The ministry of road transport and highways will cap the additional performance security deposit for existing road contractors building highways on the engineering-procurement-construction (EPC) mode to 3% of the bid price and release any additional performance security deposited by them at the time of bidding to ease the liquidity crunch.
However, this will be subject to the condition that the contractor has surpassed 60% of the scheduled construction period or Milestone-II. The move comes at a time when several road projects under EPC mode are stalled because of paucity of funds.
The ministry is of the view that this will help in timely completion of the project.
“It has come to the notice of the ministry that liquidity stress in the highways sector is still continuing and there are cases where existing projects have been delayed or stalled for the reason of liquidity crunch,” the ministry said in a notification.
According to the notification, the ministry will extend the benefit of capping the security to 3% of the bid price to the exacting EPC contracts as it is logical and non-discriminatory and will ensure project completion in time by easing the liquidity crunch.
However, while releasing the performance security deposit to the contractor, the government will ensure that there are no contractual disputes, arbitration or court proceedings between the two parties.
“Further, while releasing the additional performance security beyond the limit of 3%, any outstanding recovery against the contractor will be adjusted under intimation to the contractor,” it added.
In 2022, the road transport ministry had directed highway builders to furnish an additional security with an aim to rein in errant bidders that bid abnormally low.
It had, in a circular dated May 18, 2022, revised the formula for calculation of additional performance security and had capped the maximum limit to 3% of bid price offered by selected bidder.
