Executive Summary:
This document summarizes responses to questions regarding arbitration and price escalation clauses in CPWD tenders. It confirms the use of uniform arbitration clauses, details interest penalties for delayed payments to contractors, and states alignment of procurement policies with best practices, with ongoing improvements based on stakeholder feedback. The reference date for the information provided is August 21, 2025.
Key Points / Main Content:
Arbitration Clause:
* A uniform Arbitration Clause, as per the Arbitration and Conciliation Act, 1996, is included in CPWD's standard tender document (General Conditions of Contract - GCC).
* Clause 25 of GCC governs the settlement of disputes through conciliation and arbitration.
* As per the Act, the Arbitral Tribunal must publish the award within twelve months from the date of completion of pleadings.
Price Escalation Clause:
* CPWD is not omitting or capping price escalation/variation clauses in its tenders.
Payment and Interest for Delays:
* CPWD aims to clear bills as per GCC provisions, timelines, and fund availability, upon receipt of complete documentation from contractors; however, specific data on average durations is not maintained.
* Interest penalties are prescribed in the GCC for delayed payments:
* Running Bills: 5% simple interest per annum is payable to the contractor if payment is delayed beyond 45 days from bill submission.
* Final Bills: 5% simple interest per annum is payable if payment is delayed beyond 3 months of submission (or 1 month after the final certificate of completion, whichever is earlier), provided the bill is in order.
Procurement Policies:
* CPWD's procurement policies in GCC and CPWD Works Manual are aligned with best practices to balance the rights and obligations of contracting authorities and private bidders.
* Policies are regularly improved and modified based on suggestions from various Ministries and stakeholders.
Impact Analysis:
Contractors:
Impact: Contractors are ensured a uniform arbitration process and are eligible for interest payments in case of delayed payments by CPWD as per defined conditions.
Action Required: Ensure timely and accurate submission of bills with all required documentation to facilitate prompt payment. Be aware of the provisions regarding interest penalties for delayed payments.
CPWD:
Impact: CPWD must adhere to the uniform arbitration clause and ensure timely processing of payments to avoid incurring interest penalties. They must also continuously improve procurement policies based on stakeholder feedback.
Action Required: Implement the uniform arbitration clause in all tenders. Ensure timely processing of contractor payments within the stipulated timeframes. Continuously seek and incorporate feedback from stakeholders to improve procurement policies.
Government (Ministry of Housing and Urban Affairs):
Impact: The Ministry is responsible for overseeing the implementation of these policies and ensuring that CPWD adheres to best practices in procurement and dispute resolution.
Action Required: Monitor the implementation of the arbitration clause and payment policies. Support CPWD in gathering and incorporating stakeholder feedback to improve procurement practices.
Key Entities Referenced
Central Public Works Department (CPWD): A government authority responsible for public works, specifically mentioned in relation to tenders, contracts, and payment processes.
Arbitration Act: Refers to the law governing arbitration, ensuring a uniform clause is included in tender documents for dispute resolution.
Arbitration and Conciliation Act, 1996: The specific act governing arbitration and conciliation processes in India, relevant to dispute resolution in CPWD contracts.
General Conditions of Contract (GCC): The standard tender document used by CPWD, containing clauses related to arbitration, payment terms, and other contractual obligations.
SHRI ANURAG SINGH THAKUR: Member of Parliament who raised questions regarding arbitration and price escalation clauses in CPWD tenders.
SHRI TOKHAN SAHU: Minister of State in the Ministry of Housing and Urban Affairs who provided the answers to the questions raised.
Ministry of Housing and Urban Affairs: The government ministry responsible for housing and urban development, overseeing CPWD and related policies.
CPWD Works Manual: A manual containing the guidelines and procedures for works undertaken by the CPWD.
GOVERNMENT OF INDIA
MINISTRY OF HOUSING AND URBAN AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 4630
TO BE ANSWERED ON AUGUST 21, 2025
ARBITRATION AND PRICE ESCALATION CLAUSE IN CPWD TENDERS
NO. 4630. SHRI ANURAG SINGH THAKUR:
Will the Minister of HOUSING AND URBAN AFFAIRS be pleased to
state:
(a) whether omitting or capping price escalation/variation clauses are
being implemented by CPWD in the tenders issued by the
Government and any study has been conducted on the reasons for
such omission and if so, the details thereof;
(b) whether the Government includes a uniform arbitration clause in
accordance with the Arbitration Act in all its tender documents, if
so, the details thereof and if not, the reasons therefor;
(c) whether the Government proposes any measures to ensure
arbitration in tender documents for expediting contractual dispute
resolution in a time-bound manner and if so, the details thereof;
(d) the details of the average duration between invoice submission
and payment release for completed works by CPWD during 2023–
25?
(e) whether the Government has considered prescribing an interest
penalty for delayed payments to contractors similar to banks’
penalty interest provision and if so, the proposed interest rate and
implementation mechanism to safeguard contractors’ working
capital; and
(f) the steps taken/to be taken to align procurement policies of the
Government with best practices to balance the rights and
obligations of both contracting authorities and private bidders?
ANSWER
THE MINISTER OF STATE IN THE
MINISTRY OF HOUSING AND URBAN AFFAIRS
(SHRI TOKHAN SAHU)
(a): No.
(b): Yes, a uniform Arbitration Clause is a part of standard tender
document i.e. General Conditions of Contract (GCC) of CPWD. As per
Clause 25 for ‘Settlement of Disputes by Conciliation and Arbitration’ of
GCC, the Arbitration is conducted in accordance with the Arbitration and
Conciliation Act, 1996.
…2/--2-
(c): Yes, as per Clause-25 of GCC of CPWD, Arbitration is conducted in
accordance with the provisions of the Arbitration and Conciliation Act
1996. As per the Act, Arbitral Tribunal shall publish award within a
period of twelve months from the date of completion of pleadings.
(d): CPWD clears bills as per provision and time line provided in GCC on
receipt of it from contractors with all relevant documents,
measurements and analysis of rates and on availability of fund. However
no such information has been maintained in CPWD.
(e): Yes, following provision is already prescribed in GCC:
For running bills: As per clause 7 of General Conditions of Contract
(GCC) of CPWD, in case of delay in payment of intermediate bills after 45
days of submission of bill by the contractor, a simple interest @ 5% per
annum is payable to the contractor from the date of expiry of prescribed
time limit.
For final bills: As per clause 9 of GCC, if the final bill is submitted by the
contractor within three months of completion of work or within one
month of the date of final certificate of completion, whichever is earlier,
and payment of final bill is made by the Department after prescribed
time limit of 3 months for payment to the contractor, a simple interest @
5 % per annum is paid to the contractor from the date of expiry of
prescribed time limit, provided the final bill submitted by the contractor
is found to be in order.
(f): Procurement Policies of CPWD in GCC and CPWD Works Manual are
aligned with best practices to balance the rights and obligations of both
(contracting authorities and private bidders), however, improvements/
modifications in policies are regularly done based on the suggestions
received from different Ministries/ Stakeholders.
*****