WHAT IS PPP [ PUBLIC PRIVATE PARTNERSHIP]

An arrangement between the public and private sectors with clear agreement for delivery of
public infrastructure and/or public services.

The private sector contractors are long term providers of services combining Design, Build,
Finance, Operation & Maintenance and To deliver services needed by public sector

FORMS OF PPP

Build Operate & Transfer (BOT):

1. Build-Operate-Transfer (Annuity)
2. Build-Operate-Transfer (Toll)

Design, Build, Finance, Operate & Transfer (DBFOT)

BENEFITS OF PPP APPROACH

1. Speedy, Efficient and Cost-effective delivery of Projects
2. Higher Performance Incentives
3. Better Value of Money
4. Competition and Greater Construction Capacity
5. Higher Accountability
6. Better Risk Allocation
7. Government Support
WHAT IS EPC MODE

The EPC contractor (EPCC) agrees to deliver EPC, which is an acronym that stands
for engineering, procurement and construction. It is a common form of contracting
arrangement within the construction industry

Under an EPC contract, the contractor designs the installation, procures the necessary
materials and builds the project, either directly or by subcontracting part of the work. In some
cases, the contractor carries the project risk for schedule as well as budget in return for
a fixed price, called lump sum or LSTK depending on the agreed scope of work.

NEED FOR EPC

1. Guaranteed Price

2. Guaranteed Timeline for Completion

3. Specified Level of Performance
4. Single Point of Responsibility
5. Post-Commissioning Services
6. Flexibility and Certainty
7. Higher Supervision and Control
PRINCIPAL ELEMENTS OF EPC STRUCTURE
1. Cost, Time & Quality
2. Single Point of Responsibility
3. Fixed Completion Date
4. Performance Specifications
5. Monetary Liabilities for Delay/Defaults
6. Cap on Liability
7. Performance Guarantee
8. Defect Liability
WHY GOVERNMENT ADOPTED EPC MODEL INSTEAD OF PPP MODEL FOR
NATIONAL HIGHWAYS

Current growth scenario cannot support big highway projects typically developed in the PPP
mode.

There are no private equity funds which are willing to come in at this moment to take up
these projects

Thirdly, there are no developments regarding many provisions which NHAI has proposed to
improve financing conditions. Hence, NHAI now believes that projects can only be
developed through the engineering, procurement and construction (EPC) mode.

ADVANTAGES OF EPC MODE OVER PPP MODE IN CONSTRUCTING BIG HIGHWAY

PROJECTS

Together with the Schedules, the proposed framework of the Model EPC Agreement
incorporates international best practices and embodies an enabling contractual framework for
construction of highways in an efficient, economical and competitive environment. It will

minimise, if not eliminate, the time and cost over-runs characteristic of the extant item rate
contracts. Further, this will enable a faster roll-out of projects with least costs and greater
efficiency while minimizing the potential for excessive discretion
12TH FIVE YEAR PLAN

The Twelfth Plan envisages investment of USD 1 trillion in infrastructure for a sustained and
inclusive growth of the economy. To meet these expanding demands, large investments will
be needed in roads, railways, ports and civil aviation sectors for augmentation of capacities
and modernization. The public sector is expected to continue to play an important role in
building transport infrastructure

WHY RECENTLY IN NEWS

The Ministry of Road Transport and Highways has decided to adopt the Engineering
Procurement and Construction (EPC) mode for National Highways which are not viable on
PPP basis. The 12th Five Year Plan envisages construction of 20,000 km of 2-lane National
Highways projects through EPC mode.

The Government has adopted the EPC mode of construction to ensure implementation of
projects to specified Standards with a fair degree of certainty relating to cost and time and
with a view to enabling a transparent, fair and competitive roll out of National Highway
projects.

The EPC mode is different from the conventional Item Rate Contracts. Experience has shown
that such contracts are prone to excessive time and cost over runs.

The EPC mode assigns the responsibility for investigation, design and construction to
Contractors for a lump sum price awarded through competitive bidding, wherein provision
for index based price variation is made.

The new initiative has been adopted to resolve the hindrances in the construction of National
Highways on a fast track and to ensure seamless construction of National Highways in the
country.

The Ministry of Road Transport and Highways is entrusted with the responsibility for
construction and maintenance of National Highways (NHs) in the country. All roads other
than the National Highways in the States fall within the jurisdiction of respective State
Governments. In order to assist the State Governments in the development of State roads, the
Ministry also provides financial assistance out of the Central Road Fund (CRF) and InterState Connectivity and Economic Importance (ISC & EI) schemes.