Power Minister RK Singh on Wednesday approved a “dispute avoidance mechanism’’ through “independent engineer” for the construction contracts of central public sector enterprises (CPSEs) executing hydropower projects.

It mandates the appointment of ‘independent engineers’ — the mechanism of engaging an independent third-party expert, widely used in major infra projects both nationally and internationally, who has domain knowledge of the subject as well as commercial and legal principles, an official release said.

This ‘independent engineer’ can have regular oversight of the project, with open communication with all the key stakeholders, which can play an effective role in the avoidance of disputes. This mechanism seeks to avoid the escalation of initial disagreements into full-fledged disputes, and for an expeditious end to conflicts in a fair manner. This will avert time and cost overruns for the timely completion of projects.

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As per the release, CPSEs were worried that the current mechanism of dispute resolution in the hydropower sector did not provide an adequate framework to address conflicts between employer and contractor at the inception stage, and addressed it only after the dispute had been notified between the parties.

A committee of board-level officers was constituted to study the field-level issues and the difficulties faced in resolving them. The committee submitted its report, which was discussed in the ministry in the presence of Central Electricity Authority officials and board-level officers of hydropower CPSEs.

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“The committee observed that delays in addressing disagreements or claims related to execution of contracts actually results in significant financial and economic losses besides time and project cost overruns. Fair and just resolution of disagreements related to contracts at inception stage is key to successful performance of the contract as per scheduled timelines, leading to both effective utilisation of budget and prevention of time and cost overruns,” the release added.

The salient features of the “dispute avoidance mechanism” include setting up a panel of domain-specific experts, and joint selection of one member from the panel for each package of works by the CPSE and contractor.

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