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Infrastructure & Design

Correlation of Employer and the Dredging Contractor
- Prof. Dr. GYV Victor, Member, Board – EADA (Asia, Pacific region), Advisor – Dharti Dredging and Infrastructure Limited.
Indian ports are not efficient in handling capsize vessels due to shallow drafts. Dredging is need of the hour to increase depth of ports. To run the operations of port hassle free, it is necessary to resolve disputes between dredging contractor and port authority. In this article, author suggests that the employer should involve dredging contractors in the port development project since the early stage of bidding process.

Most of the India’s state owned ports are in doldrums to achieve and honor the commitments provided to the private terminals/private cargo handlers those who operate under BoT mechanism. The port struggles to provide safe navigational approach channel and the berth pockets to attract large, deeper drafted vessels to the port. It is imperative from the NMD Policy, the minimum depth of the ports shall be increased to (-) 16 m CD against the global average depth of the port being at (-) 21 m CD, either capital or capital-cummaintenance dredging is required to increase the depth of the ports. Since dredging is predominately undertaken by either the state owned or private dredging companies, any difference or dispute between the dredging contractor and the engineer shall have direct bearing on the operations of the port. Such direct bearing of the impact on the operations of the port shall lead to fall of cargo and reduced income to the ports. The dredging market in the next five years is estimated to be 3 Billion Indian Rupees.

Dredging contracts are normally governed by the tailor made FIDIC contract documents in India that are project, location and employers specific documents failing to address certain critical and important essence of the contract (The author earlier in 2012 published the difference in the tailor made contracts that fail to address the essence of the contract). Still recently the Indian ports were tendered on the unit rate basis calculated on the quantum of the dredged material from the substrata. Keeping abreast the dredging cycle of supply management, the employers moved from unit rate to depth based contract. Though the depth based contract has its own disadvantages over than few advantages, the employers preferred the depth based contract to reduce their supervision and engineering methods. With the dredging cycle turning to the zenith with surplus supply, the employers are foreseeing to adopt the method of BoT mechanism for dredging and or the PPP participation for dredging, and such mechanism shall be self-sufficient to generate its own funds and sustain themselves for the operation. The method that is foreseen by the employers shall be based on Landlord concept where the employer shall be deemed as landlord.

In all the above different approaches in formulating the dredging contract, the basic essence still remains unchanged whether the approach is on unit rate or depth based or PPP or BoT mode of contract. This basic essence of the contract is widely the biggest challenge that is encountered by the dredging contractor for ages and such challenge shall persist until such time the employer and the potential contractors resolve to involve themselves at the early tender or contract stage. It is pertinent that document preparatory work for larger marine infrastructure projects often consumes an extraordinary amount of span of time, financial resources and human resource, that often results as ineffective document, further the involvement of the contractor in the bidding process post preparatory work confirms the incorrectness of the documents. The incorrect information and data are provided to the consultants, engineer to prepare the design and levels results along with the conditions of the contractual clauses results in tailoring the FIDIC documents to suit the incorrect information that was obtained during the preparatory work and such tender documents are always qualifies for dispute between the contactor and the engineer. Due to the incorrect information, the standard procedure and the dimensions in accordance to the soil substrata are altered to suit to the requirement of the information that was collected with preset qualification of the dredging equipment that the consultants could have experienced, had sufficient correct information was made available, the tender document could have evolved with appropriate contractual clauses by increasing transparency thereof reducing the risk with increased shared responsibility and limit the cause and reasons of disputes and litigations. Since the information are scantly and limited, the employer fails to own the information provided in the tender documents resulting in contractors increased risk, that being loaded on the price and uneven sharing of responsibility leading to disputes and litigation.

In most of the dredging tenders, the contractors are viewed as rivals since these dredging contractors are responsible for the revenue outflow of the port, but the employer forgets to appreciate though the dredging contractors are responsible for revenue outflow of the port they are instrumental in generating higher revenue inflow for the port by attracting giant size vessels with deeper draft to the port. To avoid increase in the estimated cost of the projects or from being shelved or putting on hold the development, the best solution is to involve the potential contractors at the early stage of project preparatory works. Such involvement shall provide efficient means of designing and planning infrastructure projects in a more realistic estimated cost of the project with less adversary complex issues. It is pertinent that the involvement of the contractors shall also result in healthy competition with the employer getting the more realistic quote for the project that would avoid him to seek approval or ratification of the revised estimate cost but for the escalation factors. Though the employers and employer assisted consultants are experts in the field, such expertise could not be underdetermining the expertise of the dredging contractor whose only scope of work is dredging. However, these early involvement of the contractor may be possible in private owned ports and the same model shall not work for the state owned ports that are governed by stringent rules and regulations.

The solution for the state owned ports is to include the value engineering clause in the tender and allow the contractor to submit the alternate proposal or the value added engineering in his bid. The evaluation and discussion with the respective contractors shall bring out the salient features of the value added engineering clause that shall be deemed to be the same as that of the early involvement of the contractor. In both the options mentioned above, the employer shall have the advantage of involving the contractor at the early stage of the bid submission, so that the contractor from his experience and expertise shall positively contribute to the project to be a win-win situation for both the employer and the contractor.