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Recommendations of the Technical Committee for Review of Standard Bidding Document under PMGSY April, 2006
Recommendations of the
Technical Committee for
Review of Standard Bidding Document under PMGSY April, 2006
National Rural Roads Development Agency, Ministry of Rural Development, Government of India,
5th Floor, 15 NBCC Tower, Bhikaji Cama Place, New Delhi – 66
Content
Description Page No.
1. Acknowledgement 2
2. Introduction 3
3. Deliberations in the Committee and Recommendations. 5
4. Appendix – 1 Suggestions of the Chairman for Provision of Incentives
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5. Annexure – 1 Office Order for constitution of Technical Committee.
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6. Annexure – 2 Terms of Reference for the Technical Committee.
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7. Annexure – 3 Background Note for Proposed Modifications 15
8. Annexure – 4 Office Order for reconstitution of Technical Committee.
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9. Annexure – 5 Terms of Reference for the reconstituted Technical Committee.
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10. Annexure – 6 Minutes of First Meeting of Technical Committee.
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11. Annexure – 7 Agenda for First Meeting of Re-Constituted Technical Committee on 6th January, 2006.
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12. Annexure – 8 Minutes of First Meeting of Re-Constituted Technical Committee on 6th January, 2006.
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Acknowledgements
These recommendations are the out come of the deliberations and suggestions given by the members of the committee and by the special invitees for modifying the conditions of the Standard Bidding Document. I, therefore, express my gratitude to all the members of the committee and special invitees for giving their valuable suggestions and time for this purpose.
I must place on record my appreciation for the hard work done by Shri Prabha Kant Katare, Chief Quality Coordinator & Joint Director, NRRDA and convener of the committee who have contributed considerably to this job without which this technical and arduous nature of work could not have been completed.
(Pradip Bhargav)Chairman of the Committee
and Principal Secretary, Panchayat and Rural Development Department.
Government of Madhya Pradesh
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Introduction
The Ministry of Rural Development is implementing Pradhan Mantri Gram Sadak Yojana (PMGSY), a programme to provide all weather connectivity to unconnected habitations. As per the Programme guidelines, the works under programme are being executed on the bases of Standard Bidding Document prescribed by National Rural Road Development Agency (An agency constituted under Ministry of Rural Road to provide Technical and Management support for PMGSY).
A Standard Bidding Document was developed and prescribed for the programme in March, 2003. This Standard Bidding Document was developed using the bidding document of the Ministry of Road Transport & Highways as well as the bidding document for National Competitive Bidding under World Bank funded Projects as approved by Ministry of Finance. The template Standard Bidding Document was adopted by all the States and the works under the programme are being executed on the basis of this document.
Based on the feedback received from the States and other stakeholders, it was felt that there is a need to look into various issues including the rationalization of the defect liablity period. Therefore, with a view to make the Standard Bidding Document (SBD) more effective, a Technical Committee was constituted by National Rural Roads Development Agency (NRRDA) to recommend amendments or modifications to the Standard bidding documents vide order No. P-17011/3/2005/P-III dated 22nd August, 2005.
Looking to the additional requirement regarding suggestions in respect of enhancement of capacity of contracting, the Committee was reconstituted vide order No. P-17011/3/2005/P-III dated 15th December, 2005 as under:
1. Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development Department, Govt. of Madhya Pradesh, Bhopal – Chairman
2. Shri S. K. Sharma, Additional Legal Advisor, Department of Legal Affairs, Ministry of Law and Justice, Shastri Bhavan, New Delhi. - Member
3. Shri C. S. Rajan, Principal Secretary, Public Works Department, Govt. of Rajasthan, Jaipur – Member
4. Shri Subhash Negi, Principal Secretary, Public Works Department, Govt. of Himachal Pradesh, Shimla – Member
5. Shri Aurobindo Behera, Principal Secretary, Public Works Department, Govt. of Orissa, Bhubneshwar – Member.
6. Shri K. Das Roy, Secretary, Public Works Department (R&B), Govt. of Meghalaya, Shillong – Member.
7. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of India, New Delhi – Corresponding Member.
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8. Shri N.V. Merani, Former Secretary, PWD Maharashtra, Mumbai –Corresponding Member.
9. Shri D. P. Gupta, Former Director General MoRTH, Govt. of India, New Delhi – Member.
10. Dr. Ashok Kumar, Rural Road Specialist, World Bank, New Delhi – Member.11. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi – Member12. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi – Member13. Shri Prabha Kant Katare, Chief Quality Coordinator & JD (P-III) NRRDA,
New Delhi – Convener
Copy of orders issued for constitution of the Technical Committee along with the terms of reference and background note are enclosed as Annexure 1, 2 & 3 and copy of orders issued for re-constitution of the Technical Committee and Terms of Reference is enclosed as Annexure-4 and 5 respectively.
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Deliberations in the Committee and Recommendations
The first meeting of the Committee was held on 12th September, 2005 and many suggestions were received during the meeting. Based on the discussions, the States and PIUs were also requested to send suggestions to the convener of the Committee. The minutes of the first meeting are enclosed as Annexure 6. As the Committee was reconstituted in December, 2005, the first meeting of the reconstituted Committee was held on 6th January, 2006. The Agenda of the meeting and Minutes of the meeting are enclosed as Annexure 7 and 8, respectively.
The second and final meeting of the Committee was held on 18th February, 2006. The following members attended the meeting.
1. Shri Pradip Bhargava, Principal Secretary, P&RDD, Govt. of MP – in Chair.
2. Shri S. K. Sharma, Addl. Legal Advisor, Ministry of Law and Justice – Member.
3. Shri D. P. Gupta, Former DG MoRTH – Member.4. Shri H. K. Srivastava, Director (Projects – I), NRRDA – Member.5. Shri A. P. Agarwal, OSD, Ministry of Law and Justice – Special Invitee.6. Shri Pradeep Chauhan, Superintending Engineer, PWD, Shimla. –
Representing Principal Secretary, PWD of Govt. of Himachal Pradesh7. Shri H. L. Mina, Chief Engineer, PWD, Govt. of Rajasthan – Representing
Principal Secretary, PWD, Govt. of Rajasthan.8. Shri S. K. Roy, Chief Engineer, Rural Works Department, Orissa. –
Representing Principal Secretary, RD, Govt. of Orissa 9. Shri Prabha Kant Katare, Chief Quality Coordinator, NRRDA - Convener
The following officers also attended the meeting:
1. Shri Ashok Shah, Chief Executive Officer, MPRRDA, Bhopal.2. Shri M. L. Haldkar, Chief Executive Officer, CGRRDA, Chhattisgarh. –
Representative of Govt. of Chhattisgarh. 3. Shri R. S. Bajpai, Financial Advisor, MPRRDA.
The issue-wise deliberations and recommendations of the Committee are given below:
1. Review of Provisions of Standard Bidding Document with a view to enhance Contracting Capacity: There was general consensus that the various provisions of bidding document may be reviewed with a view to enhance the capacity of contractors. Sizable length of new roads are to be constructed and roads of similar length are to be upgraded in next three years under PMGSY as per targets fixed under Bharat Nirman Initiative of Government of India. It was a general feeling that with the present provisions in the SBD about qualification of the contractors, only a
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specific group of contractors is able to qualify for the award of work and it may be difficult to meet the targets of Bharat Nirman, if the same provisions are continued. It was also felt strongly that if qualification criteria are lowered, the contractors of inadequate capacity and qualification would qualify, with a result the pace and quality of work is likely to suffer. Therefore, the attempt should be made to use the contracting capacity available in the States in such a way that the contractors with different capacity should be attracted to carry out the works suited for their capacity and the provisions of bidding document should be suitably drafted. In this connection, the following issues were deliberated and recommendations are given below:
(a) Packaging of works: Looking to the vastness of the country and different conditions prevailing in various States, it was felt that in some States there will be a need to attract smaller contractors, whereas, in other States medium contractors and in some other States large and very large contractors may be attracted for execution of PMGSY works. At the same time, in some States a combination of various types of contractors could also be necessary. Thus, with a view to attract more contractors, the Committee recommends that the contract packages may be made in following categories:
(i) Category 1: Package cost between Rs. 50 Lakh to Rs.2 Crore.(ii) Category 2: Package cost between Rs. 2 Crore to Rs. 10 Crore
(iii) Category 3: Package cost between Rs.10 Crore to Rs.50 Crore.(iv) Category 4: Package cost between Rs.50 Crore and above.
The States may be allowed to adopt category 1 i.e. package cost between Rs.50 Lakh to Rs.2 Crore subject to the following restrictions and reasons for adopting this category of packaging may be recorded:
(i) Packaging may be done for the works situated in hilly/scarcely populated areas.
(ii) The State may adopt repackaging in this category with an intention to break the cartel of the contractors (if cartel formation is detected).
(iii) If, tenders are not received even after three calls.
(b) Qualification – Financial Turnover: Shri D. P. Gupta, Shri H. K. Srivastava, representative of Govt. of Rajasthan and Orissa were of the view that the requirement of financial turnover in all cases of civil engineering construction works should remain in the bidding document, however, there was a general consensus that depending upon the category of works the requirement of turnover may be moderated.
The Committee recommends that the word ‘financial turnover’ should be replaced by “financial turnover as certified by Charted Accountant”. And that the qualification criteria, as required in Clause 4.4A of ITB, may be adopted for various categories in the following manner:
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(i) Category 1: Turnover – amount equal to 60% of amount put to tender and similar work criteria same as presently provided in the SBD.
(ii) Category 2: Turnover – amount equal to 75% of amount put to tender and similar work criteria same as presently provided in the SBD.
(iii) Category 3&4: Turnover – from civil Engg. Works amount equal to the amount put to tender.
(c) Qualification – Requirement of Completion of Similar Work: There was a general consensus in the Committee that the requirement for satisfactorily completing the similar work should continue to remain in the qualification criteria, however, it may be moderated in such a way that the experience of the contractor should be counted even if he has worked as sub-contractor (the certificate of working as sub-contractor should be obtained from the employer of that prime contractor under whom the bidder has worked as sub-contractor. Also while drafting the clause pertaining to sub-contracting; care should be taken to avoid double counting of the experiences of the prime contractor and sub-contractors).
Therefore, the Committee recommends that the requirement of satisfactory completion of work may continue to remain in the bidding document in its present form for category 1 and 2. However, for larger contracts (category 3 & 4) where the experience of contractor in respect of other Civil Engineering works is considered under the turnover, the requirement for experience of execution of similar work may be dispensed with.
(d) Joint Ventures: There was a general consensus in the Committee that the Joint Ventures (JV) should be allowed under PMGSY. Therefore Committee recommends that the Joint Ventures may be allowed under PMGSY. The MORTH documents and ADB Guidelines in this regard may be referred while drafting of the clause related to JVs and the following points may be given attention:
(i) All the partners of JV should be legal entity.(ii) There should be proper agreement and registration of the agreement
between the parties of JV.(iii) The lead partner of the JV should have 60% share and rest of the
parties may have upto 40% share.(iv) The JVs should not have more than three parties.
(e) Sub Contracting: It was general feeling of the members that sub-contracting would enhance the capacity of the contractors, therefore; higher sub-contracting could be considered for PMGSY. Therefore, the Committee recommends that upto 40% sub-contracting may be allowed as against present provision of 25%.
2. Period of Completion of Work: The Committee deliberated on the issue of completion time provided in the contract. It was a general feeling that for packages
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of Category 1, a maximum of 12 months time should be allowed for completion of the package in normal areas and 18 months time should be allowed for hill/ north-eastern States. For Category 2 packages, a maximum of 15 months time should be allowed for completion of the package in normal areas and 18 months time should be allowed for hill/ north-eastern States. . For Category 3 packages, a maximum of 18 months time should be allowed for completion of the package in normal areas and 24 months time should be allowed for hill/ north-eastern States. For Category 4 packages, a maximum of 24 months time should be allowed for completion of the package in normal areas as well as for hill/ north-eastern States.
Therefore, the Committee recommends that the time of completion of works may be decided on the basis of work involved in the package and its spread subject to maximum period prescribed below:
(i) For Category 1, 18 months in case of works in hilly/NE States for plain areas, 12 months including rainy season.
(ii) For Category 2, 18 months in case of works in hilly/NE States for plain areas, 15 months including rainy season.
(iii) For Category 3, 24 months in case of works in hilly/NE States for plain areas, 18 months including rainy season.
(iv) For Category 4, 24 months in case of works in hilly/NE States or plain areas, including rainy season.
3. Escalation: It was a general feeling of the members that there has been frequent upward revision of rates of some critical items like bitumen, steel, cement and diesel in the last 1-2 years. Because of absence of provision regarding escalation or star rates the contractors get discouraged. Further, if, the provision of star rates or escalation is made in the bidding the element of risk of contractor gets reduced and there would be all possibilities of getting more realistic tender rates. It emerged during the deliberations that instead of making provisions for escalation clause, the provision for star rates may be a better preposition because the time of completion is limited.
Therefore, the Committee recommends that the SBD should be provided with the provision of star rates for critical items like bitumen, diesel, steel and cement, however, Committee feels that the wage rate and rate of other materials should not be included in star rates because the revision of rates in these items is not considerable during the normal construction period of one year. It is also recommended that the formulation about the provision for base rate and revision of rates should be done with due care.
4. Release of Retention Amount and Performance Security: It was a general feeling in the Committee that the provision of performance security has financial implication but it acts as a deterrent to the Contractor for abandoning the work or leaving it incomplete and therefore this provision should continue in SBD. The members had different views regarding the release of performance security. It was commonly felt that for initial two-three years, substantial routine maintenance is
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not required, however, sufficient amount of routine maintenance work is required in third, fourth and fifth year. The NRRDA has made provision of release of 50% of retention amount after the completion of construction and an amount of about 7.5% of the cost of the work is available with the employer till the end of five year period of defect liability. It was also expressed that in five years an amount of about 5%-8% of the total cost is required for routine maintenance. At present, 5% amount is taken as performance guarantee before the agreement and 5% amount is retained from every running bill. 50% of the retention amount is released on the completion of construction work component of the contract. It was felt that the retention of about 7.5% of contract amount blocks the workable cash flow of the contractor for the routine maintenance of five years. The Committee felt that the phased release of 7.5% amount should be provided. A total of about 5% to 8% of the cost of construction is required for routine maintenance for a period of 5 years and the year-wise requirement of funds for routine maintenance generally works out to be about 0.5% for 1st Year, about 1.0 % for 2nd Year, about 1.5% for 3rd Year, about 2.0% for 4th Year and about 3.0% for 5th Year. Thus, it is seen that about 5% amount is required for 4 th and 5th
year.
Therefore, the Committee recommends that in addition to the provision of release of performance security and retention amount, a further release of 1%, 1.5%, 2% may be allowed at the end of 2nd year, 3rd year and 4th year, respectively. The formulation for release of security may differ in such works where the requirement of funds for maintenance may differ substantially. Conversion of balance of performance security or retention amount from cash or BG to other interest bearing securities should be allowed suitably.
5. Compensation Events: There was a general consensus that compensation events and obligation on part of the employer have not been adequately defined in the bidding document.
Therefore, the Committee recommends that the provision of compensation events should be revisited and events, such as, site possession not provided, working drawings or designs not provided, unreasonable delay in issuance of completion certificate and other such events may be covered as compensation events in the document.
6. Performance of Contractor: The Committee felt that clear provision regarding performance and the events which may be classified as non-performance of the contractor should be spelt out. The representative of MPRRDA indicated that provision for forfeiture of performance security should be made in the document. The special invitee from the Ministry of Law and Justice clarified that performance security cannot be forfeited but consequent to obligation, the amount can be adjusted in the event of non-performance.
Therefore, the Committee recommends that the events of non-performance may suitably be put into the bidding document.
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7. Defect Liability Period and Routine Maintenance: Representative of State of Rajasthan, Orissa and Himachal Pradesh were of the view that the defect liability period should be reduced to reasonable period between 1 to 2 years, however, the process of routine maintenance prescribed in the bidding documents may be continued. Majority of other members were of the view that defect liability period of 5 years with the responsibility to the contractor to maintain the road is a provision which acts as a deterrent to contractor for poor quality execution of work and at present majority of States have not given any specific adverse observations about this provision, as such, this provision may continue to be retained in the bidding document.
Therefore, the Committee recommends that the provision about defect liability period and provision of 5 year routine maintenance may continue in the bidding document in the present form.
8. Incentives and Disincentives: The provision for liquidated damages has been made as a disincentive for delay in completing the contract. It was proposed in the Committee that on the lines of disincentive, the provision for incentives may also be made in the Contract to encourage the contractors for completion of work before the stipulated period. Shri D. P. Gupta, Shri H. K. Srivastava, representative of the State of Rajasthan and Himachal Pradesh were of the view that the provisions of incentives are made in such cases, where because of early completion, there is direct financial gain to the employer and a fraction of the financial gain is passed on to the contractor as an incentive. The incentive in case of rural roads may not be a suitable preposition as it is likely to be more prone to misuse. Other members felt that if provision is properly worded, the chances of misuse could be minimized.
The Committee recommends that provision of incentives should be made in PMGSY because more contractors are required to be attracted and while the damages are recovered for delay, there are reasons to provide for incentives in case of early completion. It is however important to word the provisions in such a way that it is not prone to misuse. The Chairman of the Committee suggested the provision of bonus and the suggestion is given in Appendix-1.
At the end of deliberations, the members of the Committee expressed their appreciation for contributions made by the Chairman in the subject matter. The members also expressed their gratitude to the Chairman for conducting the meetings with all fairness and giving equal opportunities to all the members to express their ideas.
(Prabha Kant Katare)Convener of the Committee
and Chief Quality Coordinator & JDNational Rural Roads Development Agency
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Appendix-1Suggestion of the Chairman
for Provision of Incentive in Standard Bidding Document
Good construction practices and Standard Bidding Process has paid dividends
in implementation of Pradhan Mantri Gram Sadak Yojana (PMGSY). The essence of
the contracts under PMGSY is “time” and “quality”. There are adequate provisions
for ensuring the timely completion of work with quality and adequate disincentives
have been built into the agreement. In coming four years, a huge length of roads is to
be created, for which contracting capacity needs to be built. Provisions of
disincentives only may not always work as effective tools in absence of incentives for
good and timely work; therefore, provision of incentive also deserves to be considered
for Standard Bidding Document under PMGSY. The incentive would not only
encourage the contractors to complete the work before time but it would also generate
a sense of competition amongst them and discipline.
It is therefore, proposed that the provision of incentive should be made as
“bonus” in the SBD. The bonus should be linked to “Work Plan” and not
withstanding any provisions in the agreement the payment of bonus should be
regulated. The work plan should be phased quarterly (Milestone) and the early
completion of stipulated work for every quarter should be considered for payment of
bonus. For early completion of the amount of work stipulated for any of the
milestones, the bonus at the rate of ½ % of contract price per week of early
completion, subject to a maximum of 5% of contract price may be considered. The
detailed formulation of the clause may be prepared on the basis of legal advice.
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Annexure – 1
No. P-17011/3/2005/P-IIINational Rural Roads Development Agency
Ministry of Rural Development, Government of India5th Floor, 15-NBCC Tower, Bhikaji Cama Place, New Delhi – 66
Date: 22-08-05
OFFICE ORDER
A Standard Bidding Document has been developed for PMGSY after the study of good procurement systems and best national and international practices. The work of development of Standard Bidding Document was given to the experts of the field. The procurement process and Standard Bidding Documents of various States, MORTH, World Bank and ADB etc. were studied and the development of draft documents was completed. The draft was subjected to the process of thorough review and consultation by experts and the State Governments and was finalised. The document was prescribed for use by the Executing Agencies of the State Governments with effect from 2003-04.
Based on the feedback received from various states, two amendments have been effected and the brief of the amendments is as under:
(a) allows returning 50% of the security deposit ( i.e., 2.5% of the tender value) on completion of construction
(b) lays down time period for settlement of final bill(c) specifies modified frequency of routine maintenance operations (d) strengthens provisions in the General Conditions of Contract (GCC), pertaining
to deployment of construction machinery, technical man power and field laboratory.
(e) Provided for recovery of liquidated damages in case the work is terminated because of delay in execution by the Contractor.
With a view to make the document more effective, various issues including the rationalization of the defect liablity period are under consideration of the Agency. Therefore, a Technical Committee with the following composition has been constituted to recommend the amendments or modifications to the Standard bidding documents.
1. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of
India, New Delhi – Chairman. 2. Shri D. P. Gupta, Former Director General MoRTH, Govt. of India, New Delhi
– Member.3. Shri N.V. Merani, Formar Secretary, PWD Maharashtra, Mumbai –Member. 4. Dr. Ashok Kumar, Rural Road Specialist, World Bank, New Delhi – Member.
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5. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi – Member6. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi – Member7. Shri Prabha Kant Katare, Chief Quality Coordinator & JD (P-III) NRRDA,
New Delhi – ConvenerThe background note, the copy of Standard Bidding Document with amendments, the terms of reference for the Technical Committee is enclosed. The Committee may deliberate and submit its recommendations before 31st October, 2005.
(Prabha Kant Katare)CQC & JD (P-III)Tel. No.51000472
Distribution:
1. Joint Secretary (RC), MoRD2. Director (RC-BP)/ Director (RC-CRK)/ Director (RC-AKD), MoRD3. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of
India, New Delhi4. Shri D. P. Gupta, Former Director General MoRTH, C/144, G. K. – I Enclave,
New Delhi – 48.5. Shri N.V. Merani, Formar Secretary, PWD Maharashtra, Mumbai.6. Dr. Ashok Kumar, Senior Road Specialist, World Bank, 70, Lodhi Estate, New
Delhi.7. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi8. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi9. Shri Prabha Kant Katare, Chief Quality Coordinator & JD (P-III) NRRDA,
New Delhi.
1. PS to DG, NRRDA
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Annexure – 2
Standard Bidding Document - Pradhan Mantri Gram Sadak Yojana
Terms of Reference for the Technical Committee Constituted for Recommending the Modifications
The terms of reference, time frame and the payment conditions for the Technical Committee constituted for recommending the modifications to Standard Bidding Document under Pradhan Mantri Gram Sadak Yojana shall be as follows:
1. Terms of Reference:
a. In the Standard Bidding Document, there is a provision of routine maintenance along with the defect liability of 5 years. It was suggested that the defect liability period needs to be brought down to 1 year. The committee may consider this proposal and also suggest the changes in the bidding document.
b. At present, the payment of routine maintenance is to be made to the Contractor for all 5 years. The Committee may suggest whether the routine maintenance will be paid during the period of defect liability for 1 year.
c. As per the present provisions of the SBD, the Bill of Quantities contains the items of construction as well as items of routine maintenance for every year on lump-sum basis. Performance security of 5% of the cost of construction and retention amount of 5% is retained as security. 50% of retention amount is repaid to the Contractor after completion of construction but rest of the retention amount and Performance Security is repaid to the contractor only after completion of defect liability period of 5 years. Effectively 7.5% cost of construction is released after 6 years (about 1 year construction time). Retention of this large amount ensures the maintenance of road by the Contractor. If defect liability period is reduced, it may not be possible to retain this 7.5% amount for maintenance period also, therefore; the Committee may suggest the ways to ensure that the same Contractor carried out maintenance after 5 years.
d. Any other issue related to the SBD which the Committee feels important.
2. Time Frame: The Committee may hold two/ three meetings and submit report before 31st October 2005.
3. Payment: The non-official members of the Technical Committee will be paid as per rules of NRRDA; however, official members shall not be entitled for remunerations.
Projects –III Div, NRRDA, August 2005
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Annexure – 3
Standard Bidding Document under PMGSY
Background Note for Proposed Modifications
1. A Standard Bidding Document has been developed for the PMGSY after the study of good procurement systems and best national and international practices. The work of development of Standard Bidding Document was given to the experts of the field. The procurement process and Standard Bidding Documents of various States, MORTH, World Bank and ADB etc. were studied and the development of draft documents was completed. The draft was subjected to the process of thorough review and consultation by experts and the State Governments. The document has been prescribed for use by the Executing Agencies of the State Governments with effect from 2003-04. The Standard Bidding Documents has the following main provisions:-
The tender will be invited for construction as well as maintenance of the road work for five years.
The technical qualification of the contractor in terms of the bidding capacity, the experience of civil engineering works and in relevant field, possession of requisite machinery and equipments and financial capacity etc. will be evaluated before opening of the financial offer.
The responsibility of establishment of Quality Control laboratory and mandatory testing will be of the contractor and the contractor will be required to employ requisite engineering and technical staff.
The funds for the construction will be provided through the Pradhan Mantri Gram Sadak Yojana and the funds for maintenance of the road work for five years will be provided by the State Governments.
In order to give the effect to the provisions of Standard Bidding Documents, the following procedure has been adopted for execution of works under the Pradhan Mantri Gram Sadak Yojana :-
The estimates of each work under PMGSY will be made in two parts. The first part will be estimate for Construction of the Road works and the second part will be the estimate of year wise routine maintenance for 5 years.
The clearance for the estimates for construction of Road works will be provided by this Ministry of Rural Development but the clearance for the estimate of routine maintenance will be provided by the State Government and the provision for the funds related to the maintenance will be done by the State Government.
Before submitting the proposals for Construction of Road works for clearance to the Empowered Committee of the Ministry of Rural Development, the State Government will be required to give approval for routine maintenance of every work in the proposal. The State Government will also be required to furnish a
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certificate to the effect that the provision of funds for maintenance will be made in the State Budget separately for PMGSY Roads.
Based on the feedback received from various states, two amendments have been effected and the brief of the amendments is as under:
Returning 50% of the security deposit ( i.e., 2.5% of the tender value) on completion of construction
Lays down time period for settlement of final bill Specifies modified frequency of routine maintenance operations Strengthens provisions in the General Conditions of Contract (GCC),
pertaining to deployment of construction machinery, technical man power and field laboratory.
Provided for recovery of liquidated damages in case the work is terminated because of delay in execution by the Contractor.
2. As mentioned in paragraphs above, the Standard Bidding Document prescribed for Pradhan Mantri Gram Sadak Yojana provides for a defect liability period of five years coupled with routine maintenance. The Contractor is required to furnish 5% of the cost of construction as performance security and an amount equal to 5% of the bill is retained as security, thus an amount of about 10% is available with the Employer till the completion of work plus 5 year period of defect liability and maintenance. After receiving many representations from the States, an amendment was effected recently and 50% of the retention amount has been allowed to be released after completion of the work. Effectively, now there is a provision of keeping 7.5% of the cost of construction as security for about 6 years.
The background of this provision is given below:
Clause 15.2 of the PMGSY Programme Guidelines issued during 2001 (now superceded by the November, 2004 Guidelines) provide for the following:
“The roads constructed under the programme are expected to be of very high standard, requiring no major repairs for at least five (5) years after completion of construction. In order to realize this objective, suitable clauses relating to Performance Guarantee / routine maintenance shall be included in the Contract Documents, as per the provisions in the Standard Bidding Document. In particular, the State Government shall obtain a Bank Guarantee from the Contractor for 10% of the value of the work, which should remain valid for the 5 year period and should be discharged only after consulting the Panchayati Raj Institution responsible for maintenance.”
While the bidding document was being developed by the experts, many States and experts clearly mentioned that as per the professional practice and type of construction envisaged in rural roads, defect liability of five years is not practical and
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attempt should be made to make defect liability of 1 year, which is a common practice in the profession. However, the suggestions of the profession could not be incorporated because the routine maintenance scenario was not quite clear.
Initially, it was thought that rural roads could be constructed in such a way that if quality of construction is good, no maintenance will be required. It was clarified by the profession and also mentioned in Rural Roads Manual that routine maintenance will be required even in the case of concrete roads and there is nothing like “maintenance free rural road”. It is a fact that in case of properly designed and executed roads expenditure on maintenance would be minimal but on the condition that routine maintenance has been carried out regularly.
Accordingly, prescribing the bidding document, based on discussion regarding defect liability and routine maintenance, it was felt that in addition to making the provisions for defect liability, routine maintenance will also be required, otherwise it will be difficult to segregate the defects caused because of natural wear and tear of the road and it will be almost impossible to really implement the defect liability clause. As such, the provisions for tendering the routine maintenance for five years were made in the bidding document and also the liability of Contractor towards the defects was built in the provisions. It was also decided that while the amount required for construction is being given from PMGSY, the amount required for routine maintenance for five years shall be given by the State Government. To give effect to the provisions of routine maintenance, the items of estimated routine maintenance for each year of the five years were included in Bill of Quantities and Contractor is required to quote the rates for maintenance also in the same way as he is quoting rates for construction items.
PMGSY is 100% centrally funded scheme and making compulsory provisions for maintenance and mandatory arrangement of funds by the States was not appreciated by the States in the initial period and a lot of efforts were made to convince the States for funding the routine maintenance. However now, because of realization of loss of assets because of lack of maintenance, the States have appreciated the initiative of the Ministry in respect of provision of five year maintenance and majority of States have also provided funds. While the serious thinking was going on in PMGSY regarding the importance of maintenance of rural roads, the recommendations of Twelfth Finance Commission also came. In fact the Twelfth Finance Commission has laid necessary and welcome emphasis on maintenance, as evident from the following extracts of their report.
“It is far more important to ensure that assets already created are maintained and yield services as originally envisaged than to go on undertaking commitments for creating new assets.”“Some of the basic features of our approach and the resultant modifications …… may be summarized as below…… With a view to ensuring minimum level of services in the case of education and health, we consider conditional grants derived on the basis of a normative approach as relevant. A similar consideration applies to maintenance expenditures.”
17
“while encouraging higher growth in expenditure in areas relating to education, health, maintenance of roads and …….. We have encouraged larger expenditures on maintenance of roads and bridges providing separate additional as discussed in chapter 10.”“We, however, notice that maintenance of roads and buildings has not been given adequate importance by the States. We are, therefore, recommending additional grants separately for maintenance of roads and bridges, and for maintenance of buildings…… A grant of Rs.15,000 crore over the award period is recommended for maintenance of roads and bridges. The amount will be in addition to the normal expenditure which the states would be incurring on maintenance of roads and bridges.”
From the recommendations of the Twelfth Finance Commission, the States are more comfortable in providing maintenance funds because of the funding of Rs.15,000 Crore for road maintenance.
During the discussions with the States in the regional reviews and the professionals at various occasions, it has always been emphasized that liability of defects envisaged for a period of five years is not practicable. Many States, NHAI and other organizations provide for only one year defect liability, however, the preposition of five year routine maintenance can be continued.
It is a fact that the 5 year defect liability is distorting PMGSY in more ways than one: Given past construction standards, 5 year defect-free guarantee for rural roads is an
extremely high standard. It deters good contractors, and pushes up costs in comparison to earlier costs for similar roads.
In reality it is not easy to pinpoint whether a road failure if it happens is due to (a) construction defect; (b) lack of maintenance, particularly of drainage systems; (c) design defect in either drainage or crust thickness; or (d) unusually high traffic. It may be, generally, a combination of factors.
The ‘defect-free’ conditionality is therefore suspected to be a cause for over – design by engineers and higher tender rates by Contractors.
On the other hand, there is no viable enforcement mechanism. As a management practice, the contractor’s security can be forfeited but the contractor has already factored this with his bid (and we are paying for it).
As brought out above, the ‘defect free’ requirement is not a substitute for maintenance which should be done anyway, particularly routine maintenance items like filling rain cuts in shoulders, clearing drains, etc. In fact, if maintenance is not done, liability for defect guarantee can get diluted.
In the past, many States, which are to pay for maintenance, have compelled contractors to do free maintenance in the guise of operationalising the ‘defect-free’ guarantee. Because this is not a correct procedure, States have not been able to evolve and operationalise technically sound routine maintenance systems.
18
As such, during the last 4 years, consistent pressure has been put on States to budget separately for maintenance, and operationalise a maintenance management system.
The construction-cum-maintenance contract enforced with effect from 2003-04 is now in operation and has been observed to be working satisfactorily. Since paid routine maintenance is now a practical solution already being enforced, the false confidence of an unworkable ‘5 year defect-free guarantee’ is no longer necessary. The earlier feeling that States may not be able to sustain a paid routine maintenance regime is also now dispelled, since the Twelfth Finance Commission (TFC) has given a generous award for maintenance of the road network. In fact the TFC’s feeling is absorption capacity for maintenance needs to be built up. Fortunately in PMGSY we have done just that over the past 2 years, by
Having a construction-cum-maintenance contract system. Defining routine maintenance items in the Contractor’s Bill of Quantities
(BoQ). Specifying the periodicity of inspection of roads by PIUs to enforce
maintenance. Working out a simple but effective visual ‘Pavement Condition Index’ (PCI)
already operationalised in many States, to develop a Routine Maintenance Priority List (RMPL).As such, ‘maintenance’ rather than ‘defect liability’ is what is required to be
focused upon, and since the 5 year defect liability is in fact confusing the obligation of the Contractor for 5 year paid maintenance, it is necessary to revise the idea of 5 year defect liability. The time is therefore ripe to make ‘routine maintenance’ rather than ‘defect liability’ as the cornerstone of our network management policy.
****************** Projects –III Div, NRRDA, August 2005
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Annexure - 4
No. P-17011/3/2005/P-IIINational Rural Roads Development Agency
Ministry of Rural Development, Government of India5th Floor, 15-NBCC Tower, Bhikaji Cama Place, New Delhi – 66
Date: 14-12-05
OFFICE ORDER
With a view to make the Standard Bidding Document (SBD) under Pradhan
Mantri Gram Sadak Yojana more effective, and to look into various issues including
the rationalization of the defect liablity period, a Technical Committee was
constituted to recommend the amendments or modifications to the Standard bidding
documents vide this office order No. P-17011/3/2005/P-III dated 22nd August, 2005.
The Committee met once on 12th September, 2005 and many suggestions were
received. The States and PIUs were also requested to send suggestions to the
convener of the Committee and many suggestions have also been received.
Ambitious targets have been fixed for construction of Rural Roads under Bharat
Nirman and in this connection, the States have suggested that the bidding process
under PMGSY may be revisited with a view to attract more contractors under the
programme and thereby enabling the enhancement of capacity of contracting.
Since the Committee constituted vide order dated 22nd August, 2005 was
already working to recommend amendments and modifications to the bidding
document and looking to the additional requirement regarding suggestions in respect
of enhancement of capacity of contracting, the Committee is reconstituted as under:
1. Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development
Department, Govt. of Madhya Pradesh, Bhopal – Chairman
2. Shri S. K. Sharma, Additional Legal Advisor, Department of Legal Affairs,
Ministry of Law and Justice, Shastri Bhavan, New Delhi. - Member
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3. Shri C. S. Rajan, Principal Secretary, Public Works Department, Govt. of Rajasthan, Jaipur – Member
4. Shri Subhash Negi, Principal Secretary, Public Works Department, Govt. of
Himachal Pradesh, Shimla – Member
5. Shri Aurobindo Behera, Principal Secretary, Public Works Department, Govt.
of Orissa, Bhubneshwar – Member.
6. Shri K. Das Roy, Secretary, Public Works Department (R&B), Govt. of
Meghalaya, Shillong – Member.
7. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of
India, New Delhi – Corresponding Member.
8. Shri N.V. Merani, Former Secretary, PWD Maharashtra, Mumbai –
Corresponding Member.
9. Shri D. P. Gupta, Former Director General MoRTH, Govt. of India, New Delhi
– Member.
10. Dr. Ashok Kumar, Rural Road Specialist, World Bank, New Delhi – Member.
11. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi – Member
12. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi – Member
13. Shri Prabha Kant Katare, Chief Quality Coordinator & JD (P-III) NRRDA,
New Delhi – Convener
The revised ‘Terms of Reference of the Committee’ is enclosed. The
reconstituted Committee may also consider the suggestions received by the earlier
Committee.
(J. K. Mohapatra)
Joint Secretary (RC), MoRD & Director General, NRRDA
Distribution:
1. Director (RC-BP)/ Director (RC-CRK)/ Director (RC-AKD), MoRD2. Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development
Department, Govt. of Madhya Pradesh, Bhopal.
21
3. Shri S. K. Sharma, Additional Legal Advisor, Department of Legal Affairs, Ministry of Law and Justice, Room No.433, A-Wing, 4 th Floor, Shastri Bhavan, New Delhi.
4. Shri C. S. Rajan, Principal Secretary, Public Works Department, Govt. of Rajasthan, Jaipur.
5. Shri Subhash Negi, Principal Secretary, Public Works Department, Govt. of Himachal Pradesh, Shimla.
6. Shri Aurobindo Behera, Principal Secretary, Public Works Department, Govt. of Orissa, Bhubneshwar.
7. Shri K. Das Roy, Secretary, Public Works Department, Govt. of Meghalaya, Lower Lachumiere, Shillong - 793001.
8. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of India, New Delhi
9. Shri D. P. Gupta, Former Director General MoRTH, C/144, G. K. – I Enclave, New Delhi – 48.
10. Shri N.V. Merani, Formar Secretary, PWD Maharashtra, Mumbai.11. Dr. Ashok Kumar, Senior Road Specialist, World Bank, 70, Lodhi Estate, New
Delhi.12. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi13. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi14. Shri Prabha Kant Katare, Chief Quality Coordinator & JD (P-III) NRRDA,
New Delhi.1. PS to DG, NRRDA
22
Annexure - 5
Standard Bidding Document Pradhan Mantri Gram Sadak Yojana
Terms of Reference for the Technical Committee Constituted for Recommending the Modifications
The terms of reference, time frame and the payment conditions for the Technical Committee constituted for recommending the modifications to Standard Bidding Document under Pradhan Mantri Gram Sadak Yojana shall be as follows:
1. Terms of Reference
a. *Review of the provisions of Standard Bidding Document for attracting more contractors and thereby enhancing the contracting capacity. In this connection, the issues like qualification criteria and support to the Contractor etc. may be reviewed.b. In the Standard Bidding Document, there is a provision of routine maintenance along with the defect liability of 5 years. It was suggested that the defect liability period needs to be brought down to 1 year. The committee may consider this proposal and also suggest the changes in the bidding document.c. At present, the payment of routine maintenance is to be made to the Contractor for all 5 years. The Committee may suggest whether the routine maintenance will be paid during the period of defect liability for 1 year.d. As per the present provisions of the SBD, the Bill of Quantities contains the items of construction as well as items of routine maintenance for every year on lump-sum basis. Performance security of 5% of the cost of construction and retention amount of 5% is retained as security. 50% of retention amount is repaid to the Contractor after completion of construction but rest of the retention amount and Performance Security is repaid to the contractor only after completion of defect liability period of 5 years. Effectively 7.5% cost of construction is released after 6 years (about 1 year construction time). Retention of this large amount ensures the maintenance of road by the Contractor. If defect liability period is reduced, it may not be possible to retain this 7.5% amount for maintenance period also, therefore; the Committee may suggest the ways to ensure that the same Contractor carried out maintenance after 5 years.e. Any other issue related to the SBD which the Committee feels important.
2. Time Frame : The Committee may hold two/ three meetings and submit report by February 2006.
3. Payment : The non-official members of the Technical Committee will be paid as per rules of NRRDA; however, official members shall not be entitled for remunerations.
23
* New Item Projects –III Div, NRRDA, December, 2005
24
Annexure – 6
No. P-17011/3/2005/P-IIINational Rural Roads Development Agency
Ministry of Rural DevelopmentGovernment of India
5th Floor, 15 NBCC Tower,Bhikaji Cama Place, New Delhi – 66.
Dated the 5th December, 2005.
Minutes of First Meeting of Technical Committee for Revision of Standard Bidding Document
The First Meeting of Technical Committee for Revision of Standard Bidding Document held on 12th September, 2005 at Conference Hall of NRRDA. The meeting was Chaired by Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of India. The list of the members of Committee who attended the meeting is enclosed. The summary of proceedings of the meeting is as follows:
The suggestions received from six officers are enclosed. In addition, the members expressed their views about the suggestions made by the different stake holders and also gave their own suggestions. The issue-wise discussion is summarized below:
1. Defect Liability Period and Payment for Routine Maintenance: It was a general feeling that defect liability period of 5 years with the responsibility of the Contractor to maintain the road is a provision which acts as deterrent to the Contractor for bad quality execution of work and at present majority of States have not given any specific adverse observation about these provisions, therefore; this provision may continue to remain in the bidding document. This issue may further be discussed in the next meeting.
2. Performance Security: Though the provision of performance security has financial implication but it acts as a deterrent to the Contractor for leaving the work incomplete and therefore this provision should continue in SBD. The members had different views regarding the release of performance security. It was commonly felt that for initial two-three years, substantial routine maintenance is not required, however, sufficient amount of routine maintenance work is required in third, fourth and fifth year. The NRRDA has made provision of release of 50% of retention amount after the completion of construction and an amount of about 7.5% of the cost of the work is available
25
with the employer till the end of five year period of defect liability. It was also expressed that in five years an amount of about 5%-8% of the total cost is required for routine maintenance, therefore; it was felt appropriate to retain the present provision regarding the release of performance security as well as balance retention amount.
3. The following additional issues were indicated and discussed:
a. It was indicated by members that the bidding document does not provide for the procedure for extension of time.
b. The milestones provided in the contract data and the work programme may differ and the bidding document does not have any provision to address this issue. The adverse effect of the weather conditions also does not reflect adequately in the milestones because of its linear provision irrespective of the date of issue of work order.
c. The bidding document provides for dispute redressal by the competent authority at the first instance. The States have generally made CEs as the competent authority but in some States, the officers who do not have any qualification or experience of adjudication, dispute redressal or management of contract are attending to such disputes.
d. The compensation events are highly leaning towards the employer and it needs to be expended.
4. The Committee felt that the issues indicated in the above para should also be examined and discussed in the next meeting.
5. The meeting ended with thanks to the chair.
(Prabha Kant Katare)Chief Quality Coordinator & JD (P-III)
National Rural Roads Development Agency
26
List of Members Present in the Meeting
1. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of
India – Chairman.
2. Shri D. P. Gupta, Former Director General MoRTH, Govt. of India – Member.
3. Dr. Ashok Kumar, Rural Road Specialist, World Bank – Member.
4. Shri H. K. Srivastava, Director (P-I) – Member
5. Shri S. Baliga, Director (P-II) – Member
6. Shri Prabha Kant Katare, CQC & JD (P-III) – Convener
27
Annexure – 7
Review of Standard Bidding Document under PMGSY Agenda for First Meeting of Re-Constituted Technical Committee
on 6th January, 2006 at NRRDA, New Delhi
The Technical Committee may discuss the issues in light of the TOR and the base paper, however, for the structured discussions; the following issues have been identified:
1. The structure of the bidding document, core conditions and extent of flexibility in other conditions based on State specific requirements.
2. In the context of Bharat Nirman the efforts for enhancement of contracting capacity. The following issues may be deliberated:
a. Qualification criteria for contractors in terms of turnover and experience of similar work.
b. Allowing Joint Venture – formulation and policy.c. Extent of sub-contracting.d. Flexible provisions of bidding document to accommodate very large
packages or very small packages based on specific requirements of the States.
e. Time of completionf. Introduction of escalation clause
3. It is almost compulsory to use adequate construction machinery and equipments, field laboratory and technical manpower for achieving desired standards. To what extent it is necessary to provide for possession/ access of contractors to these items.
4. Development of contractor friendly environment.5. For ensuring more working capital with the contractor, the following issues may
be deliberated. a. In how much quantity and in what shape, the performance guarantee and
retention money should be taken from the contractor to have a workable cash flow with the contractor.
b. There is a provision of liquidated damages for delay in execution. It is felt that substantial amount of the contractor is withheld till the completion of work, which blocks the capital of the contractor and causes avoidable inconvenient situation.
6. Defect Liability Period and Payment for Routine Maintenance. Need to clearly define the defect liability and routine maintenance and to deliberate whether defect liability period should be 5 years or not.
7. Well defined provision of extension of time8. Provision of milestones in Contract Data and their convergence with work
programme9. Dispute Redressal – issues of adjudication and issues of qualification criteria for
competent authority.
28
10. Expansion of compensation events to accommodate the concerns of contractors. 11. Provision of incentives and disincentives.12. In World Bank and ADB assisted contracts the exemption for excise duty is
available, whether this kind of facility could be extended to PMGSY.13. Any other items with the permission of the Chair.
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Annexure - 8
No. P-17011/3/2005/P-IIINational Rural Roads Development Agency
Ministry of Rural DevelopmentGovernment of India
5th Floor, 15 NBCC Tower,Bhikaji Cama Place, New Delhi – 66.
Dated the 10th January, 2006.
Review of Standard Bidding Document under PMGSY Minutes of First Meeting of Re-Constituted Technical Committee
on 6th January, 2006 at NRRDA, New Delhi
The First Meeting of re-constituted Technical Committee for Review of Standard Bidding Document held on 6th January, 2006 at Conference Hall of NRRDA. The meeting was chaired by Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development Department, Government of Madhya Pradesh.
Shri J. K. Mohapatra, JS (RC) & DG, NRRDA also attended initial discussions and outlined the necessity for revisiting the Standard Biding Document in wake of Bharat Nirman targets under PMGSY. The list of the members of Committee who attended the meeting is enclosed. The convener of the committee welcomed all the participants and gave a brief introduction of the Standard Bidding Document and background of its development. He also gave brief description of earlier discussions and outlined the issues.
The summary of discussions held in the meeting is given below:
1. The Committee reviewed the necessity of the standard bidding process and it emerged that standard bidding process has helped in methodical and systematic execution of works. Further, based on the experience of implementation of this process, timely amendments have also been carried out. Under Bharat Nirman ambitious targets have been fixed and there is a need to revisit the standard bidding process with a view to enhance the contracting capacity and to attract more contractors for execution of works under PMGSY. The Committee further emphasized that while revisiting the standard bidding process, the basic aim would continue to be execution of works in a professional manner as per specifications and with proper quality and in prescribed time limit.
2. Looking to the vastness of the country and different conditions of various States it was felt that in some States there will be a need to attract smaller contractors, whereas, in other States medium contractors and in some other States large and very large contractors may be required to be attracted for execution of PMGSY works. At the same time, in some States a combination
30
of various types of contractors could also be tried. Thus, with a view to attract more contractors, the contract packages may be made in following categories:
a. Category 1: Package cost between Rs. 50 Lakh to Rs.2 Crore.b. Category 2: Package cost between Rs. 2 Crore to Rs. 10 Crorec. Category 3: Package cost between Rs.10 Crore to Rs.50 Crore.d. Category 4: Package cost between Rs.50 Crore and above.
3. The Committee felt that while assessing the financial turnover the requirement of turnover pertaining to only civil engineering work may be dispensed with and the financial capability of the contractor should be judged on the basis of total financial turnover, as such, in Clause 4.4A (a) of ITB ‘financial turnover’ should be replaced by “financial turnover as certified by Charted Accountant” and the words ‘(in all cases of civil engineering construction works only)’ should be deleted.
The Committee also felt that the requirement for satisfactorily completing the similar work should be amended in such a way that the experience of the contractor should be counted even if he has worked as sub-contractor (the certificate of working as sub-contractor should be obtained from the employer of that prime contractor under whom the bidder has worked as sub-contractor.).
Further, Committee felt that qualification criteria, as required in Clause 4.4A of ITB, may be adopted for various categories in the following manner:
a. Category 1: The W-1 document of the World Bank may be seen and the formulation for this category may be discussed in the next meeting.
b. Category 2: Turnover – amount equal to 75% of amount put to tender and similar work criteria same as presently provided in the SBD.
c. Category 3&4: Turnover – amount equal to the amount put to tender.Requirement of similar work – should have executed civil engineering works in a year equal to the value of amount put to tender
4. The Committee felt that the Joint Ventures (JV) may be allowed. The documents of MoRTH and Procurement Guidelines of ADB may be studied and the drafting of this clause may be done very carefully in consultation with the members of the Committee, Shri S. K. Sharma, Additional Legal Advisor and Shri D. P. Gupta, Former DG MoRTH. While drafting the clause the following points may be kept in mind:
a. All the partners of JV should be legal entity.b. There should be proper agreement and registration of the agreement
between the parties of JV.c. The lead partner of the JV should have 60% share and rest of the parties
may have upto 40% share.d. The JVs should not have more than three parties.
5. Presently 25% sub-contracting is provided under the SBD, the Committee felt that upto 40% sub-contracting may be allowed. However, the care should be
31
taken to avoid double counting of the experiences of the prime contractor and sub-contractors. This issue may be deliberated after the study of FIDIC Document or World Bank Document.
6. The Committee felt that in general, for packages upto Rs.10 Crore cost, a maximum of 18 months time should be allowed for completion of the package in hill/ north-eastern States, however, a maximum of 12 months time should be allowed for completion of packages in normal areas. It was also felt that if the cost of package between Rs.10 to 50 Crore the time of completion should be maximum 18 months including adverse weather conditions and in case of packages of more than Rs.50 Crore the time of completion could be kept as maximum of 24 months including adverse weather conditions.
7. It was observed that generally the escalation clause is made applicable if the time of completion is beyond 12 months; the convener was requested to find the rationale and legal provision behind this 12 months period with the help of Shri S. K. Sharma, Additional Legal Advisor. The Committee felt that the provision of escalation clause should be made in the SBD also and the formulation used in World Bank Document for PMGSY may be used with appropriate modifications.
8. The list of machinery and equipments required for construction and equipments for field laboratory is to be provided in the Appendix to ITB and the Contract Data. It has been observed that a common list is generally appended without due consideration to the quantities of various items of work. The NRRDA may issue detailed guidelines in this regard.
9. The provision regarding defect liability period of 5 years clubbed with paid routine maintenance has worked well so far. The proposal of reduction of defect liability period from 5 years to 1 year has been supported by many stakeholders but many other stakeholders feel that the provision acts as deterrent for contractor against the execution of poor work. The Committee felt that this issue should further be deliberated.
10. At present, 5% amount is taken as performance guarantee before the agreement and 5% amount is retained from every running bill. 50% of the retention amount is released on the completion of construction work component of the contract. It was felt that the retention of about 7.5% of contract amount blocks the workable cash flow of the contractor for the routine maintenance of five years. The Committee felt that the phased release of 7.5% amount should be provided. During the discussion it emerged that a total of about 5% to 8% of the cost of construction is required for routine maintenance for a period of 5 years and the year-wise requirement of funds for routine maintenance generally works out to be as follows:
a. 1st Year: about 0.5% b. 2nd Year: about 1.0 %
32
c. 3rd Year: about 1.5%d. 4th Year: about 2.0%e. 5th Year: about 3.0%
It is seen that about 5% amount is required for 4th and 5th year, therefore; further release of 1%, 1.5%, 2% may be allowed at the end of 2nd year, 3rd year and 4th
year, respectively. The formulation for release of security may differ in such works where the requirement of funds for maintenance may differ substantially. The formulation for the shape in which the performance guarantee and retention amount should be taken may be drafted.
11. The Committee felt that provisions to deal variation, extension of time and compensation events should be drafted carefully again.
12. Committee also felt that the convergence of milestones given in the contract data and milestones given in the work programme should be worked out and drafted.
13. The Committee felt that the issue about prescribing the qualification and experience of the competent authority Clause 24.1 of GCC should be further discussed. The provision may be drafted and may be proposed for further discussion.
14. The Committee felt that the provisions for disincentives has been made in form of the liquated damages but the issue regarding provision of the incentives for carrying out work before stipulated time may be deliberated.
15. The Committee felt that the provisions of compensation events and obligation on part of employer may properly be listed in the SBD.
16. CEO, MPRRDA mentioned that it has not been clearly provided in the contract that for non-performance the performance security may be forfeited. This issue may be examined and appropriate formulation may be prepared under Clause 53 of GCC. The Committee also felt that asking for 2% earnest money may be reviewed and revised formulation may be proposed.
The meeting ended with thanks to the Chair.
(Prabha Kant Katare)Chief Quality Coordinator & JD (P-III)
National Rural Roads Development Agency
33
Distribution:
1. Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development Department, Govt. of Madhya Pradesh, Bhopal.
2. Shri S. K. Sharma, Additional Legal Advisor, Department of Legal Affairs, Ministry of Law and Justice, Room No.433, A-Wing, 4th Floor, Shastri Bhavan, New Delhi.
3. Shri C. S. Rajan, Principal Secretary, Public Works Department, Govt. of Rajasthan, Jaipur.
4. Shri Subhash Negi, Principal Secretary, Public Works Department, Govt. of Himachal Pradesh, Shimla.
5. Shri Aurobindo Behera, Principal Secretary, Public Works Department, Govt. of Orissa, Bhubneshwar.
6. Shri K. Das Roy, Secretary, Public Works Department, Govt. of Meghalaya, Lower Lachumiere, Shillong - 793001.
7. Shri M. P. Gupta, Former Additional Secretary, Ministry of Finance, Govt. of India, New Delhi
8. Shri D. P. Gupta, Former Director General MoRTH, C/144, G. K. – I Enclave, New Delhi – 48.
9. Shri N.V. Merani, Formar Secretary, PWD Maharashtra, Mumbai.10. Dr. Ashok Kumar, Senior Road Specialist, World Bank, 70, Lodhi Estate, New
Delhi.11. Shri H. K. Srivastava, Director (Projects-I), NRRDA, New Delhi12. Shri S. Baliga, Director (Projects-II), NRRDA, New Delhi
13. PS to DG, NRRDA14. PA to Chief Quality Coordinator & JD (P-III) NRRDA, New Delhi.
34
List of Members Present in the Meeting
1. Shri Pradip Bhargav, Principal Secretary, Panchayat & Rural Development
Department, Govt. of Madhya Pradesh - Chairman
2. Shri Subhash Negi, Principal Secretary, Public Works Department, Govt. of
Himachal Pradesh - Member
3. Shri S. K. Sharma, Additional Legal Advisor, Department of Legal Affairs,
Ministry of Law and Justice - Member
4. Shri D. P. Gupta, Former Director General MoRTH, Govt. of India – Member.
5. Dr. Ashok Kumar, Rural Road Specialist, World Bank – Member.
6. Shri H. K. Srivastava, Director (P-I) – Member
7. Shri S. Baliga, Director (P-II) – Member
8. Shri Prabha Kant Katare, CQC & JD (P-III) – Convener
Following officers were also present in the meeting:
1. Shri Ashok Shah, CEO, MPRRDA, Govt. of Madhya Pradesh.
2. Shri A. D. Kapaley, Chief General Manager, MPRRDA, Govt. of Madhya
Pradesh.
3. Shri R. S. Bajpai, Financial Advisor, MPRRDA, Govt. of Madhya Pradesh.
4. Shri K. G. Mittal, Superintending Engineer, Public Works Department,
Govt. of Rajasthan.
35
