Analysis of Rates

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pankajp	Analysis of Rates	Lead	[-]
Posts: 321 (11/19/08 20:57:15) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Tags : None In one of the zonal railways, finance is insisting on rate analysis even at the time of works programme proposal itself i.e. while the proposal is being initiated for inclusion in works programme for next financial year. Budgetary quotation from railway's approved vendor is not being accepted and rate analysis is being insisted upon, before agreeing to concurr the proposal for inclusion in works programme. If reasonableness of rate is to be ascertained at the time of framing of proposal itself, why do we have system of open tendering followed by judging of reasonableness of rate by tender committee?
subbu98	Reasonableness of rate.	#1	[-]
Posts: 168 (11/20/08 10:59:54) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Dear Pankaj, I do not know of the circumstances and am hazarding a guess. The reasons could be many. The most immediate one that comes to my mind is that the basic job of a financial adviser is to appraise the sanctioning authority about the justification for a proposal and a reasonable cost at which the proposal is going to be executed. The resourses available in hand are limited. Were they not, mere justification would have been sufficient. The perils of over and under estimation are well known. Just to reiterate, over estimation squeezes out available resources at planning and programming stage and under estimation causes problems at implementation stage. In Railways, a proposal undergoes financial scrutiny at three levels before it gets sanctioned to get included in the Pink Book. Its priority of requirement and the cost involved vis-a-vis those of other proposals decide whether it is sanctioned to be considered at the next level. Ascertaining reasonableness of rate at tendering stage is different. At that time the most fundamental objective is to ensure that the exchequer is not over charged. If last accepted rates are not available (or if they are not reliable), a rate analysis is taken recourse to. Under similar circumstances at the planning stage, a budgetary quote may not always be reliable. It does not matter even if it is from an approved source. A source is approved for its product. Not the rate at which it says it sells the product. Anyone who quotes for something is expected to have done a rate analysis. One is not very sure if that premise is always adhered to in case of budgetary quotes. So if in doubt, a rate analysis is the best option. The earlier it is done in the project cycle, the better it is. Subhashish Nath Dy FA/FX, Northern Railway Last Edited By: subbu98 11/20/08 11:28:51. Edited 2 times.
pankajp	rate analysis	#2	[-]
Posts: 322 (11/20/08 19:31:28) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Dear Subhashish Nath Thanks for your prompt comments. The resources available with the Executive preparing a proposal (for inclusion in works programme) are also limited. If the exact rate is to be included and certified at the time of initial proposal itself, then the ideal (and time consuming) route available for the executive is to call for expression of interest followed by limited tender from the interested firms. The lowest rate thus obtained can be certified by the executive as the reasonable rate (for the purpose of proposal to be included in works programme). This is specially valid for new works (other than civil engineering works) of electrical/mechanical/electronics enginnering where no LAR is available. I request other IRAS officers to also post their comments.
malikapm	THE EARLIER THE BETTER	#3	[-]
Posts: 9 (11/20/08 21:53:36) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Finance is correct. Without knowing the actual cost of something, how can sanctioning authority arrive at a decision? If following the procedure leads to 'delays', better live with the delays, instead of getting emotionally attached with the proposal. It is the culture we have created that ability to bypass procedures is called smartness, and those being scrupulous are chucked out. Of course in the trail of the 'smart' people lie debris of excess over estimates, unsanctioned expenditures, material modifications, variations which require sanction at the level of MR personally! Of the case you are dealing with, finance can do their bit by associating themselves with the rate survey and rate analysis, something which they are not likely to do. We like to 'check' things, instead of doing them. A correct rate discovered at this stage would lead to a very fast speed at all later stages, and satisfaction of a job well done would be the additional bonus. A P MALIK DyCE/C/II/CCG Last Edited By: malikapm 11/20/08 21:58:18. Edited 1 times.
pkatre		#4	[-]
Posts: 137 (11/20/08 23:57:20) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Nice to see DyFA and DyCE agreeing on the basic premise regarding framing of proposals though they might differ in the process or procedure to be adopted for achieving the stated common objective. Finance only insists on following what is written in the Code books of respective Executive Departments. In case of Works Program and framing of Abstract Estimates, the necesity of reasonable assessment of cost is already laid down in the Engg Code. However what causes all the problems is the Interpretation of what a 'reasonably accurate' cost is. This further gets compounded by Railway Culture of rushing through everything at the last minute and then smart people (as mentioned by Shri Malik) show up with all their tricks and tactics to bail everybody out leaving it to their successors to clear the mess. Parag Katre DyCAO (G)/WCR
subbu98		#5	[-]
Posts: 169 (11/21/08 04:30:07) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	>> The resources available with the Executive preparing a proposal (for inclusion in works programme) are also limited. The priorities of the Zonal Railway are different from those of the individual Divisions and the same gets extended to the Railway Board. Here we are talking about the same user Department and the same Plan Head. This is why the whole thing is a three tier process where at the apex level priorities are visualized holistically. I do not know which Department you are from, Shri Pankaj. Just to cite an example, the priorities of the GM are more holistic than those of the DRM. >> If the exact rate is to be included and certified at the time of initial proposal itself, then the ideal (and time consuming) route available for the executive is to call for expression of interest followed by limited tender from the interested firms. I have a strong feeling that you're mixing up issues. Perfection is a very ideal thing. Unfortunately one cannot achieve the same at a planning stage. So we try to be as realistic as possible. Whatever is realistic from the view point of the user department may not always be realistic for others. Especially when we know - and as Mr Mallik has very rightly pointed out - that we do have a degree of 'smartness' going around the system. Nothing to be taken personally here. The idea is not to delay. There is a schedule for everything involved here. At the same time, the idea is also not to accept a budgetary quote as the closest thing to reality just because it is from an approved source. >> Of the case you are dealing with, finance can do their bit by associating themselves with the rate survey and rate analysis. I like that idea of Mr Mallik as a progressive one. There have been instances where this has been taken recourse to.
pkatre		#6	[-]
Posts: 138 (11/21/08 04:53:14) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Regarding associating Finance for finding the right price for the right product, the best example is the Spot Purchase Committee. Also,there have been instances where IOW and SSO/Finance have jointly collected independent budgetary quotations for getting rate refernces of new NS items. Agencies like CPWD revise and update their Schedule of Rates regularly almost on an annual basis. But Railways take 10 years or more by which time the SSRs beomes a farce. Parag
pankajp	queries	#7	[-]
Posts: 323 (11/21/08 21:38:03) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Respected Subhashish Sir I am an Electrical Engineer in IR but the discussion is valid for all departments. Why is it that the course of action suggested to get exact rate [EOI followed by Limited tender] is being termed as "Perfectionist"? Why should an executive also get attached to different works proposals? If exact rate at the time of proposal stage itself causes delay in whole cycle, why this becomes unacceptable to "Managers"? Civil engineering works have an advantage of having repetitive nature unlike new works of electrical/mechanical/electronics engineering department. In civil engineering department also, SOR is lagging behind but that is covered by availability of LAR for similar works. This advantage is not available to other technical departments, specially for new types of works proposal e.g. Purchase of Simulator for running staff (First purchase).
ananth	Analysis of rates!	#8	[-]
Posts: 911 (11/24/08 21:47:55) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Pankaj, it makes greater sense for the executives to ensure that the 'latest' LARs, duly certified, are proposed at the time of sanction itself and a rate analysis done for items for which no LAR is available. It becomes so easy for you to prepare the detailed estimate and the tender proposal. You are more likely to get competetive rates for execution. But that is only possible if you have planned thoroughly for executing the work at the proposal stage itself, which is not normally done, leading to variations in estimates, contracts and the consequent time and cost overruns in projects. Budgetary quotes are discouraged and even when they are provided, HQ finance here has decided that there will be a 20% cut on all budgetary quotes. Not that there will not be any price rigging but we should have a rough index to acertain the correct, lowest price. Budgetary quotations are being obtained mainly in Electrical and S&T Departments, which are supposedly deploying the latest technology every year. Ananth Sr.DFM/BSP
subbu98		#9	[-]
Posts: 170 (11/25/08 09:40:38) Reply Quote More My Recent Posts Message Me Connection Blocking Invite Ignore User's Posts	Dear Pankaj, First things first. Your concerns are quite valid. Especially in light of the circumstances all of us work under. It's good that you brought the issue under debate here. Let's look at it this way. If a reasonable LAR is not available at the time of framing the proposal, there is a great likelihood that the same would not be available at the time of deciding the tender. In that case, the tender committee in any case has to rely upon activities like rate analysis for reasonableness of rates. A rate obtained through a competitive process is not sufficient on its own to justify its reasonableness. That is the bottom line. All of us know that. In that case, if some effort in that direction is inevitable, it would only be prudent to take up some portion of that activity at the proposal stage. It can be a pre-cursor to the efforts that are to be made in any case. We look for shortcuts. So we many times end up creating a mess. Why do 'managers' shirk away from ascertining an exact rate - if not exact at least a realistic rate - at the time of proposal? My guess on that would be as good as yours, my dear friend. New type of work in departments that have to assimilate newer technology may not look so new after all if it is broken down to components. When it is down to the components, it may so happen that we may not appear to be the only consumers. As a technical manager, I must exactly know what is it that I intend to buy or set up. The moment I do that, I start getting a reasonable idea about proportionate contribution of the various components to the cost. Whenever such an analysis is brought down in a reasonable manner on paper, it starts appearing reasonable to another reasonable person, which I presume a sanctioning authority invariably is. You talked about simulators. If I am not mistaken, a batch of 12-13 simulators were procured by the Railways around 2002 or 2003. We are at an advanced stage of procuring another batch of 18. And I must tell you that if you are framing a proposal for another simulator in future, you would do well for yourself by doing a rate analysis. Or else you over provide so much that at the time of tendering, you would also feel tempted to get a building constructed as a 'concomittant' or 'optional' accesory within the sanctioned scope of the M&P. You may disagree with me, but then such things happen most often than not - in both north and southward directions - in our system. It's time we moved on from being 'smart' to be intelligent. Subhashish Nath

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