Icra, Auto News, ET Auto
New Delhi: The waiver of deposit deposits for EPC mode road projects is a relief for midsize road players, Icra rating agency said on Thursday.
Instead of the tender guarantee, tenderers are now required to sign a tender guarantee declaration accepting that if they withdraw or modify the tenders during the period of validity or if they do not present a performance guarantee for the contract awarded before the deadline, they be suspended from participation in the tender process for one year.
The decision by the Ministry of Road Transport and Highways (MoRTH) that all nodal agencies for the implementation of national road projects – NHAI, MoRTH and National Highways and Infrastructure Development Corporation (NHIDCL) – will no longer be required to apply for Bid Guarantees Money Deposit / Bid Security) for Engineering, Procurement and Construction (EPC) projects is a welcome step, he said.
“This waiver is a relief for midsize entrepreneurs, especially at a time when players are struggling to get improvements within limits not based on funds,” Icra said in a statement.
Central road implementing agencies ask for 1 percent of the contract value as bid security and the same value is higher for other central government agencies at 2.5 percent.
Depending on the success rate of the bids (which generally varies between 10 and 30%), the value of the contracts for which the bidding process and, therefore, the requirement for bid bond guarantees vary for each contractor.
Shubham Jain, Executive Vice President and Group Head, Corporate Ratings, Icra said: “For every 100 crore rupees added to a new order, entrepreneurs need approximately 6.25 crore rupees. guarantee plus a margin to secure the bid bond guarantees; that would be released now. In addition to freeing up margin money that can now be used to cover working capital needs, the waiver would also result in savings on bank guarantee commission fees which will go directly to the bottom line. ”
Regarding the bid security statement, Jain added, “Prohibiting contractors from participating in the bidding process for a period of one year in the event of non-compliance is a good deterrent to eliminate offending players. Otherwise, the tendering process would lose its sanctity. Overall, this is a win-win for both parties. “