Project delays force Prabhu to adopt new models
The public sector behemoth has directed its zonal offices to identify two-three projects, which could be awarded on the EPC basis to test waters before handing away more projects. The move could open a floodgate of opportunities for construction companies such as L&T, Gammon and Hindustan Construction Company and Soma Infrastructure.
“We have written to all our zonal managers to tender out two-three projects on the EPC basis. This will help us gain some experience and better understand the model for railway projects. The model is generally considered more efficient than item rate contract so we would like to adopt it going forward,” a senior railway ministry official said.
Under the item rate contract, railways provides the design and estimate quantities of different items of work. Payments are made on the basis of work completed in each item. But under the EPC model, design and cost are determined by contractor through bidding.
Infrastructure sector experts consider the EPC model more efficient than item rate contract. “EPC is far more efficient than item rate contract,” said Sanjay Sethi, MD & CEO, Nestor Consulting, a Delhi-based infrastructure advisory firm.
Erstwhile plan panel had found item rate contract to be prone to excessive time and cost over-runs besides disputes with contractors involving large claims. Perhaps, this is one of the reasons railways has topped the list of delayed projects with some projects running 15-20 years behind the schedule.
Realising the deficiencies in its project implementation, railways minister Suresh Prabhu has adopted various models, including the Swiss challenge, to kickstart infrastructure development in the sector.
Railways has undertaken redevelopment of 400 stations on this innovative model. It is in the process of offering various projects on the build, operate and transfer annuity model involving private firms.
“We will participate in EPC projects as and when it comes after studying them,” said Soma Enterprise MD Ankineedu Maganti. Soma, one of the key infrastructure players, is executing 32 projects in 15 states.