EPC
By Nageswara Rao,
9492432160
- Also known as the Turnkey project (Turn
of the Key) - The EPC Contractor coordinates throughout the
execution of the Project from Engineering to commissioning underway, and
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
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Letter
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Stands for
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EPC Contractor will carry out
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E
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Engineering
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the detailed Engineering Design
of the Project.,
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P
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Procurement
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Procurement of all the Equipment and Material for the construction of
the said Project.,
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C
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Construction
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then, Construction of the Project and Delivering it to their
Client.
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- 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, the Railway Board will come out with a Model EPC Agreement,
which was released recently.
Differences between
Item Rate Contracts and EPC Contracts
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Item Rate Contracts
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EPC Contracts
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Conventional method
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Latest and Modern method
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Indian Railways provides the detailed design
as well as the estimates of quantities for different items of Work i.e., Bill
of Quantities
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Responsibility for Designs and Estimates is
left to the EPC Contractor, not the Indian Railways
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Prone to Cost overruns and Time Over-Runs due
to delays in design and drawing, variations in items and quantities, and
inadequate fund provision
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Assigning the responsibility for
investigations, design, and construction to the Contractor
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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
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Now, Railway Engineers concentrate on the
Policy matters
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Payments for Individual Items / Units (based
on the measurements recorded in the Measurement Book)
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Payments are linked to specified stages of
Construction (Payment milestones)
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Fixed designs provided by the Indian Railways
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Allows Contractor to design and construct the
Project using Design Engineering and global best practices as specified in
the Standard EPC Agreement
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EMD - Earnest Money Deposit
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Bid Security
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SD - Security Deposit
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Retention Money
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PG - Performance Guarantee
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Performance Security
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Salient features of the Standard EPC Agreement of
Indian Railways
- Lump sum Contract Price (subject to Price Variation
clause)
- Time Extension - Arising out of
delays due to 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 )
- Retention Money ( Replacing the
Security Deposit)
- Performance Security (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 to be 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. Indian
Railways will bear it.
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Survey, Investigations,
Designs & Drawings - Responsibility of the Contractor subject to conformity
with the specifications & standards laid down in the Agreement.
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Representing Indian
Railways
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Appointed an Engineer by
the Railways among its Executive Engineers. or PMC - Project Management
Consultancy by the Indian Railways
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Within 15 days from the
Appointed Date
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Act as a Single Window
for coordination with the Contractor.
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Responsible for
Monitoring and supervision of the Construction of the Railway
Project.
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.
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
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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 the Contractor fails
to rectify the defects, 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.
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Document
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Prevails over the_____
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EPC Agreement
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All other Agreements & Documents
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Relevant clause
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All other clauses
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Clauses
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Schedules
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Schedules
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Annexes
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Relevant Schedule
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All other Schedules
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Specifications & Drawings
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The written description of the Drawings
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Specific written dimension
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Dimension scaled from the Drawing
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The value written in words
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The value written in numerals
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- Appointed
Date: The later of:
A.
15th day from the
signing of the Agreement
B.
30th day from the date
on which the Contractor has submitted Performance Security
C.
The date on which Indian
Railways has provided the ROW - Right Of Way and environmental & forest
clearance at least 95% of the core land length and 90 % of the 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:
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Not more than 70 % of
the Contract Price
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The Contractor Shall
carry out at least 30 % of the Contract Price directly under its own
supervision and through its personnel.
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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:
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The number of persons
shall not exceed 6
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Before issuance of
Provisional Certificate / Completion Certificate.
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In areas of diagnostic,
troubleshooting, repairing, operation, and maintenance of S&T
equipment
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In the area of SCADA
(Supervisory Control And Data Acquisition)
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SCADA: A Control system
architecture comprising computers, networked data communications, and a
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 up to 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 the Performance Security.
- Bid Security of unsuccessful
bidders - returned within 7 working days of the issue of LOA.
Retention Money:
- Guarantee money for the
performance & obligations of the Contractor during the Construction
Period.
- Equivalent to the SD - Security
Deposit in Rate Contracts
- 5 % of the Contract Price
- They were recovered at the rate
of 6 % of Bill payments subject to the maximum of 5 % of the Contract
Price.
- If the Contractor submits an
irrevocable and unconditional Bank Guarantee towards the Retention Money,
the IR should return the recovered amount to the Contractor.
Performance
Security:
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Equivalent to the
Performance Guarantee in Rate Contracts.
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3% / 5% of the Contract
Price
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Within 30 days from LOA
(Letter Of Award/Acceptance)
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Extension: Another 30
days. Damages 0.002 % per each day of delay.
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An irrevocable and
unconditional Bank Guarantee
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Valid until 60 days of
the expiry of the DLP - Defects Liability Period.
- Failure to submit Performance
Security in an Extended period, if any:
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Terminate the Agreement
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Encash the Bid Security
(EMD) and adjust it as part of the damages.
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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: After 60 days of the DLP - Defects Liability Period/extended
DLP
Payments to the
Contractor:
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Simple & Rational
Method
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Broadly, works are
divided into
1.
Civil & Track
works
2.
S&T works
3.
Electrification works
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All the above works can
be taken together under a Single Project or different Projects.
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Each item of the above
works sub-divided into stages
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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)
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Project Milestone
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Due date from the Appointed Date
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Stage payments not less than ____ of Contract
Price
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I
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240th day ( 8 months)
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10 %
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II
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480th day ( 16 months)
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35 %
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III
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700th day (approx. 23 months)
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70 %
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Completion
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900th day (30 months or 2 ½ years)
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100 %
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Damages due to delay in
completion of the Work:
- Damages due to delay i.e., 0.05 % of Contract
Price for one day delay from the
date specified in the above milestones.
- Maximum damages are not to
exceed 10 % of the Contract Price. That means the maximum delay is
200 days ( 200 x 0.05 = 10)
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 of 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 installments
- For Mobilization expenses &
for the 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
- Secunderabad Railway Station - Redevelopment
(undergoing)
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