CAG Report No. 11 of 2025 — Implementation of Smart City Mission, Government of Karnataka

Implementation of Projects and Monitoring
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However, on scrutiny of RFPs of the ICCC Phase-I and Phase-II in MSCL,
Audit observed that security infrastructure provisioned in the RFP of MSI was
duplicated in the contract agreement of LSI for establishment of ICCC in
Mangaluru city. The total cost of provisions made for security infrastructure as
per the approved Bill of Quantity (BoQ) worked out to ₹3.02 crore.
As provision of security infrastructure comes under the scope of MSI,
provisioning of these infrastructure in the scope of LSI resulted in duplication
of item of work worth ₹3.02 crore which was avoidable.
The State Government replied (April 2025) that installing minimum security
features to protect the application and field-level devices installed at the city
level was essential. The reply was not acceptable as no other smart city in the
state had installed the above security features in their city-level data centre.
Further, the reply was in contravention to the guidelines issued by State
Government for establishment of ICCC.
4.6.1.4 Appointment of ineligible LSI in Shivamogga Smart City
The tender for appointment of LSI for implementation of ICCC project in SSCL
was awarded (August 2020) to a consortium at the tendered price of ₹41.84
crore. Audit scrutiny of the tender files revealed the following:
➢ OEM Experience Violation: The selected LSI claimed the work
experience of OEM viz., M/s Synergy Telematics Private Limited
(OEM) for implementing smart Solid Waste Management (SWM), even
though the LSI did not possess the work experience. This violated the
MoHUA-prescribed model RFP, which did not allow the use of OEM
experience.
➢ Change of OEM: According to the model RFP guidelines, changing the
OEM was allowed only in exceptional cases, such as the closure of the
company. However, the LSI executed the SWM component through a
different OEM, M/s Ajeevi Technologies Private Limited, after the
tender was awarded, which was not justified.
➢ Eligibility of the Lead Bidder: The original tender conditions required
the lead bidder to have a minimum of 50 per cent of the overall turnover
(₹100 crore). However, this condition was amended in February 2020,
allowing the lead bidder to qualify by demonstrating experience in
similar ICT projects worth ₹50 crore in the past five years. This change
contradicted the MoHUA model RFP. Audit further observed that the
lead bidder's turnover over the past five years was only ₹34.83 crore,
which would have made them ineligible without the amendment.
Thus, the dilution of the standard tender condition resulted in selection of
ineligible LSI for implementation of ICCC project in Shivamogga. Further,
acceptance of change in OEM after the award of tender vitiated the sanctity of
tender evaluation.
The State Government replied (April 2025) that the turnover clause was in line
with KTPP Rules and not with model document of MoHUA. The common
practice in procurement under KTPP norms is to seek annual turnover as two
times the amount put to tender. It was also stated that modification of OEM
post award of work was permissible as per model RFP of MoHUA.