LSTK Contracts

Types of contracts in ONGC

 1) Service Contracts viz. Catering, House keeping, security, painting, Hiring of

vehicles etc with fixed validity period

 2) Rate Contracts. Item Rate contracts with fixed validity period

 3) Annual Maintenance contract with fixed validity period.

 4) Hiring of Rigs

 5) LSTK Contracts
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What is LSTK Contract ?

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 What is the deciding factor for type of contract

 PMC Circular No: 55/2018 clarifies as under:

 Cases where predominantly services are involved including supply of material

should be considered as Service Tender.

 Cases where functional specifications are provided by ONGC and the

responsibility for design, detailed engineering, procurement, construction and
installation etc lies with the contractor to be considered as LSTK tender.
55_2018 Categorigation of tenders.pdf

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What is basic difference betw een LSTK Contract and other contracts

Activity Service contract LSTK Contract

Contract Fixed validity period of Completion period which is
period/Validity of contract viz. 1 year, 2 extendable with LD if required.
contract years or 3 years

Payment Regular payments as Milestone/Progressive payments

defined in the contract
Viz. Fortnight, Monthly,
Quarterly etc

Liquidated On delay in mobilization. Delay in completion of total

Damages project SOW with in completion
period stipulated in the contract

Change order Not applicable Applicable

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 Sanction Process

 In case of LSTK / EPC works, costing methodology approved by respective

Chief of Services through their respective VCC shall be followed (Para 4.6.1 of
IMMM).

 Execution Methodology : Execution methodology of projects will be approved

by the CPA (Concerned Director has full powers). Para 5.4.1

 Scope of Work : Scope of work will be prepared by Project team.

 Sanction will be obtained from concerned sanctioning authority as per BDP
(Scheme/Capital works).

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 Terms and Conditions/Clauses

 No standard tender document issued by PMC for LSTK contracts

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 Some of the important clauses:
 Change order:
Covered at Chapter 19 of Integrated MM Manual and at Para 22.3 of BDP.
Powers under change order approval
a) For Contracts with value up to ₹ 5 crore :
Functional Director : Up to 100% of original contract value
Concerned L1 : Up to 50% of original contract value
b) For Contracts with value more than ₹ 5 crore
EPC : Full Powers
 Functional Director : Up to ₹ 50 crore each change order subject to sum of all change

orders shall not exceed 10% of original contract value

 Concerned L1 (A) : Up to ₹ 25* crore each change order subject to sum of all change
orders shall not exceed 5% of original contract value

*L-1B: Rs. 15 Cr, L1-C: Rs. 10 Cr, L1-D/E: Rs. 5 Cr.

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 Some of the important clauses:

 Completion Certificate:
Completion Certificate is issued after completion of the entire Scope of work.
(Ref PMC Circular No: 42/2020) 42_2020 Completion Certificate.pdf
 Warranty:
Warranty for completion project will start from date of completion certificate for the
period of 12 months.
 Insurance:

Specific Insurance provisions applicable for LSTK projects issued by PMC covering
All risk policy, Cargo Transit Insurance, Third Party Liability and statutory
requirement of workmen compensation policy.
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 Some of the important clauses
 Price Format :

1) Lumpsum Price format1 Annexure V Lumpsum Price Format Hot Oil .xlsx
2) Break-up of Lumsum prices – Material & Services.
2 Annexure V A Material price.xlsx, 3 Annexure V A Services price.xlsx
3) Taxes and Duties Proforma.

 GST: Single GST on the works, not on the line item wise.
64_2020 Optimization of tax.pdf

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 Delay Analysis

 As per para No: 18.2.5 (C) of IMMM in LSTK contracts delay analysis is carried out
on completion of delivery /work.

 Joint statement (Delay analysis) to be signed by both ONGC and Contractor which
will be prepared by User at the level of TC. Concerned Level-II Officer of indenting
department shall have full powers.

 TC will examine the delay analysis the quantum of LD will be approved by the CPA
on recommendation of TC. For EPC cases concerned Director can approve the TC
quantum of LD.16_2021_Joint Statement.pdf
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  Financial Criteria

Turnover of Bidders  
For Goods 30% of bid value or more

For LSTK / Service Contracts  50% of annualized bid value or more

Net Worth of Bidder 

For Goods Positive 
For LSTK / Service Contracts  15% of annualized bid value or more

Working Capital* 15% of annualized bid value or more.

(Applicable for LSTK  
Contracts)  
Debt equity ratio* Less than 2:1
(Applicable for LSTK  
Contracts)

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 Type of Bids allowed

Single Bidder
 JV Bidder
 Consortium Bids-Optional (depending of type of Scope of work)
 Supporting Company (Applicable in ICB or specialized services in NCB)
57_2020 Eligibility Criteria.pdf

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 PRE-BID CONFERENCE

In tenders for LSTK Projects, employees (preferably) of

proposed consortium members and / or sub-contractors
and / or vendors who are competent to present their
queries in the pre bid conference shall be allowed to
participate in the pre-bid conference along with the bidder
subject to prior submission of details to ONGC.

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 Technical comments/Technical evaluation report on offers

 15(fifteen) days for LSTK days are allowed to Indentor / User to furnish the
Technical Comments/ Technical evaluation report in case of two bid system. In
case of LSTK projects by Offshore & Onshore Engineering Services,
preparation of technical evaluation report should be completed within 15 days
time and will be approved by Level II officer of design section within 3 days
and forwarded to MM section through Head Works.

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 Correspondence with bidders by indentors

 In case of LSTK projects, correspondences with suppliers/contractors shall be

carried out by Indentor/Project group/Project management consultant directly
after award of work in addition to MM (Para 13.5 of IMMM)

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 Additional BG for Warranty period.

 Additional Security Deposit/PBG is also obtained for warranty period

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 N K YO U . .
TH A

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