An internal inquiry report of Bharat Electronics (BEL) has exposed massive irregularities in the way the contracts were awarded for an IAF project and how it was implemented at 10 locations across the country.

New Delhi: Defence public sector undertaking Bharat Electronics Limited (BEL) is under the scanner for allegedly compromising national security by awarding a highly sensitive air command and control contract of the Indian Air Force to an ill-equipped and newly formed private design firm in 2011. The project was worth Rs 7,900 crore.

An internal inquiry report of BEL has exposed massive irregularities in the way the contracts were awarded and how the Integrated Air Command and Control System (IACCS) was implemented at 10 locations across the country.

IACCS is an automated command and control system for air defence operations that integrates all ground-based and airborne sensors. BEL is the executing agency for the highly-sensitive project.

BEL's internal investigation report — exclusively reviewed by Firstpost — also highlighted a conflict of interest of a BEL officer, who was instrumental in the hiring of a private vendor to put together the Preliminary Project Report (PPR) of the coded system, in joining the same private company after retirement. The report also suggested that the investigative team looking into the irregularities was not provided with crucial project documents allegedly to bury the scam.

The defence PSU's internal inquiry report was prepared in October 2018. It flagged discrepancies at various stages of the execution of the project. To begin with, the report questioned the move to hire M/s RD Konsultants to prepare the PPR in 2011 and then bringing the same company on board as the design consultant in 2013, violating the norms in place during UPA regime. The inquiry report also red-flagged other serious issues, including monumental lapses in ordering the execution of the contracts at all 10 sites across the country and deviations in the implementation at certain project sites where BEL had to bear additional expenditure.

After Firstpost mailed a detailed questionnaire to MV Gowtama, chairman and managing director (CMD) of BEL, Ranjit Karamchandani from the CMD's office denied the findings of the firm's own inquiry report.

"BEL follows a transparent process in selection of its vendors/partners," he said. "Prima facie, BEL does not see any irregularity, as alleged."

Questionnaires sent to RD Konsultants seeking its comment on findings of the inquiry report went unanswered.

Deep-rooted nexus exposed

According to the inquiry report, BEL first hired RD Konsultants in September 2011 to prepare the PPR for IACCS. The report pointed out that the firm was barely one and a half years old when it was hired, having come into existence on 1 April, 2010, on 50-50 partnership between Ruby Kant and Suresh Kumar Anand. The BEL top brass approved the proposal to award the contract to the company on 6 September, 2011, with a note that made it amply clear that "as per corporate vigilance guidelines, if 'M/s RD Konsultants' is hired as a consultant for preparing the PPR, then it cannot be considered for similar requirements in the future". The note added that for the IACCS project, BEL would have to look for new consultants for "future requirements of consultancy".

The inquiry report also flagged the way RD Konsultants was hired to prepare the PPR. "...No norms of Request for Proposal or tendering were followed, but it was selected just based on a recommendation by the Defence Research and Development Organisation (DRDO) with no written correspondence from the DRDO," it said.

But BEL officers went a step ahead to allegedly favor RD Konsultants in the second stage of the project while hiring a consultant to prepare a Detailed Project Report (DPR), the inquiry report suggested. As per the rules in place in October 2012, BEL formed a committee to select consultants to prepare the DPR along with a detailed design for 10 sites of IACCS nodes. That RD Konsultants should not have been allowed was clearly mentioned in the file initiated by BEL's Network Centric System (NCS-Strategic Business Unit) on 28 July, 2011, and cleared by the top brass on 6 September, 2011. But that did not happen.

RK Handa, who was the general manager of the NCS at the time, was part of the committee that selected the vendors and hired RD Konsultants in 2011, the report noted.

"In fact the file raised in October 2012 should have been in continuation to the file initiated on 28 July, 2011. Why it was not done needs a detailed investigation with respect to malafide intentions to violate the Central Vigilance Commission's guidelines for hiring of consultants," it added. "Even in the selection of M/s RD Konsultants for the second time, there were a lot of deviations from the norms laid down."

The inquiry report further highlighted that had a financial criterion been put in place, RD Konsultants would not have qualified for the job.

The defence PSU signed the second contract with the firm in September 2013 to prepare the DPR of all 10 IACCS sites. The inquiry report noted that RD Konsultants was paid Rs 13.5 lakh for consultancy charges to prepare the PPR but Rs 15.94 crore for the DPR, alleging that someone was pulling the strings to favour the company, and that the financial criterion was changed twice during the course of selection of vendors.

"M/s RD Konsultants' had been established in April 2010, but to show a turnover in the last three years as required, they showed a turnover in 2009-10, also verified by a chartered accountant. This clearly shows that false information was provided. Also, a company that came into existence on April 2010 showed that its employees had an experience of five years in 2013. This again is false information. It is interesting to note that another company, M/s Systems Dynamics, was rejected by the committee on the criterion that it had shown a turnover for only two years (2010-11 and 2011-12)," the inquiry report said.

The chartered accountant certificate enclosed with the inquiry report does not mention a telephone number. The letterhead of the CA firm merely shows an address of Shakarpur in New Delhi.

Raising concerns over the track record of RD Konsultants, the inquiry report recommended further investigation to find out whether it has actually completed the big ticket projects as it claimed to BEL. Raising suspicion, the report said RD Konsultants had mentioned that by March 2013, they had completed 30 projects worth Rs 1,266 crore, with consultancy charges of Rs 36 crore, whereas they had 45 works worth Rs 1,743 crore underway, with consultancy charges of Rs 52.29 crore.

"How was a company, which came into existence in April 2010, awarded 75 projects within three years (when as per DRDO rules, any company without requisite experience and turnover cannot be awarded contracts). What was the timeline in which these projects were completed? These need detailed investigations to find the ground reality. As per the BEL Works Contract Manual, it is mandatory that all vendors who qualify submit proof of the works they claimed to have done. RD Konsultants took the plea that they could not share details of the works since they were for the DRDO and confidential in nature, though another vendor, 'M/s Systems Dynamics', submitted documents related to the DRDO as well as the integrated headquarters of the army to confirm the work they did. There is no secrecy in the order copy or listing of the works carried out for the DRDO. Non-submission of the details (by RD Konsultants) itself casts doubts on the validity of the claims made," the inquiry report said in its scathing observation.

BEL's inquiry report further alleged that RD Konsultants had claimed to have provided design consultancy to a few well-known brands that specialise in equipment used for structures similar to IACCS, such as Temet Oy Finland and Pro-Hub Germany. It added that RD Konsultants was also into civil construction "with direct/indirect control on a lot of companies like SR Ashok & Associates, CS Construction etc."

"Being the designer agency, which got the order for all 10 sites, they have a huge influence on the selection of vendors for various sub-systems of the project. A detailed investigation is needed to find out where orders have been placed with companies where RD Konsultants has direct/indirect influence. (There was a case wherein SR Ashok & Associates had applied for civil execution of underground structures and CS Construction was hired by L&T for execution of work at sites). Also, Temet Oy Finland and Pro-Hub Germany have been given orders for sub-systems to be installed inside the IACCS structures," the report observed.

Moreover, the file to hire consultants for IACCS structures was initiated with the mandate that one agency will not get the order for all 10 sites. Even the newspaper advertisement and qualification document clearly mentioned that a consultancy firm could be given a contract for five sites. However, the inquiry report alleged that the entire process was manipulated. Further alleging serious charges of conflict of interest, the report said BEL officer PK Bhola, who was instrumental in having RD Konsultants cleared to prepare the PPR for the IACCS project in 2011 joined the same company after retiring from the defence PSU. The report said he might have passed on crucial information to benefit the company.

"How come the order for all sites was finally awarded to only one vendor, which violated the tender document? The quote given by RD Konsultants was nearly the same as that estimated by BEL, which leads to doubts whether the methodology of estimates was known to RD Konsultants. Mr PK Bhola (DGM of NCS-Marketing), who was the main resource in BEL for raising all the files and interfacing with the customer for the project, joined RD Konsultants after his retirement from BEL, and hence, all information was being transmitted to RD Konsultants through Mr Bhola," the report alleged.

Firstpost reviewed two BEL notes regarding the inquiry report's observations on Bhola. The first note from July 2011 signed by Bhola, when he was the deputy general manager of marketing at the NCS, is on hiring RD Konsultants to prepare the PPR for the IACCS project. The second note, dated 8 August, 2016, which is basically minutes of a pre-bid meeting for two tenders related to the IACCS project. In this, Bhola is mentioned as a representative of RD Konsultants.

Irregularities in ground execution

RD Konsultants is the design consultancy firm for all 10 IACCS sites, but the contract to execute the project was given to different companies. The details quoted by the inquiry report from the files related to the project suggests that after clearance, certain changes were made in the quantities, which escalated the cost of the project by Rs 106 crore to the government exchequer. The report said such changes were concurred to by the BEL director of finance vide note no 37, where it is mentioned that "this is a deviation from the works' contract manual".

The report further observed that L&T was awarded the execution work at three sites, but its cost per site was more than that of the other sites being constructed by other companies. The inquiry also found that L&T had subcontracted work at two IACCS sites to a private vendor, which is allegedly linked to RD Konsultants.

"L&T has further subcontracted part of the work at two sites to 'M/s CS Constructions', which is again a company related to RD Konsultants. The director of the company, Mr Rahul Bhuchar, has been coming to BEL and meeting the assistant general manager (infrastructure) as a representative of RD Konsultants. The sub-contracting of work by L&T to a party related to RD Konsultants is in violation to the terms of the contract. A civil engineering expert needs to go into the details of the costing for each site and the various considerations that led to the difference in the cost of various sites. As per the file on the selection of a consultant, DRDO representatives had brought out that all sites will be same, with only cosmetic differences in design. If that was so, then how come the difference in the costing between the lowest and the highest is more than two times?" the report said, flagging the loopholes in financial deviations, seeking further investigation into the entire matter.

It also said that under "para 3.2.3 of the design and engineering contract, RD Konsultants and his affiliates as well as sub-consultants have been debarred from providing any goods, works or services". "RD Konsultants failed to make a voluntary and complete disclosure in this regard, thus violating the contract," it concluded.

BEL shelled out more due to deviations in project

BEL's internal investigation report said that at three IACCS sites, deviations in execution on the ground forced BEL to shell out more money. The report observed that at all three locations, the conditions of the sites during excavation were found to be in mismatch with those taken by RD Konsultants while designing and preparation of the Standard Operating Procedure (SOP) for excavation.

The report also revealed that a few IACCS sites under construction had collapsed. An inspection team visited one of the sites on 22 and 23 March 2018 to investigate the mishap. Although CCTV cameras were installed, the BEL fact-finding team was told by its own manager deployed at the site that the footage was not available. Interestingly, an engineer from MECON Limited, the government-owned company that blew the whistle on irregularities at a project site, was transferred. MECON Limited functions under the Ministry of Steel and is working as a project management consultant at five IACCS sites.

Firstpost is withholding the name of the whistleblower and the location of the IACCS project in the interest of national security. The inquiry report mentioned these in detail.

"There was a complaint received from 'AAAAA' (site engineer) posted by M/s MECON at the 'BBBBB' site alleging that though he had brought out that quality procedures were not being followed at the site, senior executives at BEL, in collusion with the vendor, have not responded to his calls/reports. He alleged that pressure was put on him to ignore the facts since it was more important to meet the timelines. He also alleged that he was transferred along with the local BEL site engineer because they had highlighted that procedures were bypassed. The complaints need to be pursued to find out the facts," the inquiry report asserted.

Firstpost reviewed the engineer's complaint dated 28 March, 2018, which was sent to two senior BEL officials. In the letter, he claimed higher officials of BEL impose a lot of unethical verbal instructions on juniors, which is damaging for a PSU of national importance.

"I was posted as the site in-charge of MECON Limited and tried my best to act as a whistleblower, being a part of a project of national importance. I had issued innumerable emails and letters regarding quality issues of the project. But the engineer in charge and other higher officials from BEL desisted me verbally to not follow quality procedures strictly on the pretext of progress of the project. They actually always blindly favored the contractor anywhere and everywhere," the MECON Limited engineer wrote in his complaint.

"However, when we did not allow any relaxation in this regard and made deduction in bills wherever quality procedures were not followed, higher officials of BEL were not satisfied with the site in-charges (both officials of BEL and MECON Limited) for not favoring the contractor and for following the rule book strictly. For this reason, the BEL general manager and assistant general manager transferred their own site in-charge and pressurised MECON Limited to transfer its senior manager (name withheld) in September 2017 on the pretext that they did not perform satisfactorily, whereas actually it was just the opposite. This was to instill a sense of fear so that other engineers fall in line."

The inquiry report said walls at the site of another project collapsed twice due to the soil conditions being different from what were assessed by the design consultant when the SOP for excavation was formulated. BEL had to get the soil analysed independently by the Indian Institute of Science in Bengaluru at its own expense.

"The total cost of the execution increased because of the side wall collapse and also the change in the foundation, which, once again, resulted in extra cash flow of crores of rupees. All this needs detailed investigation by some civil engineering expert," report further added.

The report also highlighted glaring irregularities in the hiring of civil engineer Manish Goyal to look after the IACCS projects' infrastructure as a manager. It claimed Goyal was hired despite falling short of the required 10 to 12 years' experience and without having any exposure to highly specialised work like the IACCS project. The report expressed shock over this, saying it was quite surprising how and why the human resources division of BEL did not fully check or verify the documents Goyal's submitted while establishing his experience as per BEL's requirements and rules. The report said Goyal earlier worked with L&T. As the manager of NCS-infrastructure, Goyal was later given charge of the three IACCS sites that the infrastructure giant is working on and authorises L&T bills.

It is pertinent to mention that before the internal inquiry report was submitted in October 2018, a three-member BEL team had submitted an investigation-cum-site inspection report in May 2018 regarding certain allegations related to the execution of the IACCS projects. The panel, which included BEL officers AK Raheja, Sayanarayana and MM Roy, had submitted the report to BEL's vigilance department, concluding that there were serious irregularities in the implementation of the ambitious national security project. Also, BEL's panel report clearly said that the RD Konsultants' capabilities were not checked before it was awarded the contract in 2011 and 2013.

"There are evidences of work being subcontracted to CS Constructions Private Limited by L&T, the execution contractor, both on the material and labour front. The registered addresses of CS Constructions Private Limited and RD Konsultants are one and the same. The company profile of YS Anand Consultants Private Limited shows Suresh Kumar Anand (partner of RD Konsultants) and Sarita Anand (director of CS Constructions Private Limited) as its directors. This evidences the fact of RD Konsultants' involvement with the affiliates related to persons otherwise interested in project," the panel's report noted.

"The soil test report as submitted by the design consultant does not match the strata found in excavation," it added. "Evidence exists of Manish Goyal (manager, NCS-infra), a key person in the infrastructure project, being a former L&T person. The documents submitted by Manish Goyal lack transparency. A part of the work experience of Manish Goyal conflicts with the tenure of pursuing M Tech, and to that extent, his work experience falls short of the minimum eligibility criteria. After the soil collapse at YYYY site (location withheld), no independent inquiry was conducted by the management for any corrective measure. The design of the soil extraction was changed without analysing the reasons for the soil collapse. Although a CAR (Comprehensive All Risk) policy exists in the joint name of BEL and L&T, no insurance claim was lodged. Pinpoint focus by BEL IACCS-Infra is somewhere lacking, and work is being left at the mercy of site engineers and the agencies hired."

The panel's report further suggested that BEL officials had tried to cover up the collapse. It indicated that the non-availability of CCTV camera footage at the important sites was yet another attempt to allegedly conceal the wrongdoing.