Govt to finalize new model for bidding road projects soon

February 20, 2012

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The Road Transport and Highways ministry will shortly finalize a new model to be used for bidding out 20,000 km of two laned highways worth Rs 50,000 crore that it plans to build during the next five years.

Under the new EPC (Engineering Procurement Construction) model, projects would be awarded on a turn key basis. The ministry will specify the project requirement including its cost and pay the entire amount to the lowest bidder at one go. It differs from the earlier EPC model, which was executed on item rate basis, where the ministry separately tendered and billed for every item of expenditure.

The old system was infamous for cost escalation, time overruns and too much official interference.

At a meeting on Monday attended among others by CP Joshi, road minister and Montek Singh Ahluwalia, Planning Commission deputy chairman, some of the sticky provisions of the EPC document including the duration of defect liability period (DLP), subcontracting clauses, bonus to be given to contractors for early completion of projects, etc. were discussed.

“It was decided to sort out all issues within the next fortnight and get the final EPC document approved by the Inter Ministerial Group by month end,” said a official.

The duration of DLP had become a major bone of contention between the plan panel and the road ministry. While the ministry wanted the DLP of 5 years, the plan panel has decided on two years. “The ministry has finally come on board on the issue,” said a official.

Another issue involves subcontracting by the developer. While the ministry wants that not more that 50% of the total length of the highway can be sub contracted, the plan panel wants it to be 70%. The plan panel also wants a bonus of upto 5% of project cost for the contractor for early completion. However, road ministry wants the bonus clause to be deleted.

The model document, which is being prepared by the plan panel, has already undergone six revisions.

The ministry presently adapts two other models for awarding highway projects –BOT (toll) where a developer builds roads and recovers investment through toll collection during the contract period which usually runs upto 20 years and BOT (annuity) where the developer builds the roads and the government pays it in installments.

Source: http://www.hindustantimes.com