Road project consultants in India will have to sign ‘Integrity Pacts’ soon as the government looks to increase accountability, improve quality and bring global standards.
The Ministry of Road Transport and Highways of India (MoRTH) plans to introduce five new clauses as part of its request for proposals (RFP) when inviting consultants to make detailed project reports (DPR) for road projects in India.
According to a draft notification by MoRTH floated on October 19, the five new clauses include a proposal for consultants to sign an "Integrity Pact" as part of the contract agreement involved in making DPRs for new road projects, according to the draft document seen by Moneycontrol.
These clauses, which will also tighten DPR timelines, are likely to be put in place by the middle of November 2023, following which the government will work on introducing similar "Integrity Pacts" for construction firms, independent quality control consultants, and awarding authorities.
The five clauses include provisions to terminate consultant contracts and debar consultant firms for a period of two years if their experience or documentation of the project is found to be false at any stage.
"The new clauses have been discussed since 2018 but were not introduced earlier due to fewer market players and backlash from the industry but this time around the industry has been receptive to these clauses," a senior MoRTH official told Moneycontrol.
More accountability
He said that the clauses are being introduced as part of the government's efforts to add elements of accountability for consultants involved in road construction projects.
"As part of discussions with foreign players keen on investing in India, adoption of international practices such as implementing Integrity Pacts in construction projects has been brought up to improve investor confidence," another official said.
As part of Moneycontrol’s In Bad Shape series, we reported that while India typically follows globally accepted standards, the current framework allows for gaps and overlaps in standards.
"Integrity Pacts will not only improve the quality of road projects in the country but will also help boost foreign investors’ confidence in projects awarded by government entities in India," the second official said.
The government is looking to create dedicated cadre for agencies such as the National Highways Authority of India (NHAI) and National Highways & Infrastructure Development Corporation (NHIDCL), so that executives from within these agencies can be promoted to top posts.
Eyeing foreign investments
The proposals by MoRTH have come at a time when the government is looking to tap foreign direct investment in road projects in India by monetising assets of the National Highways Authority of India (NHAI).
According to the National Monetisation Pipeline, the NHAI should look to monetise around 26,700 km of assets by 2024-25.
The MoRTH, NHAI, and National Highways Infra Trust (NHIT) are working with the market regulator Securities and Exchange Board of India (SEBI) to come up with norms that allow retail investors to participate in Investment Infrastructure Investment Trusts (InvIT) that hold a majority of under-construction assets.
At the moment, the SEBI only allows privately placed InvITs to invest in under-construction assets as well as completed and revenue-generating assets and public InvITs can invest majorly in completed and revenue-generating assets.
Strict penal provisions
As part of the new clauses proposed by MoRTH have stricter penal provisions for putting out false information about individuals and firms.
Consultancy firms would also have to return salaries claimed for persons employed in the firm where information is found to be false and incorrect.
The government has also proposed that consultants submit a self-certificate that the services offered meet the minimum local content requirement of up to 50 percent, to be treated as a 'local supplier'.
In case the consultant has not submitted the certificate, it will be treated as a ‘non-local supplier’ and accordingly its bid would go down in purchase preference under public procurement regulations.
The local content regulation for consultants is further proposed to be tightened by making a certificate in this regard (specifying local content in services) from the statutory auditor or cost auditor mandatory in cases where the procurement of a value is in excess of Rs 10 crore.
While non-local service providers would be allowed to participate in the bidding, they would lose out once purchase preference regulations are invoked giving first preference to bidders with high levels of local content.
The changes proposed in bid guidelines assume significance given that India plans 13,800 km of highway construction in the current financial year amid claims of cost overruns.
Stricter monitoring of work progress and transparent qualifying criteria and eligibility regulations are expected to weed out non-serious players from preparing blueprints and developing critical infrastructure for the country.
Strengthening DPR norms
The proposed DPR consultancy regulations have also given specific timeframes for work to be undertaken in road sector projects for finalising the DPR unlike earlier where all DPRs had a completion period of 300 days.
Accordingly, it has been proposed that for the widening and upgradation of 2-lane highways, work on DPR has to be completed within 10-15 months; for 4 to 6-lane highways – 12-18 months; for greenfield expressways – 18 to 24 months. More time would be given to complete work in hilly regions and for tunnelling and long-span bridges.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
