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Experience in execution

under EPC &


Suggestions for fast-paced
implementation of EPC
Projects
in Indian Railway

Session by
Satya Kumar Vuppala
Larsen & Toubro
Sensitivity: LNT Construction General Business
Comparison of Design & Build and EPC
Design & Build (D&B)
• In a design-build contract, the client provides a high-level design outline, which the contractor has to
refine and carry out detailed engineering.
• Globally, FIDIC Yellow book is followed in D&B Projects.

Engineering, Procurement & Construction (EPC)


• In an EPC contract, the client provides only a concept design and functional requirements. The
Contractor has to design the entire solution.
• Globally, FIDIC Silver book is followed in EPC / Turnkey Projects.

• In India, various clients generally use these terms interchangeably. We generally have a model on
D&B lines.

Sensitivity: LNT Construction General Business


Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-paced implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


L&T Overview | Technology, Engineering , Construction, Projects, Manufacturing and Financial Services

Established in 1938

Gross Revenue USD


21b (2019-20)

Market Capital USD


26b

~ 53,000 Employees

Rating
CRISIL (S&P) AAA
ICRA (Moody) AAA

Landmark Projects in
30 countries

‘Top Indian Company in


Construction’ - Dun &
Bradstreet

Ranks 24th - ENR’s Top


250 Global 2018

Ranks 22nd - World’s Best


Employers for 2018

Sensitivity: LNT Construction General Business


Mainline Railways|
Civil, Trackworks, OHE, Traction and Systems for Freight Corridors and Indian Railways
Civil & Track
Bridges and Viaduct Trackworks Tunnel

Civil & Trackworks through High level of Mechanisation | WDFC –2113 tkm, 228 major and 1460 minor bridges | EDFC – 222 tkm, 37 major and 395 minor bridges

Systems Works Power Supply, Traction Signalling & Telecom


OHE

High Speed Execution Through Wiring Train and Mechanisation Moving Towards ETCS Level 2 | 897 tkm
2x25 kV Electrification (3125 tkm in WDFC and 1024 tkm in EDFC) involving Command Center, EI and GSM-R.

Executing Largest Scope of JICA funded WDFC and Significant World Bank funded sections across all domains on EPC Basis
Sensitivity: LNT Construction General Business
Mass Transit Rail System| Covering Entire Spectrum

Metro Systems Construction


Track Works Power Supply, Traction AFC Telecom
Delhi Metro – Phase 3 Delhi Metro – Phase 3

Riyadh Line 1 & 2

463 tkm of Metro and LRT Trackworks 8 RSS/TSS |146 ASS |470 tkm Traction Auto. Fare collection (AFC) System Turnkey Telecom system & TETRA
|350 tkm OHE Radio Comm. System
Metro Civil Construction
Viaducts Depots & Yards Stations
Riyadh Metro Line 3 Hyderabad Metro – Riyadh Metro Line 3
Uppal Depot

163 km of all types of viaduct construction 6 Depots and 3 Stabling Yards 136 Elevated Metro Stations

Civil and Systems Works at Mauritius, Riyadh, Doha, Dhaka, Delhi, Mumbai, Hyderabad, Chennai, Lucknow and Kochi
Sensitivity: LNT Construction General Business
Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Dedicated Freight Projects (Western & Eastern) | Infrastructure to Substantially improve freight share
of Railways
Owner : Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL)
(SPV under Ministry of Railways)
Role : Planning, Mobilization of finance, Tendering, O&M
CRISIL rating CCR - AAA | Moody’s [ICRA]AAA
WDFC : 1504 km| Electrified Double Ludhiana EDFC : 1856 km | Ludhiana to Khurja -
line (2X25 KV) | 1504 km Electrified single line 389 km | Khurja
Dankuni – Elec. double line 1451 km
Dadri Khurja
Funding WDFC Funding EDFC
WDFC Rewari EDFC
 Overall USD 7 billion 1504 km 1840 km  Overall USD 4 billion
 JICA funding USD 5.8 b Jaipur  Ludhiana – Mughalsarai section
 Land cost USD 1.2 b Kanpur funded by World Bank USD 2.7 b
Allahabad  Mughlsarai – Sonenagar section
Mughalsarai funded by Indian Railways
 Sonnagar – Dankuni : PPP
Sonnagar
Project Management Consultant Ikbalgarh Project Management Consultant
Features & Technology
 Avg. speed increase from 40 kmph to 75 kmph Dankuni
Makarpura 15,000 t haulage capacity (existing 4000 t)
(Vadodara)  Allows 10 min headway thru Automatic Block Signaling
Freight :  GSM-R based Communication
Containers traffic to all ports  High Rise OHE (WDFC) | 2x25 KV, 50 Hz AT Traction Freight :
 Train Protection & Warning System (Equiv. to ETCS 1) Coal for the power plants from
Mumbai, Pipavav, Mundra, Kandla |
JNPT  Free from all Level Crossing (689 RUBs & 314 ROBs) Coalfields | Bulk Materials
Imported Bulk Materials |
Sensitivity: LNT Construction General Business Dedicated Freight lines to relieve capacity bottlenecks
Dedicated Freight Projects (Western & Eastern) | Executing Projects in Civil & Track, Electrification,
Signalling & Telecom - Design, Build, Supply, Installations, Testing & Commissioning
Civil & Track
Ludhiana 1,388 tkm (1 billion) CTP -1 & 2
Pilkhani JICA Funded
725 tkm (708 m) CTP - 3R
WDFC
CP 303 India’s Largest Design & Build Civil & Track Laying Project | 160 Major
Dadri Bridges 1150 Minor Bridges| Earthwork 64m m3
Khurja
Rewari
CTP 14 220 tkm (427 m) CP - 303 World Bank
EDFC
World Bank Funded EDFC Project | 37 Major Bridges | 395 Minor Bridges |
CTP 1-2
38 Major RUBs | 193 Minor RUBs
Kanpur
New Bhaupur Railway Electrification
EMP 4 Mughalsarai 2,120 tkm (462 m) EMP - 4
JICA Funded
CP 204 897 tkm (181 m) EMP- 16
Chillarpattu WDFC
EDFC One of the largest Elec. Projects in the world | 2x25 kV | Hi Rise OHE
Ikbalgarh Sonnagar IR Funded
CTP 3R

290 tkm (47 m) EDFC


EDFC 881 tkm (126 m) CP-204 World Bank
Dankuni
Integrated Sys. Project | 2x25 KV Traction and OHE along with S&T, SCADA
Makarpura
(Vadodara)
Signalling & Telecom
897 tkm (94 m) STP 17 JICA Funded
STP 17

EMP 16
WDFC
Integrated Signaling Project | Command Center, Automatic Block
Signalling, FOTS and GSM-R
JNPT
Integrated Project
WDFC Association 72% Civil & Track | 100 % Electrical | 33% S&T 316 tkm (567 m) CTP 14 JICA Funded
EDFC Association 21% Civil & Track |37% Electrical and S&T Works Integrated Civil & Track, Tunnel, Electrification Signaling & Telecom.

Executing largest scope of JICA funded WDFC & Significant World Bank funded sections in EDFC across all domains
Sensitivity: LNT Construction General Business
Traction & Power Supply | 25 kV Traction System | Executing Indian Railways first Large Scale EPC
Electrification Project under Mission Electrification & Konkan Railway in challenging & difficult terrain
1. Roha (Mah) - Verna (Goa) of Konkan Railway (428 rkm / 582 tkm) 2. Delhi Sarai Rohilla - Rewari, Alwar – Bandikui – Jaipur - Phulera - Madar
(Total 353.8rkm / 780 tkm)

Tractor Mounted Auger

Roha

Double Track
Veer
Major portion of KR 70
Khed
Tunnels, 125 bridges

Chiplun
Single Track
Ratnagairi

Rajapur

Kudal
Samantwadi

Pernem

Verna

Sensitivity: LNT Construction General Business Paradigm shift in contracting Electrification Projects
Projects for Private Developers | Connectivity to Ports and Power Sector developers

OPGC, Orissa – India Nabha Power Limited, Punjab - India


45 km link to Power Plant NABHA
POWER

Applied
Energy
Services
USA

• 68 Km MGR Railway line for 2X660


MW Power Plant
• Water Pipeline from Intake channel
to Coal mine

Sterlite Energy Limited, Jharsuguda, Orissa-India Dhamra Port Company Ltd (DPCL), Orissa-India

45 Km Coal connectivity for


4 X 600 MW Power plant

• 66 Km port connectivity from Mainline


• Int. Railway Project along with Cent. Traffic Control

Sensitivity: LNT Construction General Business Most preferred EPC partner for Global players in India 12
Dedicated Freight Projects | Overview of Civil & Track

Interface WDFC Civil & Interface Electrical


Signalling
Trackworks Works
Works
Co-ordination with Client, PMC Bridges

Trackworks Earthworks Structures


250 m Rail panels, Track EW Cutting / Tunnel
Laying, Ballast Packing, Blasting
Distressing etc. Viaducts
Filling
Earth Works Supply of Ballast, Rails, Major Bridges Trackworks
Track Fittings etc. Blanketing
Rail Fly Overs (RFO)
Stations Retaining
structures Minor Bridges
Integrated Testing &
Commissioning Longitudinal &
cross drains

Sleeper Production Tunnel

Sensitivity: LNT Construction General Business Diverse Construction Challenges across domains
Railway Project Execution | Rail Stacking Yard, Welding to Form 250m Long Welded Rail at 5 locations
(Bhagega, Marwar, Bandu, Timba and Gulaothi)

25m rail being welded to


form 250m Rail Panels Handling Large quantities of Track Elements and Making Long Welded Panels
(250 m) using FBW

Ultrasonic Flaw Detection -


Stringent quality control

Weld quality ensured to Factory Standard | Minimal Logistic & Re- Handling of LWRs | 210,000 tons Rail Supplied
Sensitivity: LNT Construction General Business
WDFC Civil & Track Project | Trackworks - World Class Technologies and P&M Deployed | Integration of
Multiple Machines - Ballast Laying, Sleeper & Track Laying (NTC), Tamping, FBW
New Track Construction Machines at - CTP 1-2 | Both Harsco and
Plasser machines being used

Ballast Regulating Machine Unimat and Duomatic (Plasser) Tamping (Harsco- Mark 6)

Sensitivity: LNT Construction General Business High degree of Mechanisation for faster project completion along with better quality
Railway Projects Execution | Sleeper Production in CTP 1&2
Automated Sleeper Production for Quality & Delivery through Long Line Technology
Production @ 3200 Sleepers / Day - 100% higher than Conventional ‘Stress Bench’ Method Concreting

Sleeper Transportation

Curing Sleeper Testing Wire laying

Video

Sensitivity: LNT Construction General Business Complete Automation provides better Quality, Finish & Higher Production
Railway Projects Execution | Construction of Bridges

Extensive use of Precast Tech.


• Spans of Major Bridges : Post/Pre
tensioned beams
• Minor bridges : Box segment type

Standardised Pier cross sections


• Optimized Formwork
• Enables usage of Slip forming for
Speed of Construction

Mass Production
• 8 Precast RCC Box Yards
• Casting Yards dedicated to a
particular Beam type
Piers Constructed through Slip Forming

All RuB using Std. Box segments Production and Transportation of Box sections Tandem lifting of heavy precast Girders
Sensitivity: LNT Construction General Business Construction over 228 Major Bridges and 1460 Minor Bridges in WDFC
Traction & Power Supply
Foundation/Concreting Mast Erection with Grouting Cantilever Assembly with SPS Wiring - Testing - Inspection
Auger on crawler based RRV

Mast Delivery
Insulator testing &
Auger on truck based RRV Bracket Assembly

Mast
Grabber at
EMP 4 site
Platform to reach
12m mast
Cylindrical Foundation

 Mechanisation increases  Safe working while  Brackets assembly &


productivity by 5-6 times adjacent to Live Track Testing in controlled  Fully Mechanised OHE -
assembly line Simultaneous Stringing of
 Flexibility to work in all  High Productivity 10min / Conductors under tension
possible stages of Mast as against Derrick  Efficient supply chain ‘JIT’  3 times High Productivity
formation/track Method delivery at work front

Sensitivity: LNT Construction General Business High Level of Mechanisation in Mega Projects to achieve faster progress
System Integration | Executing Multiple Integrated Mass Transit & Mainline Projects

Mauritius LRT - Integrated LRT Hyderabad Metro - Largest Metro Dhaka Metro - D&B Electrical & DFCC CTP-14: Integrated package for
System | Civil & Systems Transit on Concessionaire (DBFOT) Mechanical Systems Civil & Track, OHE and S&T works

Overview Overview Overview Overview


26 rkm| 56 tkm | 19 Stations | 3 high density lines | 71 km 66 20 rkm | 62 tkm | 16 Stations | 128 rkm| 316 tkm | 26 Major Bridges
Stations | 3 Depots | 6 Phases Maintenance Depot
1 Depot | 18 Tram sets | 1 Tunnel | 5 Stations
Systems Works
• Elevated & At-grade section, • 25 kV OHE • DC OHE • 2x25 kV OHE
Roadworks • TSS/Aux.Sub Station • RSS/ TSS/ ASS /Aux • Traction Sub station
• Ballastless, Ballasted & Embedded • S&T, CBTC Train Control • Energy Storage Sys.(ESS) & SCADA • Aux. substation
Track • Operational & Command Centre • S&T, CBTC Train Ctrl., LTE Telecom • SCADA
• 750 V DC OHE & Power Supply • Heavy Metro Rolling Stock • Operational & Command Centre • S&T
• 22 kV Aux Sub Station • Ballasted & Ballastless Track • Ballastless Track • MSDAC & SSDAC Train Detection
• Control & Monitoring System • AFC • AFC | PSD | Lifts & Escalator • Train Management system
• 45 mts long, 300 pax capacity Tram • Depot Systems • Depot Systems • GSM-R

Sensitivity: LNT Construction General Business Amongst Largest ‘Full Range System Integrator’ for Railways
Mauritius LRT| Design & Build Turnkey Project – Track to Train
 Route - 26 Kms Depot at Richelieu
 Stations - 19 (2 Elevated)
 Viaduct - 3 Kms, At Grade – 23 Km

Trackworks
 Ballasted | Ballastless Plinth |
Embedded

Power Supply and OHE Operations Control Center

 750 V Traction Power Supply System


 22 kV Auxiliary Sub Station
 Auxiliary Power System

Control & Monitoring


 Centralized OCC
GRNW Bridge Phase – I (13 Km) commissioned on 3rd
Oct’19 by PM Modi and Mauritius PM
 Drive
CBTC on Sight signaling Anirudh Jugannauth
 AVLS & TSPS
 Radio Comm. based on LTE
 Electronic Ticketing system
 PIS, PAS, Telephone system, CCTV

Rolling Stock
 Low floor LRV - 18 trains sets (7 mod)

First Indian Company to execute an Integrated LRT project overseas valued – 575 Mn USD |
Sensitivity: LNT Construction General Business Priority section (13 km) completed in record time of 2 years 20
Hyderabad Metro | World’s Largest Mass Transit Project on Concessionaire Model

SPV of L&T

 71 Km Viaduct
 3 Corridors , 66 stations
 166 Tkm Trackworks
Traction Sub
 25 kV AC Traction System station
 33 kV Auxiliary Power
Supply
 SCADA Uppal Depot

 Latest CBTC technology


for S&T
 Operation Control Centre
 3 Depots
 Heavy Metro

Major Priority Sections in Operation since Nov 2017 | Current Ridership ~ 420,000 Pax daily
Sensitivity: LNT Construction General Business
Dhaka Metro | Design & Build Electrical & Mechanical Systems |JICA Funded | 455 Mn USD

Communication based
 Ballastless track work (43 TKM) Train Control (Moving
Block Signalling) 1500V DC Overhead
 Ballasted track work Depot (19TKM) Traction

 Electrical works consisting of EHV


Cabling
 2 Nos. Receiving Sub Stations (RSS)
 33 kV cable ring mains
 16 Nos. Auxiliary Sub Stations (ASS)
 8 Nos. 1500V DC TSS (TSS)
 DC Overhead Catenary System
(OCS)
 Energy Storage System (ESS) &
SCADA Ballastless
Trackworks

 CBTC AFC CBTC

 Radio Comm. based on LTE

 Automatic Fare Collection


 Platform Screen Doors
 Lifts and Escalators
Platform Screen Door
Integrated Systems Project | High level of interfacing with Viaduct & Elevated Station Packages, Depot and Rolling Stock
Sensitivity: LNT Construction General Business
Dedicated Freight Corridor: CTP 14 | Integrated package for Civil & Track, OHE and S&T works

Tunnel Viaduct Constructing Launching Girder


 5 stations

 NATM Tunnel (1 Km)

 Viaducts (3 Km )

 Ballasted track work (322 TKM)

 2x25 kV AC Overhead Traction


System (OCS)

 Traction Sub Station (2 Nos)

 SCADA Traction Sub Station GSM-R based Telecom System

 Electrical works consisting of EHV


Cabling

 Electronic Interlocking

 GSMR based Telecom System

Sensitivity: LNT Construction General Business India’s Largest Integrated Composite Mainline Project
Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


IR Project Model (RVNL, CORE, Zonal)
Schedule of Rates (SOR) Based
Details Free Issue
Typical Projects
Client Tkm Value Scope Items %
Sambalpur - 550 Cr.
RVNL 236 Civil, Track S&T Rails , Sleepers 30
Titlagarh (3 pkgs)

Rewari-Manheru RVNL 82 215 Cr. Civil, Track & Elec. Rails & Sleepers 30

Bharuch - Dahej RVNL 83 220 Cr. Composite Rails & Sleepers 30

Conductors Steel
Moradabad - Roza CORE 428 55 Cr. Electrification 60
Struc. Bharuch-Dahej Project (Track, OHE, S&T)

Features Issues
 Quantities and Unit Rates provided by client  Leads to distorted unit rates vis-à-vis market rates
 Speculative bidding due to Variation in qty. and difference in
 Bidder allowed to quote % (above/below/at par) on the SOR SOR rates vs actual rates

 Free issue of items - Rails, sleepers, conductors, transformers by  Timing Mismatch of free issue items
client. (30-60 % of project cost)  Availability of Traffic & Power Blocks
 Design and Engg. under the scope of client. Small size Packages (<
200 Cr.)  No Scope for Value Engineering and Mechanisation not viable

Sensitivity: LNT Construction General Business Project time overrun typically more than 100%
Design Build EPC Model (DFC)
Milestone based Lumpsum
Civil & Track Electrification Signalling & Telecom
CTP 1&2 1388 Tkm 6700 Cr. EMP 4 2120 Tkm 3097 Cr. STP-17 897 tkm 631 Cr.
Projects
WDFC | EDFC CTP 3R 725 Tkm 4744 Cr. EMP16 897 Tkm 1213 Cr.
CP-204 881 Tkm 847 Cr.

 Alignment Design and Optimisation  Equipment rating/sizing based on  Optimisation of Signalling system
Traction Power Simulation architecture
 Bridge Design Optimisation meeting
Contractor Scope
in Design & codal requirements  Optimization of Span, Mast sizes,  Design of Telecom Network
Build –
 Flexibility to Choose Sleeper tension length etc. including GSM-R

manufacturing technology  Mechanised OHE Installation  Choice of State-of-Art Equipment

 Mechanised Track laying

Contractual FIDIC Conditions | Risk at the Right Place | Milestones & weightages defined by client | Reduced Interfaces amongst
Features of
D&B Model multiple Contractors | No Free Issue | Value Engineering | Best Practices

Sensitivity: LNT Construction General Business Projects 10 times in ‘SIZE & SCOPE’ being executed in ‘SAME TIMELINE’
Advantages of EPC Model
 Speculative bidding avoided
 Bidder has to work out the cost of each activity / Item
 Transparency in rates and quantities

 Risk at the right place


 Quantity as well as cost risk lies with Contractor
 In case of change in scope, the risk is borne by Employer.

 Single Point Responsibility with Contractor

 Healthy participation
 Eastern Dedicated Freight Corridors(EDFC) Tenders on D&B turnkey basis
 Participations from 5 consortiums

 Flexibility in efficient designs without compromising on quality and the safety

 EPC shall facilitate improved and modernized project execution capabilities

 No time and cost overruns due to delays in issue of Designs and Drawings

 Milestone based pro-rata payments

 Promotion of Value Engineering & best practices


Sensitivity: LNT Construction General Business
Value Engineering | Example
Reinforced Soil Earth - Use of Geo slope & RE Wall in Railway Embankment
DFCC (CTP 1 & 2)
Alternate methods to RCC Wall
RCC Wall is mandated along the entire alignment Slope Reduction thru
(95% along the existing IR line) Reinforced soil
RoW
Reinforced
At certain places RoW is too tight for RCC wall Engineered (RE)
Wall
Solutions
1. Slope Reduction thru Reinforced soil 3.5 m Service Road
2. RE Wall

RE Wall Construction Sequence of ‘Reinforced Engineered wall


Wall’ (RE)

Advantages
 Easier and faster construction
 Min. infringement on IR side
 Better Finishing
 Improved Aesthetics
 Used mostly in International Projects First time in IR

Sensitivity: LNT Construction General Business Better Quality & Finish along with enhanced Construction Speed
Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Composite EPC Projects (Civil, Track, OHE and S&T): Current Status
1. NWR / Phulera – Degana: Civil, Track, and S&T works for 109 Kms of doubling works.
• Client Estimate: INR 482 Cr.
• Tender Result:
o M/s Punj Lloyd Limited - INR 477 Cr.
o M/s Jaiprakash Associates - INR 630 Cr.
o M/s AFCONS Infrastructure Limited - INR 641 Cr.
o M/s Larsen & Toubro Limited - INR 811 Cr.
o M/s Ircon International - INR 833 Cr.

 Status: L1 bidder targeted client estimate. However, after a few months of execution the project did not move because of non workable prices and
the project was finally terminated.

2. RVNL / Jimidipeta – Vizianagram: Civil, Track, OHE and S&T works for 105 Kms 3rd Line works.
• Client Estimate: INR 752 Cr.
• Tender Result:
o M/s Reliance Infrastructure Limited - INR 774 Cr.
o M/s Larsen & Toubro Limited - INR 864 Cr.
o M/s NCC Limited - INR 1238 Cr.

 Status: L1 bidder understandably targeted client estimate during bidding. However L1 bidder did not submit the PBG and the project was terminated.

3. CR / Itarsi Nagpur : Civil, Track, OHE and S&T works for 94 Kms of 3rd Line works.
• Client Estimate: INR 665 Cr.
• Tender Result:
o M/s AFCONS Infrastructure Limited - INR 930 Cr.
o M/s Larsen & Toubro Limited - INR 1010 Cr.

 Status: Bidders did not target the client estimate and submitted reasonable workable prices. However, as the client estimate was too low compared
to the L1 bid the tender could not be awarded and was discharged.

Sensitivity: LNT Construction General Business Low Client Estimates led to the failure of EPC model in composite projects
Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement

Pre-Qualification Criteria:
• Technical Capacity of the tenderer should be evaluated based on the past experiences in Railway projects only.
• Participation in EPC tenders should be limited only to contractors with EPC experience.
• Mandatory participation of all JV stake holders in project execution will ensure completion of project in time and
Prevents credentials borrowing from foreign companies who have limited contribution in project execution.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement

Site Visit & Geo-Tech Investigation:


• Site Visit not organized by client
• Necessary Permission to undertake Geotech investigation generally not granted by Client in Doubling / Third
Line Projects

Recommendation:
• Site visit on motor trolley or inspection car should be organized by client to enable the contractor to visit all the
critical locations in the project stretch.
• This shall enable the contractor to investigate the critical locations in a detailed manner during a separate
site visit.
• Necessary Permission to undertake Geotech investigation should be granted by client.
• For the tenders which involves S&T scope of works, client should organize a separate site visit to model stations
and provide necessary access to the contractor into IPS Rooms, Relay Rooms and Important Location Boxes
for observation and collecting necessary details.
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement

Ambiguity in Project Scope in Bid Documents

Any ambiguity in project scope shall lead to speculations and incorrect assessment of the project cost.

Ex : CR Ghoradongri Chichonda Tender.


Tender Abstract : Toe wall ( RCC)/Retaining Wall (RCC )=12000m. The length provided above is for guidance only,
the same may increase or decrease as per design proposed by the Contractor and approved by the Authority. Any
change in length shall not amount to variation.
Estimation by L&T : Toe wall ( RCC)/Retaining Wall (RCC )=20000m

Recommendation:

• Above scenario shall lead to speculations. In EPC tenders, such quantities should not be defined by the client
and it should be left to the EPC tenderer to design and estimate.
• If quantity to be executed is defined in the tender, it should form the basis of assessment for client and
contractor. Any variation (increase or decrease) during the project execution shall be treated as a variation.
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement

Change of Scope & Variation:

1. Minor change in scope like change in yard layout during execution stage, construction of platforms for higher
design load etc. are not being qualified for variation in few projects which creates uncertainty amongst the
contractors.

2. Variation orders are generally issued towards the end of the project which delays the completion of project within
specified timelines.

Recommendation:

Any change in scope should clearly constitute a variation since EPC doesn’t mean any change in scope should be
borne by the contractor.
Any variation should not be issued towards the end of the project to avoid delays in project closure.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Provision for Quantity Risk:


5% of the cost shall be considered towards quantity risk in the EPC estimate

Provision for additional resources / acceleration:


2% - 3% of project value towards acceleration shall be considered in the project estimate for projects with tight
timelines.

Provision for Idling of Resources during Project Execution:

Suitable provision towards idling of men and machinery should be considered in the estimate.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Supply Items

Railway estimate for major items like Copper conductor, Steel structure, P-way Supplies, Cement, Steel, Cables
etc. are generally derived from the Zonal Railway’s LARs. While capturing the rates from LARs, recent market
fluctuations in the prices due to the change in prevailing commodity prices as on base date is not captured.

Recommendation:

It is recommended that latest market quotations with PV formula should be collected while preparing estimates.
The estimate needs to be updated using the PV formulae provided by the vendors during the tendering stage to
revise the estimate appropriately.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate
Estimate for Earthwork

• Various elements involved in earthwork cost are as follows:

SN Cost Element Rate Remarks

1 Owner’s Royalty Site Specific.


Realistic Owner’s Royalty to
Varies based on the project
be included in the estimate.
2 Government Royalty location.

3 Excavation
Extra rate for transportation
4 Transportation (Up to 4 Km) ~ Rs. 140 - 150 / Cum * of earth beyond 4 km is ~Rs
15 / Cum / Km.
5 Processing (i.e. Grading, Rolling etc.)

* Note: This rate shall increase for areas with difficult terrain, places with higher than average rainfall, Non-availability of Local
P&M etc.
Generally the estimate are prepared based on LARs of similar project in nearby locations and not based on the prevalent market
rates.

Recommendation: It is recommended that employer’s representative or engineer should carry out local survey in the region to
assess the ownership royalty based on the prevalent Demand – Supply.
It is also recommended to add suitable differential of transportation charges based on actual leads calculated for the project.
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Estimate for Blanketing

• Blanketing is a critical item in terms of cost composition for projects including civil scope of works.

• For blanketing, there are criteria defined by RDSO for gradation & CBR which are important factors deciding the
actual cost of blanketing for a project.

Recommendation:

It is recommended that employer should insist engineer / consultant to submit the test reports to determine the
blending ratio which has been considered to assess the cost for blanketing. Accordingly blanketing cost should
include the cost of Sand / Crusher dust / Aggregates etc. based on the blending ratio.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Estimate for Ballast

It has been observed that in various tenders, Ballast rate is considered from the nearest available quarry /
crushers. However, criteria for ballast as per RDSO is stringent and we have experienced that only few quarries
available near the project section meets these specifications.

Any change in source of Ballast shall lead to additional lead which in turn shall increase the cost of ballast (Current
transportation rate of ballast varies between Rs. 5 to 7 / MT / KM across the country)

Recommendation:

It is recommended that Sourcing of Ballast from suitable quarry which meets the specification should only be
considered in the estimate after duly factoring the prevalent Royalty rates & Local transportation rates.

Employer should insist engineer / consultant to submit the test reports of the material from the quarry considered
for estimation purpose
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement |
Project Estimate
Major Cost Elements in Concrete
SN Cost Element Rate
1 Cement
Site Specific.
2 Coarse Aggregate Varies based on the project
location.
3 Fine Aggregate
4 Concrete Production
5 Concrete Transportation ~ Rs. 2000 - 2500 / Cum
6 Concrete Laying

It has been observed that Concrete rates from nearby projects are being considered for cost estimation. However, the LAR may not
be valid due to various reasons like different nature of work, Batching plant requirement etc.
In composite projects, continuous availability of workfront for concrete is not available due to lack of Access to Site within defined
timelines, delay in design approvals, design clearance from concerned zonal railways etc. and hence batching plants in composite
project is utilised only about 20-25% of its rated capacity.
Extended stay of batching plant at site becomes inevitable to complete the entire scope of concrete works. Other Machinery
associated with batching plant like wheel loaders, transit mixers and concrete pumps etc. also ends up with extended stay at site.
This increases the cost of concrete production, transportation and laying beyond planned cost.

Recommendation: It is recommended that in addition to considering actual prevalent rates for material for concrete, Production,
transportation & laying cost to be considered around INR 2500 / Cum for composite works
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement

Traffic Block / Power Block

Total aggregate hours of traffic / power block are generally mentioned in EPC tender. However, minimum
continuous duration of the block is not mentioned which creates uncertainty in mobilization of Workmen and P&M
for block working.

Recommendation:

Minimum continuous duration of the block should be clearly indicated in the tender and the same shall be followed
during execution in spirit.

Sensitivity: LNT Construction General Business


Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Key Enablers for development and execution of EPC project |
A win-win approach

Tenders to be floated after the completion of Pre-requisite activities like completion of Land acquisition
and approval of DPR.
Collaborative Peripheral structures like RUB/RoBs on level crossings should be awarded Integral or initiated earlier
approach than D&B Civil Works.
Between Single window for approval / clearances
‘Contractor’ and Approval of drawings / layouts within timeline specified in tender
‘Employer ’
PMC should be empowered, updated in global practices and ramp up in proportion to project progress
Steering committee involving all stake holders (IR, NGT, PWD , Funding agency, Client, Contractor)

Holistic and realistic scope of the project should be defined in the tender.
Atleast 90% of Land should be made available before floating tenders
NOCs for provision of Limited Height Subways (LHS) should be obtained from relevant department
Detailed Survey or assessment of utilities shall be carried out before floating tender and all such
Pre-requisites utilities should be removed by railways before commencement of the project
Forest & environmental clearances should be obtained before floating tender
Conceptual Yard Plans and Tentative Alignment Drawings
Details, specifications of buildings, structures & track with preliminary drawings
Details, specifications of interlocking and signaling system

Sensitivity: LNT Construction General Business


Key Enablers for development and execution of EPC project |
A win-win approach

Large scale EPC Projects (> 200km) would enable high degree of mechanisation
Project Size &
Scope Integrated EPC Projects - Eliminates dependency on the slowest contractor (weak-link) that might hold
the commissioning of a Railway Line

Tender estimates should be realistic to facilitate early finalization of tender

Tender Aspects Strong financials and mandatory participation of all JV stake holders in project execution - Ensures
completion of project and Prevents credentials borrowing from foreign companies who have limited
contribution in project execution

Contract Price weightages of various activities should be realistic


• Recent guidelines from Model EPC Agreement regarding payment milestones should be followed
Cash Flow in Spirit.
• Contractor should be allowed to sub-divide the milestones and payment should be made for each
stage of work after necessary approval from the client

Sensitivity: LNT Construction General Business


Flow of presentation

Experience of L&T in execution under EPC


• L&T Overview
• L&T in EPC Projects
Suggestions for fast-pace implementation of EPC in Indian Railway
• Why EPC ?
• EPC Tenders in IR – Status So Far
• EPC Projects : Issues & Recommendations
• Key Enablers
• Conclusion

Sensitivity: LNT Construction General Business


Conclusion |
EPC benefits the client for faster execution and adoption of Global Practices

• Optimized Design reduces overall project cost


Benefits of EPC
Projects to Client
• Value Engineering and adoption of latest practices.

• Speedy Execution through Mechanized Construction

• Reduces interface amongst multiple Contractors

• Effective Project management

• Less Technical Management and site coordination – Lean Organization for client

Success of EPC project • Adopting Best Practices


Depends on
• Having Key Enablers in place

EPC Model is most suited for faster implementation of upcoming projects like Capacity Augmentation / Doubling projects of
Sensitivity: LNT Construction General Business Indian Railway, High Speed Rail, and upcoming DFC corridors
Thank You !!!

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement

Unfavourable Payment Milestones

The milestone-based payment terms in EPC contract are unfavourable and affect the cash flows adversely. Our
detailed internal analysis in the recent EPC tenders shows that even with mobilization advance and a practical
schedule, the project will have negative cash flows for significant duration. (Average - 10% and Peak - 15% of
CV). Such a high negative cashflow significantly affects the performance of the project and leads to delay.

Recommendation:

Payment Milestones in future tenders should be modified to assist neutral cashflow which shall facilitate timely
project execution. Employer should facilitate the contractor by approving sub-milestones during the execution of
the project.

Example

Sensitivity: LNT Construction General Business


Payment Milestones – Existing vs Proposed | Earthwork

Item Existing Schedule Existing Payment Terms Proposed Schedules Proposed Payment Terms
Earthwork in embankment Unit of measurement is Earthwork in embankment The Unit of measurement is
and cutting including linear length. Payment of and cutting includinglinear length along
compaction up to bottom of each stage shall be made on compaction so as to achieve alignment. Payment of each
the sub-grade a pro rata basis on 50% of desired height below stage will be made on pro-
completion of a stage in a bottom of subgrade layer rata completion of linear
block section or in a length Balance earthwork in length per weightage given
of 10 km, whichever is less embankment/ cutting in this Schedule.
Earthwork including compaction up to
bottom of subgrade layer
Earthwork in sub-grade Earthwork in sub-grade
complete in all respects complete in all respects
Providing blanketing layer Providing blanketing layer
complete in all respects complete in all respects

Sensitivity: LNT Construction General Business


Payment Milestones – Existing vs Proposed | Minor Bridges

Item Existing Schedule Existing Payment Terms Proposed Schedules Proposed Payment Terms
On Completion of Cost of each Minor Bridge On Ground Clearance, Completion Cost of each minor bridge will be
Minor Bridge shall be determined on of Foundation including Testing if determined on the basis of the
pro rata basis with respect any length of the particular Bridge
to the total linear length of (measured along the alignment) in
On Completion of RCC Boxes,
the Minor bridges. proportion to the total length of
Abutment, Piers for Slab Bridges
Payment shall be made on minor bridges required for that
the completion of a Minor Project. Payment of each stage for
Bridge. On Completion of Works as per a bridge/ culvert will be made on
Minor Bridges Drawing like -Deck Slab along with the completion of the relevant
Walkway, Railings, Wing Walls, stage as per the weightage given in
Return Walls. this schedule.
On completion of balance works
as per Drawing like Back Filling and
Approaches, all types of
Protection Works, Pitching,
Turfing, River Training Works if any

Sensitivity: LNT Construction General Business


Payment Milestones – Existing vs Proposed | Track works
Item Existing Schedule Existing Payment Terms Proposed Schedules Proposed Payment Terms
Ballast supplying, laying, Unit of measurement is Ballast supplying, laying, compacting
The Unit of measurement is
compacting initial layer oflinear length. Payment of initial layer of 200 mm to facilitate
linear length along
200 mm to facilitate each stage shall be made mechanized track laying. (Note : 80
alignment. Payment of each
mechanized track laying on a pro rata basis on % of total payment will be made stage will be made on pro-
completion of a stage in a against supply of Ballast) rata completion of linear
block section or in a length per weightage given
Mechanized track laying in length of 10 km, Mechanized track laying in block in this Schedule.
block section between whichever is less section between station limits on
station limits on PSC PSC sleepers complete in all
sleepers complete in all respects
respects
Track Works
Mechanized track laying in Mechanized track laying in yards
yards (within station limits) (within station limits) on PSC
on PSC sleepers complete in sleepers complete in all respects
all respects
Ballast supplying and laying Ballast supplying and laying final
final layer to facilitate lifting layer to facilitate lifting of track,
of track, making of full making of full ballast cushion and
ballast cushion and profile, profile, distressing of long welded
distressing of long welded rails, machine tamping of track.
rails, machine tamping of (Note : 50 % of total payment will
track.
Sensitivity: LNT Construction General Business
be made against supply of Ballast)
Payment Milestones – Existing vs Proposed | Staff Quarter Buildings

Item Existing Schedule Existing Payment Terms Proposed Schedules Proposed Payment Terms
Construction of staff Unit of measurement is On completion of Foundation up Cost of each building will be
quarters complete in plinth area in square to plinth level as per the determined on pro rata basis of
all respects including metres. For the staff Employer’s Requirement. total area of Building for the
fixing doors, windows, quarters having more than project in Sqm. For buildings
On completion of RCC Frame
sanitary, water supply one storey, the total area having more than one storey, the
including Roof slab.
works, electrification, shall be found out by adding total area of each such building
lifts, escalators and all the area of each storey. Unit On completion of brick work up to would be found out by adding the
other specified and cost shall be determined on roof level including fixing of door area of each storey to arrive at
Staff incidental works. pro rata basis with respect and window frames as per the the total area. Payment of each
Quarters to the total area of all staff stage will be made as per
Employer’s Requirement.
Buildings quarters. Payment shall be weightage given in this Schedule.
made on completion of On completion of plastering, fixing
staff quarters at a station door / window shutters, Painting
door window shutters, Sanitary
and water supply works in the
buildings, electrical works and final
finishing with all works complete
as per the Employer’s
Requirement.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Additional resources requirement:

For every project, the initial Mobilisation, Survey & Design takes certain minimum time which is generally same for
all projects.

In such scenario, challenging Project Timeline (e.g. 1. 42 months for 125 TKM in Central Railway Ghoradongri –
Chichonda composite project including tunnelling & viaduct works and 2. 24 months for 1060 TKM in Gr. 207 & 208
RE Project) requires additional offices and temporary setups, higher manpower and machinery considerations
including dependency on Traffic Block and Tower Wagon/ Formation availability.

The above leads to higher costs which is generally overlooked while preparing the client estimate which is
generally based on LARs.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement

Pre-Qualification Criteria

Technical and Financial criteria does not make it mandatory for tenderers to have experience of work in Railway
construction. This leads to increased responses from non-railway contractors who may not be able to make a
realistic assessment of challenges involved in Railway Work and cost associated

Recommendation:

Technical Capacity of the tenderer should be evaluated based on the past experiences in Railway projects only.
Mandatory participation of all JV stake holders in project execution will ensures completion of project in time and
Prevents credentials borrowing from foreign companies who have limited contribution in project execution.

Further, participation in EPC tenders should be limited only to contractors with EPC experience.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement

Time for Bidding

EPC bids floated by Zonal Railways usually provides around 45 – 60 days for bidding which is generally insufficient
to estimate the reasonable price of the project.

Ex : NWR Phulera Degana bid was floated on 8th June 2017 and the tender was submitted on 2nd August 2017

Recommendation:

The EPC nature of this contract demands extensive prebid investigations of the project site including conducting
survey for design of alignment and for estimation of earthwork quantities, soil investigation for embankment design,
geotechnical investigations, collecting High Flood Level and hydrological data for structure designing, validation of
RFP details with respect to actual site conditions, etc. Hence, it is recommended that minimum 3 to 4 months’ time
for EPC bids should be provided for bidding based on scope of work & project length.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Provision for Price Variation Risk


(PV risk due to inadequate compensation with tender PV formulae)
• In conventional SOR projects, there are separate PV formulae for different schedules which covers the risk to a large extent.
• In EPC tenders where payments are milestone based, the percentage for each milestone is not a true reflection of its actual
price.
• Low correlation is observed between Cost Composition of works in a particular milestone and indices in corresponding PV
formula which leads to PV risk.
• In EPC projects, Contract PV formulae is based on WPI indices which have poor correlation with the actual escalation indices
(LME/IEEMA , Steel prices, Diesel etc.) for major items (copper conductors, steel structures, Transformers, cables, P-way
Supplies, Earthworks, Concrete etc.) and expose the Contractor to major risks due to mismatch between the PV inflow and
outflows. Therefore certain provision for PV risk needs to be considered while preparing Client estimate.

Recommendation: It is recommended that relevant indices like IEEMA, LME etc. be used for relevant items in upcoming EPC
tenders for PV calculation.
To cater to the balance PV risk, it is recommended to include ~5% of cost in the estimate for a project of 24 - 36 months duration.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Provision for Financing charges

The milestone-based payment terms in EPC contract are unfavourable and affect the cash flows adversely. Our
detailed internal analysis shows that even with mobilization advance and a practical schedule the project will have
negative cash flows for significant duration. (Average - 10% and Peak - 15% of CV). This attracts financing cost for
the project which any contractor will build in his price.

Therefore provision for financing charges against negative cashflow in addition to the interest charges for
mobilization advance (if applicable) needs to be considered while preparing Client estimate.

Recommendation:

It is recommended that 3% of the Contract Value should be considered towards financing charges and interest on
mobilisation advance in the estimate.

Sensitivity: LNT Construction General Business


Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Associated civil scope of works under-estimated in the project estimates for electrical (RE) projects:

It has been observed that Client estimate for associated civil works are generally based on per TKM extrapolation rather than
considering actual scope of works and quantities. The comparative statement below shows that quantities of certain items vary
significantly in various bids, but the client estimate does not capture the same sufficiently.

Associated Civil Works UoM CORE Del - JPR CORE Gr. 207 & 208

Service Buildings (Sq.m) Sq.m/TKM 3.41 10.45


Track Works
a. Glued Joints Nos. 24 836
b. Turn Out & Derailing Switch Nos. 3 12

Higher requirement of Approach Road Sq.m/TKM 10.1 67.6

Height Guage Nos./TKM 0.17 0.47

Tree Plantation / Landscaping No. Trees 1000 7980

Recommendation: It is recommended that cost estimate should be carried out judiciously for all items based on actual scope of
work even if the scope is minor in nature.
Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement |
Project Estimate
Provision for Quantity Risk

Client estimates are generally prepared based on references and LARs of SOR projects wherein the Quantity risk is borne by
Client. SOR projects generally end up with significantly higher contract values predominantly due to the quantity variation. The
table below provides a summary of certain SOR projects.
In EPC Contracts where the Quantity risks lies with the Contractor, Contractor needs to consider certain risk provision towards
quantity escalation .This is generally not considered in the Client Estimate.

Percentage
S.N. Name of the project Original Contract Value Revised Contract Value
variation

1 RVNL / Lucknow – Sitapur (Pkg 1) 175.48 Cr. 249.50 Cr. 42.18%

2 RVNL / Panskura – Kharagpur 186.12 Cr. 248.00 Cr. 33.24%

3 RVNL / Rewari - Manheru 211.50 Cr. 224.00 Cr. 5.91%

4 Gr. 140 B : Bachuara – Chapra 19.41 Cr. 26.86 Cr. 38.38%

5 Gr. 140 A: Hajipur – Barauni 27.16 Cr. 43.45 Cr. 59.97%

6 Gr. 149 : Barauni – Katihar 40.49 Cr. 50.0 Cr. 23.48%

Sensitivity: LNT Construction General Business


Case Study
Sample tender with one schedule having 7 items.
Considerations: L1 Contractor quoted 13% over and above all the items after considering 8% margin

SOR Estimation of the Contractor Price Schedule as per contract


Rate Payable
Item/ Rate with
S.No Quantity SOR Total Actual Rate Amount Amount (13% over & Amount
Schedule 8% margin
above SOR)
1 A 10 100 1,000 120 1,200 130 1,304 113 1,130
2 B 5 150 750 135 675 147 734 169 847
3 C 20 50 1,000 35 700 38 761 56 1,130
4 D 30 200 6,000 230 6,900 250 7,500 226 6,779
5 E 35 120 4,200 100 3,500 109 3,804 136 4,746
6 F 50 160 8,000 180 9,000 196 9,783 181 9,039
7 G 20 250 5,000 250 5,000 272 5,435 282 5,649
25,950 26,975 29,321 29,321
Contractor's overhead and profit 8%*
* (29,321- 26,975)/29,321 x100
Overall % on SOR 13%**
**(29,321- 25,950)/25,950 x100

Scenario 1 - Quantity of Item A, D & F whose actual rate > SOR increases
Scenario 2 - Quantity of Item B,C & E whose actual rate < SOR decreases
Scenario 3 - Quantity of Item A, D & F whose actual rate > SOR decreases
Sensitivity: LNT Construction General Business
Scenario 1
Quantity of Item A increases from 10 to 15
Quantity of Item D increases from 30 to 45
Quantity of Item F increases from 50 to 75

SOR Contractor’s actual cost Payment as per contract

Rate
S.No Item/ Schedule Quantity SOR Total Rate Amount Amount
(13% over & above SOR)

1 A 15 100 1,500 120 1,800 113 1,695


2 B 5 150 750 135 675 169 847
3 C 20 50 1,000 35 700 56 1,130
4 D 45 200 9,000 230 10,350 226 10,169
5 E 35 120 4,200 100 3,500 136 4,746
6 F 75 160 12,000 180 13,500 181 13,559
7 G 20 250 5,000 250 5,000 282 5,649
33,450 35,525 37,795
Overall % on SOR 13%
* (37,795- 35,525) /37,795 x100
Contractor’s OH &
6%*
Profit

OH & Profit reduces from 8% to 6% due to quantity variation


Sensitivity: LNT Construction General Business
62
Scenario 2
Quantity of Item B decreases from 5 to 3
Quantity of Item C decreases from 20 to 15
Quantity of Item E decreases from 35 to 20
SOR Contractor’s actual cost Payment as per contract

Rate
S.No Item/ Schedule Quantity SOR Total Rate Amount Amount
(13% over & above SOR)
1 A 10 100 1,000 120 1,200 113 1,130
2 B 3 150 450 135 405 169 508
3 C 15 50 750 35 525 56 847
4 D 30 200 6,000 230 6,900 226 6,779
5 E 20 120 2,400 100 2,000 136 2,712
6 F 50 160 8,000 180 9,000 181 9,039
7 G 20 250 5,000 250 5,000 282 5,649
23,600 25,030 26,665
Overall % on SOR 13% * (26,665- 25,030) /26,665 x100
Contractor’s OH &
6.13%*
Profit

OH & Profit reduces from 8% to 6.13% due to quantity variation


Sensitivity: LNT Construction General Business
Scenario 3
Quantity of Item A decreases from 10 to 5
Quantity of Item D decreases from 30 to 20
Quantity of Item F decreases from 50 to 40

SOR Contractor’s actual cost Payment as per contract

Rate
S.No Item/ Schedule Quantity SOR Total Rate Amount Amount
(13% over & above SOR)
1 A 5 100 500 120 600 113 565
2 B 5 150 750 135 675 169 847
3 C 20 50 1,000 35 700 56 1,130
4 D 20 200 4,000 230 4,600 226 4,520
5 E 35 120 4,200 100 3,500 136 4,746
6 F 40 160 6,400 180 7,200 181 7,231
7 G 20 250 5,000 250 5,000 282 5,649
21,850 22,275 24,688
Overall % on SOR 13%
* (24,688- 22,275) /24,688 x100
Contractor’s OH &
9.77%*
Profit

OH & Profit increases from 8% to 9.77% due to quantity variation.


Sensitivity: LNT Construction General Business
64
Model Comparison | SOR vs EPC vs Unit Rate
Particular SOR- Based EPC Mode Unit Rate
(Model followed in DMRC Track
Projects)
Modality Single percentage to be A Single price for the Overall Separate rates to be quoted
quoted on entire schedule project to be quoted against individual items

Cash Flow + Better Cash Flow since - Generally negative Cash Flow + Better Cash Flow since
payment based on quantity since payment is based on payment based on quantity
executed Milestone achievements executed

NS items + Any new Items different from = Bid Price to be all inclusive + Any new Items different from
Client’s Schedule will be Client’s Schedule will be
payable as NS item payable as NS item

Quantity Risk/ = In client’s Scope + In Contractor’s Scope = In Client’s Scope


Opportunity (In RVNL limited scope for
optimization since contractor is
expected to maintain adjacent
rail levels). All other parameters
also to be inline with existing line

Key: + Favorable - Unfavorable = Neutral


Sensitivity: LNT Construction General Business
Model Comparison | SOR vs EPC vs Unit Rate

Particular SOR- Based EPC Mode Unit Rate


(Model followed in DMRC Track
Projects)
Effect of Quantity -- Profitability of Contract varies + Not Applicable + Risk is mitigated since
Variation from considerably due to quantity individual rates to be quoted
Tender Quantities variation in SOR tender due to against individual items
difference in actual rates & SOR reflecting actual cost
rates
RVNL & Contractor do not have
control on the same.
Bidders’ - Bidders’ Competency doesn't + Bidders` Competency comes = Bidders` Competency comes
Competency comes into play and leads to into play. into play.
speculating bid.
Only Competent bidders with Bidders need to properly
“Quote on trend basis” capable design and estimation estimate the rates due to
strength shall participate. absence of SOR for guidance
Incompetent bidders without
any adequate design and However bidders without any
estimation strength may end up design capability can still
winning the bid. participate.

Key: + Favorable - Unfavorable = Neutral


Sensitivity: LNT Construction General Business
Issues in EPC Projects and Recommendations for Improvement |
Project Estimate

Provision for Idling of Resources during Project Execution

Idling of Plant & Equipment, Human Resources etc. is inevitable during project execution owing to reasons like
delay in finalisation of yard plans, working adjacent to live traffic / charged section, working in traffic block, interface
and delays by other contractors, ROW issues, external factors etc.
Experienced contractor builds reasonable provision towards idling of manpower and machinery during the project
duration which are generally overlooked while preparing estimate

Sensitivity: LNT Construction General Business

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