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Showing posts with label Engineering Procurement & Construction. Show all posts
Showing posts with label Engineering Procurement & Construction. Show all posts

Sunday, April 30, 2023

EPC - Engineering, Procurement & Construction



By Nageswara Rao, 9492432160 


  • Also known as the Turnkey project (Turn of the Key)  - Since the EPC Contractor coordinates throughout the execution of the Project from Engineering to commissioning underway, assumes the responsibility for the installation.

  • A new and prominent form of Contract Agreement in the Construction industry.    

  • Key feature: To execute and deliver the Project (from Planning to Completion in all respects)  within the Agreed time and Budget.   

  • EPC stands for Engineering, Procurement & Construction 


Stands for

EPC Contractor will carry out



Carry out the detailed Engineering Design of the Project., 



Procurement of  all the Equipment and Material for the construction of the said Project.,



then, Construction of the Project and Deliver it to their Client.   

  • Usually in EPC Contracts, the Client i.e., IR employs a PMC - Project Management Consultant to supervise the work.   

Need of EPC in Indian Railways  

  • In Conventional Item Rate Contracts (present Works Contracts), the usual drawbacks are  

A. Delay in Survey  

B. Delay in preparation of Estimates 

C. Delayed Measurements  

D. Inadequate funds 

E. Cost overruns 

F. Time overruns 

G. Disputes on various issues with Contractors  

  • To address all the above issues, Railway Board will come out with a Model EPC Agreement,  which is released recently.   

Differences between Item Rate Contracts and EPC Contracts 

Item Rate Contracts

EPC Contracts

Conventional method

Latest and Modern method

Indian Railways provides the detailed design as well as the estimates of quantities for different items of Work i.e., Bill of Quantities

Responsibility of Designs and Estimates is left to the EPC Contractor, not the Indian Railways

Prone to Cost overruns and Time Over-Runs due to delays in design and drawing, variations in items and quantities, and inadequate fund provision

Assigning the responsibility for investigations, design, and construction to the Contractor 

Considerable time of Project Engineers of IR is consumed in dealing with variations in quantities, the introduction of NS (Non-Scheduled) Items, and variations in the Contract price

Now, Railway Engineers concentrate on the Policy matters 

Payments for Individual Items / Units (based on the measurements recorded in the Measurement Book)

Payments are linked to specified stages of Construction (Payment milestones) 

Fixed designs provided by the Indian Railways

Allows Contractor to design and construct the Project using Design Engineering and global best practices as specified in the Standard EPC Agreement

EMD - Earnest Money Deposit

Bid Security

SD - Security Deposit

Performance Security

PG - Performance Guarantee

Retention Money

Salient features of Standard EPC Agreement of Indian Railways  

  • Lump sum Contract Price (subject to Price Variation clause) 

  • Within Time 

  • Damages due to delay i.e., 0.05 % of Contract Price for one day delay.  

  • Maximum damages are not to exceed 10 % of the Contract Price. That means the maximum delay is  200 days ( 200 x 0.05 = 10)  


  • Time Extension - Arising out of delays on account of change of scope, force majeure, delay caused by or attributable to the Indian Railways. 

  • Assigned responsibility for Investigations, Design & Construction to the EPC Contractor 

  • Transferring the Construction Risk to the EPC Contractor.  

  • Payments are linked to the Specific Stages of Construction. (unlike individual measurements like  in existing rate contracts/Works contracts) 

  • Defect Liability Period - 2 years 

  • Bid Security (Replacing EMD ) 

  • Performance Security ( Replacing Security Deposit) 

  • Retention Money (Replacing the Performance Guarantee) 


  • Risk Allocation distribution: 


  • Contractor: Project risks such as soil conditions, weather, and commercial and technical risks relating to Design and Construction.  


  • Indian Railways:  Delays in handing over Land, approvals from Road Authorities for ROB/RUB at Level crossings, Environmental clearances, shifting of utilities, and approvals in respect of engineering scale plan and signaling interlocking plan.  


Selection of the Contractor:  

  • Open Competitive Bidding 

  • All project parameters i.e., Contract Period, Price Adjustment / Price Variation, and Technical parameters are tobe clearly stated upfront along with the Lump Sum Price for the Railway Project.  


Design & Construction:   

  • The ceiling of 25 % of the Contract price - any change in the scope of the Project.  IR will bear it. 


  • Survey, Investigations, Designs & Drawings - Responsibility of the Contractor subject to conformity with the specifications & standards laid down in the Agreement.  


  • Authority Engineer:  

  • Representing Indian Railways  


  • Nominated by the Railways among its Executive Engineers 

  • Act as a Single Window for coordination with the Contractor.   

  • Responsible for Monitoring & Supervision of the Construction of the Railway Project.  


DLP - Defect Liability Period:   

  • Two Years from the date of issue of Provisional Completion Certificate or 18 months from the date of Completion Certificate whichever is later.

  •  Additional comfort to the Indian Railways  

  • The Contractor shall remedy any and all loss or damage to the Railway Project during the DLP at its own cost within a period of 15 days from the date of notice issued by the Railways.  

  • If failed to rectify the defects by the Contractor, the same will be rectified by the IR and impose the damage i.e., Actual cost incurred by IR plus 20% of such cost on the Contractor.   

Priority or Order of Precedence: In case of ambiguities or discrepancies, the document in the first column will prevail over the documents in the second column.


Prevails over the_____

EPC Agreement

All other Agreements & Documents 

Relevant clause

All other clauses





Relevant Schedule

All other Schedules

Specifications & Drawings

Written description on the Drawings

Specific written dimension

Dimension scaled from the Drawing

Value written in words

Value written in numerals

  • Appointed Date: The latter of:  

  1. 15th day from the signing of the Agreement 

  2. 30th day from the date on which the Contractor has submitted Performance Security 

  3. The date on which Indian Railways has provided the ROW - Right Of Way and environmental & forest clearance at least 95% of core land length and 90 % of non core land length of the Railway Project.  

  • The appointed Date is most important for calculating different periods in the execution of the Project.  


  • Subletting / Sub-Contracts: 


  • Not more than 70 % of the Contract Price  

  •  The Contractor Shall carry out at least 30 % of Contract Price directly under its own supervision and through its personnel.  

  • Any sub-contract for works, if exceeds 5 % of the Contract Price, the same should be informed to Indian Railways by the Contractor.  

Training of Railway Personnel by the Contractor:  

  • The number of persons shall not exceed 6 

  • Before issuance of Provisional Certificate / Completion Certificate. 

  • In areas of diagnostic, troubleshooting, repairing, operation, and maintenance of S&T equipment  

  • In the area of SCADA (Supervisory Control And Data Acquisition) 

  • SCADA: A Control system architecture comprising computers, networked data communications and graphical user interface for high-level supervision of machines & processes. 

Bid Security:  

  • 0.5 % of the Project estimated cost subject to a maximum of Rs.2 Crores.   

  • Through e-payment gateway or Bank Guarantee Bond valid upto 90 days beyond the bid validity period. 

  • Submitted by the Contractor along with the RFP - Request For Proposal 

  • Remain in force in case of a successful bidder until substituted by Performance Security. 

  • Bid Security of unsuccessful bidders - returned within 7 working days of the issue of LOA. 

 Performance Security:  

  • Equivalent to the SD - Security Deposit in Rate Contracts.  

  • 3% / 5% of the Contract Price 

  • Within 30 days from LOA (Letter Of Award/Acceptance)  

  • Extension: Another 30 days.  Damages 0.002 % per each day of delay.  

  • An irrecoverable and unconditional Bank Guarantee 

  • Valid until 60 days of the expiry of DLP - Defects Liability Period.  

  • Failure to submit Performance Security in Extended period, if any:  

  • Terminate the Agreement 

  • Encash the Bid Security (EMD) and adjusted as part of damages. 

  •  Balance Performance Security - shall be recoverable from the Contractor’s pending / future dues with IR in any of the ongoing/future contracts.

  • Release of Performance Security:  Within 60 days of the DLP - Defects Liability Period/extended DLP 

Retention Money: 


  • Guarantee money for performance & obligations of the Contractor during the Construction Period.

  • Equivalent to the PG - Performance Guarantee in Rate Contracts 

  • 5 % of the Contract Price 

  • Recovered at the rate of 6 % of Bill payments subject to the maximum of 5 % of the Contract Price. 

  • If the Contractor submits an irrecoverable and unconditional Bank Guarantee towards the Retention Monety, the IR should return the recovered amount to the Contractor.  

Design Director: 


  • Appointed by the Contractor

  • Within 20 days of the Appointed Date 

  • Head of Contractor’s Design unit

  • Responsible for Surveys, Investigations, collection of data, and preparation of preliminary and detailed designs.


Authority Engineer:   


  • Appointed an Engineer of IR or PMC - Project Management Consultancy by the Indian Railways 

  • Within 15 days from the Appointed Date 

  • Responsible for discharge of the functions and duties specified in the Agreement.   

Payments to the Contractor:  

  •  Simple & Rational Method 

  • Broadly, works are divided into  

  1.  Civil & Track works 

  2. S&T works 

  3. Electrification works

  • All the above works can be taken together under Single Project or different Projects.  

  • Each item of the above works sub-divided into stages  

  • Payments will be made for each completed stage of work.  

Project Completion Schedule:  


  • Scheduled Completion Date  - 900th day from the Appointed Date ( 30 months or 2 ½ years)

Project Milestone

Due date from the Appointed Date

Stage payments not less than ____ of Contract Price


240th day ( 8 months)

10 %


480th day ( 16 months)

35 %


700th day (approx. 23 months)

70 %


900th day (30 months or 2 ½ years)

100 %


Damages due to delay in completion of the Work:  


  • 0.05 % of the Contract Price for delay of each day reckoned from the date specified in the above Milestones.   

  • Maximum is 10 % of the Contract Price. 

Contract Price: 


  • Valid & effective until the issue of Completion Certificate 

  • All payments in Indian Rupees

  • Includes: All duties, taxes, royalty, and fees as per the laws and regulations in force as on the date.  

  • Covers all the Contractor’s obligations for the Works under the Agreement and all things necessary for the Construction thereof and for the rectification of any Defects during DLP in the Railway Project

  • Excludes: Taxes if any paid by the Contractor 

Advance Payments to the Contractor:   

  • Up to 10% of the Contract Price 

  • In Two equal instalments 

  • For Mobilisation expenses & for acquisition of equipment 

  • Interest Rate: Bank Rate + 4 % per annum 

  • Irrecoverable Bank Guarantee to be submitted by the Contractor equivalent to 110 % of Advance Payment

 Examples of EPC in the Indian Railways / Transport sector. 


  • RE - Railway Electrification Project - 781 Kms in Konkan Railway given to L & T in the year 2017.

  • Delhi Metro Railway Construction 

  • Construction of Railway Bridge in Jammu - Udhampur Railway Link