IEEMA develops model address disputes on power projects
Updated: Jun 19, 2014 01:51:08pm
New Delhi, Jun 19 (KNN) The Indian Electrical and Electronics Manufacturers’ Association (IEEMA) has come up with a model mechanism to address disputes on power projects such as early contractual closure of turnkey power transmission, distribution and sub-station projects and protracted delays.
IEEMA’s model document on standard terms and conditions to reduce disputes on power projects has been submitted to the Ministry of Power recently.
The model mechanism is expected to facilitate early contractual closure of turnkey power transmission, distribution and sub-station projects and avoid protracted delays, reports said.
The model document deals with resolving ambiguous issues related to site clearances, repercussion of mistakes in drawings, grievances of contractors on account of delayed payments and many more in existing documents.
If adopted, the model document would assist in timely implementation of ongoing projects of power utilities and at the same time assist contractors to reduce their counter-productiveness and recurring costs on things such as bank guarantees, liquidated damages, insurance premiums, travelling costs, working capital finance costs, site expenditure and manpower costs, a media report added.
On the rationale for the mechanism, the Association said that funds amounting to more than Rs 50,000 crore have been held up in the power sector owing to disputes between utilities and the contractors building their projects.
Owing to the failure of these engineering, procurement and construction contractors to meet contract closures, central and state utilities aren’t releasing their bank guarantees, the report quoting IEEMA said.
This has happened even after some of the plants started commercial operations, it added.
Use of a non-standard contract document results in lower rate of return on the owner's investment and the contractor running the risk of cost escalation and penalties, according to IEEMA.
Further, different state and central utilities use their own contract documents for projects, which result in a very cautious approach adopted by the contractors resulting in delays, or contractual disputes. Because of this, there are invariable stoppages and delays in project completion, it said.
The model document was compiled by a committee of experts from leading turnkey contractors, following a detailed study of contract documents of major customer utilities. (KNN/ES)
IEEMA’s model document on standard terms and conditions to reduce disputes on power projects has been submitted to the Ministry of Power recently.
The model mechanism is expected to facilitate early contractual closure of turnkey power transmission, distribution and sub-station projects and avoid protracted delays, reports said.
The model document deals with resolving ambiguous issues related to site clearances, repercussion of mistakes in drawings, grievances of contractors on account of delayed payments and many more in existing documents.
If adopted, the model document would assist in timely implementation of ongoing projects of power utilities and at the same time assist contractors to reduce their counter-productiveness and recurring costs on things such as bank guarantees, liquidated damages, insurance premiums, travelling costs, working capital finance costs, site expenditure and manpower costs, a media report added.
On the rationale for the mechanism, the Association said that funds amounting to more than Rs 50,000 crore have been held up in the power sector owing to disputes between utilities and the contractors building their projects.
Owing to the failure of these engineering, procurement and construction contractors to meet contract closures, central and state utilities aren’t releasing their bank guarantees, the report quoting IEEMA said.
This has happened even after some of the plants started commercial operations, it added.
Use of a non-standard contract document results in lower rate of return on the owner's investment and the contractor running the risk of cost escalation and penalties, according to IEEMA.
Further, different state and central utilities use their own contract documents for projects, which result in a very cautious approach adopted by the contractors resulting in delays, or contractual disputes. Because of this, there are invariable stoppages and delays in project completion, it said.
The model document was compiled by a committee of experts from leading turnkey contractors, following a detailed study of contract documents of major customer utilities. (KNN/ES)
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