Roads ministry red flags model EPC bid rules

* The draft for projects in roads sector leaves scope for compromise: MoRTH.

The ministry of road transport and highways (MoRTH) has raised objections to the draft bidding documents for engineering procurement and construction (EPC) projects in the roads sector arguing it leaves ample scope for compromise on the quality of highways. In its preliminary discussions,the ministry has also said that the technical threshold set for contractors to qualify for EPC projects is likely to eliminate small players from the fray and promote name lending.

The new model seeks to transform the way EPC projects are executed from an item rate contract to turnkey basis. In an item-rate contract,every item of expenditure is separately tendered and billed for,while,under turnkey,the government specifies the broad requirements for a highway including the estimated cost. The contractor then has complete freedom to design,engineer and execute the project. The ministry claims that the model request for qualification (RFQ) document has been largely prepared by the Plan panel on the basis of inputs from advisor to the deputy chairman Planning Commission Gajendra Haldea. When contacted,Haldea,however,told The Indian Express he has not drafted the document.

The said RFQ is being drafted by the concerned ministry on the basis of the Model RFQ published by the Ministry of Finance. We have given our suggestions on various issues from time to time. The decisions on each of these issues have to be taken by the ministry, Haldea said in response to an e-mail over certain objections raised by the roads ministry. If anyone feels that his interests are adversely affected,it can approach the ministry.

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A key issue raised by the ministry relates to the defect liability period (DLP) specified as one year in the document. DLP is the period during which the contractor maintains the road after construction before handing it over to the government. According to the ministry,the DLP should be at least 3-5 years.

If it is just a year,the contractor may use substandard material and designs that may hamper the long term durability of the road. If defects surface in the medium term,the government will have to bear an extra burden for construction and repair, a senior ministry official told The Indian Express.

Another sticking point in the draft is that the conflict of interest clause prescribes a maximum cross shareholding of 5 per cent. In the past,this had emerged as one of the major reasons for most shortlisted players getting disqualified on build operate transfer (BOT) toll projects. The limit was raised to 25 per cent on recommendations of the B K Chaturvedi committee.

The document further says that in the case of a consortium bidding,only the technical score of the lead member will be taken for computing the experience score. The proposed RFQ allows the lead member to construct just 50 per cent of the project and leave the rest to its joint venture partners,which could potentially lead to name lending.

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