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BL Research Bureau

The contention over the “Request for Qualification” (RFQ) document prescribed for public private partnerships (PPP) in road projects hold the risk of delaying order flows in the road sector.

The contentious clause states that financial bids for road projects would be invited from only five-six bidders even if the other bidders were technically qualified.

The National Highway Builders Federation (NHBF) has moved the court regarding this clause.

Madhucon Projects was one of the companies that recently dropped from the initial list of technically qualified bidders under the RFQ.

It is to be noted that similar RFQ norms are already in vogue in sectors such as ports and airports.

The newly introduced RFQ norm in the road sector is also in line with international practices.

The new Model Concession Agreement under which PPP road projects are now being awarded appears more balanced in terms of risk-return ratio, unlike the manifold returns earlier earned by the developer alone.

However, norms such as the one in the RFQ are likely to ensure that only serious players with sufficient qualification are able to bid.

Given the increasingly larger size of PPP orders, such a move may be in the right direction to ensure timely execution.

However, this could well lead to consolidation in the industry.

Further, contractors who had tried to venture in the road development business may once again have to be content with contracting work.

While the RFQ provides restriction on number of players who qualify for financial bids, it is also more equitable in terms of providing restrictions on the number of projects a company can bid for/win within a two-month period. This clause would thus allow other players (who could not qualify in earlier bids) to participate.

The current action of the NHBF to move the court poses the risk of once again slowing order flows from NHAI. The award of orders had picked up post-2007, after a lull when the new Model Concession Agreement was under framework.

Gammon Infrastructure, IRB Developers, Hindustan Construction and Nagarjuna Construction, Madhucon Projects are some of the players with substantial exposure to road projects.

More Stories on : Stocks | Roadways

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