The National Highways Authority of India (NHAI) claims that switchover to a build-operate-transfer (BOT) mode has brought in greater fiscal prudence in highway construction. The Central agency was previously executing such projects through turnkey contracts.
According to the Chief General Manager (CGM) of NHAI, Mr G. Suresh, the State-owned organisation, had received higher bids for different road projects. The BOT system, he claimed, requires contractors with more financial stability and larger resources to bid for road projects. Under BOT, contractors need to ensure proper planning to ensure execution of projects.
“There has been a lot of interest amongst contractors through the BOT system. Response from the investor community has been so good that we need to see whether all the bids are reasonable or not,” Mr Suresh told
Monitoring Mechanism
According to Mr Suresh, NHAI is planning to strengthen its monitoring system as it was found that several smaller companies (contractors) have come up with better offers as compared to larger firms. Even larger road contractors were losing out on several bids. This has made the organisation aware of possible “speculative bids.”
Citing one instance, Mr Suresh said that a smaller company had bid at a 20 per cent premium in a case where NHAI was expecting to give 20 per cent financial grant to the contractors for the bid.
Checks and balances
“A lot of checks and balances have been put in place for those bidding for NHAI projects. However, we are closely watching these companies to ensure better monitoring of the projects,” he said
“There are some bids which are highly optimistic and sometimes over-optimistic. These people are quoting lower rates. So there is a doubt in our minds if these bids are sustainable or reasonable,” Mr Suresh added.
Some of the steps taken so far include strengthening the pre-qualifying criteria – which include going through the financial strength of prospective bidders like their capacity and net-worth requirements – and better ground level monitoring. Under the EPC model (engineering procurement contracts); contractors with previous experience in road making could bid for similar projects.