Govt changes contract rules for highways, project cost to be sole factor

For work under Hybrid Annuity Mode, operations and maintenance will not be a criteria anymore.

The ministry of road transport and highways, after inter-ministerial consultations, has changed the terms of awarding highway contracts under the Hybrid Annuity Model (HAM), where the project cost will be the sole factor for evaluation of bids.

Earlier, evaluation was done on the basis of combined value of project cost and operations and maintenance (O&M). The ministry also changed provisions under which O&M payments are made to contractors."

For flexible perpetual pavement, including structures, no maintenance charges will be paid for the first year.

It will be 0.40 per cent of the bid project cost each for the second, third and fourth years, and 0.60 per cent each for subsequent years. This is till laying of the renewal layer or end of the concession period, whichever is earlier, the notification by the ministry read.

Moreover, any O&M expenses incurred over and above the O&M payments will be borne by the concessionaire, the order read. There is a caveat that the scale of payments could also change based on the scope of the project.

Similar percentage-based provisions have been made for O&M payments in these contracts. These are based on the type of projects, such as rigid pavements and standalone bridges and tunnels.

Sector experts said that the need arises from previous bidding abnormalities by contractors. Players would bid arbitrary amounts in their O&M estimates, often leading to aggressive bidding for tenders. This was because lower O&M bids were influential factors in the award of contracts.

“It’s a positive development as it brings back sanctity in the bidding process. We would earlier have some situations of abnormally low O&M revenue bids which could have the potential of disruptions in future maintenance. With percentage based payments, it brings the bidding process on even ground and augurs well for long-term stability of the projects,” said Vishal Kotecha, director at India Ratings and Research.

The ministry has also changed provisions in the build-operate-transfer (toll) model. It now allows change of ownership in one year from the commercial operation date, instead of the earlier two years.