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, NAVAYUGA ENGINEERING COMPANY LTD. ‘MULT! DISCIPLINARY CONSTRUCTION ENGINEERS. Ref: 1278/NSN/1093, Dated : 18.02.2019. To ‘The Chief Construction Engineer Research & Development Organization ‘Akbar Road, PB No, 1569 Secunderabad-500 003. Sub: Design & Construction of Shipyard Facilities and Allied Services at SBC (V), Visakhapatnam. Revised Rates for Subject Work. Meeting with Shipyard Committee Members under the Chairmanship of DG ATVP, Aakanksha on 11.02.2019. Dear Sir, This is further to the meeting referred above and we place on record our sincere gratitude to DG ATVP, Members of the Shipyard Committee and your good selves for the courtesy extended to our Team lead by Chairman, NEC. The subject work which was commenced during the second half of the year 2015 could not be progressed as envisaged for the following reason: (1). Delay of over a year on account of non-availabilityof Environmental Clearance (EC) without which the project could not be commenced. (2), Change Imposed in respect of the approved vendor by the Shipyard Committee / DRDO for the supply of the main ship lift equipment which resulted in a delay of about two years. (3). Additions and alterations enforced to the scope of work originally envisaged which resulted in delay in the execution of the work and consequent idling of the mobilised resources. All the above causes which contributed to a time overrun in the execution of the project and the consequent cost overrun were discussed and deliberated in detail and we are thankful to the Committee for their patient hearing. The various issues leading to the suspension of the work, consequent of idling of resources, change in the scope of work which resulted in an increase In the quantum of items which are to be executed were discussed and the committee after due deliberation affirmed the applicability of some of ‘our claims / contentions and the same are briefly summarised as below:- (a). NEC's claim on non-applicability of the recovery of interest effected, with respect to the baseline programme was agreed upon by all the Members of the Shipyard Committee who confirmed that the amount so recovered to the tune of about Rs.30.00 Crores be reimbursed forthwith. (b). The resources which were mobilised, were rendered idle for a period of almost four years for reasons which were not attributable to us. The same~fas-agreed to and as directed, we would be submitting this claim separately. 5-14", ON Regd. Off : 48-9-17, Dwarakanagar, Visakhapatnam - 530 016. India Tel: +91-891-2754602, 2747805, Fax : +91-091-2747862, E-mail: necvizag @navayuga cori Corp. Off. : Plot No. 379, Rd # 10, Jubilee Hills, Hyderabad - 500 033, INDIA Tel : 040-28339990 / 91 / 92, Fax : 040-23337789, E-mail : nec@navayuga.com, www.necitd.com CIN : U45203AP1986PLC006925 (©). The original commercial terms agreed to in respect of price variation / cost escalation, for the execution of the subject work under Engineering, Procurement and Commissioning Contract (EPC) basis covered only a very small portion of the whole contract. Originally the work was envisaged to be completed in a period of 42 months. Even though the price variation formula did not sufficiently cover the scope of work, the provision was accepted in good faith. However considering the fact that only about 10% of the contracted work has been completed coupled with the inordinate delay, the extant formula for price variation does not meet the upward variation to the cost that has resulted.It was explained to the Committee that the four years of delay in the execution of the project for reasons as enumerated above has necessitatedin the need to modify the escalation formula by including a suitable provision which would justifiably compensate the cost escalation. In this context the escalation formula which is being implemented in the project Seabird, Karwar under the jurisdiction of Indian Navy is found to match the requirements as above. An extract of the same which is based on FIDIC conditions as well is enclosed herewith for your perusal and acceptances please (Annexure-1). (d). Further the modifications effected to the design parameters and specifications of Shiplift and Transfer System have necessitated the provision of a twin ship lift system, which also resulted in a large scale increase in the number of trestles than that was foreseen in the tender as well as during the preliminary pre-tender evaluation. It is now established that the weight of the structural steel components for the ship lift and transfer systems with trestles, has increased to about 4496 MT from the original quantity of 3228 MT foreseen.It was duly submitted by Chairman, NEC that any and all revisions to the rates shall be directly proportional to the increase in the loads and the resulting quantities of the main items of work. This being an EPC Contract, the above inference would only be the logical way out as no past data on such cases are available and this also had the concurrence of all the members present. It is also presumed that the Draft of the Object as given during bidding process remains the same even now. ‘Computing as explained above, the percentage increase in the quantum of work as a direct relation to the weight of the ship lift platform results in an increase about 39.28% (i.e, 1268 / 2700 MT). From the above, it is seen that the contract requires an upward revision to the tune of about Rs.745 Crores (Rs.1895 Crores * 39.28%) covering the balance items of work. (e). The changes in the design parameters coupled with modifications envisaged on the various items of work as enumerated above has resulted in the above detailed substantial upward revision of the overall contract price. Hence, it is appropriate that the mobilisation charge at 10% of the value of the work Is paid on the value of the above additional items of work as well. NAVAYUGA q pp This submission is a summation of the issues which were affirmed by the Ship Yard Committee during the discussions held at DG, ATVP, Aakanksha on 11.02.2019. We look forward to your approval for the release of the immediate payment amounting to Rs.104.50Cr.(Rs.30.00Cr against Interest recovery and Rs.74.50Cr. against fresh advance) as detailed above besides issue ofnecessary amendments to the contract for inclusion of price variation clause as weil as amended contract price. Thanking you, Yours faithfully, /AYUGA ENGINEERING CO. LTD., Vs Yo) (N.S.R-BABU)) (3 (ytt® yeh Director - Engineering *\_/& Sse Encl: Escalation formulae of Seabird Karawar with FIDIC extract.(Annexure I) Copy : PMO, CCE(R&D), Visakhapatnam.