The contracting practices for urban rail and railway projects in India have evolved over time. The launch of the Metro Rail Policy in 2017 boosted the interest of stakeholders in the urban rail sector. The policy provides opportunities for private investments across a range of metro operations, making a public-private partnership (PPP) component mandatory for availing of central assistance for new metro projects. The introduction of private investment and other innovative forms of financing for metro projects was done to fulfil the increased resource demand for capital intensive and high-capacity metro projects. This has resulted in a significant increase in investments in metro projects.
Experience so far
Earlier, metro projects used to come out with engineering, procurement and construction (EPC) tenders, while the railways would launch bill of quantities tenders. Now, the situation has been reversed. An EPC contract requires a detailed scope and precise quantification of all items. Since each government department is accountable to other departments such as vigilance, audits and accounts, it interprets contractual terms in a rigid way. Thus, it is mandatory to define a contract agreement as clearly as possible to avoid issues related to misinterpretation of clauses. A contract agreement should be precise and formalised. The element of discretion must be minimised in the contract.
The three “Ms” on which cash flow is dependent are manpower, material and machinery. The most important “M”, which guides all three other “Ms”, is money. Thus, this element should be taken care of by the employer and the engineer so that the contractor can execute the project successfully. In the Indian scenario, the engineer, who has to take independent decisions, often circumvents the approach of the employer by interfering. This leads to the employer taking a rigid and conservative view of the contract agreement. When maintaining cash flows, many decisions need to be taken, as improperly defined variations in claims and cost may affect the cash flows of the contractor. For metro projects, where the project timelines are stringent, cash flow issues are taken care of. However, for most other projects, cash flow issues are left to be dealt with at later stages –usually after the contract is finalised and the project delivery date has been decided.
Previously, there used to be a price variation clause allowing contractors to propose prices for various metro components. Now, the prices are based on the wholesale price index, which is not in sync with the London Metal Exchange or the actual prices of metro components. Thus, metro authorities need to align their practices with the overall industry.
The increased capex is one of the major reasons for the railways becoming more competitive. For 2023-24, the government has extended a massive budgetary capex support of about Rs 2 trillion to the railway sector, and the target is to reach about Rs 3 trillion per year. Meanwhile, the capex for the metro rail segment will probably touch Rs 300-500 billion in the next two years. There has been significant relaxation in the qualification criteria for contractors in the railway sector. However, metro authorities continue to maintain steep qualification criteria. They must recognise that the railway sector has become a very big market for EPC contractors.
Construction practices in technology
The digitalisation of construction practices has been increasing. Contractors are trying to develop and use various technologies and digital solutions to optimise project costs. In EPC and PPP contracts, most of the relevant requirements are already specified, leaving little scope for the contractor to use innovative methods. However, there are certain internal areas where a contractor may use innovative technologies such as higher grade concrete, plasticisers and pre-cast construction technologies.
These days, the progress of projects is being monitored through WhatsApp and other applications. For instance, Indian Railways has started using a Project Management Information System (PMIS) to monitor the construction of projects. A PMIS is a web-enabled information technology application for managing the entire life cycle of complex railway projects. For example, to start excavation works, a request needs to be raised on the portal. All approvals are subsequently provided online through a mobile application. Further, to monitor labour movement and productivity, biometric systems and other applications are being used.
Other digitisation tools being used in urban rail projects include virtual twins, building information modelling (BIM) and project management software. During the Covid-19 pandemic, Delhi Metro used BIM to approve various designs. BIM serves as a common platform for various stakeholders in a construction project, including the employer, architect, engineer and contractor, thus improving communication. Meanwhile, virtual twin technology enables optimisation of construction, helping in the identification of issues in advance and their subsequent resolution. These technologies also promote a reduction in the use of resources, thus minimising waste.
Key challenges
The shifting of utilities and traffic diversions remain major challenges for metro projects, as they often pass through the centre of cities. Moreover, the underground sections of metros face geological challenges. Further, third-rail systems differ across metro projects (in third-rail systems, electric traction is provided to trains through an additional rail placed alongside the two parallel rails on which the train runs). There are interface challenges as well.
For metro projects, there are a considerable number of restrictions. For instance, contracts do not specify vendors from whom one may procure equipment or other products, and this is left to the engineer or employer to decide. This should be standardised, and there should be some kind of approved list of vendors, so that the costing for the project can be determined more accurately.
Since everything is dictated by the client, it leaves little scope for the contractor to use a new construction methodology or a different type of equipment/material for the project.
Next steps
There should be some uniformity across metro rail projects, whether for bidding documents, operations and maintenance specifications, vendors or other components. Difficulties arise because of different metro authorities working in different ways. The conditions specified in a bidding document should be fair and balanced for all stakeholders involved. Once a contract is awarded, a decision-making authority should guide the entire process of project execution. Its decisions should not be one-sided, and the employer and engineer should learn about and consider the practical difficulties faced by the contractor. Thus, all decisions related to projects should be made proactively, hastening the delivery of the projects.
Lastly, The urban transport system in India focuses largely on one mode of transport – the metro rail. Other modes of transport, such as trams, electric buses and Metro Neo should also be considered. In order to improve the overall transportation system, it is necessary to research innovative modes of transport and standard procedures adopted by other cities across the world, which may then be introduced in India based on demand, available technology and requirements.
Based on remarks by Praveen Goyal, Senior Vice-President, Business Development, Railway, KEC International Limited; Aniruddha Kumar, Senior Vice-President, Business Development and Tender, Railways and Metro, Kalpataru Projects International Limited; and Veer Narayan, Vice-President, Projects and Head Operations, Railways, Transportation and Strategic Infrastructure, Tata Projects, at a recent India Infrastructure conference
