Delays could cost firms future highway contracts

Companies delaying the execution of highway projects may soon be disqualified from bidding for the next round of contracts. The government is mulling over a proposal to debar concessionaires from future tenders if their previous contracts missed the completion deadlines.

According to the proposal, the government is not in favour of completely blacklisting such companies despite receiving the necessary regulatory clearances. “If there is no delay in land acquisition or receiving other regulatory clearances, and the progress on the project is sluggish due to delays on the part of the concessionaire, then the government can debar that company from submitting bids for other projects,” a road ministry official told Business Standard.

The debarment would be temporary and subject to certain conditions. For instance, if one highway construction company is executing 10 projects of which seven are delayed, then it can be allowed to bid for a new project only if work gets completed in at least four of the seven delayed contracts, the official said.

Though there is a provision for blacklisting companies, such a step is not taken frequently. Last month, the National Highways Authority of India (NHAI) issued a list of 20 highway contracts, including those with L&T Infrastructure, HCC, Essel Infra, MBL Infra, and Soma Enterprises that could be terminated over delays in implementation. The termination, however, has not happened after the initial show-cause notice.

The NHAI had terminated a contract with Transstroy, which was signed in April 2012, for four-laning the Obedullaganj-Betul section on NH-69 in Madhya Pradesh, due to extremely slow pace of work.

Some experts feel that complete blacklisting of a company would hamper the growth in the infrastructure sector, which was better off than the most in terms of non-performing assets. They say the government should ensure that the companies are not highly leveraged at the time of the tender and are fit to bid for the projects. 

“The bid capacity of the concessionaire should be established beforehand. If the total worth of the company is Rs 200 crore, it cannot execute projects worth Rs 10,000 crore,” Adil Zaidi, partner, economic development, and infrastructure advisory, EY, said.

Besides, there are very few big companies that are in the road construction business. Debarring even a few of them would limit competition in the sector. The comprehensive proposal would be applicable for the projects executed by the Ministry of Road Transport and Highways, the NHAI, and the National Highways and Infrastructure Development Corporation.

Analysts believe that the move will not help as the government needs to first establish the reasons that are causing delays in the implementation of projects.

TAKING THE HIGH ROAD

• Companies delaying execution of highway projects may be disqualified from bidding in the next round of contracts

• New policy in the works to debar concessionaires from tenders of fresh road projects if their previous contracts have missed completion timelines

• Government not in favour of completely blacklisting the companies that have missed completion timelines

• The debarment would be temporary and subject to certain conditions

• The proposal would be applicable for MoRTH, NHAI, and NHIDCL projects