Turnkey implementation of Distribution Projects :Few DO’s & DON’T’s

* D. Pawan Kumar & A. K. Sinha

Preamble :

Phenomenal growth in power sector and the advent of heavy investment in distribution sector throughout the country have brought in a need for new models of implementation such as turnkey projects. Additionally, the utilities are accustomed to departmental implementation process, which are okay for small time O&M jobs, while turnkey approach helps to bring in several advantages like quality assurance, time and cost control, alongside, best practices, if due care is exercised. Following do’s & don’ts sound simple, yet, they reflect major concerns for careful attention.

The major activities in turnkey implementation are found to be included the following based on the nature, type and scope of the project. For a traditional turnkey contract, comprising of investment of huge investments and timely and effective implementation, the projects require commitment of varied skills and resources in almost all the areas as follows:

• Project Initiation / Identification /Formulation

• Preparation of Detailed project report along with

Bill of Materials Bill of Quantities Component wise /Lump sum cost detailsEstimation of project Completion time & cost

• Technical / Financial vetting & Approval of DPR both technical & financial

• Preparation of bid provisions & complete document comprising of :

General conditions of contract, Special conditions of contract, Technical specifications, Drawings, Bid proposal Sheets

• Finalization of Document & Floating of tender

• Pre bid conference for the intending bidders expressing interest, including

arrangement of site visit

• Finalization of bid & issuance of LoA

• Project Monitoring, Physical (supply / Erection) & financial progress,

measurement, Verification, Inspection, Quality Assurance

• Closure of the project, documenting improvements, benefits achieved, best

practices, case studies, Impact Assessment,

• The detailed project report or DPR is the first major document based on which

proposals/funds are approved and should represent and overall view of the project

including technical and financial benefits. Features of what a DPR should contain

are:

EXECUTIVE SUMMARY DESCRIPTION OF EXISTING SYSTEM DEFICIENCIES IN EXISTING SYSTEM ON-GOING INITIATIVES PROPOSED SYSTEM COST ESTIMATE COST BENEFITS MANAGEMENT & TECHNOLOGY

MAJOR AREAS REQUIRING CAREFUL ATTENTION:

• During the preparation of the Bid documents, many times, costs are taken from internal documents, references and past data and often, these costs are old/outdated, specially when the technical specifications, equipment specifications, demand, international level quality assurance. Therefore, care needs to be taken, to get latest cost/revised cost of equipment, with flexibility for factoring increments, since implementation cycle may take few months/years often.

• In certain difficult terrains, cost of erection may on the higher side. These need to be factored while preparing the DPR.

• In case of supply of certain items, there is a special procurement preference by State/Central Governments to boost the local SSIs, manufacturers and price advantages for local manufacturers, towards growth of local industries, which often are not considered while preparing the project report, and may cause derailment/delay/cost escalation of the project.

• Many a time, the project approval and fund approval take considerable time delay, specially in case of national and international projects and during the time of tender floating, a snap shot price validation/review may be carried out, towards revised project cost estimation (e.g. the prices of steel and associated materials has increased by several folds in the very recent past and is continuously increasing and majority of sub-transmission and distribution projects consume a substantial quantity of steel and steel material like rail poles, angles, channels and similar other items). Such cost overruns makes the estimated price unrealistic and therefore offered price may be much higher, even for the lowest bidder and makes bid evaluation and approval process difficult with special justification is called for. Similarly IT related projects may need to factor in latest versions of hardware/software with scalability provisions.

• Sometimes, intending bidders bid without surveying the site conditions, specially in case of green field projects and often land themselves, as well as the owner, into difficult situation.

• In case of green field projects, where site/land has to be acquired, planning may be initiated during the DPR stage itself, towards process of land acquisition (specially in urban areas). This takes time and requires formalities, co-ordination between various departments and may become one of the reasons for time and cost overrun.

• While the Bid is finalized and LoA issued, care may be taken to get the weekly, monthly schedule of supply and erection activities through formal project planning technique, and linking the same with fund flow is crucial towards smooth implementation of the project and avoidance of delay in progress of work.

• While the project is under implementation, streamlining various procedures like the following go a long way towards timely completion of the project:

Deployment of a dedicated team towards inspection, testing of materials as per specifications and project requirements.

Deployment of a project team for monitoring of the project progress both for supply and erection.

Formalizing the measurement books of the project.

Quick estimation of materials and quantities for the items which are required over and above LoA quantity for completion of the job as per site requirement and conditions.

Systematizing the procedure towards incorporating deviations and also bringing necessary amendments in the project arising out of such variations in items, quantities, and specification and price implications of the same.

• The above precautions taken at the Planning stage will enable both the contractor as well as owner to complete the project within the time and also tuning the internal team adequately to meet the project requirements (the activities which requires approval from the owner) will also avoid conflicts.

• However, though money is invested and project is completed, formal closure of the project takes a long time due to missing links in any one of the areas brought out in the above paras.

• In case of modern technologies, IT enabled projects, like SCADA, static metering, DCS, etc., it would be very desirable to incorporate 3 to 5 year MIS support as part of project deliverables to help capacity building of owner’s team. This also ensures commitment of the bidder/supplier for Quality Assurance in the long run.

• Distribution projects are often implemented with certain goals such as the following :

Capacity enhancement Loss Reduction Outage reduction Overall Revenue performance improvement Improvement of image to customers, consumers

It is also obligatory to document benefits achieved, best practices implemented, impact assessment of the projects, which are normally missed and given least priority. Therefore, documentation through case studies will go a long way in formulating, identification of similar projects and also clearing the project documents for similar projects in future.