EPC
By Nageswara Rao, 9492432160
Letter | Stands for | EPC Contractor will carry out |
E | Engineering | Carry out the detailed Engineering Design of the Project., |
P | Procurement | Procurement of all the Equipment and Material for the construction of the said Project., |
C | Construction | then, Construction of the Project and Deliver it to their Client. |
Need of EPC in Indian Railways
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
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
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:
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.
Document | Prevails over the_____ |
EPC Agreement | All other Agreements & Documents |
Relevant clause | All other clauses |
Clauses | Schedules |
Schedules | Annexes |
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 |
15th day from the signing of the Agreement
30th day from the date on which the Contractor has submitted Performance Security
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.
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.
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.
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:
Civil & Track works
S&T works
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:
Project Milestone | Due date from the Appointed Date | Stage payments not less than ____ of Contract Price |
I | 240th day ( 8 months) | 10 % |
II | 480th day ( 16 months) | 35 % |
III | 700th day (approx. 23 months) | 70 % |
Completion | 900th day (30 months or 2 ½ years) | 100 % |
Damages due to delay in completion of the Work:
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.
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