1. INTRODUCTION

1.1 The Ministry of Road Transport & Highways, through a letter dated 2 November, 2020, has introduced changes to eligibility criteria for bidders in relation to road projects undertaken on Engineering, Procurement and Construction method ("EPC Projects"), to ensure larger participation of bidders in road projects.

1.2 The changes hold significance as there are over 700 (seven hundred) developers for EPC Projects, of which only 21 (twenty one) are capable of executing projects worth over INR 2,000 crore (Rupees two thousand crore) as per the previous qualification criteria.

The article discusses the key changes introduced to the bidder qualification criteria for EPC Projects.

2. KEY HIGHLIGHTS OF THE CHANGES IN BIDDER ELIGIBILITY CRITERIA FOR EPC PROJECTS

2.1 Threshold Technical Capacity for Normal Highway Projects and Stand-alone Specialised Projects

The threshold for technical capacity of bidders has been relaxed for the EPC Projects to the following:

(i) In the case of normal highway projects, i.e projects which include construction and development of a highway for a specified region ("Normal Highway Projects"), the technical capacity threshold has been reduced to:

(a) 0.75 time of the estimated project cost for projects of up to INR 100 crores (Rupees one hundred crore), which has been reduced from one time;

(b) one time of the estimated project cost for projects of more than INR 100 crores (Rupees one hundred crore), which has been reduced from 1.5 times; and

(c) one time of the estimated project cost for projects of more than INR 500 crores (Rupees five hundred crore), which has been reduced from two times.

(ii) For stand-alone specialised projects, i.e projects which include construction and development of stand-alone structures such as major bridges, road over bridges, flyovers and tunnels ("Stand-alone Specialised Projects"), the technical capacity threshold has been set as:

(a) 0.75 time of the estimated project cost for projects of up to INR 100 crores (Rupees one hundred crore), which has been reduced from one time;

(b) one time of the estimated project cost for projects of more than INR 100 crores (Rupees one hundred crore) and up to INR 1000 crores (Rupees one thousand crore), which has been reduced from two times; and

(c) one time of the estimated project cost or INR 1000 crores (Rupees one thousand crore), whichever is less, for projects of more than INR 1000 crores (Rupees one thousand crore), which has been reduced from the earlier threshold of greater than or equal to INR 2000 crore (Rupees two thousand crore).

(iii) For Normal Highway Projects (including major bridges/road over bridges/flyovers/tunnels), the bidder will be required to have completed at least one similar work of 20% of the estimated project cost (which has been reduced from 25%). Further, no additional qualification would be required in the case where the longest span of bridge/road over bridge/flyover is less than or equal to 60 (sixty) meters, and in case of tunnels with length of less than or equal to 200 (two hundred) meters.

(iv) For Stand-alone Specialised Projects, with project cost of less than or equal to INR 1000 crore (Rupees one thousand crore), a bidder is now required to have completed at least 1 (one) similar project and cost of such similar project being at least 20% of the estimated project cost. Further, in the case of Stand-alone Specialised Projects of cost of more than INR 1000 crores (Rupees one thousand crore), the bidder will be required to have completed at least one similar project and cost of such similar project being at least 20% of the estimated project cost or INR 1000 crore (Rupees one thousand crore), whichever is less.

2.2 Average Annual Turnover Ratio

Earlier, the bidder was required to have a minimum average annual turnover ratio of 20% of the estimated cost of the project for which bids were invited. The minimum average annual turnover threshold has now been reduced to 15% of the estimated project cost of the project for which bids were invited. This will further widen the eligibility criteria for contractors and ensure wider participation.

2.3 Expansion of Core Sectors

To be eligible to bid for EPC Projects, a bidder is required to have experience in highway and "core sector". Earlier, the definition of "core sector" only included sectors such as commercial setups (SEZs etc.), airports, industrial parks/estates, logistic parks, pipelines, irrigation, water supply sewerage and real estate development. However, now the definition of "core sectors" has now been expanded to include new sectors such as water supply, stadium, hospitals, hotel, smart city, warehouses/silos and oil gas and further paving the way for a wider participation.

2.4. Technical Experience

Earlier, for computing technical experience of a bidder, a bidder was required to have received payments from its clients for the executed construction works during the 5 (five) financial years immediately preceding the bid due date, with only the gross amount actually received being considered, and the amount received was required to be 10% or more of the estimated project cost for which the bid is conducted. But as per the new changes, the threshold for computation of technical experience has been reduced to 5%, thus allowing for wider participant pool.

Earlier, the financial capacity criteria made very few contractors eligible for the EPC Projects, and consequently many EPC Projects would languish because of lack of bidder. With these relaxations, the bidding capacity of smaller players and new entrants for EPC Projects is increased, and EPC Projects should see more bidder participation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.