ONGC makes it harder for EPC consortia to bid

Vol 20, PW 15 (20 Apr 17) Exploration & Production

If you're a big EPC contractor, with diverse areas of expertise, you'll probably benefit from ONGC's new EPC project consortia rules.

But if you're a medium-sized or smaller contractor, you'll most likely lose out. Ashwini Nagia, an ONGC executive director in the materials management division, dispatched a notice on April 3 stating that henceforth consortium partners must formally guarantee each other's work when bidding for projects.

"Some companies will find it hard to give guarantees for each other," says a worried source. "In practice it means ONGC will receive bids only from companies with expertise across diverse areas of an EPC project." McDermott, Technip, Saipem, NPCC or SapuraKencana will benefit from this new directive.

But smaller mainly Indian companies like L&T, Essar, Punj Lloyd or AFCONS who need to form consortia are probable losers. Analysts describe ONGC's move as a direct result of bad experiences with consortia led by Swiber, Punj Lloyd, Essar, Leighton and others who quoted rock-bottom prices to win projects they couldn't execute.

It is also a dramatic change from the earlier system where ONGC needed only a MoU from consortium partners agreeing to 'joint and several responsibility' while executing the project. "We used to sign this MoU and hand it to ONGC with bids," says a source.

"But consortium partners never had to formally give guarantees for each other."

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