The document provides an update on NASSCOM's e-governance initiative study. It discusses methodology, feedback received from government and industry perspectives, issues identified, and preliminary recommendations. Key issues highlighted include low functional expertise in e-governance projects, unrealistic commercial bids, capacity issues within government, and contractual and payment terms that discourage vendors. Recommendations focus on standardizing eligibility criteria, model documents, dispute resolution guidelines, and improving project estimation and governance.

1. e-Governance Initiative Update
October 4th, 2010
Rama Vedashree
rama@nasscom.in

2. eGov & IT Services Procurement Issues,
Challenges, Preliminary Recommendations
a NASSCOM Study
6-Oct-10
2

3. Methodology
• Discuss with cross section of Industry and obtain feedback, on all
phases of eGov Projects Life Cycle
o Large / SME System Integrators both incumbents and aspirants
o OEMs
o Consultancy Organizations (Both Technology/eGov and
Infrastructure Advisory)
• Discuss with cross section of State & Central Government
o Central Government – Cross Section of Mission Mode Project
Teams
o State Government IT Departments and Nodal Agencies
o Ex - IT Secretaries
• Study Best practices from Infrastructure Sector
• Study International practices
Questionnaire for IT Services Companies
Points for Discussion for TN Government
West Bengal Response
Points for Discussion for Mr J Satyanarayana

4. GOVERNMENT PERSPECTIVE

5. Feedback to Industry
• eGov and Functional/Domain Expertise very low – Consultants & SIs
• Delivery Resources Assigned to eGov projects, is not satisfactory
• Low, unviable commercial bids being submitted by Vendors
o Entry Strategy
o Low Price Bids without estimating complete scope
o “Throwing Due Diligence and Project Estimation to Winds”
• “Industry should change its focus from product orientation to citizen
service delivery in e-Governance projects. The industry is still oriented
towards supply of goods and services, the service orientation which is
the core of all e-Governance services is lacking”

6. Capacity within Government
• Government officers not tuned to core technology issues related to
e-Gov Projects
• Expertise in devising Service Level Agreements and issues related
to Contract Management for IT Projects
• Two solutions
o Bolster capacity within Government by training , recruiting staff
• Some states have established dedicated empowered
organization for implementation of E-Gov Projects
o Establish a specialist service for handling e-Gov Projects & IT
Function
• Capacity can be supplemented by officers of Public Works and
Finance Departments (for Contracting Phase)
• Need for Government to develop overall capacity of Government
employees in managing IT

7. Project Conceptualization and Development
• Need for Financial modeling / risk assessment of e-
Governance Projects – Specially PPP
• Need to identify policy changes to ensure
implementation of e-Gov projects and Electronic
Service Delivery
• Framework for IIIrd party audit, and Impact
Assessment
• Calculation of current cost of delivering service in
manual mode
o Cost Estimation Practices of PWD
• E-Gov projects should have realistic achievable
SLA’s, with corresponding penalties

8. INDUSTRY PERSPECTIVE

9. Discussions with Industry
Response
SI's Large TCS, Wipro, 3i Infotech, NIIT, Mastek,
Incumbents & Mindtree, L & T, HCL Technologies
Aspirants Cross
Section Infosys (Only eBiz feedback)
SI's SME Ram Info, COMAT, ABM , Radiant, UTL, CMS,
Zylog, Humanitics)
Consultancy PwC, E & Y, IL&FS, NISG, IDFC (for
Infrastructure Best practices)
OEM Microsoft
Total 23
• Discussion through Face to Face as well as Telephonic Interviews
• Several SIs Provided Formal Written Feedback

10. Summary of Industry Responses
• The Respondents, provided a total of 277 issues which were
distilled to 170 unique issues related to Procurement of IT Services
• These issues were grouped into 19 Categories of issues - Project
Conceptualization, Scope of Work, Project Execution .. For a
complete list, click here
• Maximum Issues & Challenges
1. Project Execution
2. Project Conceptualization & SOW
3. Contract, T&C

11. Issues of Industry – A Summary
S No. Issue OEM Incumbent Incumbent Aspirant Consultant Total Total No.
( 1) Large SME Large (5) No. of of Unique
( 3) ( 8) (6) Respon Issues
ses
1 Project Execution 0 8 29 12 8 57 32
2 Project 1 5 16 14 4 40 26
Conceptualization
and Development
3 Contract ( Terms 0 20 3 12 3 38 24
and Conditions
Document)
4 Pre Qualification 2 2 18 15 1 38 12
5 Tender Evaluation 1 8 3 11 2 25 16
6 Scope of Work 2 4 8 7 0 21 15
7 Other Issues ( 13 0 15 17 19 7 58 45
broad types of
issues)
6 62 94 90 25 277 170

12. Issues Related to Project Execution
Timely Payment
• Lack of timely payment despite fulfillment of the deliverables of the
Vendor, and Acceptance of Deliverables
• Lack of Continuity of Project Champion
• Delays in deliverables from Government
• Investments made by the Vendor remaining idle and not paid for
• The RFP may have a service level for procurement of goods
by a certain date, however Site, provisioning of power supply
may not be ready
• Equipment of the Vendor will need to be stored in a
Wearhouse
• Budgetary Sanctions/Transfer to Line Department
• Delays in giving timely signoffs to Vendors both by TPA and
Department

13. Project Execution Issues ( Contd..)
• During Project Execution many issues come up which may not
have been anticipated in the RFP
• Department PMU not empowered to take appropriate
decisions, in the interest of project implementation
• Signoff's given by a Government Officer regarding a
project, are not respected by the successor. Many times
the successor likes to re-evaluate / review the certification
of work, and even SoW & Contract
• Lack of dedicated team within the Government Department for
Project Monitoring

14. Project Conceptualization Issues
• Projects incorporate many Non IT items as well, which increase
the Project Cost. This leads to an increase in prequalification
turnover norms, and also risk assessment of Vendors
• Acceptance criteria / specifications for such non IT work, is not well
defined
• By clubbing requirements and entrusting the Turnkey job to a Prime
SI, the Government does not take advantage of best of breed
solutions from specialized Vendors
• This issue has been highlighted by both Incumbent and Aspirant
Large IT Services companies
• Projects incorporate requirements like Lease Rental, Diesel for
running of Gensets
• Cost Estimation is guesswork, both on the extent of Grid
Power Outages, and cost of diesel over a 5 Year Tenure.
Indexing such input costs to a base price and factoring
escalation is missing

15. Scope of Work, Specifications
• There are many activities that only the Government Department can
accomplish, but even these are given as scope of work of the
Vendor . Some Examples:
o Obtaining space from another Government Agency, access to
the database/systems of another Government Department
o Consent from participating departments to come on board an
integrated services project, and enable integration to backends
o No Counter Guarantees built into the SLAs for default by
Govt and Govt Agencies

16. Payment Model / Business Model
• The Payment terms in Government Projects discourage growing the
ecosystem of service providers
o Payments in many cases are not milestone based, and even when
milestone based, the Payments are skewed towards the end (telescopic)
• The payment for the early milestones does not cover the complete cost of
production – Cash Flow Challenges for SMEs
• Many Projects increase the amount of investment, expenses of the Vendor
by asking for heavy bank guarantees
o In IT infrastructure projects with deferred (QGR) payment model, the
investment by the Vendor in IT equipment, is not factored in Security
against default
• Escrow mechanism not being adopted in most Projects

17. Pre Qualification
• Framing of prequalification norms is a pain point specially for
Incumbent SME and Aspirant large organizations
• Redundant pre-qualification criteria like CMMI Level 5 for consultants or
CMMi certification not relevant to projects
• Pre Qualification criteria favours incumbents who have experience only in
Government Sector
• No Level Playing field for firms, that have good credentials in other
sectors, and now want to participate in Government Projects
• Similar experience from non government sector in India (Telcos/Banks),
not given due weightage
• Relevant global experience in International Government Sector projects
or relevant international private sector projects, not given weightage
• In consistency in Pre-Qualification Criteria across similar types of
projects, or almost the same project across states
• Some projects pre-qualification criteria require net worth, in some
profitability, in some case 3 or 5 years past revenues. Lack of
standardized criteria tends to impact ‘Level Playing Field’

18. Contract (T&C/ MSA Document)
• Contracts have unlimited liability terms with no Caps linked to Contract Value
and Payments to Date
• Contracts one sided and no counter SLAs on Govt Deliverables – Risk
Overload for Vendors
• Liquidated Damages for Delays is disproportional to the Contract Value,
Payments to Date
• eGov Contracts donot incorporate accepted best practices from World Bank Standard
Bidding Documents, tender documents of well managed PSUs
• Termination for convenience by the Customer
o Where Vendor has made investments, termination for convenience is an unfair
practice
o Exit management clauses donot adequately compensate the Vendor for
investments
Dispute Resolution
• Arbitration Clause - Arbitrators to be mutually decided as per Indian Arbitration Act.
• Arbitrator should not be a Officer of the same Line Department
• Arbitrator should be a neutral person like a retired judge/civil servant
• The judgment of the arbitrator should be binding on both the parties
• Many times, the same type of dispute with two different companies, is resolved in
different ways

19. Tender Evaluation
• Communication of scores to bidders, on the technical selection criteria
not followed – reinforces misperceptions of Transparency
• Evaluation Criteria, not in line with Industry Staffing & Resourcing
practices
• Bid Process expects Vendor to give names of employees that
will be assigned to the Project. Given the Time Lag in
Evaluation, Bid Award, Contract & Project Kick-Off, this is not
practically feasible
• "Available tender capacity" not considered while evaluating bidders,
leading to some vendors being over leveraged
• Significant difference between L1 and L2, Predatory pricing by
some bidders. Floor Price Estimation is not adopted
• Multiple Bid Validity Extensions are unreasonable

20. PPP Projects
• Most PPP projects are first of a kind project and it is difficult to anticipate
transaction volumes. Further they are dependent on a number of upstream
activities like computerization of Government Departments
• Given the risk of these projects, there should be some risk mitigation
measures, counter guarantees to reduce the investment risk of the
bidders
• In PPP projects, SPV between the Government and winning bidder not being
encouraged
• In PPP Projects, Service Fee to Vendors not allowed to be deducted at source
• Risks in PPP projects due to wide variance in estimate of likely services and
volumes to be delivered through the Project.
• Service cost is dependent on the numerator ( Anticipated investment which has
a fixed and variable component ) and denominator ( Anticipated number of
services, Expected Transaction Volumes) – Under/Overestimation Risks
• PPP Project not designed in a manner to enable re-negotiation in both
cases of excessive profitability or losses to vendor, compared to
Infrastructure Sector

21. Broad issues related to e-Gov Procurement
1. Project Conceptualization and Development
2. Payment Model / Business Model
3. Scope of Work
4. Misprocurement
5. Tender publication
6. Bidding terms and conditions
7. Contract ( Terms and Conditions Document)
8. Pre Qualification
9. Pre-Bid meetings / Pre- Bid Clarifications
10. Tender Submission
11. Tender Evaluation
12. Post Tender Process
13. Third Party Audit
14. Project Execution
15. Post Implementation
16. PPP Projects
17. Consultant Issues
18. Dispute Resolution
19. Other Issues Go Back to Summary of Responses Slide

22. Preliminary Recommendations
• Rationalize Eligibility Criteria Norms across different category, size of
eGov Projects – Enable level playing field
• Model RFPs, Contracts, MSA for different Category of Projects
o To be prepared by a joint Government-Industry Team (include Reps
from Banking Sector, NISG, Consultants)
o Review by a Panel including DIT, Department of Expenditure, MoF
o Customize these for state projects, and drive uniformity
o SLAs should incorporate SLA and events of default for both Vendor
& Govt/Govt Agencies
o Incorporate Best practices of Model Documents Published by
Planning Commission for Infrastructure Sector PPP
o Toolkits for PPP, BOOT Projects and Business Model options to
guide departments
6-Oct-10
22

23. Preliminary Recommendations
• Similar to Process followed for Pre-Bid Meetings, standardize on Suppliers
debriefing, post vendor selection
• Initiate a practice of sharing techno-commercial evaluation scores
• Project Governance Structure Publish a Model for different category of projects
• Resourcing & Skills Profile across Lifecycle stages
• Consult Enterprise CIOs, Industry and Banking PSUs
• Decide a Dispute Resolution & Arbitration Guidelines
• Panel of retired officers from Government and Academia, knowledgeable
with IT Projects Execution
• Alternative Dispute Resolution mechanism on lines of procurement
Ombudsman of Canada
• Centralized digital repository of all Information assets of Bids, Projects – on a
secure Govt Network
• RFPS, Pre-Bid Queries, Bid Amendments, Contracts, MSAs
• Project Reviews, Audit Reports, Impact Assessment Reports
• Vendor defaults/force majeure Situations
6-Oct-10
23

24. Industry Actionables
• eGov Functional/Domain Expertise
• eGov Orientation/Functional Skills Development Programs
• Project Estimation Rigor and Bid Review Process
• Do we need leadership attention ?
• CSC Bids have become a negative showcase for, NeGP,
Outsourcing, PPP
• Several states going through long drawn litigation or rebids
• Initiate Impact Assessment of Projects Executed
• Success Stories, Case Studies
• Learnings from Failed projects
6-Oct-10
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25. Thank You