National highway contractors will start getting pecuniary rewards for early completion of work if a proposal by the Planning Commission is accepted by the road ministry and the National Highways Authority of India (NHAI) .
The commission has suggested payment of 1% of the contract price for every 30-day period by which the project is completed ahead of schedule, subject to a maximum of 5%. The aim is to encourage contractors to avoid any delay in project completion on their part, thus reducing chances of cost escalation. According to government data of August 2010, 65% of road projects taken up by the NHAI suffered time and/or cost overruns. However, there is no break-up of how much of the delay was caused by to reasons controllable by contractors and by factors outside their control.
The commission believes contractors deliberately delay some projects to extract extra money from the government. ?Contractors should be motivated for quick work on projects. Payment of bonus is one way to do that,? a senior Planning Commission official told FE , asking not to be identified as the matter is being debated with the NHAI.
The NHAI, which awards national highway construction projects, is against the payment of any bonus as it thinks a contractor’s job is to deliver the project on time. ?Why should they get bonus for performing the contracted job?? a person in the top management of the NHAI asked.
The road body is also concerned about increasing the liability of the government on account of bonus payments. ?The finance ministry and the finance department of the road ministry are against payment of bonus,? another NHAI official said.
The proposal is part of a new set of norms being discussed by the government to streamline work on road projects carried out on engineering, procurement and construction (EPC) basis. The government wants to develop stretches totalling 20,000 km into two lanes through turnkey EPC contracts rather than the current item-rate EPC contracts.
The idea behind the shift from item-rate contracts to turnkey contracts is to reduce the incidence of corruption from EPC projects. In turnkey contracts, companies bid after considering all the costs involved in developing a stretch but in the case of item-rate contracts, bids are placed for each item used for constructing a road. The Planning Commission believes item-rate contracts give contractors a chance to escalate costs in collusion with road engineers.
The commission has also suggested that contractors submit 7.5% of the project cost with the government for two years after the road is complete as performance guarantee. In addition to this, it has recommended that the maintenance period should be cut from five years at present to two years.
In the current dispensation, the rate of performance guarantee is 10% of the project cost. In addition, the NHAI also retains up to 5% of the total cost as retention money till the time it is satisfied of the successful completion of the project.
However, the NHAI is opposed to these two proposals too. ?Why should we change something that is working for the system?? the first NHAI official remarked when asked about the authority?s reservation on the proposals.
Reacting to the suggestions and ongoing debate between the Planning Commission and the NHAI, road contractors said the sector is likely to benefit if the suggestions are implemented in ?right earnest?.
?The government institutions involved in the discussion should act responsibly for the betterment of the sector as a whole,? a senior official of a contractors? lobby said.