FUNDAMENTALS

of EPC Contracts
A Case Study of Delhi Metro

RAJESH AGARWAL
DRM FIROZPUR

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 आ नो भद्राः
क्रतवो यन्तु विश्वतः
Vedic mantra (Rig_Veda 1.89.1) 

Let noble thoughts come to me

from all directions
 FUND AND PROCUREMENT

Nature Process Condition Accountability

Personal Self determine NIL Your self

Private Not defined Range owner

Pvt Ltd Defined with Lender’s Audit (diversion of

Company Flexibility condition ? Fund?)

Public Ltd, Defined. Open, Pressures? Vigilance, audit

Govt fund competitive &
transparent

Multilateral Rigidly defined Many? + of Funding

Agency?
Activities in Life Cycle of Project
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Activities m i
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in is
F
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tru
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C
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D es
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Pla

Time
Forms of Works Contract
EPC

Design,
Design, Build,
Item Build to Design
Build Finance,
Rate Design and
and Operate
Contrac Contrac Construct
Finance and
t t Contract
Contract Maintain
Contract
Increasing Degree of Risk Allocation to Contractor
BOT
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 INGREDIENTS OF SUCCESS
• Work culture
– Empowerment with accountability,
– Trust with transparency,
– Teamwork and No excuses
– Time-bound Commitments

• Emphasis on
– Integrity, prompt decision-making
– Quality, punctuality and targets
– No unproductive layers and babu-dom
 Project Phases and its Control
Phase Primary Secondary Tertiary
Control Control Control
Planning Institutional System
Environment
Design Organizational Institutional System
Environment
Construction, Technical Core Organization Institutional
Services & al
Finishing
Testing and Organizational Institutional
Commissioning
Operation Separate Operating Organization
 Record Sheet of DMRC
Section Length Target Date Commission
(km) as in 2002 Date

Shahdara-Tis Hazari 8.0 Dec 2002 Dec 2002

Tis Hazari-Tri Nagar 4.7 Sept 2003 Sep 2003
Tri Nagar-Rithala 8.8 Mar 2004 Mar 2004
Vishwa Vidyalaya-Kashmere Gate* 4.0 July 2005 Dec 2004
Kashmere Gate-Central Secretariate 5.5 Sep 2005 Sep 2005

Barakhamba Road-Kirti Nagar 6.0 June 2005 Dec 2005

Kirti Nagar-Dwarka 16.4 Sep 2005 Dec 2005

*The Case study is based specifically on this MC1A Contract

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 MC1A Corridor
 Work started in May,2001
 completion of works Dec,2004

 2,31,000 Cum of structural concrete

 12,00,000 Cum of excavation

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Some Site Photographs

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A view of Concrete Batching Plant

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A view of Rebar Fabrication Yard

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Formwork fixing in Progress on Tunnel Roof

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Concreting in Progress on Tunnel Roof

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Work in Progress from Steel Deck inside the Hoarding

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Work in Progress at Vishwavidyalaya Station

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Excavation under Steel Struts Supporting Sheet Piles

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Inside the partially roof casted tunnel

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Dedicated Footpath on both sides on the Shamnath Marg

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6.00 Hrs in the morning, traffic stopped for blast

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Rebar Fixing at floor slab at Vishwavidyalaya Station

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An aerial view of road and work sites

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Tunnel Taking Shape- Top Down Construction

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Steel Deck Access to a Residence in Civil Lines area

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Vibro Sheet Piler at work

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Silent Sheet Piler at work

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Tyre Washing System

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A safety training in Class

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Crack Meter on the wall of a building

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Best Section Manager Award by MD to A-1 Section Manager

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Safety Talk to Workers on Safe Working at Height in A-2 Section

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 PROJECT MANAGEMENT
• Land - acquisition and rehabilitation
• Fund – debt, equity, internal resources
• Prompt Decision - time value of Capital
– 1 Planning and Review
– 2 Procurement and Tendering
– 3 Measurement and Billing
– 4 Progress Reporting, Monitoring
– 5 Environment, Quality and Safety
– 6 Public information and Convenience
 Why CONSULTANTS ?
• Own team may not be experienced and
equipped to handle complex
contracts/projects

• To keep organization lean

• Professional Management
• Bridging the Knowledge Gaps
• Better Relationship with Contractor
• Managing New Contract types
• Requirement of Funding Agency
 How to Balance the role?
Client • Payment, Variations, and other
contract management issues
• Planning, procurement and tendering
• Overall responsibility
Contractor • Contractor’s own Safety and Quality
monitoring
• Monthly Progress Reporting
• Measurement and Billing
PMC • Safety and Quality monitoring
• Parallel Progress Reporting
• Checking of measurement and bills
• Assist client in planning, procurement
and tendering
 PLANNING AND REVIEW
• OVERALL TARGET OF PROJECT
• CONTRACT PACKAGING (LEAST NUMBER)
• TIME VALUE FOR EACH DAY OF DELAY
• REVERSE CLOCK FOR COMMISSIONING
• FIXING INTERFACE REQUIREMENT
• 4 MONTH AND 4 WEEK ROLLING PLANS
• RECORD DECISIONS, NOT THE VIEWS
Reviewing DPR by DMRC
 Corridors revised to align them to the busiest roads
 Contract Packaging changed for better quality and
control e.g. Metro Corridor:
DPR Contract Package
• 10 Civil Structure Contracts. • Two Contract MC1A & 1B.
• Construct Only. • Design & Construct -EPC
• Tender Documents are • The Packaging is done
prepared on the basis of based on proposed method
traditional multi-contract of construction i.e.(cut &
implementation Strategy Cover vs Tunnel Boring)
• Several E&M Contracts • Civil Engg. Electrical &
Mechanical, Lighting(AC &
• Several Ventilation/AC
Ventilation) all combined.
Contracts
 PROCUREMENT & TENDERING
 SINGLE STAGE OR TWO STAGE PROCESS Prequalification
Basically Consist Of
• Technical
– Experience of similar work
– Defining similar work
– Evaluation criterion
• Financial
– Bid Capacity (turnover – order book)
– Cash flow (liquidity, net worth etc)
 OUTCOME
All meeting Criterion or top few qualifying for next
stage of bidding
 Single Vs Two Stage Process
SN SINGLE STAGE TWO PACKET
1 Separate technical bid and
financial bid but submitted in
single envelope.
2 Technical bid opened first.
Financial bid of qualified bidder
opened at short notice.
3 Not aware of competitors, No
Possibility Of Cartelization.
4 Bidders do their own due
diligence and generally try to be
competitive
5 When availability of projects are
less, bidders may tend to under
quote.
TWO STAGE TWO PACKET
Technical bid in Ist stage. Financial bid from
shortlisted bidders in IInd stage.
Technical bids opened and list of qualified
bidders published. Reasonable time given to
qualified bidder for submission of financial
bid
Qualified bidder : Publicly known, Possibility
of cartelization cannot be eliminated.
There is an influence of knowledge of
industry standards being followed by their
competitors in their due diligence.
In limited competitive environment,
possibility of under quote is less.
 Single Vs Two Stage Process
SN SINGLE STAGE TWO PACKET
6 Quote will be reasonable even
if more number of projects are
available in the market.
7 Representation/request can be
promptly disposed off.
8 More suitable for small to
medium size projects with
lesser complexity.
9 Possibility of Shortlisted bidder
without the Financial bid does
not exist.
TWO STAGE TWO PACKET
Being a limited competitive
environment, bidder hands may be
full and may lead to higher quotes.
Representation/request will require
considered decisions and may take
more time.
More suitable for bigger size (>1000
Cr) and for complex projects which
require bidders association in
finalizing the tender documents.
Shortlisted Bidders at times do not
participate at Financial bid stage.
Founding Principles of Delhi Metro
 No hoardings reads
– “Inconvenience is regretted”,
– “Work in Progress”,
– “Please bear with us”
 Above indicate poor planning & callous approach.
Hoardings at work sites on street should
– be a welcome sign
– Public expect better roads, smooth traffic & safety
– be a brand building for Client, Contractor and
Consultant
General Consultant to DMRC
 Acted as Employer’s Representative on specific corridors
and contracts
 Did for Employer
– review of DPR
– tender management
– monitoring of execution
– NOC to Contractor’s drawings
– Testing and Commissioning different systems
 DMRC kept payment, changes in contract, approval to
key drawings only

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Key Issues in EPC
Contract

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Tender Document Constituents
 Requirements for preparing Proposals
 Proposals to conform to
– Employer’s Requirements-General, Functional, Design,
Construction, Manufacturing-Installation-Testing, Appendices
– Outline Design Specification- For each component of project
– Outline Construction Specification
 GCC & SCC
 Other submissions
– Tender Program
– Outline Quality Plan, Safety Plan and Environmental plan
– Rate Schedule for major items of work

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MC1A Contract- Uncertain and Risky
Items in Provisional Sum
Description Amount

a. Additional Testings Rs. 50 Lacs

b. Furniture, Cabinets & Shelves Rs. 50 Lacs
c. Artwork & Landscaping Rs. 1.5 lacs
d. Architectural finishes including Rs. 15.5 (crores)
false ceiling
e. Diversion & Support of utilities
Rs.15 crores

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Activity Milestones Based Payment
 Cost Center Based Planning:
– 01 Preliminaries and General Requirements
– 02 Design (A-Civil, B-E&M, C-Tunnel Vent)
– 03 Tunnel Construction (A to D Sections, E-Depot Access)
– 04 Station Construction (A to D Stations)
– 05 Electrical (A to D Stations)
– 06 Water, Plumbing, Drainage (A to D Stations)
– 07 Fire Detection and Suppression (A to D Stations)
– 08 ECS (A to D Stations)
– 09 Tunnel Vent (A to D Stations)
– 10 Testing & Commissioning (A to D Stations)
– 11 Product Support (A to D Stations)

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Milestones Submission by Tenderers
 Cost Center Outline describing activities included in it and
typical activities and their ID numbers provided in tender
 Tenderer to prepare its own Milestone Schedule matching its
Program for entire project quoting $ and Re components of
payment demanded together with Week of completion
 Typical Milestone Numbers and what it implies
– 3B.20B implies Sheet Plie 50% complete by plan length at Ch
11+002 m to 11+627 m of Tunnel from V V Stn. to OS Stn.
– 4D.10A implies V V Station Base Slab 50% complete
 Monthly cash flow to be submitted by tenderer and that should
generally match with the physical progress of work proposed
e.g.‘S’ Curves for Concrete
 Highest tenderer based on cumulative present value of
milestone payment schedule of the tenderer

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Sub-Contracting Provisions
 Tenderer prequalified with Design Consultant and
T&C of proposed contract with it to be submitted
with tender
 Sub-contracting for works other than design limited
to 50% of LS Price
 Each sub-contract exceeding Rs. 1 million to be prior
approved
 Each sub-contract for provisional sum works,
irrespective of value, to be prior approved

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Interfacing with Other
Contracts

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Metro Corridor System Wide
Contracts
 MC1A Civil Structures VW Station to ISBT (4Km)
 MC1B Civil Structures ISBT to Central Secretariat (6.5 KM)
 SYS 01 Signalling and Communication
 SYS 02 Traction & Power Supply
 SYS 03 Track work
 SYS 04 Automatic Fare Collection
 SYS 05 Lifts and Escalators
 MC2 Khyber Pass Depot
 RS1 Rolling Stock

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 Key Dates for MC1A Connecting
System Wide Contracts
Key Description of Key Date
Date
KD1 Preliminary Design 14 Weeks
KD5 Definitive Design 39 Weeks
KD8A Hand Equipment Rooms to SYS01 & SYS02-113 Weeks
KD8B Hand Concourse to SYS04 –155 Weeks, station complete
KD8C Handover Basic Structure to SYS 05-120 Week
KD9 Hand Track way to SYS 03 – 120 Weeks, tunnel complete
KD10 Power on to Station/Tunnels – 186 Weeks
KD11 Handover for Integrated Testing-193 Weeks
KD12 Completion of Works – 218 Weeks

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 Key Dates vs Milestones
 Both have a date specified in number of weeks from NTP
for each
 Key Dates are constraints for Project Network but
Milestones are not
 Non adherence to a Key Date invites penalty while that
of a Milestone only delays the respective payment
 Achievement of subsequent Key Date gets refund of
penalty on earlier Key Dates while achievement of any
milestone is independent of any other milestone
 Key Dates were renegotiated for early commissioning
while Milestones were allowed to be split for improving
cash flow to contractor
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 Use of S- Curve for Project Scheduling
Payment S-Curve
Concrete Consumption

10000
25000 300000

Millions
Monthly Concrete Qty
9000
Actual Monthly Qty
Cumulative Concrete Qty 250000 8000
20000
Cumulative Concrete Qty
7000
200000 Cumm.
INR Equi.
15000 6000

Cumulative INR. Equivalent

Concrete Qty

150000 5000

10000 4000

100000
3000

5000
2000
50000

1000

0 0
0

Months
Time Period

S-Curve for Concrete Pouring S- Curve for Milestone

Payment

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Monitoring through Cost Center
and Milestones
 Cost Center bifurcation helped in distinct responsibility and
monitoring of works of various disciplines in one composite contract
 Every conceivable requirement in contract linked to at least one
milestone with coding
– 4A.10A [Vishwa Vidyalaya Station (4A), Station Box external walls (10)
50% complete (A)]
 Even Contractor’s monthly supervision (1.12 to 1.61), monthly site
running (1.79 to 1.128), Quarterly Audit reports on
Quality/Safety/Environment (1.62 to 1.78) had one milestone each
 Every submission is linked to a milestone
 The coding of milestone and the organizational structure ensures
that the responsible person for each milestone is known

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 Milestone is the Focal Point
 Network Programme is based on Milestone
 Certification of completion of Milestone by GC
enable payment
 GC asks Production wing why certain Milestones
that should have been completed in the month
were not completed
 Accounts wing computes the achievable
milestones to get required cash flow and chases
Production for completing

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 Milestone Focal Point…
 GC asks Quality, Safety and Environment wings
for closure of NCNs and blocks payment of
respective milestones
 Accounts chases theses wings for getting
blocked Milestones cleared
 Quality, Safety and Environment wings chases
Production for compliances so that they close
the NCNs to release the milestone payment

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Assuring Cash Flow to Contractor

 Weekly cash disbursal monitored by MD

 80% payment within 3 days of submission of contractor
prepared bills
 Recovery of Advance suspended for certain period
 Advances against ‘under consideration claims’
 Milestones allowed to be split for faster cash flow
Motto: No Contractor should suffer for want of cash flow

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Project Scheduling

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Scheduling Strategy of Contractor
 Cumulative Payments ‘S’ curve matched with the
Earthwork and Concrete ‘S’ curve derived from
Schedule
 Estimation of cost, payment flows and Programme
logic followed each other
 Some key resources centralized for reducing
uncertainties- Lab, Batching Plant, Rebar Fabrication
yard, Plant Maintenance, stone crushing plant
 Objective: Latest Start and Highest economy
 Proposed: 3 phase construction, for reusing
temporary structural steel

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Standardization of
Processes

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Procedures and Method Statements
 Deputy Production Manager responsible
for preparing from Contractor side
 Resident Engineer from GC responsible for
reviewing and giving comments
 Work started only after relevant process
approved through issue of NOC from GC
 32 MPs, 56 MSs & ITPs and more than 30
WPs were developed in the contract

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Request for Qualification
(RFQ)

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 Why need Pre Qualification?
 Preparation of High Value EPC Bid: a time consuming
and costly affair
 Good parties do not invest in bidding unless they
have a 20% chance of winning
 Pre-qualified bidders provide a structured and
meaningful feedback on the bid process and
documents
 They become stakeholders in the faster completion
of the bid process
 Necessary for bigger and complex projects

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Value Addition During
Tendering

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 Alternative Proposals/ Negotiation
 Tenderers allowed to offer alternative technical offers with price
discounts
 Based on pre-bid queries and meetings eight amendments issued
 GC teams of experts in each field evaluated proposals
 211 clarification questions covering every aspect of the proposal
raised- many repeated to get clear confirmation
 Answers/ confirmations sought in unambiguous terms together with
revised proposals in many cases
 Final negotiated bids including technical proposal invited
 KSHI JV came lowest in this bid process

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 Value Addition in Tender Process
 Interactions with tenderers lead to understanding of
break up of offer and risks that were priced
 A reduction of more than Rs. 60 crore was achieved in
LS Price
– By including Utility Diversion in Provisional Sum and increasing it
by Rs.15 crore
 A reduction of more than Rs. 200 crore was achieved in
LS price due to following changes
– Min soil cover over tunnel/station box roof relaxed from 2m to
1m at localized places like subways
– Road allowed to be raised and regraded at localized places to
meet min soil cover without raising tunnel alignment

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Monitoring System

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Building Site Organization- MC1A
Contract
 4 Sections, A to D (corresponding to cost center names)
comprising one km of tunnel including one station
 GC Organization parallel to Contractor’s
– Section Manager (Contractor) vs Section Engineer (GC)
 Quality, Safety and Environment Managers reporting
directly to the Project Leader
– Respective GC Experts reported to PD whereas SE Spl was the
counterpart at site reporting to RE
 Traffic and Utility Coordinator appointed by the contractor
for coordination with sub contractors and authorities

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 Organizational
Structure of MC1A
MD (DMRC) CPM-Chief Proj
Manager; PM-Proj
Manager; CRE-
Dir Proj Proj Dir (GC) Chief Resident
Engineer; RE-
Resident Engineer;
CPM (MC) PM (MC)
SE-Section
Engineer; EE-
Dy. CE North CRE (MC1A) PL (MC1A)
Executive
MC Engineer; PL-Proj
Leader; PM-
RE PM Production
Manager; SM-
Section Manager;
E. E.-1 SE Section A SM Section A RMs-Resource
Managers
E. E.-2 SE Section B SM Section B

SE Section C SM Section C Line of communication

SE Section D SM Section D
Line of Command
SE Spl RMs 1,2,3,4

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Schedule of Meetings
• Chaired By DMRC
– Quarterly Community Interaction Meeting
– Monthly progress meeting by Director
– Field meeting by MD after inspection
• Chaired by GC
– Weekly Progress Meeting
– Weekly Design Coordination meeting

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Schedule of Meetings…contd.
• Chaired by Contractor
– Monthly Safety Meeting
– Site coordination meeting by each Section Manager
– Interface Coordination meeting with other contractors
How it Paid: Complex issues got resolved fast to
every one’s satisfaction, Accountability for
commitments

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