of the project.

Before forwarding part estimates duly concurred by FA & CAO and

approved by General Manager for sanction to the Rly. Board, it should
be certified that no works included in the part estimates are likely
to become redundant when estimate for the whole project is
prepared.
 MANAGING OF VARIOUS RAILWAY FUNDS
1.1 The Railways maintain the following funds for different purposes viz

INTERNAL FUNDS
a)     Depreciation Reserve Fund (DRF)
b)     Pension Fund
c)    Development Fund
d)   Capital Fund

RESERVE FUNDS

234 Railway Revenue Reserve Fund – This is a minor head under the major head 816-revenue Reserve Funds
(under J-Reserve Funds-(a) Reserve Funds bearing interest) the account of the Fund will be maintained in the
Office of the Railway Board only. The Fund will be credited mainly with appropriation from revenue surplus,
interest on the balances of the fund and loans from General Revenues. The accounts of the Fund will be debited
with (i) such sums as may be required for dividend equalisation that is to say to make up the shortfall in the
revenue surplus available for payment of dividend to the General Revenues, (ii) repayment of loans form General
Revenue and interest on loan. The balance of the fund will be carried forward from year to year.
Fund is closed.

235. Railway Development Fund- This is a minor head under the major head 817- Development Funds (under
J-Reserve Funds-(a)-Reserve Funds bearing interest). The accounts of the Fund will be maintained in railway
board’s Office. The Fund will be credited with appropriation from revenue surplus, interest on Fund balances and
loans from General Revenue. The withdrawals from the Fund will be in accordance with the rules of the Fund,
namely to meet the expenditure on providing amenities for passengers and other railway users, labour welfare
works, unremunerative operating improvements etc. The balance of the Fund will be carried forward from year to
year.
Fund is closed.

237 Accident Compensation, Safety and Passenger Amenities Fund - This is a minor head under the major
head 821-General and other Reserve Funds (under J-Reserve Funds, (a) Reserve Funds bearing interest). The
Fund will be credited with the amount collected as surcharge on passenger tickets (towards accident
compensation etc.) and interest on the balance in the Fund. The Fund will be debited with (a) payments of
compensation to passengers involved in railway accidents, (b) expenditure on safety works such as Track
Circuiting or Axle Counters, Automatic warning System, Vigilance Control Device, Lifting Barriers at level
crossings, inter-locking of level crossing gates with signals and such other safety works as may be authorised to
be financed out of this fund from time to time and (c) expenditure on specified items of passenger amenities and
allied works such as provision of platforms and covers there on, Train indicator Boards, Rest Shelters for
licensed porters etc. The balances of the Fund will be carried forward from year to year.
Fund is closed.

OLWR :
This fund is meant for debiting those expenditure Which are costing more  than Rs 1 Lakh and upto Rs 10
Lakhs.  New Minor Limits.  The object of this fund is to enable those  Expenditure costing more than Rs 10 Lakhs
to be charged not To Revenue but to this fund.  This would reduce the Revenue Expenditure  considerably.
Now closed

External Funds:
1.     Market borrowing through Indian Railway Finance  Corporation IRFC  Raising bonds in 
market Fund Rolling Stock production On lease basis Charges 16 % p a
2.     General Exchequer – support from GOI Interest bearing loan in perpetuity 7 % p a
3.     Railway Safety Fund – a share from the Central Road Fund – every lr of petrol sold railways
get 12.5 paise and diesel 6.25 paise meant for construction of ROB/RUB,  manning
unmanned level crossing
4.     Special Railway Safety Fund –  non lapsable fund Rs 15000 Crores for renewal and
Rplacement of tracks, bridges,  Rolling Stock Over aged coaches and wagons,  signaling
gears
5.     Ministry of Defence for rail lines in  strategic areas – Udhampur – Katra – Baramulla –
Quazigund 100 % support
6.     North East Development Forum – for all projects in the seven North Eastern States
7.     State Participation: Since the construction of new Lines have cost dearly to the railways, the
RailwayMinisters Namely Shri George Fernandez and Shri Nitish Kumar have Raised this
issue in the Parliament through “Status Paper On Railways” and a “White Paper on Railway
Projects”. They have appealed the State Governments to take up The new lines under Infra
Structure Development Projects In their respective States.  
Maharashtra:            Mumbai Rail Vikas Corporation 2/3
Karnataka   :             Karnataka Rail Infrastructure Development Enterprises  2/3
Andhra Pradesh:      50 : 50 sharing
West Bengal    :       Metro Rail – Dolliganj – Dahria     1/3 share
Jarkhand         :       2/3 sharing
Tamil Nadu :            MRTS – Taramani – Velacheri 2/3
                                              GC – MSB – TBM               50:50
                                  GC  -  SA  - COT                 50:50
8.     PPP Public Private Participation:
Pipavav Mundra Port Railway

9.     LIC of India has come forward to invest Rs 150000 Crores in Indian Railways

Rashtriya Rail Sanraksha Kosh (RRSK) 

A fund namely ‘Rashtriya Rail Sanraksha Kosh’ (RRSK) has been created in 2017-18 with a corpus of ₹1 lakh
crore over a period of five years for critical safety related works. Accordingly, a provision of ₹20,000 crore has
been made in Budget Estimates and Revised Estimate, 2017-2018 out of ‘Rashtriya Rail Sanraksha Kosh’ to
fund essential works for ensuring safety.
The details of works to be executed through Rashtriya Rail Sanraksha Kosh (RRSK) have been summarized as
under: –
Summary of RRSK works identified
(1) Civil Engineering Works
(including Track works, Bridge rehabilitation, Vehicular ultrasound testing system for
rail/welds, broken rail detection system, adoption of flash butt welds & weld quality
improvement etc)
(2) Safety works at Level Crossings (includig elimination of LC/ROB/RUB/Subways etc)
S&T Works (including Train Protection & Warning System, Train Collision Avoidance
System, up-gradation of standard of interlocking, replacement of overaged signalling
(3)
gears by
electrical/electronic interlocking etc)
(including Freight Design & Maintenance, Coach Design & Maintenance, Diesel
(4)
Locomotive maintenance, Crew Management and Disaster management)
Electrical Engineering (Replacement of overaged traction distribution assets,
(5) conversion of unregulated OHE to regulated OHE, replacement of masts/portals,
replacement of transformers, cables,earthing, panels, wiring etc)
(6) Human Resource Development

The above works of asset replacement are targeted for liquidation in a period of five years. Outlay of the ₹20,000
crore has been allocated in Budget Estimates 2018-19 also.
Safety is accorded the highest priority by Indian Railways and all possible steps are undertaken on a continual
basis including upgradation of technology to aid safe running of trains. These include replacement of over-aged
assets, elimination of unmanned level crossings, adoption of suitable technologies for upgradation and
maintenance of track, rolling stock, signalling and interlocking systems, safety drives, greater emphasis on
training of officials and inspections at regular intervals to monitor and educate staff for observance of safe
practices.
As a safety culture a well established safety management systems is existing which identifies Safety hazards and
unsafe practices in the railway operation so that corrective action can be initiated much before occurrence of a
disaster. Instructions have been issued from time to time to inculcate safety habits amongst all railway
employees.

(a) Price variation clause:

 This clause has been introduced Stores and Works Contracts just to give the benefit of
any increase in prize due to inflation.
 This clause is not applicable if variation is up to 5%only. It is limited to 10% [i.e. 15% -
5%] for contracts with completion period is up to 2 years and it is limited to 20% [i.e.
25% -5%] for contracts with completion period more than 2 years.
 Material supplied by railways free of cost for use on that particular work is excluded from
the value of the contract.
 This clause is applicable to the contracts valued at Rs. 10 lakhs and above. However
Chief Engineer can delete this clause from contracts valued between Rs.10 lakhs to 25
lakhs on some special considerations. This is applicable to contracts where completion
period is more than one year however as per recent amendment, if original completion
period of less than one year is extended beyond one year, this clause can be made
applicable. In case extensions are granted under clause no. 17.4 of GCC, this clause is not
applicable.
 Railway Board has decided the percentage of fixed components & fuel, labour, material
and other components, etc. applicable in earthwork, query, ballast, bridges work. This
percentage has to be specifically indicated in the tender schedule to enable the contractor
to know the same while quoting the rates. Chief Engineer can change these percentages
according to the local situations / complexities of work in consultation with FA & CAO.
In no case the same can be changed after the contract is awarded.
 The month of opening the tender/negotiated offer is taken as base month and further price
escalation is calculated on quarterly, on average of 3 months basis as per formula laid
down.

(c) Liquidated damages:

Are governed by (a) clause No.17.1, 17.2,17.3,17.4of General conditions of contracts (b)
chapter II of rules for entering into supply contracts (c) para 1267-E. It has been laid down
that though this clause appears in every contract agreement, it is mandatory for the Rly.
administration to serve a notice of intention of to recover the L.D.

This is applicable when the supply or works are not completed within the prescribed time
limit of the contract agreement and extension has to be granted. The delay can be on account
of (a) Railway administration by way of additional quantity, additional items, change in
scope of work etc. (b) due to failure of the contractor (c) due to reasons beyond the control of
the contractor / Railways i.e. act of god, lockout, strikes, fire etc.

If Railway administration is not in a position to cancel the contract for the balance
work/supply for awarding the same on risk & cost basis, but has suffered some kind of loss /
inconvenience, L.D. is imposed in proportion with the quantum of loss etc.
The authority that has approved the tender enjoys the full powers for imposing / waiving this
penalty in respect of contracts entered into. In case of waivel, full reasons for doing so have
to be recorded on file and communicated to FA & CAO.

In case of works contract, the penalty to the extent of one half of one percent of the contract
value for each week or a part of the week, the contractor is at fault for delayed execution of
work. In case of supply contract LD is recovered at 2% of the contract price/consignment per
month or a part of the month where the supply is in arrears. In case there is no actual loss /
inconvenience can not quantified in terms of money, the LD is recovered at 10% of the 2%
applicable.

While granting the extensions specific clause of the GCC under which it is being granted has
to be invariably indicated along with the percentage of LD to be imposed. Where time is the
essence of the contracts, extension shall be allowed on valid grounds & only if it is felt that
the contractor can complete the work in the extended period.

Q.No.3 What are the factors leading to time and cost over-run in projects? How can they be
avoided?

Answer: Cost over-runs and time over-runs in the case of number of construction projects,
of late, have become very common. Unless the cost-base of major inputs making up the
overall cost of the projects is realistically adopted and the overall cost of the projects so
assessed, cost over-runs are unavoidable consequences and the results of original cost-benefit
analysis are bound to be vitiated.

Main purpose of framing works estimates is to bring to the notice of the sanctioning
authority the scope of the work, time-frame of completion and the financial liability that is
being incurred. For preparing a proper estimate, it is necessary that the scope of the work is
well defined based on approved work plan. Structural computations and the availability of
the proposed structural materials.

The major areas causing concern with reference to Railway projects are delays
inefficiencies, alterations distortions in implementation and execution of works. At times the
systems of execution of works through agencies not competent to handle the delicious of
planning are same major areas causing concern they are namely:

I. Clear and specific job responsibilities with the time frame are not determined at all
levels and vigorously monitored in the field.

ii. The systems lack the method of identifying the areas of wastages, localizing them
and remedial actions to be taken up. It grapples with the problems as and when the surface at
higher cost.

iii. Rigorous performance oriented budgeting is not used as a parameter at key levels
of implementation to ensure optimum results.

Iv. Indian Railways cannot afford planning and execution on a trial and error method
of growth pattern.
 v. Monitoring should become an integral part of planning. The present method of
productivity tests and reviews appear to have little significance.

vi. The management is in a hurry and anxious to implement a number of schemes and
at times they look as plans of expediency.

The works are started with the sanction of detailed estimates and works-in-progress
and matched with the allotment of funds. It is interesting to know that the time over runs and
cost over runs are in the range of 200% or above in respect of major as well as minor
projects. The analysis in retrospective, indicate distortions like under estimation, delays in
implementation and execution of works, unrealistic time span projected for completion of the
works. As the number of projects increase, not matching with the corresponding funds
allotments, the works get starved for want of resources resulting in time over –runs. The
emphasis of management should be to fix their priorities limit the number of projects and
ensure completion within the time frame and budget allocation.

How can be avoided?

The programming and execution of works should have a built in mechanism to

ensure:-

i. The implementation of the scheme is within the financial and physical resources.

ii. Execution is within the prescribed time schedule.

iii. A system to system to ensure all preliminary planning, like acquisition of land,
preparation of detailed plans, estimates and contract schedules.

iv. A monitoring system to ensure all preliminary planning, like acquisition of land ,
preparation of detailed plans , estimates and contract schedules.

v. To handle the contract management efficiently to ensure economy during

execution.

vi. Many errors originate in imperfect knowledge of the field of enquiry. A good
knowledge of the area of investigation is essential.

vii. Development of suitable models for the solution of similar problems occurring
during the course of project implementation.

Viii .Railway Management should accord priority to complete the works by

allocating additional funds. There are a large number of works more than three years old
which physical progress is less than 25%. A review may indicate whether these projects are
still considered justified.

Although cost over-runs, in the case of major projects, are inevitable to some extant,
owing to the functional set up, operational procedures, price escalation, inflationary
conditions etc. yet, it can be minimized to a great extent by realistic cost assessment through
compilation of works estimate framed on a firm and realistic cost-base and initiating action
for processing revised estimates, no sooner it comes to light that the original sanctioned cost
is likely to be exceeded. The Board have taken a very serious view of the cost over-runs and
in this connection their latest instructions making it incumbent on the project authorities to
undertake a “Mandatory Review” of the cost estimates with a view to make sure whether
these would require upward revision, at the stage when funds to the extent of 50% of the
approved cost are released, are worth mentioning. It as a result of this review, the project is
likely to exceed the approved cost; the revised cost estimates should be drawn up and got
considered and sanctioned by the competent authority before any funds are released beyond
the sanctioned estimates.

Tender Schedules:

Once the detailed estimates are sanctioned, the process of taking up

the work commences either by executing the work departmentally or
by inviting tenders. There are hardly any works which are done
departmentally. All the works other than normal maintenance are
executed through tenders. For inviting tenders, it is necessary to
prepare tender schedules. This should be prepared duly keeping the
following points into consideration.

i. General Conditions of the Contract duly updating the conditions

modified from time to time.

ii. Special Conditions of the Contract, if any.

iii. Specifications of the work as per approved drawings/plans.

iv. Quantities and rates as incorporated in the sanctioned

estimates based on approved drawing and plans.

v. Incorporating necessary PVC clause for the tenders costing

more than Rs. 50 lakhs.

vi. Stage payment clause for the tenders costing more than Rs.15
crores,

vii. Incentive payment clause of 1% subject to a maximum of 6% as

an incentive for early completion of works in respect (Planhead
Doubling, TF and GC) throughput enhancement works.

viii. Eligibility criteria for the tender: No eligibility criterion is

required to be laid down for tender upto Rs.50 lakhs each. For
the tenders costing > Rs.50 lakhs, it should stipulated that the
tenderer should have completed atleast one similar work of
value of not less than the 35% of the estimated cost of the
tender during last 3 years. Other criteria if any as specified in a
particular type of works needs to be stipulated.
 ix. The conditions stipulating the eligibility in terms of financial
capacity indicating that the tenderer should have a turnover of
150% of the tendered value during last 3 years.

x. Fixation of cost of tender forms shall be made as per the rates

fixed by Board from Rs.1, 000/- to Rs.25, 000/- depending on
the value of the tender.

xi. EMD shall be fixed @ 2% of the tender value upto Rs. 1 crore
and ½% of the tender value exceeding Rs.1 crore subject to a
maximum EMD of Rs.1 crore.

xii. It should be ensured that, necessary conditions regarding

submission of Security Deposit/Performance Guarantee and
their release after satisfactory completion of the work /
maintenance period is incorporated in the Tender conditions.

xiii. It should be ensured that the tenders are invited only for the
works which are covered by the sanctioned estimates with
sufficient availability of funds.

xiv. The quantum of work and the rates should match with the
details of the sanctioned estimate.

xv. The period of contract should commensurate with the expected

period of construction and the outlay allotted for the work.

Pre-vetting of Tender Schedules: Pre-vetting of tender schedules is

dispensed with as per the recommendations of the Sudhir Chandra
Committee except in the urgent cases where tenders have to be invited
pending preparation/sanction of the detailed estimates. Pre-vetting is
also not necessary for the works chargeable to Revenue in case of
Zonal Works and Revenue works in Open Line for which detailed
estimates are not framed.
Advances to Contractors

v  1264 E -Para No.64 of 12th chapter of Indian Railways Engineering Code  - Click here

v  As far as possible abstain from giving advances to Contractors.  That means No

payment is made except for work actually done. 

v  GMs may, however, sanction within their delegation of powers  - Those works which
are capital intensive and specialized nature and also when estimated value of the
tender exceeds Rs.25 Crores.

v  Such advances are of four types.

I-Mobilization Advance: 

v    Limited to 10% of the Contract value and payable in 2 stages. 

A.      Stage I - 5% of Contract value  - on signing of the Contract Agreement.

B.      Stage II - 5 % on mobilization of site establishment, setting up of offices, bringing in

equipment & actual commencement of work.

     II- Advance against Machinery & Equipment:

v   Limited to a maximum of 10% of the Contract value.  Also Limited to 75% of the

purchase price of such
          Equipment.

v   Against New Machinery & Equipment, involving substantial outlay, brought to side
and essentially
           required for the work. (No advance -Against old equipment)

v  Hypotheticate to the President of India by a suitable Bond or alternatively covered by

an irrevocable Bank Guarantee for full cost of the Plant & Equipment

v  The Plant & equipment shall be insured for the full value and for the entire period.

v  Such Plant & Equipment shall not be removed from the site of work without prior
written permission of the Railway Engineer.  
III -   Advances For Accelerating Progress Of The Work During Course Of Execution
Of Contract -

v  Decided on the merits of each case .

v  By General Managers with recommendations of PCE in consultation with PFA. 

v  Total of such Advance is up to Rs.100 Crores or less or as decided by Railway Board in

a year.

v  Restricted to 5% of Contract value or Rs.1 Crore whichever is less. 

IV - Advances in Exceptional Cases:

v  By General Managers with recommendations of PCE in consultation with PFA. 

v  Up to a maximum of Rs. 5 Lakhs.

v  Contracts of value of less than Rs. 50 Lakhs.

v  Exceptional cases only.

The Above Advances Are Subject To The Following Conditions -  ACS 54  Click here

ü   Interest rate  - decided by the Railway Board at the beginning of the financial year.   -
applicable for the tenders opened in that financial year.

ü   Advances except those against machinery and equipment,   - Irrevocable guarantee

(Bank Guarantee, FDRs, KVPs/NSCs) of at least 110% of the value of the
sanctioned advance amount (covering principal plus interest). The Bank
Guarantee shall be from a Nationalised Bank in India or State Bank of India in a
form acceptable to the Railways;

ü   The recovery shall commence - When the value of contract executed reaches 15% of
original contract value

ü   The recovery shall complete - When the value of work executed reaches 85% of the
original contract value.

ü   The instalments on each "on account bill" will be on pro-rata basis;

ü   Grant of advance is primarily in Railway's own interest

ü    Not eligible - same Advance for same work from different officers.

ü   Accounts Office - responsible for payment & recovery of such advances.

Recovery of Interest:

v   Interest shall be recovered on the advance outstanding for the period commencing
from the date of payment of advance till date of particular on-account bill

v  adjusted fully against on-account bill along with pro-rata principal recovery.

v  In the event of any short-fall, the same shall be carried forward to the next on-account
bill and shall attract interest.

v  The Bank Guarantee for such advances shall clearly cover at least 110% of the value
of the sanctioned advance amount (covering principal plus interest).
****

ASSETS REGISTER

In order to prove the value of assets, an Assets Register44 is to be maintained wherein

the investment cost of all projects should be docketed. In case of projects executed by
the Construction Organisation, the Assets Register should be handed over to the Open
Line Organisation (i.e. Division) for retention as permanent record. There are different
kinds of assets in IR viz Track, Buildings, Rolling Stock, Machinery, Bridges, Signalling
and Telecom equipments, Medical equipments etc. These entire assets are to be brought
in the Assets Register by the departments concerned.
v  Para No. 1720 of Engineering Code

v  All assets valued over and above Rs.20 lakhs should be entered in Assets Register.

v  Assets Register should be maintained in Form No.1720 of Engineering Code.

v  The information will be posted from CRs - Completion Reports.

v  Types of Assets:  Track,  Buildings,  Rolling Stock,  Machinery,  Bridges,  S & T

equipments,  Medical equipments etc.        

v  In the case of buildings, the information will be docketed in the Building Register in
form No. 1977 of Engineering Code.

v  The completion Reports (CRs) of the said works need not be preserved, once
the information is docketed in the Assets Register or Building Register.
v  However for works which are costing less than Rs.20 lakhs, the sanctioned CR -
Completion Report and Completion Estimate should be preserved for a period of
five years.

v  When the project is executed by the Construction organization, the Assets

Register will be handed over to Open Line organization (as part of handing
over records) for retention as a permanent record.         

Out of Turn Works - OOT Works

ü  Definition:  Works that are to be undertaken during a year, provided neither

provided in the Sanctioned works in the current year, nor included in the Sanctioned
works of Previous years.

ü   Execution authority - should justify the need to undertake the work immediately
(though not included in the Sanctioned works) and also why it could not be
anticipated/included in the Pink Book/LAW.

ü  Funds should be provided for OOT works - duly re appropriated within the same Plan
Head from the Itemized works.

ü  CPDE - Chief Planning and Design Engineer   /   CE/P&D - Chief Engineer/Planning &

Design  - Nodal officer for OOT works in a Zonal Railway.

ü  Prior Finance Concurrence of PFA/Sr.DFM is required for OOT works in Zonal Railway
& Division respectively.  

ü   Passenger Amenities works :-

1.   Emphasis / Importance should be on creation of amenities of durable and lasting

nature.
2.    Funds should not be frittered / wasted on provision of superficial items like
furnishings & furniture etc.

ü  Funds provided for OOT woks should be duly re appropriated within the same Plan
Head from itemized works.

ü  Safety works under OOT - Should be completed within a maximum period of 8 months
from the date of sanction of Detailed Estimate.  Otherwise, the object of OOT for safety
works itself is defeated.
ü  Before obtaining Out of turn sanction of GM for traffic facilities/ line capacity work,
approval of PCOM should be taken.  

ü  Administrative approval of GM/DRM as stated below - should be obtained before

incurring expenditure on out of turn basis.
Plan Heads Sanctioning Powers (as Remarks
per MSOP)
GM DRM
PH 5300- 2.5 2.5 Crores Annual ceiling of Rs.25 Crores
Passengers & Other Crores per case (other than Lumpsum grant)
user amenities per case for non-safety items.
PH 5200 - Staff 1 Crore Nil
amenities This restriction is not
Other Plan Heads 2.5 Nil applicable in case of Safety
Crores works.
per case
M & P Items 10 lakhs Nil Annual ceiling is Rs. 50
per case lakhs.  However, all such
proposals together with M&P
items sanctioned at CME level
under LAW should be within
the Lump sum grant given by
the Board.