5thMaster Class Training Program on

EPC Contracting
Legal, Taxation, Commercials and Risks
12th - 13th August, 2013 Le Mridien, Chennai
ORGANISED BY

www.constructionsphere.com

SUPPORTED BY
www.solarquarter.com

www.windinsider.com

www.powerbusinessweek.com

Reliability Built through Quality

Date : 13th August 2013

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Reliability Built through Quality

OVER VIEW ON L&T- TIIC

For ease of operation, better project management and focussed attention on domestic and international project execution, L&T has formed Transportation Infrastructure Independent Company, which is executing several transportation projects such as Highways, Expressways, Runways, Railways, Elevated Corridors etc. on EPC and Item Rate Contracts. Majority of on-going projects in India are offered on DBFOT model, which are being executed by L&T-TIIC on EPC basis for various SPVs/ Concessionaires.

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PROJECTS
Few projects being undertaken by L&T-TIIC in India on EPC model are Four Laning of AmravatiJalgaon (275 km)

Four Laning of Jalgaon-Maharashtra/Gujarat Border (208 km) Six Laning of SamakhialiGandhidham (56 km) Six Laning of KandlaMundra (71 km) Four Laning Beawar-PaliPindwara (244 km) Six Laning of DelhiAgra (180 km) Six Laning of Krishnagiri Walajahpet (148 km) Four Laning of Maharashtra Karnataka Border Sangareddy (145 km) Six Laning Hosur Krishnagiri (60 km) KMDAs Project for construction of ROBs and Flyovers Mumbai Mono Rail Project WDFCC CTP1 & CTP 2 - REWARI-IQBALGARH (626 km)
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ISSUES & EXPERIENCE

Major Risks associated with EPC Projects may be classified broadly as under:

A. Contractual Risks B. Commercial Risks

C. Engineering Risks

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Reliability Built through Quality

MAJOR RISKS IN EPC

A. Contractual Risks
Site Handing Over /Land Acquisition Statutory Clearances/ Approvals Approval from Railways for ROBs Utility Shifting Prolonged Performance Security

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MAJOR RISKS IN EPC contd.

B. Commercial Risks
Over stretched Defects Liability Period
Payment Schedule incl. Mob. Adv. Recovery Delay Damages/LD

Price Escalation Clause Subsequent Legislation

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ISSUE-1
Non-availability of Land:
Schedule 100% land to be handed over in 90 days

of commencement Actual handing over 50% Site at commencement (full of hindrances) and balance 50% (bypasses) only after completion of original contract duration Result 125 % time overruns with huge costs 33 months project completed in 74 months No compensation matter in arbitration
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Reliability Built through Quality

ISSUE - 2
GAD Approvals & Utility Shifting :

Inordinate delay in approval from railways - Time period

of 3-6 Months Inordinate delay in approval from multiple agencies for identification, diversion/shifting of both chartered/unchartered utilities In case of an urban elevated corridor project, underground utility is a major bottleneck for project execution. Most of the cases, it leads to change in alignment and/or re-design of foundations, leading to total variation in methodology of works, time & cost implication
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ISSUE 3 Milestones and LD for failure of Intermediate Milestones

In most of the EPC Contract, the % achievement recommended for the first milestone is very high considering the fact that for any project, during the first one year lot of time gets consumed in preconstruction activities, in due diligence for getting approvals from various government authorities etc. and hence achieving the desired 10% progress in 6 months time is always a difficult proposition.
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Reliability Built through Quality

MAJOR RISKS IN EPC Contd

C. Engineering Risks
Quantity Variation Poorly prepared DPR Inconsistency in the Contract between Schedules,

Manuals, IRC Codes and Tech Specs. Inconsistency in the clauses of 2/4/6 Laning Manual. Indecisiveness in the approval of Change in Scope.

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Reliability Built through Quality

ISSUE -4
Poor Drafting of RFP /DPR

Interpretation of Indicative cross section -MBCB:

Schedule B, shows Metal Beam Crash Barrier of double beam in the indicative cross section.

Manual, defines the requirement and type of crash barrier Single beam or double beam under various criteria .
CONTD
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Reliability Built through Quality

ISSUE -4 CONTD..
Poor Drafting of RFP /DPR
Interpretation of Indicative cross section
Hume Pipe: Schedule B shows rectangular drain in Cross Section SP 84 allows to use Covered or Piped drain.

Apart from economy, the ease of construction of piped drain will actually speed up the construction process.
Contd.
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Reliability Built through Quality

ISSUE 5: Plan & Profile ( P&P ) Interpretation

P&P is a function of various parameters like Sight

Distance, Speed, Vertical and Horizontal Gradient. Further Embankment height is a function of HFL/Ground water table.
In most of the recent EPC bids, it is observed that the

NHAIs given P&P in schedule B is non-conforming to the requirements of 2/4/6 Laning manual in terms of sight distance criteria, embankment criteria.
CONTD
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Reliability Built through Quality

ISSUE 5: Plan & Profile ( P&P ) Interpretation CONTD..

RE Wall and Reconstruction Length RE Wall length increased by 40% due to wrong P&P and length of RE wall mentioned in Schedule B . Reconstruction Length increased due to increase in RE Wall length Embankment Qty Incorrect interpretation of Clause 4.2.2 of SP 84 criteria of fixing the Height of embankment, the quantities of earthworks dramatically by 20% .
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Reliability Built through Quality

Issue 6 : Contradictions in Schedules, Ambiguities in IRC and Manuals. Height of embankment Issue: SP 84 Clause 4.2.2 : Criteria states bottom of Subgrade shall be 1 mtr above HFL/ High Water Table. IRC 36 states that bottom of Subgrade shall be 0.6 mt to 1.0 mtr above HFL or Ground Level.
CONTD
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Reliability Built through Quality

Issue 6 : Contradictions in Schedules, Ambiguities in IRC and Manuals. CONTD... Ambiguity within the provisions of schedules
Schedule says Change of Span arrangement is not

treated as change in scope . In the similar Schedule, as a footnote below Table, it is mentioned that Increase of Span Arrangement shall not be treated as change in scope.
Contd.

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Issue 7 : Inconsistencies in 2/4/6 Laning Manuals

I) Clause 4.2.2:

Four and Six laning says bottom of Subgrade is 0.6

mtr above HFL. Two laning manual says bottom of Subgrade is 0.6 mtr above Ground Level.
II ) Clause 5.9.4 and 5.9.7

Four and Six Laning manual says reconstruction of

pavement shall be mentioned in Schedule B for reasons attributable due to poor subgrade / grossly deteriorated Condition . Two laning manual is silent if the reconstruction of pavement is required for reasons other than the failure of subgrade .
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Reliability Built through Quality

Issue 7 : Inconsistencies in 2/4/6 Laning Manuals CONTD..

Clause 6.26:
Six laning manual allows only covered RCC drains.

2 laning and 4 laning

manual allows covered or

Piped drains.

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Issue 8 - Indecisiveness of Change of Scope & Upper Limit:

In many projects till COD, change of scope not

approved / certified by Authority. The Change of Scope order pending with NHAI for operational projects are more than 10% of TPC.

For the Ongoing Projects due to upper limit of 10 %,

Change of Scope is not getting approved causing the delay in project completion.

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THANK YOU
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