Model EPC Agreement

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 CONTRACT
Contract means to make a legal agreement with
someone to do work or to have work done for
you, as per terms and conditions mutually
agreed by both parties.

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 EPC Contract
In this mode, the applicant/contractor has to quote the total
project cost which includes Engineering, Procurement &
Construction. The payment of value of work done is to be paid
by the client on monthly bill submitted by the contractor as per
Schedule enclosed with the Tender. The contractor has to
complete the project within the quoted cost and no extra
amount will be paid on account of any change in design/strata
etc. The contractor has to maintain the road during
construction and maintenance & defect liability period. In this
mode, the contractor will receive the maintenance charges @
0.5%, 1%, 1.5% & 2% of the Contract Price for the first,
second, third and fourth year respectively.
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Steps to Execute EPC Contract Agreement
Three steps to execute EPC Contract Agreement:
(i) Invitation of bids/tenders
(ii) Issue of Letter of Acceptance (LOA)
(iii) Signing of Contract Agreement within 15 days
from issue of LOA and submission of Performance
Security by the successful bidder.

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 Invitation of Bids on EPC Mode
There are two types of invitation of bids:
(i) Two stage Bidding
(ii) Single Stage Bidding

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Salient Features of Model EPC Agreement
EPC agreement is divided into VI Parts.
• Part I- Preliminary
• Part II-Scope of the Project
• Part III- Construction and Maintenance
• Part IV- Financial Covenants
• Part V-Force Majeure and Termination
• Part VI- Other Provisions

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 Model EPC Agreement- Part I
Preliminary
• Definitions
• Interpretation
• Measurements and arithmetic conventions
• Priority of agreements and errors/ discrepancies
• Joint and several liability

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 Model EPC Agreement- Part II
Scope of the Project
• Scope of the Project
• Obligations of the Contractor
• Obligations of the Authority

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 Model EPC Agreement- Part II- Contd..
Scope of the Project

Scope of work includes widening/improvement reconstruction of

existing road/structures, new construction of road/structures on
new alignment & bypasses. Scope of work is defined in Schedules
A, B, C, D & E as under:-
Schedule A- Site of the Project
Schedule B- Development of the Project Highway
Schedule C - Project Facilities
Schedule D- Specifications And Standards
Schedule E - Repair/rectification of Defects and deficiencies

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 Model EPC Agreement- Part II- Contd..
Obligations of the Contractor
• Contractor shall undertake the survey, investigation, design,
engineering, procurement, construction, and maintenance of
the Project Highway and observe, fulfil, comply with and
perform all its obligations set out in this Agreement.
• To comply with all Applicable Laws and Applicable Permits
(Schedule-F) .
• To remedy any and all loss or damage to the Project Highway
during the Defects Liability Period at the Contractor’s cost .
• The Authority’s Engineer and its authorised personnel shall
have the right of access to all relevant documents of the
agreement at all reasonable times and can inspect any work.

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 Model EPC Agreement- Part II- Contd..
Obligations of the Contractor - Obligations relating to
sub-contracts and any other agreements

The Contractor, whether Consortium/Joint Venture or sole,

shall not sub-contract any Works in more than 49% (forty
nine per cent) of the total length of the Project Highway
and shall carry out Works directly under its own
supervision and through its own personnel and
equipment in at least 51% (fifty one per cent) of the
total length of the Project Highway.

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 Model EPC Agreement- Part II- Contd..

Obligations of the Contractor

• Employment of foreign nationals
• Contractor’s personnel
• Advertisement on Project Highway
• Contractor's care of the Works
• Electricity, water and other services
• Unforeseeable difficulties

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 Model EPC Agreement- Part II- Contd..
Obligations of the Authority
• To provide the Right of Way as per Schedule-A,
within a period of 30 (thirty) days from the date of
this Agreement, on no less than 90% (ninety per
cent) of the total length of the Project Highway.
• Approval of the general arrangement drawings (the
“GAD”) from railway authorities within 60 days from
the Appointed Date.
• All environmental clearances.
• Maintenance obligations prior to the Appointed Date

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 Model EPC Agreement- Part III
Construction and Maintenance
• Performance Security : Bank Guarantee equivalent to 5%
(five percent) of the Contract Price to be submitted within
10 (ten) days of the date of the Agreement as per
Schedule-G (the “Performance Security”) and shall be valid
until 60 (sixty) days after the Defects Liability Period. The
Performance Security shall be released to the Contractor
within 60 (sixty) days from the expiry of the Maintenance
Period or the Defects Liability Period.

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 Model EPC Agreement- Part III- Contd..
Construction and Maintenance
• Additional Performance Security : If the bid price is 10% lower than the
Estimated Project Cost then additional Performance Security shall have to be
submitted by the successful bidder as under:

– If the bid price is < 10% and upto 20% of the Estimated Project Cost, then the
Additional Performance Security shall be calculated @20% of the difference in the
(a) Estimated Project Cost (as mentioned in RFP)-10% of the Estimated Project
Cost and (b) the Bid Price offered by the selected Bidder
– If the bid price is < 20% of the Estimated Project Cost, then the Additional
Performance Security shall be calculated @30% of the difference in the (a)
Estimated Project Cost (as mentioned in RFP)-10% of the Estimated Project Cost
and (b) the Bid Price offered by the selected Bidder.
– The Additional Performance Security shall be valid until 28 (twenty eight) days after
the issue of Completion Certificate under Article 12 of this Agreement.
– The Additional Performance Security shall not be treated as part of Performance
Security.
– The Additional Performance Security shall be encashed, in case the Contractor
cannot achieve the Milestones –II/III/IV … within the prescribed period as per this
Agreement due to the fault of the Contractor.
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 Model EPC Agreement- Part III- Contd..
Construction and Maintenance
• Retention Money:
Deduction @6% (six per cent) as guarantee money for performance
of the obligations of the Contractor during the Construction Period
subject to the condition that the maximum amount of Retention
Money shall not exceed 5% (five per cent) of the Contract Price.

• Refund of Retention Money

The Authority may refund the Retention Money before issue of
Completion Certificate against Bank Guarantee, provided that
tranches amount shall not be less than 1% of contract Price. Within
15 days from issue of Completion Certificate, complete Retention
Money shall be refunded by the Authority.

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 Model EPC Agreement- Part III- Contd..
Construction and Maintenance
• Right of Way: The Authority shall provide encumbrance free land to the contractor
as per Schedule-A .
Amount of Damages in Rs. per day per metre = 0.05 x C x 1/L x 1/N Where C = the Contract Price; L = length of
the Project Highway in metres; and N = Completion period in days (Appointed Date to Scheduled Completion Date)
subject maximum damages upto 10% of contract price.
• Utilities and Trees: The contractor has to shift the utilities if necessary at the
authority’s cost.
• Design and Construction of the Project Highway: Contractor shall appoint
Design Consultant, Safety Consultant and Proof Consultant.
Contractor shall submit Construction Programme within 30 days from Appointed
Date as per Schedule- H “Contract Price Weightages” and Schedule-J. “Project
Completion Schedule”.
• Maintenance during Construction Period: Contractor shall maintain the existing
NH in traffic worthy condition.
• Quality Assurance, Monitoring and Supervision: Tests required for road and
bridge construction shall be carried out by the contractor as per Quality Assurance
Plan submitted by contractor and approved by Authority Engineer.
• Monthly Progress Report 17
 Model EPC Agreement- Part III- Contd..
Construction and Maintenance
• Completion Certificate: Completion Certificate will be issued by Authority Engineer
in consultation with the employer after completion of Tests required before issue of
completion certificate. A Provisional Completion Certificate can be issued on
substantially completion of project (i.e. Physical Progress > 80% ) alongwith a Punch
List containing balance works to be completed within 30 days from the date of
Provisional certificate.
• Change of Scope: Contractor shall not undertake any Change of Scope without the
consent of the Authority, save and except any Works necessary for meeting any
Emergency. The work under Change of Scope shall be executed only after issue of
Change of Scope order wherein scope of work, cost of work and procedure of payment
is mentioned. Change of Scope shall not be more than 10% of contract price. In case
contractor is not agreed to execute the work as Change of Scope, the Authority can
execute the work by appointing any other contractor through open bidding.

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 Model EPC Agreement- Part III- Contd..
Maintenance
• Maintenance obligations of the Contractor : The Contractor shall maintain the
Project Highway for a period of 4 (four) years commencing from the date of the
Provisional Certificate (the “Maintenance Period”). For the performance of its
Maintenance obligations, the contractor shall be paid 5% of Contract prices ( 0.5% , 1%,
1.5% & 2% respectively) for flexible pavement and 2.5% of Contract price (0.25% ,
0.5%, 0.75% & 1% respectively) for rigid pavement in case of road projects. But in case
of stand alone Bridge / structure work, the contractor shall be paid 0.25%, 0.5%, 0.5%
and 0.5% of the Contract Price for the first, second, third and fourth year respectively.
Maintenance shall be maid as per Schedule-E and payment shall be made as per
Schedule-M.
• Authority’s right to take remedial measures: In case contractor failed to
maintain the road within prescribed period, the Authority is entitled to undertake
such remedial measures at the cost of the Contractor, and to recover its cost from the
Contractor. In addition to recovery of the aforesaid cost, a sum equal to 20% (twenty per
cent) of such cost shall be paid by the Contractor to the Authority as Damages. .

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 Model EPC Agreement- Part III- Contd..
TRAFFIC REGULATION
• Traffic regulation by the Contractor : The Contractor shall take all the required
measures and make arrangements for the safety of Users during the construction and
maintenance of the Project Highway or a Section thereof in accordance with the
provisions of MORTH Specifications. It shall provide, erect and maintain all such
barricades, signs, markings, flags, and lights as may be required by Good Industry
Practice for the safety of the traffic passing through the Section under construction or
maintenance. .

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 Model EPC Agreement- Part III- Contd..
DEFECTS LIABILITY
• Defects Liability Period : The Contractor shall be responsible for all the Defects and
deficiencies, except usual wear and tear in the Project Highway or any Section thereof,
till the expiry of a period of 4 (four) years commencing from the date of Provisional
Certificate (the “Defects Liability Period”). Provided that the Defects Liability Period shall
in no case be less than 42 (forty two) months from the date of Completion Certificate for
and in respect of works for which Time Extension was granted. Provided further that in
the event no Provisional Certificate is issued, the Defects Liability Period shall
commence from the date of the Completion Certificate.
• Remedying Defects : The Contractor shall repair or rectify all Defects and
deficiencies observed by the Authority’s Engineer during the Defects Liability Period
within a period of 15 (fifteen) days from the date of notice issued by the Authority’s
Engineer in this behalf, or within such reasonable period as may be determined by the
Authority’s Engineer at the request of the Contractor

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 Model EPC Agreement- Part III- Contd..
AUTHORITY’S ENGINEER
• Appointment of the Authority’s Engineer :
The Authority’s Engineer should be
appointed within 30 days from the date of this Agreement or before declaration of
Appointed Date as per Schedule-N.
• Duties and authority of the Authority’s Engineer : The Authority’s Engineer shall
perform the duties and exercise the authority in accordance with the provisions of
Schedule-N, but subject to obtaining prior written approval of the Authority before
determining:
(a) any Time Extension;
(b) any additional cost to be paid by the Authority to the Contractor;
(c) the Termination Payment; or
(d) any other matter which is not specified in (a), (b) or (c) above and which creates an
obligation or liability on either Party for a sum exceeding Rs. 5,000,000 (Rs. fifty lakh).

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 Model EPC Agreement- Part III- Contd..
AUTHORITY’S ENGINEER
• Instructions of the Authority’s Engineer : The Authority‟s Engineer may issue to
the Contractor instructions for remedying any Defect. The Contractor shall take such
instructions from the Authority’s Engineer .
• Duties and authority of the Authority’s Engineer : The Authority’s Engineer shall
perform the duties and exercise the authority in accordance with the provisions of
Schedule-N, but subject to obtaining prior written approval of the Authority before
determining:
(a) any Time Extension;
(b) any additional cost to be paid by the Authority to the Contractor;
(c) the Termination Payment; or
(d) any other matter which is not specified in (a), (b) or (c) above and which creates an
obligation or liability on either Party for a sum exceeding Rs. 5,000,000 (Rs. fifty lakh).

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 Model EPC Agreement- Part III- Contd..
AUTHORITY’S ENGINEER
• Delegation by the Authority’s Engineer : The Authority’s Engineer may
delegate his duties and responsibilities suitably qualified and experienced
personnel who are accountable to Authority’s Engineer under intimation to the
Authority and Contractor.
• Instructions of the Authority’s Engineer : The instructions issued by the
Authority’s Engineer shall be in writing.
• Remuneration of the Authority’s Engineer: The remuneration, cost and
expenses of the Authority’s Engineer shall be paid by the Authority.
• Termination of the Authority’s Engineer: The Authority may, in its discretion,
replace the Authority’s Engineer at any time. If the Contractor has reasons to
believe that the Authority’s Engineer is not discharging its duties and functions in
accordance with the provisions of this Agreement, it may make a written
representation to the Authority and seek termination of the appointment of the
Authority’s Engineer.

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 Model EPC Agreement- Part IV
Financial Covenants
PAYMENTS
• Contract Price : The Authority shall make payments to the Contractor for the
Works on the basis of the lump sum price accepted by the Authority in
consideration of the obligations specified in this Agreement for an amount equal
to “Contract Price”, which shall be subject to adjustments in accordance with the
provisions of this Agreement. Cost of Maintenance shall be paid separately in
accordance with the provisions.
• Advance Payment : The Authority shall make an interest-bearing (@ Bank
Rate of RBI) advance payment (the “Advance Payment”), equal in amount to 10
(ten) percent of the Contract Price, exclusive for mobilisation expenses in two
installments against irrevocable and unconditional guarantee from a Bank for an
amount equivalent to 110% (one hundred and ten per cent) of such installment.
First installment may be paid after Appointed and second installment within 60
days from Appointed date. Second installment will be paid only after submission
of utilization certificate of first installment by the contractor.
Additional advance payment @5% of contract price shall be paid by authority for
purchase of new plants and machines as per same terms and conditions
mentioned above.
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 Model EPC Agreement- Part IV ..contd..
Financial Covenants
PAYMENTS
• Repayment of Advance Payment : Deductions shall be made at the
rate of 15% (fifteen percent) of each Stage Payment Statement until such
time as the advance payment has been repaid; provided that the
advance payment shall be completely repaid prior to the time when 80%
(80 percent) of the Contract Price has been certified for payment.
• Procedure for estimating the payment for the Works: The Authority
shall make interim payments to the Contractor as certified by the
Authority’s Engineer on completion of a stage as per Schedule-H and
Schedule-O “Stage Payment Statement”.
• Monthly Maintenance Statement of the Project Highway: The monthly
lump sum amount payable for Maintenance shall be 1/12th (one-twelfth)
of the annual cost of Maintenance as specified in agreement as per
Schedule-O, Schedule-E and Schedule-M.

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 Model EPC Agreement- Part IV ..contd..
Financial Covenants
PAYMENTS
• Time of payment and interest : The stage payment or IPC shall be made not
later than 30 days from date of submission stage payment of works, otherwise,
the Authority shall have to pay interest at the Base Rate plus 2% (two percent) to
the contractor.
• Price adjustment for the Works :
Price adjustment for changes in cost shall be paid in accordance with
the following formulae:
(i) VRW= 0.85 RW x [PL x (LI – LO)/LO + PA x (AI – AO)/AO + PF x (FI –
FO)/FO + PB x (BI – BO)/BO + PM x (MI – MO)/MO + PC x (CI – CO)/CO+
PS x (SI – SO)/SO]
(ii) VBR = 0.85 BR x [PL x (LI – LO)/LO + PA x (AI – AO)/AO + PF x (FI –
FO)/FO + PM x (MI – MO)/MO+ PC x (CI – CO)/CO + PS x (SI – SO)/SO ]

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 Model EPC Agreement- Part IV ..contd..
Financial Covenants
PAYMENTS
• Change in law
• Bonus for early completion: on early completion of project before
Scheduled Completion date, the contractor is entitled to receive a
payment of bonus equivalent to 0.03% (zero point zero three per cent) of
the Contract Price for each day by which the Project Completion Date
precedes the Scheduled Completion Date, but subject to a maximum of
5% (five per cent) of the Contract Price. Provided, however, that the
payment of bonus, if any, shall be made only after the issue of the
Completion Certificate.

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 Model EPC Agreement- Part V
Force Majeure and Termination
FORCE MAJEURE
“Force Majeure” or “Force Majeure Event” shall mean occurrence in
India of any or all of Non-Political Event, Indirect Political Event and
Political Event, if it affects the performance by the Party claiming the
benefit of Force Majeure (the “Affected Party”) of its obligations under this
Agreement and which act or event (i) is beyond the reasonable control of
the Affected Party, and (ii) the Affected Party could not have prevented or
overcome by exercise of due diligence and following Good Industry
Practice, and (iii) has Material Adverse Effect on the Affected Party.

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 Model EPC Agreement- Part V
Force Majeure and Termination
• Suspension upon Contractor Default: On Contractor’s default, the
Authority shall be entitled to (i) suspend carrying out of the Works or
Maintenance or any part thereof, and (ii) carry out such Works or
Maintenance itself or authorise any other person to exercise or perform
the same on its behalf during such suspension (the “Suspension”).
• Termination for Contractor Default: If the Contractor fails to cure the
default within the Cure Period set forth in agreement, or where no Cure
Period is specified, then within a Cure Period of 60 (sixty) days, the
Contractor shall be deemed to be in default of this Agreement (the
“Contractor Default”).
• Upon occurrence of Contractor's default , a notice for Intention to issue of
Termination Notice shall be issued by the Authority by giving 15 days time
to make the representation. Thereafter, Termination Notice may be
issued by Authority.

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 Model EPC Agreement- Part V
Force Majeure and Termination
• Termination for Authority’s Default: If the Authority fails to cure the
default within the Cure Period within a Cure Period of 90 (ninety) days,
the Authority shall be deemed to be in default of this Agreement (the
“Authority Default”).
Upon occurrence of Authority’s default , a notice for Intention to issue of
Termination Notice shall be issued by the Contractor by giving 15 days
time to make the representation by the Authority. Thereafter, Termination
Notice may be issued by Contractor.
• Valuation of Unpaid Works: Within 45 days from the date of
termination, the Authority Engineer shall make valuation of unpaid works.

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 Model EPC Agreement- Part VI
Other Provisions
• Dispute Resolution : Any dispute, difference or controversy of whatever nature
howsoever arising under or out of or in relation to this Agreement (including its
interpretation) between the Parties, and so notified in writing by either Party to
the other Party (the “Dispute”) shall, in the first instance, be attempted to be
resolved amicably in accordance with the conciliation procedure set forth in
agreement.
• Conciliation :In the event of any Dispute between the Parties, either Party may
call upon the Authority’s Engineer, or such other person as the Parties may
mutually agree upon (the “Conciliator”) to mediate and assist the Parties in
arriving at an amicable settlement thereof.
• Failing mediation by the Conciliator or without the intervention of the Conciliator,
either Party may refer the dispute to the Chairman of the Authority and the
Chairman of the Board of Directors of the Contractor for amicable settlement,
and upon such reference, the said persons shall meet no later than 7 (seven)
business days from the date of reference to discuss and attempt to amicably
resolve the Dispute.
• If Dispute is not resolved as evidenced by the signing of written terms of
settlement, then the matter may be referred to arbitration.

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 Model EPC Agreement- Part VI
Other Provisions
• Arbitration :Any Dispute which is not resolved amicably by conciliation,
as provided in agreement, shall be finally settled by arbitration in
accordance with the rules of arbitration of the SOCIETY FOR
AFFORDABLE REDRESSAL OF DISPUTES (SAROD).
• In the event the Party against whom the Award has been granted
challenges the Award for any reason in a court of law, it shall make an
interim payment to the other Party for an amount equal to 75% (seventy
five per cent) of the Award, pending final settlement of the Dispute. The
aforesaid amount shall be paid forthwith upon furnishing an irrevocable
Bank Guarantee for a sum equal to 120 % (one hundred and twenty per
cent) of the aforesaid amount. Upon final settlement of the Dispute, the
aforesaid interim payment shall be adjusted and any balance amount due
to be paid or returned, as the case may be, shall be paid or returned with
interest calculated at the rate of 10% (ten per cent) per annum from the
date of interim payment to the date of final settlement of such balance.

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Thank You

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