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Highway contractors stare at huge penalty

Saturday, 18 August 2012 - 8:45am IST | Place: New Delhi | Agency: DNA
Highway contractors implementing projects on engineering, procurement and contract basis will now have to pay a fine for shoddy construction and delays.

Highway contractors implementing projects on engineering, procurement and contract (EPC) basis will now have to pay a fine for shoddy construction and delays.

The Ministry of Road Transport and Highways has incorporated this provision in the newly formulated model agreement for EPC projects.

“The Cabinet Committee on Infrastructure has approved the model EPC agreement for the construction of two-lane highway projects. The idea basically is to minimise cost and time overrun,” transport secretary AK Upadhyaya said on Friday.

According to the model document, the contractor will have to pay a fine of 0.05% of the contract cost per day in case he does not meet the prescribed milestones, subject to a maximum of 10%.

A senior National Highways Authority of India (NHAI) Official told DNA the fine will be effective in case the contractor does not meet the design requirements, quality requirements and the deadline to implement the project.

In case of completion ahead of the deadline, the contractor stands to get a bonus — at the rate of 0.03% of the contract price, subject to a maximum of 3% of the contract price.

The milestone-based payments are divided in four categories — road works, bridges, structures and other works.

There is also a clause of defect liability period and maintenance period. Defect liability period will be for two years, extendable by another three years. For maintenance, the contractor will get 1.5% on the contract price in first year and 2% in the second year.

The new EPC rules will come into force mainly in Phase IV of the National Highway Development Programme, which envisages interconnectivity between the Golden Quadrilateral (NHDP, Phase I) and North South east West Corridor (NHDP, phase II). Phase IV spans almost 8,000 km.

An NHAI official said about 3000-4000 km in Phase IV will be awarded as per the new concession agreement. The model agreement will award contracts based on open competitive bidding.


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