EVERY TENDER FOR CA SERVICES IS A MENACE TO THE CA FRATERNITY-CA AMRESH VASHISHT

EVERY TENDER FOR CA SERVICES IS A MENACE TO THE CA FRATERNITY-CA AMRESH VASHISHT

 

 

The menace of tendering is known to all. You are absolutely wrong if you think that the council is not aware of the professional collapse because of simple reason of tendering. Each and every council member knows that this menace is killing the spirit of professionalism and members of so called big50/big 4 firms are working against the ethics of our noble profession, yet no decision is coming out from the persons who are having the perfect knowledge of this infection effecting the profession through out the country. The slow menace of a tender is resulting in depression. No one had any measure of its progress; no one had any plan for stopping it. Everyone tried to get out of its way.

 

 

As per Clause 6 of Part I of First Schedule of the Chartered Accountant Act, 1949 as under:

“Clause (6):     solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means:

 

Provided that nothing herein contained shall be construed as preventing or prohibiting-

 

(i)         Any chartered accountant from applying or requesting for or inviting or securing professional work from another chartered accountant in practice.

(ii)             a member from responding to tenders or enquiries issued by various users of professional services or organizations from time to time and securing professional work as a consequence;”

 

This clauses (i) &  (ii) was not there till 2006. Those who are responsible for these changes are the real culprit. The beginning of tendering from 2006 has ended the brotherhood among the professionals and our fraternity has started lobbying, fraudulent human ways and methods to secure the tenders. The present going on Madhya Pradesh tussle is now again fired by the tender document from Bihar. The new tendering documents are about to issue in the state of Uttar Pradesh as the firm of a council member is dying for it to receive the same. A young Chartered Accountant from Bhopal has been compelled to apologies when he raised the voice against such tendering.  The lack of will power to fight this menace is not getting any space in the council working. In the last three years, they have failed to take any concrete policy on the same. The matter is getting dust from 2009 onward .The council members, who were there in 2006 and still working as council members have no right to even stand for the coming council elections. They are responsible for hitting under the belt of medium and small practitioner. Only time will tell about their fate but their candidature is unmoral, unethical and should be opposed with all strength, if the small and medium firms want to survive in future.

 

Let’s see how this problem cropped up by our own leaders.

 

As early as in 1984, a set of proposals for amendments in the Chartered Accountants Act, 1949, was forwarded to the Central Government for its consideration and approval. The same was returned by the Government in August, 1992 for making an overall review of the said proposals,

At the relevant time, the Perspective Planning Group (PPG) constituted by the Council .The PPG submitted its Report to the Council in December, 1992. Thereafter, the Council in June, 1993, reviewed the proposals submitted to the Central Government in 1984along with submission of new proposals in October, 1993, The discussion were still there till March, 2001.

 

In March, 2001, the Central Government while referring back ,However, in October, 2001, the Central Government requested the ICAI to reconsider the latter's proposal among other things the changes being brought about by WTO related developments etc.

 

Again  in March, 2002 a Working Group constituted for review of amendments in the Chartered Accountants Act, 1949 and the Regulations framed thereunder. The Working Group was asked to make its recommendations .From 2003 onward the process of amendment has started. The amendments were also carrying for dilution of autonomy of ICAI and were having the hardest amendments. The final shape came out in the year 2006 which carried the amendments and allows few provisions, which are detrimental to the interests of small and medium firms. The undercutting was banned so far have been allowed, the tendering became allowed. Moreover The Council has taken up the right of punishing any member who in their opinion disrepute the profession.

 

The relaxation in criteria in responding the tenders was an achievement for council. While forwarding the Code of Ethics 11^th edition the then President CA Ved Jain wrote

 

“Whether the notification imposing ceiling on non-audit fees, norms relaxing the criteria in responding to tenders of government agency or similar organizations or permitting the members to publish passport size photograph in their website, the Council, at its own wisdom, appreciated the changing scenario in the world order and the emerging opportunities of the profession.’’ However Way back in 1985, The then President , CA P.A.Nair while forwarding the 7^th edition of the code of conducts in 1985 mention the area pertain to responding to tenders of  members immediate concern.

 

 

However in practical, with the start up of legalize backing of council in tendering, the problems started from day one. There were many representations from the CA firms about the games being played by their own professional brothers. One or two years are not enough for the authorities to know this change but it was our own firms who started the cut throat competition and teaches the authorities to put  the abnormal conditions so that majority may go out for auditing the institutions. It was grossly misused by the CA firms themselves to get the work. Many representation from members forced PDC to take up the issue. The 187^th Meeting of the Professional Development Committee held on 14^th July, 2009 has taken up the cause of tendering by way of collecting the data and to make a policy on the matter. It mentioned that

 

To analyze the kind of tenders which are being floated in the market and response thereof, the office has sent survey letters to all those whose tenders have been hosted in the PD Portal since 2008 requesting for following details:

 

1. Application Money, if any. If yes, please state the amount  
2. Security Deposit, if any. If yes, please state the amount       
3. No. of applications received from the tender
4. Range of fees quoted by bidder
• Lowest Bid    
• Highest Bid    
5. Whether the assignment was allotted to lowest bidder (Yes/No). If No, reasons fo r non allotment of assignment to lowest bidder  
6. In case, not through tendering/ bidding process, the assignment fees paid to the CA/ Firm appointed for the purpose.          

 

However the unwillingness at the part of PDC has resulted in ZERO response from the firms. No further action was seen in the matter.

 

Earlier, The President himself desired that Ethical standard Board should develop suitable guidelines to curb all the ills of this practice. While framing guidelines, the following may be considered:

 

ü      Wherever any tender violates or compels a chartered accountants to violate the Code of Ethics, chartered accountant should not only abstain from doing so but should also report the same to the Institute for taking further necessary action.

ü      Some way may be devised to ensure implementation of engagement and Standard on Quality Control and Code of Ethics in conduct of various assignments.

ü      While formulating the approved guidelines, the recommendatory scale of fees may also be kept in view and it should be emphasized that the chartered accountants and firms thereof may be motivated / inspired to follow the recommendatory scale of fees while quoting for various tenders, advertisements and circulars, etc.

 

The President had also directed that Ethical Standards Board may propose guidelines with a view to streamline the prevalent practice while responding to tenders etc. and enhance the image of the profession.

 

A legal opinion from the office of the Solicitor General clearly mentioned that ICAI can formulate the guidelines for the same. As per the office note No. 29-CA/Law/NDM-663 dated 20^th August, 2009 received from Legal Section containing opinion received from Shri Parag P. Tripathi, Additional Solicitor General of India there is no bar at the part of ICAI to make such guidelines.

 

The recommendations of PDC Requirement of earnest or deposit money while responding to tenders or enquiries issued by various users of professional services or organisation from time to time have been taken up by the Council in its 291^st Meeting on December, 2009 decided to refer the matter to the Ethical Standards Board.

 

However Ethical Standard Board vide its office note no. 29-CA/ESB-337/2009 dated 27^th January, 2010 mentioned that the matter was placed before the 109^th meeting of Ethical Standards Board held on 5^th January,2010. The Board decided that the responding to tenders, advertisements, circulars and other enquiries by chartered accountants and firms is purely a contractual matter and as such there is no need to draft any guidelines in this regard.

 

The professional Development Committee was looking after the overall development of this menace. The 189^th Meeting of the Professional Development Committee held on 11^th March, 2010  at  New Delhi  considered the matter and declare that :-

 

A chartered accountant is a professional rendering specialized services (not dealing in a commodity which can be treated as per its quality/quantity) and not quoting or bidding for any property/asset etc. which require him to pay anything at the end of the day.

 

The PD Portal of the Committee regularly host various tenders/opportunities available for chartered accountants/firms thereof on its own website and the same are also mailed to all the members through daily knowledge capsule.

 

The Committee authorized the Chairman to do the needful.  The Chairman has opined the following on the issue:

 

If in the opinion of Professional Development Committee, there is a huge (abnormal) difference between the lowest quote received for a tender (on which the tender is ultimately allotted) and the next lowest quote, then peer review of the said assignment and/or  concerned chartered accountants/firm thereof can be ordered.

 

 

The President, One Institute Official & a common CA member met Shri P. C. Chaturvedi, Secretary, Ministry of Labour and Employment on July 8, 2010 and presented an approach paper dealing with the major schemes run by the Ministry and the role CA’s can play in areas like accrual accounting, internal audit, etc.   Shri Chaturvedi , the then secretary expressed his grave concern on the tendering process for utilizing the services of Chartered Accountants and emphasized that L-1, i.e. lowest bidder, cannot be the sole criteria of selecting a professional for a qualitative job.  He urged the Institute to look into the matter and ensure that tendering process, which is gradually becoming an exploitation tool in the hands of allotting authorities, should not become an obstacle for the qualitative performance of the chartered accountants. It was in perfect tune with the Planning Commission note that CA services are not products hence no tender can be invited.

 

The 191^st   Meeting of the Professional Development Committee held on 19^th August, 2010  at  New Delhi has taken up the item number 13 on the issue and decided to send the office note to the Peer Review Board at the earliest and inform them of the decision of the PDC that where there is a huge (abnormal) difference between the lowest quote received for a tender (on which the tender is ultimately allotted) and the next lowest quote, then peer review of the said assignment and /or concerned chartered accountants/firm thereof can be ordered. Thus a decision was made and directed the office to frame guidelines to be followed by firms while responding to tenders subsequently to be forwarded to ESB and then to Council for approval.

 

In view of the legal opinion that the Institute can formulate guidelines under Clause(6) of Part I of First Schedule to the Chartered Accountants Act, 1949, the following  office note dated 1^st October, 2010 was sent to ESB inviting their attention towards the following aspects which may be considered including ethical considerations while preparing the Draft Guidelines to streamline the process of response to various tenders, advertisement, circulars, or enquiries by chartered accountants and firms.

                                               

1.         A clause requiring members to respond to “tenders” only in case there is no condition of depositing earnest money/security etc. for making application. Many tenders require applicant to pay along with the application (request for proposal), earnest money or security deposit.   A chartered accountant is a professional rendering specialized services (not dealing in a commodity which can be treated as per its quality/quantity) and not quoting or bidding for any property/asset etc. which require him to pay anything at the end of the day.

 

2.         A clause requiring that members should respond only in case the scope of work is indicated clearly because it has been observed that most of the tenders are not clear as to the scope of work to be performed in the proposed engagement which at times is a potential source of dispute between the parties involved.

 

3.         A clause requiring that a member may respond to “tenders” only in case of conditions specified in the tender are generic in nature.  Many a times, authorities do have restrictive clauses like turnover of the firm, number of partners, number of chartered accountants in the firm, etc. in their tenders which allow only certain specified firms to apply for such tenders.

 

4.         Whenever any tender invites chartered accountants to respond which may involves violation of the Code of Ethics, a member should not respond but also report the same to the Institute for taking further necessary action.

 

5.         The re-commendatory scale of fees to be used as a benchmark by member while quoting for tenders be incorporated in the guidelines.

 

6.         A clause may be incorporated to ensure implementation of Quality Control and Engagement Standards and Code of Ethics in conduct of various assignments.  The inclusion of such a clause is required only in case the same is not covered elsewhere including Code of Ethics.

 

But nothing has resulted in any concrete guidelines or instruction to deal this menace. The Ethical Standard Board in the year 2012 carries the following requirement about tender.

 

No. 71. Requirement of Earnest or Deposit money while responding to tenders or enquiries issued by various users of Professional services or organization from time to time.

 

Interference with the practices prevailing for requirement of requirement of EMD/ Deposit is not required. However on having received complaint /instance of exorbitant EMD/DEPOSIT, the ethical Standard Board may look into the matter on case to case basis, Further, a cost sheet be maintained by members of the Institute responding to tenders, incorporating details of the costs being incurred therein having regard to number of persons involved, hours to be spent, etc, so that the same may be called for by the Institute for perusal.

 

In 316^th meeting of the Council held on recently, The Internal Audit Standards Board has declared that they will organise Seminar on Internal Audit of Tender Process soon, but what’s about the menace of tendering of their own profession.

 

It still very far to see a clause restricting members to respond to “tenders” only in case there is no condition of depositing earnest money/security etc. for making application. Still tenders require applicant to pay along with the application earnest money or security deposit. Abnormal conditions are day by day getting strength and more and more firms are being kicked out of the auditing. It recalls me a case where a telephone department contractor did the contracts for decades. Once he laid the ground cabling for 30 K.M. At next tender, he managed a clause that a contractor must have an experience of lying cables for 30 KM. This time the tender was for 70 KM. The third tender issued with a condition that the contractor must have an experience of 100 KM. So for decades he managed the game and only outwitted when the mobile phones comes to power and his laying of cables became obsolete.

 

I pray to the council please don’t go for forming the guidelines for tendering. There should be deletion of clauses as added in 2006.

 

I am running for the council and I assure you that if I shall be there in council, I shall work for totally banning this menace of Tendering. If the council agrees to its fine otherwise the same may be presented to Parliament by way of private bill.