80:20 formula: Road contractors to get 20 per cent payment from sixth year on, not after 10 years

Workers fill potholes on an internal road in Aarey Milk Colony in July. File pic

As part of the new tender conditions for road works across the city, the Brihanmumbai Municipal Corporation (BMC) will release 20 per cent of the total cost (in the 80:20 ratio) to contractors in parts from the sixth year onwards and not after 10 years. The civic body believes that this will ensure the contractors bid at par with the estimates because they won't have much at stake.

This is for the road works that have a defect liability period (DLP) of 10 years. A year-and-a-half back when the former civic commissioner first introduced the 60:40 payment method, the civic body received high bids for road contracts, which were later negotiated and brought down. Following that, they decided on an 80:20 payment ratio, where 80 per cent of the money was paid after completion of road work and 20 per cent released 10 years later.

BMC workers fill a pothole at Vile Parle

Civic officials had said during the two pre-bid meetings that this time the bids were not likely to go beyond the estimated values. The tender conditions were changed and fresh tenders were issued just two weeks back because the bids that had come in for Rs 1,100 crore worth of road works were 30 per cent less than the estimates. This was then criticised by former chief minister Devendra Fadnavis and Additional Municipal Commissioner, P Velrasu.

Interestingly, civic sources said that this time around the bids are not too much beyond the estimates, as payments will be released in parts after five years. A civic official said, "If they can work at a cost 30 per cent less than the estimate, then they can work under the 80:20 payment ratio as well. But this time we can hold them responsible and stop payment as well."

For the road works having a DLP of 10 years, the contractors will start getting their payment from the sixth year onwards in parts, which technically means that the amount is blocked only for five years.

Vehicles navigate potholes on the Dahisar flyover. File Pics

A senior civic official said, "The initial payment of 80 per cent is released at the end of the work after due verification of quality and then there is a lull in payment for the next five years, as for the initial three years the road is usually in a good condition and quality cannot be measured. But if the quality remains good even after that, we will start releasing the payment from the sixth year at the rate of 4 per cent/year. Then after completion of the 10th year, the remaining 4 per cent will be released. This will ensure that the quality is maintained and contractors are also interested in working."