Power Ministry approves 'Dispute Avoidance Mechanism' through Independent Engineer for Hydro projects

New Delhi [India], September 29 : The Power Ministry on Wednesday has given approval to the "Dispute Avoidance Mechanism" through 'Independent Engineer' (IE).
Being put in place for construction contracts of CPSEs executing Hydro Power Projects, it mandates the appointment of 'Independent Engineers' - a mechanism of an independent, third-party, widely used in major infra projects, nationally as well as internationally, engaging an Independent Engineer for the specific project who is an "Expert" having domain knowledge of the subject as well as commercial and legal principles.
Ministry of Power, in a statement, said, "This 'independent engineer' can have regular oversight over the project, with open communication with all the key stakeholders that can play an effective role in the avoidance of disputes. This mechanism seeks to reduce the conversion of initial disagreements over issues into full-fledged disputes, and also for expeditious elimination of disagreements in a just and fair manner. This will help avoid time and cost overruns so as to ensure timely completion of the projects."
"The Hydro CPSEs had been raising concerns that the present mechanism of dispute resolution in Hydro Power sector did not provide an adequate framework to address the conflicts between the Employer and the Contractor at their inception stage but only addresses it after the disputes have arisen and notified between the Parties," the statement said.
The committee observed that delays in addressing disagreements or claims related to the execution of Contracts actually results in significant financial and economic losses besides time and project cost overruns. A fair and just resolution of disagreements related to Contracts at the inception stage is key to the successful performance of the contract as per scheduled timelines leading to both effective utilization of budget and prevention of time and cost overruns.
"Ministry of Power shall prepare a panel of domain-specific experts with a high level of integrity and proven track record by adopting a transparent and objective selection process. Further, any changes in the panel shall only be made by the Power Ministry and it shall also keep updating the panel at regular intervals. The initial term of appointment of IE would be for a period of five (5) years or a contract period whichever is lesser and maybe further renewed on a year-on-year basis as may be mutually agreed between the CPSE and the Contractor subject to the consent of IE and final approval by the Ministry."
The ministry has made it mandatory for the IE to visit the site once every two months to be constantly aware of the ongoing project activities and to have a fair idea of any situation that may lead to disagreement between the parties. Further, additional visits may also be undertaken as and when called upon to address issues of disagreement.
Dispute Avoidance Mechanism through IE as above shall be adopted by all the Hydro CPSEs executing Power Projects. IE shall be implemented in all cases irrespective of the fact that the contractor is a CPSE or a private party. Dispute resolution mechanism through DRB or DAB in existing contracts may be subsumed by the aforementioned Dispute Avoidance Mechanism through IE with mutual consent. For future contracts, Dispute Avoidance Mechanism through IE shall only be provisioned in place of the Dispute Resolution Board or Dispute Adjudication Board. The terms of remuneration have also been spelt out.