Govt bolsters financial security

R&B Deptt unveils robust mechanism to safeguard contracts

SRINAGAR, OCT 23: In a proactive move to address concerns raised by auditors and authorities, the Government’s Roads and Buildings (R&B) department has introduced a comprehensive mechanism aimed at ensuring the secure storage and vigilant monitoring of Earnest Money Deposits (EMDs), performance securities, additional performance securities, and other vital financial instruments. This strategic approach is designed to prevent potential lapses in bank guarantees presented by contractors as performance security for government projects.

This development comes in response to recent audit findings, which unearthed instances where bank guarantees submitted by contractors had expired, thereby leaving government contracts vulnerable without adequate security measures. The R&B department considers this a significant issue, necessitating immediate corrective actions and the establishment of a robust monitoring system.

A circular issued by the R&B Department emphasises the urgency of the situation, stating, “A suitable mechanism for safe custody and monitoring of EMDs and performance securities/additional performance securities and other instruments required to be evolved and implemented by each procuring entity/unit of the department.”

The audit findings highlighted that some contractors had allowed their bank guarantees, meant to serve as performance security or additional performance security for allocated projects, to expire. This lapse in financial security was viewed with great concern by the authorities, prompting the need for a well-defined monitoring system.

The circular enjoins procuring entities to take specific actions and corrective measures. These include implementing a mechanism for the secure custody and monitoring of financial instruments, with provisions for timely extensions, encashment, or refunds of EMDs and performance securities. Additionally, it mandates a monthly review of all expiring bank guarantees and other instruments within the next three months, coupled with an assessment of the progress of the corresponding contracts.

The extension of bank guarantees and other instruments, when warranted, must be initiated and executed within their validity period. Crucially, the circular advises against handing over bank guarantees to the contractors for the purpose of extending their validity.

The Chief Accounts Officer/Accounts Officer stationed in the Chief Engineer’s Offices will carry out a fortnightly review of the status of the Bank Guarantee. They will also issue notices to the contractor one month before the bank guarantee’s expiry for revalidation. In the event of a contractor’s failure to revalidate, the bank guarantee will be encashed 15 days prior to its expiration. The proposal for encashment will be forwarded by the executing agency with recommendations and the agreement of the Chief Accounts Officer/Accounts Officer, as applicable.

Furthermore, the Chief Engineer will introduce and develop a system for monitoring securities and other instruments on the JKPWDOMS portal, complete with automatic alerts to notify concerned parties of approaching security instrument validity lapses.

The R&B Department insists that the instructions be implemented diligently and that the responsibility for safe custody and timely revalidation of Bank Guarantees rests with the concerned Chief Engineer, Superintending Engineer, Executive Engineers, and Chief Accounts Officer/Accounts Officers stationed in the Office of Chief Engineer. An action taken report on these measures shall be submitted to both Chief Engineers on a monthly basis. This initiative aims to enhance financial security and transparency in government contracts, preventing the recurrence of issues related to expired bank guarantees and ensuring the uninterrupted progress of vital infrastructure projects.

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