Following repeated allegations of corruption in highway projects funded by it in India,the World Bank has sought a new system of contracts under which road builders are paid only after they produce a certain pre-specified quantum and quality of work.
This new model of Output and Performance-based Road Contracts (OPRC),which links payments to contractors’ output,has not,however,been cleared by the ministry of road transport and highways. The ministry is working on a new Engineering Procurement and Construction (EPC) contract,and feels the OPRC is not needed.
“The World Bank has been concerned over the many delays in the implementation of road projects. Issues of graft as well as the poor quality of construction and maintenance of highways is also a matter of worry. So it has been pitching for the use of OPRC for highway projects,especially those that are being funded by it,” said a source familiar with the development.
Under the OPRC model,payments to the contractor are based on output and service levels defined in the contract. The contractor is made fully responsible for the design,durability and performance of the road he builds for a specified length of time.
States like Punjab and Gujarat have experimented with this contract for projects involving maintenance of state highways. The World Bank is learnt to have asked the National Highways Authority of India (NHAI) last year to look at alternative ways to award road contracts,following which the authority had floated an expression of interest.
But the ministry of road transport and highways disagrees. “The new EPC is coming out soon,and would address all issues of delays in construction of roads. While initially we will use it for road contracts for two-laning of roads,its scope can always be expanded as and when needed,” a ministry official said.
The proposed EPC contract would be a hybrid between item rate and turnkey contract. The contractor would have freedom to design,engineer and execute the project based on specifications given by the government. NHAI would pay a lumpsum to the concessionaire,incentivise developers who build ahead of schedule,and penalise those who build poor-quality roads.
NHAI hopes to build some 20,000 km of roads using the EPC contract during the Twelfth Five Year Plan. It is also in talks with the World Bank for a $ 1 billion loan to build two-lane roads.
Analysts are of the view that the two contracts are different,and should be used for different projects. “The EPC contract is a hybrid between input- and output-based contract where the government also specifies the type of raw material that should be used,whereas the OPRC only measures the output of the project. The EPC contract is suitable for publicly funded roads,whereas the OPRC should be used where the road is being built through public private partnerships,” said Amrit Pandurangi,senior director,Deloitte Touche Tohmatsu India.