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Highlights Of The Changes In Bidder Eligibility Criteria For Engineering, Procurement And Construction Projects – Real Estate and Construction


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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.

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