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Different Contracts Including EPC Contract System
Dr I Satyanarayana Raju, MTech,MBA,MPhil,BL,FIE,PhD.,
Former Chief Engineer,CDO(AP) Hyderabad &
Member, Technical Advisory Council,WRD(AP)&
Expert-Dam Safety Inspection Team &
Past Chairman,IEI-Telangana State Centre & AP State Centre, Hyderabad-500082(TS).
Contact:9676686158;[email protected]
Contract And Agreement
• Contract is derived from Latin word ‘Contractum’ meansdrawn together. Contract is an agreement enforceable by law.There shall be two parties between agreement, one who offerand the other accepting it.
• Agreement = Offer + Acceptance.
• An Agreement is defined as every promise and every set ofpromises forming consideration for each other sec2 (e) ofIndian Contract Act, 1872.
• All legal contracts are enforceable by Indian Contract Act,1872 (Act IX of 1872). An Amended Act 4 of 2013 was come inforce with effect from 18-01-2013
• Clause 2 of Act says-
• When one person signifies to another his willingness to do or abstain fromdoing anything with a view to obtaining the assent of that other to such actor abstinence, he is said to make a proposal.
• When the person to whom the proposal is made signifies his assent there to,the proposal said to be accepted. A proposal when accepted becomes apromise.
• The person making the proposal is called the ‘proposer’ and the personaccepting the proposal is called the ‘promisee’.
• e) Every promise and every set of promises forming the consideration foreach other is an agreement.
• g) An agreement not enforceable by law is said to be void.
• h) An agreement enforceable by law is contract.
• i) An agreement which is enforceable by law at the option.
• A contract is based on reciprocal promises. Reciprocal promises by theparties are conditions precedent for a valid contract. A contract furthermoremust be for consideration.
• “Consideration means a reasonable equivalent or othervaluable benefit passed by the promisor to promisee.
• Clause 3 of Chapter 1 of Indian Contract Act, 1872 elaboratesCommunication, acceptance, and revocation of proposals:-
• The communication of proposals, the acceptance ofproposals, and the revocation of proposals and acceptances,respectively are deemed to be made by any act or omission ofthe party proposing accepting or revoking by which he intendsto communicate such proposal, acceptance or revocation orwhich has the effect of communicating it.
• Clause 10: what agreements are contracts? All agreements arecontracts if they are by free consent of parties competent tocontract for lawful consideration and with lawful object and arenot here by expressing declared to be void.
• Clause11: Who are competent to Contract? Every person iscompetent to contract who is of the age of majority accordingto the law to which he is the subject ( Indian Majority Act1875(9 of 1875)) and who is of sound mind and is notdisqualified from contracting by any law to which he is subject.
• Clause 13: Two or three persons are said to consent when theyagree upon the same thing in same sense. Consent is said to befree when it is not by coercion, undue influence, fraud,misrepresentation, mistake.
• Clause 20: Agreement is void when both parties are undermistake as to matter of fact.
Void Contracts:
• Clause 24: Agreements are void of considerations and objectsunlawful in part.
• Clause 25: Agreement without consideration void, unless it isin writing and registered, or it is promise to compensate forsomething done or is a promise to pay a debt barred by aLimitation law.
• Clause 29: Agreements void of uncertainty: - Agreements, themeaning of which is not certain, or capable of being madecertain, are void
• Essentials of Contract: According to Section 10 of Indian Contract, 1872-All agreements are contracts if they are made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not here by expressly declared to be void.
• “Nothing here in contained shall affect any law in force in India and not here by expressly repeated by which any contract is required to be made in writing or in the presence of witness or any law relating to the registration of documents”.
• Offer: When one person signifies to another his willingness to do or abstain from doing anything with a view to abstaining the assent of other, by such act of abstinence he said to make a proposal or offer. Acceptance of offer must be absolute unqualified and unconditioned. The Communication of Acceptance be made by letters, it will be complete at the time when and at the place, the letter of acceptance is posted
Contracts in Public Works Departments(State Engineering Depts. for Project Works and maintenance works)
• K2 Contract: The value of contract is very less and meant for piece work of small item of work. Process will be one time and single payment.
• Lump sum Contract(LS): A LS contract is one to complete the work comprised it in for an ascertained and specified sum, or for a specified sum subject to it being increased or diminished by taking into consideration the value of extra done and omission made in accordance with the contract.
• LS contract is also called Item rate Contract paid based on measured quantity with rate quoted of that specific item by Contractor as per agreement.
• The State Engineering departments are following LS Contract since inception even during pre independence Era. and even today 90% contracts are LS Contracts.
• Turn Key Contract: The Turn key Contract term is used in design and builds contracts. It may be that it is intended to indicate that upon completion the Key can be turned and everything will be ready.
Engineering Procurement and Construction Contract (EPC):• In LS contract after doing Hydrology and Soil investigation, surveying, designing
and drawing, estimating cost, bill of quantities, preparing specification for eachitem of work and sub work, and the tenders will be floated.
• The Success full bidder there upon enters in to an agreement with employer.
• He commence work and will be arranged payments as per bill of quantitiesperiodically according to progress.
• Whereas the EPC contract is similar to a Turn Key contract. The Internal BenchMark value of the project or package work will be considered with requiredproject completion in a certain period of contract.
• The total completion of project will be divided in Mile stones assigningpercentage of progress.
• The tenders will be and lowest tender will be awarded EPC contract. It is theresponsibility of EPC contractor to investigate, submit designs for obtainingapproval (Engineering), Procuring materials at his end and commence, construct,and complete the work within Agreement period at quoted total cost of Project.
• But all operation by EPC Contractor shall with in frame work of all approvals fromtime to time by employer. Instead payment by bill of quantities in LS Contract,
• EPC payments will be made according achieving the Mile stones stipulatedin agreement and satisfying technical and general specifications afterparticular percentage completion of work.
• After final and full completion of Project or Package, the full payment willbe arranged safe guarding employer interests of defect liability andmaintenance of work to specified period mentioned in agreement.
• All major project were taken up under EPC contract mode since 2003-2004in WRD (erstwhile I&CAD Dept) and some were completed with balance inprogress.
• The APDSS, Department Code, Accounts Code were basically brought insuiting LS contracts since a long time.
• After EPC contracts introduced necessary amendments to these codes wereissued by Government from time to time along with guidelines andamended rules-regulations of state.
• The original clauses of D Code(LS Contract) are very much applicablesubletting, deleting portion work from main contract to entrust to othercontract(clause:63C) and Termination Clause 61 are very much in force
under EPC too.
EPC CONTRACT SYSTEM
(ENGINEERING PROCUREMENT CONSTRUCTION)
( Dr.ISNRaju, Former CE,CDO, & Member,TAC-WRD,AP)
EVOLUTION OF CONTRACT SYSTEM
CONTRACT SYSTEM• A promise enforceable by law
• Offer acceptance (legally binding)
• To be legally binding as a contract, a promise must be exchanged foradequate consideration. i.e., benefit a party receives.
AGREEMENT• “Every promise and every set of promises forming the consideration for
each other is an agreement ” section 2 (e) of the Indian Contract Act1872 ( as ammended by Act 1 of 1997).
AGREEMENT AND CONTRACT• An agreement which is enforceable by law is considered to be a
contract – section 2 (h) of the Indian Contract Act.
GOVERNMENT CONTRACTS
Government is, by far, the largest contractor in any country, so too inIndia. Supply products (purchases ) and services (consultancy, labouretc.,)
Contracts entered into between private persons and the governmentare governed by article 299 of constitution of India.
Article 299 stipulates “all contracts made in exercise of the executivepower of the union or the state shall be expressed to be made by thepresident or by the governor of the state as the case may be and allsuch contracts and all assurances of property made in the exercise ofthat power shall be executed on behalf of the president or the governorby such person and in such manners as he may direct or authorise”
Neither the president nor the governor shall be personallyliable_______”
CONTRACT SYSTEM IN AP
AP Financial code mentions only 4 forms ofexecution of work, vide chapter VIII, Article 163
1) Department execution
2) K2 Contract – Piece Work
3) Lump Sum Contract
4) Schedule Contract
Only the first 3 forms are in vogue in GovernmentDepartments
1) DEPARTMENTAL EXECUTION OF WORKS :
The Public works are executed departmentally, by
engaging work charged staff.
2) K2 CONTRACTS :
When several developmental works were taken-up, it
became difficult to manage several works with the
available meagre work charged staff. The system of ‘K2
Contracts’, or piece work agreements have come into
force. This is basically a labour and material supply
agreement and the contractor has to execute the work,
strictly as directed by the Engineer-in-Charge and with no
responsibility fixed on him.
3) L.S. Contracts :
As the number of experienced contractors started raising,
with the passage of time, the ‘Lump Sum’ contracts have
come into force. In this form of contracts, the contractor
has to execute the work as per Designs & Specifications
issued by the Department by duly employing technical
persons. The contractor is also responsible for QUALITY
EXECUTION of work.
Estimates, Administrative Approval and Technical Sanction(Article 185 of “F” code, para 99, 101, 102, 154, 390 of A.P.P.W. “D”
Code, G.O.Ms.No.94 dt.1.7.2003)
State Government works are executed following thespecifications, rules and regulations laid down in:
AP Standard Specifications (APSS)
ISI, IRC, MOST, CPWD etc specifications
AP Departmental code
AP Accounts code
G.O’s issued from time to time
In Irrigation department, for every project, estimates are
prepared on 3 different occasions.
First, at the time of preparation of feasibility report; a very
rough estimate is prepared, based on experience in construction
of similar projects.
When once Government accords approval to take up detailed
investigation, a detailed project report (DPR) is prepared based
on preliminary designs.
In the DPR the main canal estimates are prepared on levels
taken at 200 m interval. For the distributor net work and
CM/CD works estimates are drawn from cost curves. There are
bound to be variations when actual construction takes place.
Government first accords Administrative Approval, based on
DPR estimates.
When actual execution is taken up, further detailed investigation
is carried out at closer intervals of 25 m, actual quantities are
worked out and then detailed estimates are prepared adopting
Rates as per:
The common SSR (Standard Scheduled of Rates) of all
Engineering Depts approved by Board of Chief
Engineers every year (which comes into force with effect
from Ist June of every year).
The Estimated Amount thus arrived will be the ECV
(Estimated Contract Value) of the tender put to bid.
The technical sanction is accorded by the competent authority
and after technical sanction, tenders are invited.
It is observed in practice that detailed estimates prepared so
carefully are also revised based on actual at the time of
construction.
Revised Estimates (Article 197, Para 214, Para 215 ).
A revised technical estimate must be submitted when the
expenditure is likely to exceed the amount of sanctioned
estimate plus such excess as can be passed by the appropriate
authority for any case what ever other than tender premium or
when material developments or deviations necessitate revised
administrative approval.
21
Flaws in the existing practices
Abnormal variations in the sanctioned estimates and revised
estimates.
Delays due to non-finalization of alignment, non-approval of
drawings, delays due to approval from competent authority for
change in soil classification, Change in leads and lifts and delays in
land acquisition and R & R.
Prolonged litigation by Arbitration.
Thus there are both time and cost overruns in conventional
tender system.
22
EXAMPLE:
Telugu Ganga Project started in 1983 with an estimated cost of Rs.
640 crores and programmed to be completed in 6 years,
expenditure till 2003 was Rs 1800 crores with stage of completion
@ 60%. Balance works are taken up and nearing completion under
Jalayagnam Programme. The total revised cost of project is about
Rs. 4000 crores with actual completion period of more than 25
years.
23
Prolonged Litigation by ARBITRATION:
Arbitration clause as per act, was introduced in L.S. contracts, with a nobleintention to render quick justice.
The most common factors in the arbitration claims areChange in quarries and increase in leads,Reclassification of soils strata,Delays in processing of Land Acquisition and R & R,Delays in processing of Project Clearances from different departments and
acquisition of forest areas etc,.
All these lapses are often attributed to the Department and the Department inmost of the cases put up a meek defense and leads to exorbitant claims used tobe admitted.
Government, therefore, brought a change in the system in 1986, putting a ceilingof Rs. 50,000/ for resolution of disputes through Arbitration. For claims above Rs.50,000 agency has to seek dispute resolution only through civil suit. This hasresulted in bringing down the amounts due to arbitration claims drastically.
24
CAG in his report ending 31st March, 2004 has reviewed 24
Irrigation projects (10 Major and 14 Medium), out of which
17 were more than 20 years old, taken up in Andhra
Pradesh and has observed that out of 24 projects 13 projects
only giving partial benefits and in respect of 11 projects no
benefits accrued. It was also observed as “Delay in
completion of the projects resulted in huge cost overrun
(583%) and non-achievement of intended benefits (vide
para 1.8.1 of CAG Report for the year ended 31st March ,
2004. )
Observations of CAG
Concept of
EPC Contracts & Salient Features
26
NEED FOR EARLY COMPLETION OF IRRIGATION PROJECTS
Certain areas of Andhra Pradesh have been under the severe influence ofDrought for many years. Agriculture in those areas were fully dependenton monsoon.
The livelihood of farmers in those regions were affected. Many debtstrapped farmers took the extreme step of taking their own lives.
On one hand more than 2000 TMC of water is wasted into sea every yearand on the other hand in about 800 taluks out of a total of 1128 taluks inA.P., people suffer for want of water, both for irrigation and drinkingneeds.
Thus, urgent need was felt by government for early completion ofIrrigation projects to utilise the dependable waters.
To stabilise the agricultural sector, I & CAD Department in 2004 hasintroduced the “Jala Yagnam” program.
27
In these efforts, the State Government has not onlysanctioned projects but is also giving adequate financialresources to complete the projects. From 2004 onwards tilldate, 86 irrigation projects (including major and mediumirrigation, modernization and flood banks) are taken upwith estimated cost of Rs.1,79,891.74 Crores for creatingan additional irrigation potential of 109 lakh acres.
28
CHOICE OF PROCUREMENT
To carryout the programme in a time bound manner, the Government looked
around the world the existing practices of procurement for Irrigation Projects
to obtain the best practices.
Breaking up the works into convenient packages and entrusting them to
major construction companies on EPC Turn Key System.
The EPC system is in vogue in developed countries and in some of the
public sector undertakings in India and successfully adopted in Narmada
Valley project, NTPC, NHPC, NHAI etc.
FIDIC : (French acronym for the International Federation of Consulting
Engineers)
International Federation of Engineering Consultants, Europe – released a
standard tender document.
in 1987 – Red Book (Designs by employer, work by contractor)
in 1995 – Orange Book / Yellow Book (Designs & work by contractor)
in 1999 – Silver Book – EPC Turnkey System (Definite date & definite amount)
As per this document
The Employer
(i) has to obtain all project clearances, land acquisition and R & R.
(ii) make fund arrangements and make payments in time.
The Contractor
(i) has to Investigate & Design (Engineering)
(ii) has to Procure men and materials and
(iii) construct the project
THE SILVER BOOK(EPCT Contract)
• More certain final price and time required
– Balance of risk being changed
– Privately financed BOT type
• Contractor asked to cover extra risks
• Employer will have to pay more
• Completely new book – unbalanced risk
• Full open acceptance of risk picture
• Starting point for BOT type projects
30
(contd….) EPCT Contract
The EPCT Contract is suitable for:
particularly E&M and process plant projects
all types of Employers
civil law jurisdictions
where government employer or private developer wants a fixed price turnkey basis and two-party approach
31
Special Features of theSilver Book
• Responsibility for design lies with Contractor
• Employer’s Requirements usually a ‘performance specification’ (functional basis)
• Contractor carries out all engineering, procurement, construction, ready for operation at the ‘turn of a key’
• No Engineer - instead the Employer
• Lump Sum Contract Price (but adjustments in limited specified cases)
32
(contd…) Special Features
• Testing procedures to demonstrate achievement of specified end result
• Contractor carries majority of risks, so Employer pays more
• Final price and time should be more certain
• Small number of tenders with negotiation
• Contractor given freedom to use own methods and techniques
• Has to prove reliability and performance
33
(contd…) Special Features
• These Conditions are not suitable in the following circumstances:
if time or information is insufficient before Contract signature
if considerable work underground or difficult to inspect
if Employer intends to supervise closely or control or review
if an intermediary certifies interim payments
where part of the works is designed by the Employer
34
Mr. Grove, the Eminent Engineer, who was the chairman of
the Engineers team, which executed the Hong Kong Air Port
(1990-1997) pleaded for all risks to be borne by employer.
The winning tenderer, under EPC system, will either be the
gambler or low guesser.
Mr. Christopher Wade, Chairman, FIDIC commented in 2001
that Silver Book is now a reality.
The Silver Book, has become internationally popular and is
now available on U.N. website.
36
37
E.P.C – TURN KEY SYSTEM
E.P.C (Engineering Procurement Construction) /
Turn Key System is the methodology being
adopted for expeditious completion of the
projects to achieve the targeted goals by
simultaneous Investigation, Exploration, Design,
Estimating, Procurement and Construction and
Completion of Projects in a time-bound manner.
38
ENGINEERING
The Agency (Contractor) shall carry out all the related surveys ie.,
Project site, Head Works, Canals and Distributory system etc.
The Agency shall also conduct the exploration of sub soil for
preparation of detailed designs and drawings of various structures.
The Agency shall prepare Hydraulic Particulars of canals and
designs for all Structures (Head Works and CM & CD Works) and
submit to the Department for approval. The Construction will be
taken up after approval by the Department.
The Agency shall also prepare the Land Plan schedules required
for acquisition of land for construction of the project components
including localisation of area to be irrigated and submit to the
Department for further processing and making available the lands
for construction.
39
PROCUREMENT
The agency shall work out the requirement of machinery,
material, men etc for construction and procure them as per
requirement for completion of various components of the
project as per the time frame stipulated.
The agency shall also evolve the construction programme to
complete the whole work in a stipulated period (PERT and
CPM charts) and the Department shall approve the same.
40
CONSTRUCTION
As per the approved Hydraulic Particulars, designs and drawings
for various components of the project, the construction shall be
taken up and completed by the agency as per the milestones agreed.
The agency shall establish a quality control lab and conduct
various tests to specify the quality requirements and standards
specified for each item of work as per the BIS codes.
The agency shall also maintain all the required records of the
materials, test results, mark out, placement, consolidation, and any
other registers that are required for satisfying the Department as
well as the third party quality assurance teams or any other agency.
41
The agency shall prepare the record of measurements of the work done
and produce to the Department for checking and arranging payment.
The Department shall arrange land to the agency and continuously
monitor and keep a watch on the quality of work, rate of progress,
approval of designs and take necessary actions as per agreement,
payments etc., to ultimately get the whole work completed on turnkey
basis by the agency within the stipulated period.
The agency shall also do the operation and maintenance for a period of
2 years after completion of the project. During the operation and
maintenance period of the system they should ensure water supply to the
whole of the ayacut contemplated under the project.
The contractor will be discharged of his responsibility only after
successful performance of all the above conditions.
42
ADVANTAGES OF EPC SYSTEM
The procurement is for completion of the job in totality, but not
for completion of quantities assigned, as per the existing age old
practice.
The contract covers investigation, soil/foundation exploration,
preparation of designs & drawings, procurement of materials and
execution of the work to complete the job in all aspects.
Minimization of Project cost due to competitive designs and
latest construction techniques.
Advantages. . .
43
Contract value is only one fixed amount. No additional payments
either by way of increased quantities, variation of classification of
soils, increased foundation depths, deviations due to leads, change
of quarries etc. will be given.
This system is followed in Narmada valley project and other
Central Government undertakings and has been completed
successfully.
44
Pre-qualification (RFQ & RFP) In case of specialised nature of works, tenders for pre-qualification
will be called for inviting the firms having required experience inthat specialised category of works.
They will be short listed against some qualification criteria.
Whenever the tenders are called for that specialized category ofwork, only these short listed firms will be eligible to tender.
Tender (bid) documentsTender documents are to be approved by the authority who accordstechnical sanction.
Tender (Bid) documents comprise off
NIT (Notice Inviting Tenders)
Instruction to bidders
Conditions of contract (General/special)
Technical Specifications
Basic Parameters / Project Profiles
Mile Stones (Annexure – I)
Payment Schedule (Annexure – II)
45
AREAS TO BE INVESTIGATED IN
EPC SYSTEM
Mobilisation advance taken for men and materials is
being properly utilised.
Whether 5% Machinery advance taken is being
properly invested for purchasing new or old machinery
and availability of them at the site of work.
Whether insurance coverage is taken. Verification of
Bank Guarantees regarding genuinety.
Whether 5% advance on labour, materials, machinery
and its crew is properly utilised.
46
Whether establishment of Quality Control Laboratory and
Equipment provided is sufficient to conduct various tests
during execution of work.
Deployment of Technical Agents at the site of work.
Whether all the investigations required for the project is
being carried as per agreement conditions.
Like carrying out foundation exploration / bore hole
data / permeability tests / bearing capacity of soil strata
etc., for arriving soil parameters for designing the
project elements.
Whether various tests required for materials as per BIS
Codes and agreement is being conducted.
47
Whether all specifications required as per agreement and
approved drawings are being followed.
Conducting the field test on the day of working
Testing of materials being used on the work like
cement, steel, sand, aggregates etc.
Conducting of Non-destructive tests.
Whether payments made to the contracting agencies are as
per actual execution and drawings and according to the
agreement conditions.
Whether advances paid are being recovered regularly
including interest accrued from the work bills as per
agreement.
48
Whether the work is being executed as per milestones agreed
according to the agreement.
If not, reasons for not achieving the milestones.
Is it due to contracting agency fault or department
delay.
If it is due to agency fault, whether liquidated clause is
imposed and recovered as per agreement.
If it is due to departmental delay, whether revised
milestone programme is approved by the competent
authority.
49
Whether recoveries like Siegnorage fee, IT, VAT and other
statutory taxes are being recovered from the work bills.
Whether defects pointed out by various supervising agencies
being rectified or redone.
Whether labour amenities are provided to the working labour
and their families.
Verification of final measurements for the completed works
and comparing with approved drawings.
INSTITUTIONAL ARRANGEMENTS:
1. IBM : Through a High Level Technical Committee.
(Eng in Chief, CE/CDO and Concerned Project Chief Engineer)
2. State Level Standing Committee: ENC, CE/CDO,. Commissioner of
Tenders, Chief Engineer (Projects), representative of Finance (DOA).
(Evaluation of Tenders, Price Escalation, Addition / Deletion of work,
Extension of time, Sub-Contracts etc.,)
3. ENCs Committee: To examine agreements, deviations in basic project
parameters and other issues, as directed by the Government.
4(a). High Power Committee: Chief Secretary, Spl. Chief Secretary
(Finance), Secretary, Irrigation. For scrutinizing tenders and recommending
category – I packages, each valued above Rs. 150 Crs.
(b). Committee of Secretaries: Prl. Secretary (Finance), Secretary (W&P)
Finance and Secretary, Irrigation. For scrutinizing Medium Size Packages
(below Rs 150 crores).
51
Safe Guards
in EPC System
52
Safe Guards against inflation of estimate
Internal Bench Mark
ECV (Estimated Contract Value as per detailed estimate) inconventional LS contract method is replaced by Internal BenchMark in EPC mode of contracting.
IBM is prepared by field Engineers with provisions made based onthe cost of already approved similar items of work, data from theavailable DPRs, arriving at prorate cost by detailed survey of someportion of ayacut / command and scrutinized and approved by theconcerned Chief Engineer.
53
Safe Guards against inflation of estimate (Contd….)
To further safe guard the sufficiency of the IBM value i.e. fromeliminating any unnecessary provisions / inflation as well as toinclude any missing essential provisions, IBM Committee consistingof the following TechnicalExperts was constituted by the Government1) Engineer in Chief (of the respective region)2) Chief Engineer, CDO.3) Chief Engineer (of the concerned project)
The IBM Committee examines the provisions and finalises the IBMvalue.
54
Designs Safe Guards The EPC Agency is not vested with approval of any Designs.
Approval of all designs is vested only with the Department i.e. Chief Engineer,CDO, concerned Chief Engineer / Superintending Engineer as per delegationensuring compliance of the standards stipulated as per the CWC guidelines,Bureau of Indian Standards (Formerly IS Codes).
Detailed design guidelines were also issued from time to time .
Further guidelines for approval and finalisation of designs of structures wereissued streamlining the whole process vide Government Memo No.3277/Reforms/2008 Dt: 2-4-2008.
Foundations of all Earth Dams and major structures, deep cut reaches tunnelsetc, get inspected by the Geological Survey of India and designs are finalizedas per their suggestions irrespective of proposals of the EPC Agency.
55
Construction Safe Guards
EPC Agency is not allowed to take up any item of work on hisown.
Construction work by the EPC Agency either Earth work orconcrete work etc., is permitted only after due checking of themark out / passing the area by the field Engineers of theDepartment duly ensuring necessary soil explorations, materialtesting, design mix for concrete etc.
Necessary checks are exercised by the respective level of FieldEngineers.
The measurements recorded are check measured (as per thepercentages stipulated) by the Field Engineers up to level ofSuperintending Engineer and certified by the TPQC Agencybefore recommending for payment.
56
Quality Control Safe Guards
The quality control of all works executed by the EPC Agencies ischecked by the Field Engineers and quality control wing of theDepartment / V& E.
No materials i.e. soils, sand, metal, cement, steel is allowed to beused in the works without fully satisfying the characteristics of thematerial by the Field Engineers of the Department.
Other tests on the dams, concrete structures, gates, pumps,Motors, Pressure mains etc., are also carried out regularly by thefield engineers and quality control wing of the department.
57
Quality Control Safe Guards (Contd….)
Apart from the above, 3rd Party Quality Control Agencies arealso engaged to carry out necessary tests to assure the qualityof works executed out by the EPC Agencies.
3rd Party Quality Control independently carry out qualityassurance measures by engaging experts like experiencedengineers and Professors from reputed universities /Engineering Colleges by establishing their own mobile testinglaboratories, central laboratory and all other equipmentrequired.
58
Quality Control Safe Guards
Detailed guide lines for quality control were issuedvide Engineer-in-Chief, Irrigation Circular Memo No.DCE-I/OT MP/AEE/29384/2005-3 Dt: 15.6.2006.
Without the certificate issued by the 3rd party qualitycontrol after fully satisfying quality standards of theworks, no bill is admitted for payment.
Chief engineers for Quality Control also supervisequality aspects.
59
Performance Safe Guards
Price Adjustment
Normal full price adjustment clause was not allowed for EPCcontracts .
As a Safe Guard, Price adjustment of Cement, Steel, Fuels andelectro mechanical components only were allowed for EPCcontract leaving aside other materials and labour whichconstitutes major amount in EPC Agreements.
60
Performance Safe Guards(Contd…)
Mobilization Advance
As per earlier procedure works exceeding more than Rs. 1.00 croreof estimated contract value are permitted to avail mobilizationadvance in two installments equivalent to 10% of the contractamount (5% for labour mobilization and 5% for machinery andequipment).
As a safe guard, mobilization advance of 5% towards Labourmobilization is paid in two installments i.e. 1% after concludingagreement and 4% at the time of commencement of work aftercompletion of investigation, design and survey (clause 49.1 of theAgreement) as per instructions of Government vide Memo No.26135/Reforms/06 Dt: 16.9.2006.
61
Performance Safe Guards (Contd…)
Maintenance Period
As Safe Guard towards performance of the system aftercompletion under EPC contract, Maintenanceresponsibility is vested with the EPC Agencies for a periodof 2 to 15 years as per system need.
After completion of the Project, the agency shall takecare of maintenance for a period of 2 years in respect ofgravity canal systems and 5 to 15 years in respect of LiftIrrigation Schemes.
The agency shall be responsible for the maintenance ofall components of the project including associated worksin accordance with prudent utility practice (Clause – I ofSection – V of the Agreement).
62
Performance Safe Guards (Contd…)
Commensurate Bank Guarantees for both performance guarantee as well as mobilization advance.
Retention amount
The Department retains from each payment due to thecontractor at the rate of 7.5% of bill amount as FSD untilcompletion of the whole of the works.
The retention amount so accumulated will be released to atune of 5% against Bank Guarantee in Spells of Rs. 25.00 /50.00 lakhs. (Clause 47.1 of the Agreement) keeping a balanceof 2.5% (clause 47.2 of the Agreement)
5% (2.5% from EMD and 2.5% from FSD) of the value of workwill be retained till defect liability period of 2 years.
63
Performance Safe Guards (Contd…)
Liquidated Damages
As Safe Guard against delays in exemption of contract, LD are stipulatedin the Agreements.
If the contractor fails to complete whole of the works or any part thereofor section of the works within the stipulated periods of individual milestones (including any bona fide extensions allowed by the competentauthority without levying liquidated damages), the SuperintendingEngineer may without prejudice to any other method of recovery willdeduct one twentieth of one percent (0.05%) of respective mile stonefinancial programme value per calendar day or part of the day for theperiod of delays subject to a maximum of 10% of the contract value asdamages due from the contractor from any amounts in his hands due orwhich may become due to the contractor (Clause – 48.2 of theAgreement).
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Performance Safe Guards (Contd…)
Insurance
The contractor shall obtain and maintain in forceincluding period of maintenance, contractor all riskinsurance for the project providing full coverage onreplacement value basis. Covered peril shall include fire,flood and allied perils.
Insurance for workers against injury and death as perworkman compensation act shall also be obtained bythe contractor (Clause – 8 of Section – V of theAgreement)
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Payment Schedules for Civil, Hydro-mechanical and Electro-mechanical works
Payment for Earth Work Excavation and lining of gravity
canals:
A) The unit length of eligibility for arranging payment for earth work
excavation of canals (excluding CM & CD works) shall be taken as 100 M.
for main canal (discharge more than 10000 Cusecs), 250 M. for main
canal (discharge between 1000 cusecs and 10000 cusecs), 1.0 Km. for
branch canal and distibutaries/majors (discharge between 10 cusecs and
1000 cusecs).
B) In case of deep cuts, the payment schedule shall further subdivided into
components berm wise with a bay length of 25 M. and the berm wise
payments shall be followed duly restricting the berm wise payment to a
maximum length of 1 KM. in a reach (Govt.Memo No.3277/ Major. Irri/
2006-5, Dt.24-2-2007).
C) The unit length for eligibility for arranging payment for lining of canals shall
be taken as 100 M.
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Payment for construction of CM & CD works:A) In respect of CM & CD works, the intermediate payments shall
be in three stages, i.e., at (a) Completion of foundations
including earthwork, (b) Completion of Sub-structure and (c)
Completion of Super structure including miscellaneous items.
The mode of payment shall be 30% after completion of
foundations, 30% after completion of Sub-structure and balance
40% after completion of individual structure.
B) However, 30% of payment against 40% in the 3rd stage shall
be released after completion of deck slab of the structure (CM
& CD works), other than Aqueducts and super passages and
remaining 10% shall be released after completion of structure
in full shape. (Govt. Memo. No. 31960/ Reforms/2007-1, dt.
27.5.2008)
C) In case of big structures where ever the length of structure is
more than 40 M. and above on main canal, the Chief Engineer
may revise the payment schedule subject to ensuring that the
over all payment is limited to the agreement value. (Govt.
Memo. No. 37245/ Reforms/2007-1, dt.11.2.2008)
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Payment for Hydro-Mechanical works:
A) 85 % of the quoted price of Hydro-Mechanical works component for
supply of goods including fabrication (for price including all taxes
and duties) shall be paid on receipt at the Project Site based on
certificate prepared by Engineer-in-Charge and Supplier’s
Representative, on the basis of various items received in
accordance with the Contract Agreement.
B) 10 % of quoted price of Hydro-Mechanical Works component shall
be paid on erection, testing and commissioning of equipment, on
pro rate contract value of work completed as per the agreed
construction schedule and on certification by the Engineer-in-
Charge and Supplier’s Representative.
C) Balance 5 % of the quoted price of Hydro-Mechanical Works
component shall be paid at the time of final bill.
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Contingent works
Where work can not be proceededindependently without interfering with thework let out but have necessarily to beexecuted along with the original contract shallbe considered as contingent on the originalwork.
Contingent works may be with in the definedscope or out side.
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Non Contingent Works
Wherever additional items not contingent onthe main work and outside the scope oforiginal agreement which has to be executedalong with the original work are noncontingent works.
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