TCS cries foul as ESIC awards Rs1,200 crore deal to Wipro

By SiliconIndia   |   Wednesday, 25 February 2009, 07:10 Hrs   |    5 Comments
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New Delhi: Questioning Employees' State Insurance Corporation's (ESIC) move of awarding a Rs1,200 crore IT contract to Wipro, Tata Consultancy Service (TCS) which is another bidder for the same contract, has filed a complaint at the labor ministry to which ESIC reports.

ESIC, a Union government agency providing health insurance to at least 10 million workers in the country, had invited bids for a project called Panchdeep. The project was designed to streamline registration filings and payouts at ESIC's 144 hospitals and 50 regional centers.

Apart from TCS and Wipro Infosys also was a bidder for the contract. Out of the three, Wipro was selected winner by ESIC on the basis of the lowest bid, in a second round of the tender process earlier this month. The two tenders were called within a span of three months after the first round was rejected on grounds of 'defective' submissions by the parties.

In the first tender, which was floated on 24 October and financial bids were opened on 19 November, TCS, which quoted Rs1,677 crore, the lowest price compared with a Rs1,890 crore quoted by Wipro and a Rs2,100 crore bid made by Infosys Technologies.

ESIC decided to cancel that tender round because, according to a corporation official, who did not want to be identified, the bids of Wipro and Infosys were found to be defective and the agency did not want to go with the lone bidder left, TCS, even though the Tata firm was the lowest bidder in the round.

But taking objection this, a senior TCS executive insisted that his company was told its bid was rejected because it did not include service tax (of 12.36 percent on certain components of its offer). Later, when the company asked for a clarification, ESIC said that all bids would have to include service tax, this executive added, requesting not to be named.

However, TCS believed its bid then was within the terms of the tender. "Our understanding is that we don't need to pay service tax," said the TCS executive. "Even if service tax was required to be paid, the onus of paying the tax would have been on us, not ESIC or the government," he added.

However, when the second round tender bids were opened, Wipro emerged the lowest bidder with a quote of Rs1,181 crore - about 37 percent less than its previous bid, two people familiar with the tender - the TCS executive and a senior executive at a software product vendor that would have benefited from the contract - said. TCS quoted Rs1,530 crore (8.77 percent lower than its earlier bid) and Infosys Rs1,791 crore (14.71 percent less).

The Wipro offer did not include service tax and should not have been considered going by the reasons for the rejection of the TCS bid in November, said these two executives.

This was denied by Prabhat Chaturvedi, ESIC's director general, saying, "In the second round, the bidders have included a wide range of taxes, which included service, custom, excise, sales, VAT, octroi and any other leviable charges under the contract."

Wipro declined to comment specifically on whether its bid included service tax. "The contract is yet to be signed. We are in talks," said Anand Sankaran, chief executive of Wipro Infotech, the company's division looking after the business in Asia Pacific, including India.

Source: Mint

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