Need of the Hour

Making contract and project management more robust

Dredging activity in India has been on a rise due to initiatives such as Sagarmala, development of inland waterways and the Coastal Berth Scheme. Ample opportunities are thus available for contractors to take up dredging works. However, existing contract and project management practises prevailing in the country restrict contractor participation due to several shortcomings. Dredging contracts are half-baked with incomplete information on soil investigations and unreliable data on environmental factors, creating financial stress for private players. To add to this, project management consultants are not appointed prior to project execution resulting in escalation in costs and recurring dredging requirements.

India Infrastructure Research throws light on the steps needed to ensure efficient project management and contracting practices…

Preparing a blueprint  

Dredging being a capital-intensive and high- risk activity, formulation of the right contract is of utmost relevance. However, prior to formulating the contract it is imperative to clearly define the time frame for completing the project, understand the magnitude of dredging works required, and assess the budget (both fixed and variable) and level of expertise necessary, besides understanding the technical complexities and risks involved. These parameters are determined by preparing a project design (or a blueprint), which is key for successful project implementation.

For project design, investigation of soil using bathymetric and topographic surveys, study of water levels using hydraulic data and detection of seabed obstructions using side scan sonars and magnetometers are vital for assessing technical parameters accurately. Various sampling and testing methods can also be deployed to eliminate last-minute changes in design. Apart from this, the type of equipment to be used, cost estimates based on realistic deployment of equipment and its usage, project schedule planning and the quantum of skilled manpower required also need to be determined at this stage.

Contracts suiting requirements

Based on the magnitude of dredging works to be undertaken, site conditions, dredging techniques to be used, complexity of work and the preference of the owner, a suitable contract is selected. This can be a fixed price or lump sum contract, unit rate contract, cost-plus contract (cost-reimbursable) or turnkey contract on either a long-term or short-term basis. However, for formulating the contractual terms, agencies rely on guidelines provided by the International Federation of Consulting Engineers which are tweaked to suit the specific requirements of the employer or contractor, thereby defeating the very purpose of the legal framework.

Most of the times, contracts are lopsided as clients reserve information and are unwilling to share risk and liability equally with the contractor. Further, long gestation periods between the notice inviting tenders and the award of work, and the non-inclusion of contractors at the early stage of tendering results in formulation of biased contractual terms. To add to the woes, new contract models are adopted without being tested prior to implementation, resulting in early terminations.

To address these issues, responsibilities of clients, engineers and contractors have to be clearly mentioned in the contract document. For instance, the responsibility with respect to making financial arrangement for contractors to fulfil obligations, conducting cost-benefit analysis and cost analysis of delays should vest with the client. Further, a client is required to furnish accurate contract specifications and drawings to the contractor, though the client must retain the right to stop work or terminate the contract in case a contractor defaults.

On his part, a contractor must review contract documents for errors and inconsistencies, analyse parameters of the contract, determine costs and complexities involved, supervise and coordinate all construction work, be responsible for ensuring site safety, and indemnify the owner against any claims by third parties.

Engineers, who are directly involved in the dredging activity, are also responsible for the successful implementation of the contract and must therefore visit the project site to inspect the progress and quality of the work to ensure its completion in accordance with the contract document. At the same time, it is also the duty of the engineer to review the contractor’s claims and approve the amount to be paid to the contractor.

On boarding PMCs

Each dredging project presents unique issues and therefore requires careful monitoring. Project monitoring begins right at the conceptual stage and is required throughout the lifetime of the project including the contracting and completion stage and for tracking and disposal of the dredged material. This is where a project management consultant (PMC) plays a key role.

The PMC ensures selection of the right contractor and dredging technique, eliminates hindrance to port operations, supervises compliance of conditions stipulated by different stakeholders (project owners, financiers and regulators) as well as of those given in the contract document, besides monitoring the progress of work on a daily basis and payments to the contractor.

With complete project management, dredging optimisation can be achieved and costs can be reduced. For instance, concepts such as study of nautical depth can be applied to survey muddy ports and channels to determine safe navigation depth and to eliminate stretches that are inefficient to dredge due to low solid concentration and low value material. This will help in reducing recurring dredging expenses as it reduces the depth to be dredged. Cochin port is the first port to carry out such a study with the aim of reducing costs.

Further, risks related to destruction of a ship’s keel by its interaction with the density field, which is formed due to creation of waves underneath the moving vessel, can also be well managed by following methods such as dual frequency echo-sounders, and other instruments. These techniques are designed to measure density and rhealogy (study of the flow of matter) and the data so collected is then correlated with bathymetric data.

During project implementation, the costs incurred to clear sedimentation can also be reduced by timely adoption of right solutions by the PMC. These can eliminate influx of sediment into the channel or harbour as the sediment can be kept moving, thereby minimising settling. Advantage of active and passive systems can also be taken to keep sediment navigable.

Conclusion

A well-defined contract with a clear allocation of risks and responsibilities for all stakeholders is a must for industry growth. Therefore, contract formulation in the industry needs to be made more robust so as to avoid disputes later. The ideal procedure should be to draft a contract which allows risks to be shared between all parties in a pre-decided manner. It should also clearly lay down the project scope and the expectations of the management. There has to be scope of revision in costs in case of substrata changes or if there are any changes in agreement conditions. Strengthening contract formulation can go a long way in improving the quality of project execution in the industry. w

Based on presentations by Dr George Yesu Vedha Victor, Managing Partner, AMAREENA Law Office, and David Middlemiss, Principal Scientist, Dredging HR Wallingford, at a recent India Infrastructure conference

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