CONTRACT SYSTEM(including Engineering, Procurement &

Construction system)

Ghanta Surender

Former Director(ITC)

WALAMTARI

HYDERABAD

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 for adequate 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 Act 1872 ( as amended 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 anycountry, so too in India. Supply products (purchases ) andservices (consultancy, labour etc.,)

➢ Contracts entered into between private persons and thegovernment are governed by article 299 of constitution ofIndia.

➢ Article 299 stipulates “all contracts made in exercise of theexecutive power of the union or the state shall be expressedto be made by the president or by the governor of the state asthe case may be and all such contracts and all assurances ofproperty made in the exercise of that power shall be executedon behalf of the president or the governor by such personand 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 of

execution 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

Government Departments

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 meager 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

the specifications, 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.

11

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.

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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.

13

Prolonged Litigation by ARBITRATION:

➢ Arbitration clause as per act, was introduced in L.S.contracts, with a noble intention to render quickjustice.

➢ The most common factors in the arbitration claims are-Change in quarries and increase in leads,-Reclassification of soil strata,-Delays in processing of Land Acquisition and R & R,-Delays in processing of Project Clearances from

different departments and acquisition of forest areasetc,.

14

Prolonged Litigation by ARBITRATION:

➢ All these lapses are often attributed to theDepartment and the Department in most of thecases put up a meek defense and leads toexorbitant claims used to be admitted.

➢ Government, therefore, brought a change in thesystem in 1986, putting a ceiling of Rs. 50,000/ forresolution of disputes through Arbitration. Forclaims above Rs. 50,000 agency has to seek disputeresolution only through civil suit. This has resultedin bringing down the amounts due to arbitrationclaims drastically.

15

➢ CAG in his report ending 31st March, 2004 has reviewed 24

Irrigation projects (10 Major and 14 Medium), taken up in

Andhra Pradesh, out of which 17 were more than 20 years

old,

➢ observed that out of 24 projects, 13 projects only were

giving partial benefits

➢ 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

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NEED FOR EARLY COMPLETION OF IRRIGATION PROJECTS

➢Certain areas of Andhra Pradesh have been under thesevere influence of Drought for many years.Agriculture in those areas were fully dependent onmonsoon.

➢The livelihood of farmers in those regions wereaffected. Many debt strapped farmers took theextreme step of taking their own lives.

➢On one hand more than 2000 TMC of water is wastedin to sea every year and on the other hand in about 800taluks out of a total of 1128 taluks in A.P., peoplesuffer for want of water, both for irrigation anddrinking needs.

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➢ Thus, urgent need was felt by government for earlycompletion of Irrigation projects to utilise the dependablewaters.

➢ To stabilize the agricultural sector, I & CAD Department in 2004has introduced the “Jala Yagnam” program.

➢ In these efforts, the State Government has not only sanctionedprojects but is also giving adequate financial resources tocomplete the projects. From 2004 onwards till date, 86irrigation projects (including major and medium irrigation,modernization and flood banks) are taken up with estimatedcost of Rs.1,85,610 Crores for creating an additional irrigationpotential of 109 lakh acres.

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CHOICE OF PROCUREMENT

➢To carryout the programme in a time bound manner, the

Government looked around the world for 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

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 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

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(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

23

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)

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(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

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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.

27

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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.

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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.

30

➢The Agency shall also prepare the Land Plan schedules

required for acquisition of land for construction of the

project components including localization of area to be

irrigated and submit to the Department for further

processing and making available the lands for construction.

31

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.

32

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.

33

➢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.

➢The agency shall prepare the record of

measurements of the work done and produce to

the Department for checking and arranging

payment.

34

➢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.

35

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. . .

36

➢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.

➢ Pre-qualification (RFQ & RFP)▪ In case of specialized nature of works, tenders for pre-

qualification will be called for inviting the firms havingrequired experience in that specialized category ofworks.

▪ They will be short listed against some qualificationcriteria.

▪ Whenever the tenders are called for that specializedcategory of work, only these short listed firms will beeligible to tender.

➢ Tender (bid) documentsTender documents are to be approved by the authority whoaccords technical sanction.

37

➢ 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)

38

➢ To supply copies of estimates, agreements etc. to QC

& 3rd party agency, if not already supplied by

EE/SE.

➢ To study thoroughly the specifications, drawings,

estimates, agreements etc., pertaining to all works

under his jurisdiction.

➢ To ensure that the following registers are opened

and maintained by the EPC agency.

Roles And Responsibilities Of The

Assistant Executive Engineers

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1 Site order book2 Mark out register3 Placement registers for different items of

work i.e., earthwork, masonry, concrete, revetment, reinforcement and other test reports.

4 Bench mark registers5 Compaction registers in case of

embankments6 Materials register7 Register of test report of compressive

strength of concrete specimens8 Cement day book.

Note:- shall check and produce the above records to

the QC, 3rd party agency & inspecting officers.

Roles And Responsibilities Of The

Assistant Executive Engineers

40

➢To verify whether any phased execution is being

planned by the EPC Agency. If not give inputs

freely in writing to Engineer-in-charge.

➢Whether 5% Mobilization advance taken for men

and materials is being properly utilized.

➢ 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 on labour,

materials, machinery and its crew for the the

agreement period including observation period.

41

➢Whether land to be acquired is properly

assessed .

➢Whether the authorized technical agents are

being deployed by the EPC agency.

➢Whether all the investigations required for the

project is being carried as per agreement

conditions.

➢Shall see that the mark out of the area to be

tackled is properly taken and recorded in the

register by the EPC Agency. The same shall also

be got duly checked by the Dy. E.E Construction.

42

➢ Shall see that the following OK cards are kept ready at

the site of work by the EPC agency before starting the

work and that they are used at different stages of work.

1. OK card for cast-in-situ cocrete lining .

2. OK card for Earthwork Embankment.

3. OK card for grouting .

4. OK card for structural concrete work.

➢ Pre-levels(33%) and final levels(100%) should be

checked in respect of earthwork and also get them

checked by DEE Construction.

➢ As soon as the cutoff trenches are excavated, the fact

should be intimated to the QC Staff & 3rd party agency

and got them passed area wise, before filling the COT.

43

➢ To ensure that the Foundation levels in respect of

structures are recorded by the EPC Agency and get

them checked by the DEE (Const.) immediately

including verification of soils met with and the same

should be intimated to the AEE and DEE of QC and

3rd party to check the levels and soils and get the

areas passed before laying concrete.

➢ The returns of LF Books pages used, MB pages used,

progress reports, log extracts of all machinery etc., and

maintained should be verified & submitted to the 3rd

party Agency through EE concerned before 20th of

current month and 5th of succeeding month. The

measurement book and L.F. book are to be issued by

the concerned Executive Engineer duly certified and

numbered.

44

➢ The construction materials required and got collected

at site should be checked and intimated to QC staff

and 3rd party Agency well in advance, so as to enable

them to conduct necessary field tests required for

passing of the materials.

➢ The samples of materials proposed to be used on the

work to the extent required as per norms are to be

collected and sent to the lab for testing their suitability

and results obtained before starting the work.

➢ Similarly ensure that the samples are also got tested

by the EPC Agency at their established laboratory and

also some of the samples tested by the EPC Agency at

independent laboratories such as APERL or any GOVT

Eng Colleges/Institutes.

45

➢ Copies of the above test results shall be made available

to the counterparts and 3rd party Agency for study and

verification.

➢ Shall ensure that all the machinery/equipment being

used by the Contractor are got periodically calibrated.

➢ The values of OMC and MDD may be obtained for the

soils from the lab in advance .

➢ All the materials proposed to be used and the areas for

placing the embankment, earth/concrete may be got

passed by the QC Staff and 3rd party Agency before

starting of the work.

➢ To examine the foundations, so as to assess that they

are to designed specifications and to record the same in

the registers.

46

➢ If the above soils are varying from the

proposed, the revised drawings may have to

be obtained from the competent authority.

➢ The earth/structural work should be carried out

strictly in accordance with the specifications

laid down in the APSS and relevant IS Codes,

as well as agreements. In case of any

discrepancy the same should be brought to the

notice of the Executive Engineer construction.

➢ Before starting the concrete work, he should

ascertain that the materials and equipment

available for the work is adequate.

47

➢ Shall supervise and ensure that, correct

quantities of input materials as per the mix

design communicated by the central lab are fed

into the mixers/batching plants and shall ensure

adequate mixing time.

➢ Shuttering for concrete/RCC works to be

checked, not only for dimensions, but also for

gaps between shutters, dents in shutters, before

allowing the concrete for getting correct shape

and smooth faces.

➢ The steel used for reinforcement is to be got

tested for its tensile strength, diameter, unit

weight etc and to satisfy before use. Proper

cover to be ensured for reinforcement.48

➢ Shall ensure proper curing of samples collected, till the

stipulated time is over and to make arrangements to

send the samples to the laboratory.

➢ The concrete samples may be obtained during the laying

of concrete and the same may be sent to the lab for their

strength at 7 days and 28 days respectively. The results

to be recorded in the registers. Latest equipment to be

used to test these at site of work.

➢ Shall ensure cutting of concrete and scrapping so as to

prepare the surface for the next lift of work.

➢ Shall ensure proper curing/watering and shall allow the

removal of the centering only after prescribed time limit

as per specifications.

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➢ Shall ensure conducting the field tests on the day of

working

➢ Testing of materials being used on the work like cement,

steel, sand, aggregates etc.

➢ Conducting of Non-destructive tests.

➢ Further work is to be done only after attending to the

remarks of the QC Staff and after obtaining their

signature, in token of their acceptance.

➢ Whether payments made to the contracting agencies

are as per actual execution and drawings and according

to the agreement conditions.

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➢ Whether advances paid are being recovered regularly

including interest accrued from the work bills as per

agreement.

➢ Whether the work is being executed as per milestones

agreed according to the agreement.

1. If not, reasons for not achieving the

milestones.

2. Is it due to contracting agency fault or

department delay.

3. If it is due to agency fault, whether liquidated

clause is imposed and recovered as per

agreement.

4. If it is due to departmental delay, whether

revised milestone programme is approved by

the competent authority.

51

➢ 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.

52

53

➢Now a days, several Govt., memos and technical

circulars amending the existing norms are being

issued very frequently and hence keep always

updated.

➢ Insist upon regular meetings at division and

circle office level for frank and free airing of views.

➢Shall ensure that the 3rd party Agency shall

possess all the testing facilities as per Agreement

relevant to the works in progress and that they

verify 10% of the tests being done by the EPC

Agency besides conducting independent tests to

assure the quality of work.

➢ Shall obtain the daily reports being furnished by

the 3rd party Agency. Adverse remarks if any shall

be got attended by EPC Agency and cleared by

them and shall then only recommend for

payment to the EPC Agency by sending his bills

to the 3rd party Agency for certification through

the Engineer – in – charge.

➢ All the above can only be implemented if day to

day record is being maintained which leads to the

conventional system of execution.

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INSTITUTIONAL ARRANGEMENTS:

1. IBM : Through a High Level Technical Committee.

(Eng in Chief, CE/CDO and Concerned ProjectChief 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.

INSTITUTIONAL ARRANGEMENTS:

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).

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Internal Bench Mark

➢ ECV (Estimated Contract Value as per detailedestimate) in conventional LS contract method isreplaced by Internal Bench Mark in EPC mode ofcontracting.

➢ IBM is prepared by field Engineers with provisionsmade based on the cost of already approved similaritems of work, data from the available DPRs, arrivingat prorate cost by detailed survey of some portion ofayacut / command and scrutinized and approved bythe concerned Chief Engineer.

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Internal Bench Mark (Contd….)

➢ To verify the sufficiency of the IBM value i.e. from eliminating any unnecessary provisions / inflation as well as to include any missing essential provisions, IBM Committee consisting of the following Technical Experts was constituted by the Government

1) Engineer in Chief (of the respective region)2) Chief Engineer, CDO.3) Chief Engineer (of the concerned project)

The IBM Committee examines the provisions andfinalises the IBM value.

59

Designs

➢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 delegation

ensuring 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 .

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➢Further guidelines for approval and finalization of

designs of structures were issued 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 tunnels etc, get inspected by the

Geological Survey of India and designs are finalized

as per their suggestions irrespective of proposals of the

EPC Agency.

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Construction➢ EPC Agency is not allowed to take up any item of work on his

own.

➢ 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,material testing, 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.

62

Quality Control

➢ 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 tobe used in the works without fully satisfying the characteristicsof the material 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 bythe field engineers and quality control wing of the department.

63

Quality Control

➢Apart from the above, 3rd Party Quality Control

Agencies are also engaged to carry out necessary tests

to assure the quality of works executed out by the

EPC Agencies.

➢ 3rd Party Quality Control independently carry out

quality assurance measures by engaging experts like

experienced engineers and Professors from reputed

universities / Engineering Colleges by establishing

their own mobile testing laboratories, central

laboratory and all other equipment required.

64

Quality Control

➢Detailed guide lines for quality control were issued

vide 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 quality

control after fully satisfying quality standards of the

works, no bill is admitted for payment.

➢Chief engineers for Quality Control also supervise

quality aspects.

65

Price Adjustment

➢Normal full price adjustment clause was notallowed for EPC contracts .

➢As a Safe Guard, Price adjustment of Cement,Steel, Fuels and electro mechanical componentsonly were allowed for EPC contract leaving asideother materials and labour which constitutesmajor amount in EPC Agreements.

66

Mobilization Advance

➢As per earlier procedure works exceeding more than Rs. 1.00crore of estimated contract value are permitted to availmobilization advance in two installments equivalent to 10%of the contract amount (5% for labour mobilization and 5%for machinery and equipment).

➢As a safe guard, mobilization advance of 5% towards Labourmobilization is paid in two installments i.e. 1% afterconcluding agreement and 4% at the time of commencementof work after completion of investigation, design and survey(clause 49.1 of the Agreement) as per instructions ofGovernment vide Memo No. 26135/Reforms/06 Dt:16.9.2006.

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Maintenance Period

➢As Safe Guard towards performance of the system aftercompletion under EPC contract, Maintenance responsibilityis vested with the EPC Agencies for a period of 2 to 15 yearsas per system need.

➢After completion of the Project, the agency shall take careof maintenance for a period of 2 years in respect of gravitycanal systems and 5 to 15 years in respect of Lift IrrigationSchemes.

➢The agency shall be responsible for the maintenance of allcomponents of the project including associated works inaccordance with prudent utility practice (Clause – I ofSection – V of the Agreement).

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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.

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Liquidated Damages

➢As Safe Guard against delays in exemption of contract,

LD are stipulated in the Agreements.

➢ If the contractor fails to complete whole of the works or

any part thereof or section of the works within the

stipulated periods of individual mile stones (including

any bona fide extensions allowed by the competent

authority without levying liquidated damages), the

Superintending Engineer may without prejudice to any

other method of recovery:

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Liquidated Damages

➢will deduct one twentieth of one percent (0.05%) of

respective mile stone financial programme value per

calendar day or part of the day for the period of

delays subject to a maximum of 10% of the contract

value as damages due from the contractor from any

amounts in his hands due or which may become due to

the contractor (Clause – 48.2 of the Agreement).

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Insurance

➢The contractor shall obtain and maintain in force

including period of maintenance, contractor all risk

insurance for the project providing full coverage on

replacement value basis. Covered peril shall include

fire, flood and allied perils.

➢ Insurance for workers against injury and death as per

workman compensation act shall also be obtained by

the contractor (Clause – 8 of Section – V of the

Agreement)

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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

distributaries/majors (discharge between 10 cusecs

and 1000 cusecs).

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Payment Schedules for Civil, Hydro-mechanical and Electro-mechanical

worksB) 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)

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➢ Payment for construction of CM &

CD works:A) 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 proceeded independentlywithout interfering with the work let out but havenecessarily to be executed along with the originalcontract shall be considered as contingent on theoriginal work.

➢ Contingent works may be with in the defined scopeor out side.

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Non Contingent Works

➢Wherever additional items not contingent on themain work and outside the scope of originalagreement which has to be executed along with theoriginal work are non contingent works.

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