Downloaded 47 times
More Related Content
Epc contracts.
- 1. EPC Contracts - Components,Features and Contractual Technicalities PRESENTED BY: DHANYA. P.K B.COM LLB(HONS.), SCHOOL OF LEGAL STUDIES, CUSAT
- 2.
- 3. The Term Acronym variant turnkeycontracts Three main tasks: Engineering – Initiation, Planning, Estimating and Design Procurement – Purchasing, Expediting, Invoicing Construction – Construction Schedule, On-Site Material Handling, Building Activities, On-Site Client Communication, Closing entire responsibility of design to construction/ installation on one person i.e., ‘contractor’.
- 4.
- 5. Need for EPC Contracts▹ Conventional contracts – time and cost overrun ▹ Involvement of multiple agencies – involves a lot of different value contracts ▹ Failure leads to delay ▹ Lack of Flexibility in replacing failed agency .
- 6. Features of EPC contracts ▹ Single– point responsibility ▹ Mile stone basis progress ▹ Prescribed Time Limit ▹ Fixed payment terms ▹ High degree of risk for the contractor ▹ High degree of control ▹ Free from cost variation ▹ Limited risk for client
- 7. Comparative Study Criteria Turnkey ContractPackage-Based contract Price Guaranteed price for execution No guarantee on price Procurement Undertaken solely by contractor According to agreement between two parties Engineering/design Responsibility of contractor Responsibility of owner/developer Point of contact for developer Contractor is single point of contact Has to co-ordinate with several participants Level of involvement Contractor is free to work under limited supervision according to the agreed milestones Owner – day-to-day supervision Risk Significant risks are transferred to contractor Risks are retained with owner/developer
- 8. Stakeholders and their interests Project Owner • Projectrisks Contractor • Construction risks Project Managers • Overall co-ordination and approval • Consultants • Sub-contractors
- 9. EPC Contract Bidding Process – Twostages ▹ Request for Qualification(RFQ): To prequalify and shortlist eligible bidders based on eligibility criteria ▹ Request for proposals(RFP): To invite financial bids from shortlisted bidders. Comprehensive scrutiny before submitting offers.
- 10. Advantages ▹Makes contractor entirely responsible.(single-point responsibility) ▹Lessworry for the owner ▹Fixed price ▹Easier mitigation of flaws – team work Advantages and Disadvantages Disadvantages ▹Loss of Control ▹Under-design a project ▹Cost of risks
- 11. Tools in Risk Identification TheWBS can be used to generate BIM(Building Information Modeling) or VDC(Virtual Design Construction) Tools Work Breakdown Structure(WBS) Product Specification Resource Plan
- 12. Identification and Allocation of Risks ▹ Terrainrisks – owner – soil testing and site surveys. ▹ Delay risks – contracts have provisions for levy of liquidated damages for delay (Section 74 of Contract Act, 1872) ▹ Design and construction deficiencies – due diligence ▹ Defect Liability Period – deficiency affects project performance – set period – 12 months. ▹ Handover and Quality risks – sound communicative and consultative process between the owner and contractor ▹ Force Majeure risks – comprehensive insurance coverage
- 13. Important Clauses in an EPC Contracts ▹Scope of work ▹ Obligations of the Parties ▹ Contract Price ▹ Payment Terms ▹ Extension of Time ▹ Indemnity Clause ▹ Event of Defaults and Cure Period ▹ Termination & Termination Payments ▹ Dispute Resolution
- 14. Dispute Resolution ▹ ADR Mechanisms -Conciliation - Arbitration ▹ Writ remedy
- 15. Conciliation (Arbitration and Conciliation Act, 1996) ▹ PartIII – recognition of conciliation in commercial disputes. ▹ Unless specifically excluded. ▹ Confidential process. Conciliator cant be presented as witness. ▹ Restriction during arbitral or judicial proceedings ▹ Settlement – same status as arbitral award.
- 16. Arbitration – Key aspects ▹Arbitral Tribunal – competent to rule on its own jurisdiction. Appeal lies only if Arbitrator decides he has no jurisdiction or has exceeded scope of authority ▹ Contractor = Govt. authority or PSU, matter referred to Permanent Machinery for Arbitration (PMA) of the Department of Public Enterprise, Government of India ▹ the Arbitration(Amendment) Act, 2015 provides for a time limit and fast track procedure (Section 29A and 29B) ▹ Cost – generally shared between parties
- 17. Writ Remedy ▹ Extraordinary jurisdiction– act of state unreasonable – writ maintainable. ▹ Existence of arbitration clause – bar but not absolute bar – exceptions ‘Facts and circumstances’ test.
- 18. Splitting of EPC contracts ▹ SplitEPC components into 2 or more contracts – onshore construction and service and offshore supply and procurement ▹ Taxability of payments received by foreign companies ▹ Revenue authorities try to bring entire contract within range of taxes. ▹ Recent rulings – offshore supplies are not taxable in India. ▹ Taxability depends on specifies of each case. ▹ Tax authorities have not accepted
- 19. The Case of LGCables Ltd. (LGCL) (2008) Facts: LG Cable Ltd(South Korea) awarded 2 contracts by PGCIL. 1) offshore supply of equipment 2) onshore services such as installation, erection and commissioning activities. Issue: Whether offshore supply is taxable. Held: Offshore supply is not taxable in India. Accepted contentions of LGCL (based on Ishikawajima Harima Heavy Industries Case) that all related operations such as consideration, transfer of title, etc was done outside India.
- 20. Statutory Compliances ▹Contract Labour (Regulationand Abolition) Act, 1970 ▹Building and Other Workers (Regulation of Employment and Conditions of Service) Act, 1996 ▹Approvals from state pollution board in terms of Water Act, 1974 and Air Act, 1981 and regulations under Environment Protection Act, 1986 ▹EIA notification 2006 – sectors that require Environment clearance ▹ Additional compliances – varies according to sector
- 21. Recent EPC contracts ▹ RVNL– RIInfra – INR7.7 billion EPC contract – third rail line between Jimidipeta and Gotlam (East Coast Railway)(April 2018) ▹ HPCL- EPC contract - US$200 million – licensing and commissioning – Petrofac. (march 2018) ▹ Indian Railways – first EPC contract with L&T in 2017 – 1050 crore contract for electrification of 781 RKM awarded by CORE and Konkan Railways. (mission Electrification plan) ▹ ECR road, Chennai (TNRDC and Ashoka Buildcon Ltd.)
- 22.
Editor's Notes
- #5 It should be noted that even where an EPC has the in-house engineering experience, it may still need to subcontract out design works where, for example, the facility requires specialist process engineering by a third party engineer
- #15 Arbitration - the Arbitration and Conciliation (Amendment) Act, 2015 provides for a time limit and fast track procedure (Section 29A and 29B) Insertions of new Section 29A and 29B( Time limit for arbitral award and Fast Track Procedure) : To address the criticism that the arbitration regime in India is a long drawn process defying the very existence of the arbitration act, the Amended Act envisages to provide for time bound arbitrations. Under the amended act, an award shall be made by the arbitral tribunal within 12 months from the date it enters upon reference. This period can be extended to a further period of maximum 6 months by the consent of the parties, after which the mandate of the arbitrator shall terminate, unless the Court extends it for sufficient cause or on such other terms it may deem fit. Also, while extending the said period, the Court may order reduction of fees of arbitrator by upto 5% for each month such delay for reasons attributable to the arbitrator. Also, the application for extension of time shall be disposed of by Court within 60 days from the date of notice to the opposite party. The Ordinance also provides that the parties at any stage of arbitral proceeding may opt for a fast track procedure for settlement of dispute, where the tribunal shall have to make an award within a period of 6 months. The tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without oral hearing, unless the parties request for or if the tribunal considers it necessary for clarifying certain issues. Where the tribunal decides the dispute within 6 months, provided additional fees can be paid to the arbitrator with the consent of the parties.
- #22 The contract was awarded for electrification of Delhi Sarai Rohilla – Rewari and Alwr – Bandikui – Jaipur – Phulera – Ajmer (353 rkm) section at a cost of Rs 594 crore and Roha – Verna (428 rkm) of Konkan Railway at a cost of Rs. 456 crore. Also, eight agreements were also exchanged between Zonal Railways and Public Sector Undertakings for 1,735 rkm of electrification projects valuing Rs 1,746 crore Reliance Infrastructure Limited has won a prestigious engineering, procurement and construction (EPC) contract for Rs3,647cr from Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for balance of plant (BoP) package and allied civil works for 2 x 800 MW supercritical coal-based Uppur Thermal Power Project at Ramanathapuram District in Tamil Nadu. The contract entails design, engineering, supply, erection, testing and commissioning of BoP package and allied civil works on EPC basis. The project is to be commissioned in 36 months. EPC division of the infrastructure major has won the contract in International Competitive Bidding amidst competition from leading EPC players like BHEL, L&T, Tata Projects and BGR. With this contract, Reliance Infrastructure Limited’s EPC order book now stands at over Rs15,000cr. With a clear focus to position itself in India’s growing infrastructure sector, and a multitude of projects in the offing in areas as diverse as power, metro rails, nuclear power plants, air quality control, marine, railways, ports, and mega infrastructure projects, Reliance Infrastructure Limited is targeting EPC opportunities worth Rs2 lakh cr and increase the EPC order book to Rs50,000cr by FY19.