CAG highlights unrealistic rates, cost overestimation by CPWD

The Comptroller and Auditor General of India (CAG) has raised concerns over the Central Public Works Department's (CPWD) flawed methodology for determining project costs. According to the CAG's report, which was presented in Parliament, 93 percent of the projects awarded under CPWD's contract were completed at costs that were lower than the estimated expenses based on the Schedule of Rates (DSR) 2021.

The report also criticized CPWD for not conducting a market survey prior to revising the schedule in 2021, stating that their methodology for collecting base rates was not realistic.

During the period from January 2022 to January 2023, out of the 5,011 works undertaken, 4,666 or 93 percent were awarded with tendered costs that were less than the estimated cost calculated using the DSR 2021. The CAG emphasized the importance of an accurate schedule of rates, as CPWD's budget is calculated based on these estimated project costs. From 2020-21 to 2022-23, CPWD's Budget Estimates increased significantly, from Rs 2,027.33 crore to Rs 3,100.57 crore and then to Rs 4,314.08 crore.

The report highlighted the potential repercussions of inaccurate rates, warning that if the rates of Schedule of Rates items are higher than the prevailing market rates, it could lead to increased estimated project costs, thereby giving contractors an unfair advantage. Moreover, the CAG pointed out the "faulty process" used for calculating contractor profit and overhead charges, underscoring the need for precision in these estimates due to the vast amount of public funds involved.