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ADR adaptations in Indian Highways EPC Construction Projects:

Safeguarding Mutual Interests

 

STUDENT PAPER

By Chiranjit Sonowal

SKEMA Business School

Lille, France

 



Abstract

Time, Cost & Quality for the scope for projects to be completed and delivered successfully. EPC Projects in specific to the construction industry often face delays due to issues arising from contractual disputes. This can eventually lead to adverse issues for on-going projects such as, Time Lost, High Costs & Low Quality of Work. Alternative Dispute Resolution is an efficient means to address all of these contractual disputes effectively and efficiently. The main aim of this study was to identify and analyze contractual clauses on a sample NHAI EPC contract and evaluate, how best using the ADR approach could help contracting parties (Principal & Contractor) address disputes swiftly. The findings of this study provide a basis for using ADR effectively for NHAI in EPC construction projects and are of value for the Indian Construction Industry, Contractors and Consultants.

Keywords:        ADR, Disputes, Resolution, Mediation, Conciliation, Arbitration, Dispute Resolution Board, Med-Arb, Amicable Settlement, Construction, Projects, India

Introduction

ADR, as defined, stands for Alternative Dispute Resolution.  With over 20 million cases pending in the local courts, of which 2.25 million cases are anticipating closure since the past decade. This represents 10% of over the total pending cases in the courts. It clearly represents a serious problem, that the Indian Judicial System has severely failed to resolve disputes and is heavily overburdened with a pile of pending cases2. In such a situation, there is a need for an alternative solution to resolve existing and potential future disputes in a more organized and efficient fashion. ADR provides an opportunity and scope for amicably resolving contracting party disputes. The process involved to settle disputes fall into two categories, i.e., those who provide a decision to abide by, and those who persuade parties to reach a settlement. There are several methods to adopting the ADR process by means of namely, i.e., Mediation, Arbitration, Conciliation, Med-Arb (a hybrid combination of Mediation & Arbitration) etc. The ADR approach is most well-suited for the Construction Industry, wherein contracting parties have to deal with a host of dispute issues on a day-to-day basis. Construction Projects in India are mostly of the EPC [Engineering, Procurement & Construction] tender format. Mega-Projects like the National Highways construction are released on a Turnkey Format by the NHAI [National Highways Authority of India, a Public-Sector Undertaking Company] and the Ministry of Road Transport and Highways for eligible contractors to participate.  For projects of such complex nature, it is essential for an effective dispute resolution measure to be in place to quickly resolve issues and prevent from prolonging.

Therefore, to draw attention, “Is ADR the better option for NHAI (India). An EPC case study?”. In this case using the ADR approach, it can certainly be endorsed that using ADR would certainly be beneficial for both NHAI and its contractors. Firstly, evaluating whether ADR practices are incorporated and properly executed by the Principal Party. Secondly, whether the contractors are given enough ADR clauses to properly participate and execute the contract. Thirdly, by incorporating the ADR practices appropriately, assessing the realized benefits for both parties. Therefore, using the ADR mechanism, this paper seeks to analyze, whether ADR practices prove to be the better option in resolving highway EPC project disputes.

1.1.   Thesis objective statement

Is using ADR the better option for NHAI (India). An EPC project case study?

  1. Firstly, evaluating whether ADR practices are incorporated and properly executed by the Principal Party.
  2. Secondly, whether the contractors are given enough ADR clauses to properly participate and execute the contract.
  3. Thirdly, by incorporating the ADR practices appropriately, assessing the realized benefits for both parties.

Problem definition

Dispute resolution processes, organized for public sector organizations/units (PSU) in India are generally governed by the Ministry of Statistics and Programme Implementation (MSPI), Government of India and the respective PSU’s independently. MSPI has set up its model EPC Contract based on global industry standards of FIDIC, World Bank and ICC. As per MSPI’s model code of EPC contract, the Alternative Dispute Resolution procedure to be applied by PSU’s constitutes two options. As per the Standard clauses of contracts for all domestic bidders/bidding contracts, the first option as given in Clause 11 of Part 1 recommends Conciliation as the first step to resolving a dispute. Should this step fail, the case may proceed to stages of arbitration and litigation as need be.

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Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].



About the Author


Chiranjit Sonowal

Republic of India

 


Chiranjit Sonowal
is currently a Masters Candidate at SKEMA Business School, Lille Campus, based in France for the academic year 2017-2019. As part of a key module “The International Contracts” qualification requirement under the direct supervision of Professor. Paul D Giammalvo, the Course Director and the Professor Paul Gardiner, the Programme Director, this student paper has been produced with the purpose of getting it published with The PM World Journal. He hails from Assam, a North-Eastern State in India, famous globally for its rich crop cultivation of Tea. Previously, he has served as a Business Development and Project Consultant for over 33 months with RACE Consulting, based out of New Delhi, India and served on several consulting projects within the Public, Private, IT, Education, Insurance, Energy and Government sectors. Some key notable projects he has been involved, include Accenture, Bharat Petroleum, TCS, National Insurance, etc. He has completed his graduation in Project Management with honours from Lancaster University, United Kingdom during the year 2014. He is a certified PRINCE2® Practitioner and AgilePM® Professional. Contact him on: [email protected] or [email protected]