Government may change way road contracts are awarded

November 21, 2011

The government may change the way it awards road projects that it finances itself, in an attempt to make the bidding process more transparent.

The highways ministry, the National Highways Authority of India (NHAI) and the Planning Commission held a series of meetings recently to consider allowing contractors to carry out engineering work as well under so-called engineering, procurement and construction (EPC) projects, two officials from NHAI and the Planning Commission said, requesting anonymity.

Contractors typically execute only procurement and construction under EPC contracts, while engineering and design are done by government-contracted consultancies.

The government’s preferred method of awarding road contracts is the build, operate and transfer (BOT) mode, under which the bid winner finances, constructs and maintains a road for a specified “concession period”. The developer collects tolls or is paid an annuity by the government for the concession period.

Projects bid out as EPC contracts are typically those deemed unattractive for the private sector because they lie in areas that are either insurgency-hit or low in traffic.

The 12th Five-Year Plan, which gets underway in 2012, allocates more than 20,000km of highways to be bid out as EPC projects.

Contractors currently make their bids on the basis of costs incurred for every material that goes into road construction. Officials said this makes it easy for them to overcharge the government.

The Planning Commission now wants to award such contracts on a turnkey basis, under which the lowest bidder will be awarded the contract and will be responsible for building the road and maintaining it for a specified period, said the NHAI official mentioned above.

Analysts said handing over engineering work to private contractors may lead to fresh problems for the government.

As all roads constructed as EPC projects are handed over to the government a few years after construction, contractors could cut corners on engineering work, said Parvesh Minocha, managing director of Feedback Infrastructure Services, an infrastructure services company.

Minocha said that as concession tenures for BOT contracts are much longer, contractors deliver high-quality engineering and design works on such contracts.

To make EPC projects more attractive for contractors, the government should package smaller and less-profitable stretches of two-laned roads or service roads to be given on EPC contracts with lucrative expressways or highways to be given on BOT contracts, Minocha said.

Source: www.livemint.com

Written by ITW Editor · Filed Under BOT, Road

2 Comments on “Government may change way road contracts are awarded” Post your comment

alok on November 22nd, 2011 11:37 am

The government should do some thing seriously and quickly as awarding road projects by NHAI to the contractors turned concessionaires’ is serioulsy hampering the road quality and delivery. The cartel between Concessioinaire, Independent Engineer and the NHAI bigwigs is creaing havoc. It is not difficult to ascertain that only about 40% project is delivered. There are deficiencies in DPR preparation, selecting a Concessionaire followed by selection of IE where by there is a say from Concessionaire to have a choice for IE, designs by Concessionaire which have serious engineering deficiencies in name of “innovative designs”, serious constrcution defects as Concessionaire itself is the EPC contractor and finally in the road maintenance for the cocession period.
The way money is charged from public for road use is a clear loot where again Concessionaire, IC and NHAI form a cartel. Road user is not as demanding due to its mobile character as water, electricity or irrigation faciliticies user who are stationary and can represent on a regular basis. Long queues at toll plazas, no road side amenities (toilet & drinking water at minimum), non compliance of road safety norms, encroachments, no speed and load monitoring mechanisms in place, lack of plantation, insufficient/damaged signages, non availability of medical care in case of an accident and towing facilities in case of a breakdown are the norms and on top of it no grievance redressal system except a link on NHAI website which never responds to road user complaints/grievances.
Road construction has become such a loot business with guaranteed profit with no accountability and responsibility that any business is willing to enter. Only serious players be allowed.
S S Joshi on November 28th, 2011 11:20 pm

My experience about best way of road construction is in favor of EPC incusive of engineering.

The concern eched by Mr Minocha can well be addressed by firm dictat of adherence to the existing codal provisions which shall be ensured by suitably selected the eminent Construction Supervision consultancy firm.

The second mode of construction shall be with slight change in BOT /DBFOT mode where Independent Engineer is not independent.

The Independent Engineer must not be paid by either Concessionaire or NHAI directly. But a corpus fund need to be deposited by NHAI and Concessionaire and Ministry should release the monthly compensation who shall have skelton staff to monitor mobilization of IE.

Moreover, the choice of Concessionaire in selection of IE must be given Good bye.

Prima facie it appears to involve extra expenditure but in long run it means a quality construction with optimum expenditure and users shall get value for their money.

Loot in the garb of innovative design must be discouraged and reinventing the wheel shall not be acceped at any cost.
Any innovative design , must be first included in Codal provision and unnecessary disputes must be avoided.

The independent Engineer must be given independence and NHI/Concessionaire must not be bestowed with power to remove IE.
To ensure more objective approach the Independent Engineer must be totally under Finance Ministry in disbursing the monthly fee.