a) There are several contracting modes available including Force account, Design-Bid-Build, Design & Build, and Engineering-Procurement & Construction/Turnkey etc.
b) The choice of the contracting mode depends on risk allocation, complexity and efficiency are some the major parameters that are used to determine the mode of contracting preferred. Notably, for system like the railway, the various system components (civil, electro-mechanical, mechanical and signal, telecom engineering components) must be engineered, procured, manufactured, installed, synchronized and tested simultaneously.
c) Internationally FIDIC/ EPC- Turnkey contractual mode is preferred for complex and large magnitude engineering systems, like the railway. This was and is currently being used for railway projects in Ethiopia and Kenya
d) The EPC/Turnkey is a contracting mode where the employer provides functional requirements and the contractor undertakes to design, procure and construct, manufacture, install and test the system to the given requirements by the Employer. The performance of the EPC/Turnkey contract depends on the fulfillment of the functional requirements as agreed by both parties and ultimately the functionality of the system.
e) The main advantages include:
i) The contractor bears the design, procurement and construction risks so no addenda arising from design inadequacies are entertained. These addenda cause interruptions to the business programing of such projects.
ii) It’s a lump sum contract with predictable and fixed price.
iii) In most cases, they are completed on time compared to other modes of contracting.
iv) Most financiers prefer this mode due to predictable price and completion time which adversely can affect the viability of the project
v) The major challenge is that there are no detailed designs and detailed bills of quantities thus hard to justify to the public that is used to design-bid-build and there is no available list of materials.
f) The NCIP Summit directed that we use EPC/Turnkey contracts as the implementation mode.
g) EPC/Turnkey contracting mode is a condition for application for financing to the China Exim Bank.
h) During negotiations, the Government team relied on preliminary engineering study by Gauff Consultants, cost comparisons with Kenya and Ethiopia, reference rates from similar items from the UNRA roads contracts to come up with the negotiation basis. In the end the negotiated price was 20% lower than the submitted bid and 15% lower than the Gauff estimates.