Analysis of Cost Driven-Critical Clauses for EPC Contract: Indian National Highway Projects

Disagreements, lawsuits, and litigation pertaining to the construction of national highways are growing daily on a global scale. Most of the studies have focused on problems with the creation of contracts and defective contract documents. Contractors file lawsuits against the government, citing issues such as design changes, delays, and additional costs. The disputes underscored the challenges in managing large-scale infrastructure projects. With rapidly rising infrastructure development in India, lots of disputes, arbitration, litigation, and court cases are available in the Indian construction sector. It becomes imperative to carefully review contract clauses to guarantee the timely execution of projects and their cost-effectiveness. This study is based on an analysis of cost-driven critical contract clauses for Engineering Procurement and Construction (EPC) model contracts of highway Projects in India that have a high risk of cost overrun, time overrun, and litigation. A qualitative approach has been used for the data collection from contractors, consultants, and National Highway Authority of India (NHAI) officials. A total of 161 responses were collected. Dimension reduction approach of Principal Component Analysis (PCA) was used to find out total variance, rotated component matrix, etc. The outcome shows that the EPC contracts contained multiple significant (high-risk) contract clauses related to time overruns, cost overruns, and lawsuits. The cost-driven critical clauses in decreasing order are as follows: supervision and monitoring during maintenance, traffic regulation, quality monitoring and supervision, and change in scope.