SJVN Ltd Arun-3 HEP Bidding Document

Principle of EPC/Turnkey Contracts

1. EPC/Turnkey contracts – means that the contractor undertakes to design, procures and
constructs a project based on data pertaining to location, accessibility, roads, power supply,
status of land acquisition, forest clearance, environment clearance, rehabilitation and
resettlement, power transmission arrangements, desired production voltage, details of
hydrology, conceived layout, geology of area specifically in location of all structures,
seismicity of area and proposed earthquake parameter.

The contractor will work out his price based on the inputs given in the above para and
provide a certain percentage for contingencies to take care of minor variations. If during
model studies and seismicity coefficient studies major changes in design of structures are
required for safety of the structures cost of these shall be paid to the contractors at rates
given in the annexure to his contract or at mutually agreed rates.

2. In this type of contract, a team of contractor typically join together and form a
consortium/joint venture to bid for the whole project with the obligation to undertake
additional investigation, design, construction, supply, erection, testing & commission of all
the components of the project in accordance with the owner’s/employer’s requirements.

3. Risks are weighted more on the side of the contractor as compared with the package contract
approach. The mode of contracting does not alter the overall project risks, which depend
upon the technical features of the project, logistics involved and the physical conditions
under which the project is to be executed.

4. Unlike the normal practice of focusing on construction specifications, the technical

parameters proposed are based mainly on output specifications. Only the core requirements
of design, construction and operation that have a bearing on the quality and safety of the
project are to be specified and enough room is left for the Contractor to innovate and add
value. In sum, the framework focuses on the ‘what’ rather than the ‘how’ in relation to the
works to be delivered by the Contractor. This would provide the requisite flexibility to the

Principle of EPC/Turnkey contract EPC/Turnkey Basis (June-2019, Ver.1.0)

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SJVN Ltd Arun-3 HEP Bidding Document

Contractor in evolving and adopting innovative designs without compromising on quality of

the works.

5. Employer’s requirement describes the principle and basic design of plant on functional basis
and end results must meets the performance criteria specified by the employer.

6. Turnkey mode of contracting for power projects is used under the following conditions:
- Where the owner/employer requires to have a contract with total responsibility for
design and construction undertaken by the contractor and where the owner/employer
needs a high degree of certainty that the agreed contract price and time will not be
exceeded;
- Where the owner does not wish to be involved in the day-to-day process of the work;
- Where clear project performance criteria can be specified; and
- Where the proponent parties (sponsors, lenders and the owner) are willing to pay more to
the contractor and in return the contractor bears the extra risks associated with enhanced
certainty of price and time.

7. Turnkey mode of contracting is generally not used under the following conditions:
- Where there is insufficient time or insufficient information for the bidders to scrutinize
and check the owner’s /employer’s requirements and to carry out their designs, risk
assessment and estimation for submission of bids;
- If a project involves substantial underground works and in such cases the risks of
encountering unforeseen conditions may be so great that the lowest bid is the one
submitted by least knowledgeable bidder or reckless gambler rather than best bidder;
- Where the owner/employer intends to control the contractor’s work and substantial
freedom of action is not given to the contractor; or
- Where each progress payment is determined by the owner.

Principle of EPC/Turnkey contract EPC/Turnkey Basis (June-2019, Ver.1.0)

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