EXPERIENCE OF NWR IN DEALING WITH EPC CONTRACT

1. EXPERIENCE OF NWR IN DEALING WITH EPC CONTRACT NORTH WESTERN RAILWAYConstruction Organisation (01.07.2019)

2. NORTH WESTERN RAILWAY IS FIRST ON INDIAN RAILWAYS To Award Composite Engineering Work on ENGINEERING PROCUREMENT & CONSTRUCTION (EPC) EPC contract is awarded for the Doubling work between Phulera to Degana(108.75 km) of Jodhpur Division. Work was awarded to M/s Punj Lloyd, Gurugram on 09.08.17 for the total cost of Rs. 477.50 Cr. Contract is composite work inclusive of S&T, Electric work also

3. STRUCTURE OF PRESENTATION Advantages and Pre Requisites of EPC tendering Special efforts made by NWR to make EPC a success Pre-requisites and preparatory works for EPC 4. Preview of involved activities and scope 5. Brief of RFQ and RFP for Phulera- Degana Doubling Project 6. Proceedings and progress in EPC contract Issues related to EPC contract 8. Fate of EPC Contractin Doubling of Phulera - Degana 9. Suggestions for improvement in EPC documents 10. Is EPC mode of contracting really suitable for Doubling projects?

4. 1.0 ADVANTAGES & PRE REQUISITES OF EPC TENDERING • Advantages of EPC tendering • No time and cost overruns due to delays in Designs and Drawings. • Project risk (financial & technical) due to drawing and design lie with contractor • Milestone based pro-rata payments. • Higher defect liability period of two years . • Single window monitoring by Railway’s Authority Engineer. • Flexibility in efficient designs without compromising on quality and the safety. • Delay damages to be paid by both railway and contractor. • Eligibility criteria for lead member as well as other members in case of JV. • Special provision for sub contracting. • Holistic and realistic scope of the project is defined.

5. Pre requisites of EPC tendering Holistic and realistic scope of the project. Contract price based on DPR along with weightages for various activities. Land availability up to minimum 90%. NOCs for provision of Limited Height Subways (LHS). Forest & environmental clearances. Conceptual yard plans. Tentative alignment plan. Tentative proposed spans for bridges and size of LHSs. Identification of Power line crossings, U/G or O/H Details, specifications of buildings, structures & track with preliminary drgs. Details, specifications of interlocking and signalling system. 1.0 ADVANTAGES & PRE REQUISITES OF EPC TENDERING

6. 2.0 SPECIAL EFFORTS MADE BY NWR TO MAKE EPC A SUCCESS Positive & inviting factors highlighted • More than 90% of the land available • Proper Connectivity by road and rail • Mostly Plain terrain and topography • Proper working season throughout the year • Easy availability of local labour , material and resources • No law and order issues • Time bound decisions, assistance, guidance • Close co ordination with state govt. • NOC for LHSs already available • Concept plans of yards are approved

7. 2.0 SPECIAL EFFORTS MADE BY NWR TO MAKE EPC A SUCCESS • Individual letters sent and phone calls made to 18 leading infrastructure developers asking them to participate • Bidders taken on a site tour for better appreciation of work • Information were made available and queries were responded promptly • Soft copies of all drawings and documents provided to six shortlisted bidders for examination by different departments of tenderer(s) • Two pre bid meetings were held with selected top 6 bidders to clarify all doubts and instill confidence • VeryCompetitive Rates received and accepted within one week of receipt of Financial bids.

8. 3.0 PREREQUISITES AND PREPARATORY WORK FOR EPC • DPR prepared departmentally –EPC handled without consultanat • Foot to foot Survey of section was done • All GAD & Drawings of major and minor bridges collected • All land plans, land details, index plan, index section etccollected • Planning of alignment of additional line in block sections • Planning of yards done and block requirement assessed • Concept plan prepared & got approved • Right of way in full or partial width was assessed • Land acquisition of addition land required initiated • Preliminary drawings for stations, service and residential building

9. 3.0 PREREQUISITES AND PREPARATORY WORK FOR EPC • Planning and identification of scope for track works • Planning and identification of scope of passenger amenities • Planning and identification of scope of staff amenities • Planning and identification of scope of road safety works • NOCs for LCs to be eliminated by RUBs were obtained • Planning for construction for major bridges • Planning and identification of scope for Electric works • Planning and identification of scope for S&T works • Detailing and specifications of buildings, structures & track • Developing of yard diagram in layout showing all buildings and structures existing and proposed at stations

10. 4.0 Preview of ACTIVITIES INVOLVED and scope • Survey, Geo-technical investigation, collection of data & details • Developing all kinds of GADs, drawings, designs, layouts for all assets and structures • Earth work in embankment / cutting. • Construction of Major bridges, Minor bridges, Subways, LC extension & approach works. • Procurement of track material & S&T store (except Rails & sleepers) • Service buildings at stations including development of circulating area, residential buildings and roads. • New high platforms, shelters, FOB and utilities & amenities works, roads, O/H tanks, bores, fencing, walls etc

11. 4.0 Preview of ACTIVITIES INVOLVED and scope • Track laying including ballast supply and welding work. • Water supply, drainage and waste disposal system. • Rain water harvesting, green building and plantation • NI working at Stations and commissioning of section • Indoor & outdoor Signalling work. • Managing electrical crossings and general electrification • Planning, Documentation, Supervision, QAPs, Quality checks etc. • Developing the project facilities and furnishing • Shifting of required utilities, amenities, cables etc

12. 5.0 BRIEF OF RFQ AND RFP FOR PHULERA- DEGANA DOUBLING PROJECT

13. 5.0 BRIEF OF RFQ AND RFP FOR PHULERA- DEGANA DOUBLING PROJECT FIRST STAGE - REQUEST FOR QUALIFICATION (RFQ) • Complete process done through hard copies • Standard documents for RFQ by Railway Board • Preparation of RFQ document with project details • Indicative Project cost – Rs432.36 Cr. • Cost of RFQ document – Rs50,000/- • Notice for RFQ published on 13.12.17 • Document uploaded & made available at office • Pre application conference held on 16.01.17 • Response made to queries and uploaded on 23.01.17 • RFQ opened on 31.01.17 • Total 15 offers received in duplicate copies • Three offers received from Consortium

14. 5.0 BRIEF OF RFQ AND RFP FOR PHULERA- DEGANA DOUBLING PROJECT ANALYSIS OF OFFERS - PREQUALIFICATION 1. Technical capacity - For eligible projects only -For 5 FYs proceeding due date only (i). Threshold technical capacity (TTC) = 2.5 times Estimated Project Cost (1080.90) half of TTC (545.45) for eligible projects in cat in 1 & 3 (Railway Sector) (ii). One eligible project at least of 35% of Estimated Project Cost (151.326 Cr) payment receipts of 75% of the project 2. Financial capacity - Net Worth (43.326 Cr) at the close of preceding financial year >/= 10% of the Estimated Project Cost

15. 5.0 BRIEF OF RFQ AND RFP FOR PHULERA- DEGANA DOUBLING PROJECT SECOND STAGE - REQUEST FOR PROPOSAL (RFP) • Preparation of RFP document with schedules • Vetting and approval of documents • Bid Security – Rs 8.72 Cr. • Hard copies made available to 6 bidders wef 25.05.17 • All 6 copies bought by bidders within week • Last date of sending Queries 18.06.17 • First prebidmeeting held on 22.06.17 • Response to queries and C&A provided on 28.06.17 • Second prebid meeting held on 13.07.17 • Response to queries and C&A provided on 14.07.17 • BID opened on 2.08.17 • LOA issued on 09.08.17

16. 6.0 PROCEEDINGS AND PROGRESS IN EPC CONTRACT LOA issued on 09.08.17- M/S Punj Lloyd Proceedings after issue of LOA • Acknowledgement of LOA – within 7 days of receipt • Legal opinion of counsel – within 10 days of receipt • Signing of Agreement - within 15 days of LOA • Performance Security – within 15 days of Agreement • App. of Authority Engineer – within 15 days of agreement • Handing over of right of way – within 15 days of agreement or performance security whichever is later Fixing of the Appointed date – 26.09.17

17. 6.0 PROCEEDINGS AND PROGRESS IN EPC CONTRACT • Railways provided 93% land within 15 days of LOA • Railways appointed Authority’s Engineer - Within 15 days of Appointed date • Railways provided NOCs of all LHSs – within 60days of appointed date • All trees (as per RFP) were again listed and handed over • Mobilization advance was released- within 30 days of application & valid BG • Provided Railway land for RMC, labs, store, office as available from open line • Handed over all the structures which were identified for dismantling/ replacement • Balance 7 % land provided before -6 months of appointed date

18. 6.0 PROCEEDINGS AND PROGRESS IN EPC CONTRACT • Insurance as applicable was provided • Provided project facilities as per RFP- within 3 months • Awarded works to Sub-contractors as per RFP • Established labs, mobilised machineries, RMCs etc • Submission of ESP and L sections- partly submitted, resubmission after observations, advised corrections delayed. • Submitted building plans - partly submitted • Submission of bridge plans - partly submitted, resubmission after observations, advised corrections delayed. • Video-Recording 3 hrs. for each quarter- drone recording done once • Monthly meetings were held with all concerned. • Monthly progress reports were submitted

19. 6.0 PROCEEDINGS AND PROGRESS IN EPC CONTRACT • Physical progress of work was slow • First milestonewas not achieved • Facing problem due to lack of experience in Railways specially doubling • Even the subcontractor were not having experience of Railways • The project manager was changed three times • Adequate cash flow was being not infused • Delay damages came into effect after failure of first milestone • One stage payment bill was raised but it was incomplete • Notice for slow progress was issued • Agency, itself was under poor financial crunches • Agency exhibited signs of retreat – physical work slowed further • Notice to issue termination was issued. • Contract was terminated- 24.09.2018

20. 7.0 FATE OF EPC CONTRACT IN DL OF PHULERA DEGANA • Notice of intention to issue termination notice dated 08.08.18. • Agency asked for conciliation dated 20.09.18 • Termination notice issued to agency on dated 24.09.18. • Rejection for conciliator under clause 24.2 dated 03.10.18. • Delay damages recovered from the PG • Assessment of incomplete works done in one month • Invocation of arbitration by the contractor dated 09.10.18. • Arbitrator nominated by Railways dated 05.11.18 • Appointment of presiding Arbitrator dated 19.11.18 • Court case regarding illegal invocation of PG against delay damages. • Arbitration is under progress by the nominated AT

21. 8.0 ISSUES RELATED TO EPC CONTRACTS • In order to attract better response, technical and financial criteria does not make it mandatory for tenderers to have experience of work in Railway construction. • This increases response in RFQ but tenderers are inexperienced and may not be able to make a realistic assessment of challenges involved in Railway Work and cost associated.* • Railways is used to assessing cost of project through updation of last accepted rates, which may not be true cost and can misguide inexperienced tenderers. • EPC contracts are fixed contracts requiring very detailed planning. Despite best planning, there are changes demanded during execution, which are difficult to incorporate*

22. 8.0 ISSUES RELATED TO EPC CONTRACTS • No detailed survey or assessment for utilities is not done initially by either Railways or tenderer, removal of same and its effect on progress of work, time and again is cause of issues and disputes. • The shifting of utilities owned by outside department like PHeD, BSNL, VPNL etc are responsibility of contractor which is huge & time taking task. • Contractor bears limited responsibility for shifting of utilities owned by Railways, like cables, wires, pipelines etcwhich is again very tedious. • Stage Payments as per laid down schedule are involved which usually lead to locking of funds and financial failures** • Contractor has to be submit its revised schedule for stage payment after, complete planning and assessment before any payment is released.

23. 8.0 ISSUES RELATED TO EPC CONTRACT • Detailed planning of yards, bridges and major structures are not done by the tenderer has done initially, so, bid is based on rough assessments. • Tenderers are not able to assess time and effort involved in preparation & approval of ESP, SIP, L Sections and GADs of bridges, outside consultants are less experienced. • EPC Contracts are inflexible and cannot accommodate changes in policy or later on requirements (eg. passenger facilities, length of loop lines, extra lines, points etc) • Contractor intentionally hires subcontractor for each work less than 5% mostly through reverse auction, so not chosen as per any financial or technical criteria, so poor performances by them. • Generally, Railway land have earthen bunds, soft impediments, stacked rails/ sleepers/old material etc which becomes basis of created issues and hurdles.

24. 9.0 SUGGESTIONS FOR IMPROVEMENT IN EPC DOCUMENTS • Railway sector and core sector as defined in RFQ should be more elaborate and clear. • The Railway sector definition for doubling and third line in RFQ should be different from New line, GC. • Weightage of various activities in Price adjustment formulae should be standardised (we adopted DFC) for different type of projects for Indian Railways • Description of indices Co, Ci, MACHo, So & Si etc. in RFQ need to be reviewed due to non availability of mentioned WPI. • In schedule I of RFP, defining of mile stone can also be in reference to technical requirement, operating requirement etc in addition to the financial targets.

25. 9.0 SUGGESTIONS FOR IMPROVEMENT IN EPC DOCUMENTS • The stages of payment for various structures as per schedule G in RFP can be made more flexible to ensure proper cash flow for the part work done. • Clause 10.1.4 of Contract Agreement can be reviewed as this restricts and delays the release of any payment till all the drawings and L-sections are finalized. • Clause 10.3.2 of Contract Agreement can be reviewed as this imposes huge penalty of 0.05% of contract price per daywef next day of milestone, in case of not meeting of the milestones. • Clause 7.3.1 of Contract Agreement can be reviewed and the penalty amount can be recovered from the IPC (Interim Payment Certificate) at as decided percentages in instalments.

26. 9.0 SUGGESTIONS FOR IMPROVEMENT IN EPC DOCUMENTS • Clause 3.2 of Contract Agreement can be reviewed incorporating that approval of sub contractors for at least 50% of the contract price must be as per clause 3.2.2 , 3.2.3. (Punj awarded for 5%) • There must be provision for approval by Authority/Authority Engineer regularly even of sub contract value is less than 5%. • Claus 9.2.1 of Contract Agreement must be more elaborate and specific for utilities owned by Railways, specially those requiring temporary shifting/relocation with cost of material, machineries, blocks as required. • Clause 21.5 of Contract Agreement needs to be more elaborate and specific for valuation of partially completed works, after termination, as this becomes matter of huge conflict.

27. 10. IS EPC MODE OF CONTRACTING REALLY SUITABLE FOR DOULING PROJECTS? • Ever Escalating Demands of Divisions after commencement of work • Non availability of assured ETA and blocks for multiple site handling. • Limited Engineering (in the spirit of EPC) is involved in doubling/multiple line projects, like alignment is parallel, mostly standard/RDSO drgs are preferred etc. • In doubling/multiple line projects, there is dismantling of existing bridges/bank, which require intervention with running traffic and huge safety concerns. • Approvals of almost all drawings and GADs lies with open line division and HQ authorities which is very cumbersome and time consuming • EPC is more suitable for green field projects, where 90% land is available which is met out in new line, new sidings and to some extant in Gauge Conversion projects.

28. 1 THANK YOU