Contract Mngmnt

8/12/2019 Contract Mngmnt

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T Time - adhere itC Costs - control itA Assignments - complete it

R Rates - accept itT Technical - tackle itN Negotiation - play itO Opportunities- avail itC Challenges - meet it


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ENGINEERING CONTRACTS INVOLVESFIVE STAGES VIZ.

1. TENDERING STAGE AND PRE-QUALIFICATION STAGE;

2. FORMAL CONTRACT (i.e.) THE ENTIRECONTRACT DOCUMENT;

3. POST AWARD OR EXECUTION STAGE;

4. CLOSURE OF CONTRACT ON COMPLETIONAND SETTLEMENT OF DUES ;

5. DISPUTE RESOLUTION, IF ANY.


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I. PRE-AWARD STAGE INVOLVES FOLLOWINGASPECTS :-

ANALYTICAL STUDY - BUSINESS PROSPECTS

- Careful study of NIT conditions.

- Arranging appropriate site investigation.

- Thorough site investigation.

- Preparation of preliminary estimates.


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TENDERING :

Tendering is a process in which proposer invitesparties to submit his price/ offer for fulfillment of

proposers requirement. Offerer provides proposer with his most competitiveprice for project.


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SOURCES FOR TENDER :

Advertisements in news papers, magazinesFormal invitation from promoters, consultant and

architectsWell wishersInternet


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TENDERING PARAMETERS

- Nature of contract (turnkey/item rate/lumpsum/cost plus/ BOOT/ BOT/ BOLT)

- Facilities by clients (materials/power/water/space).- Statutory req ments/implications. - Special responsibilities (design/

strict liabilities).- Contract price.- Escalations (materials/labour/Others).


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- Mobilisation/secured advances- Invoicing methodology/measurement/

Certification.- Payment terms

- Recoveries- Bank guarantees (retentions, performance,Defects liability).

- Insurance

- Time of performance/cost overruns- Direct cost- Interest on overdue payment- Overheads


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PRE-QUALIFICATION

Process of short listing contractors Helps in proper selection of contractors of proven

capability and expertise Basis isTechnical capability,Resources,Expertise in similar jobs,Dependability and credentials


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ORDER BOOKINGS

- Liaison and negotiations withclients/consultants and acceptable price.

- Issue of LOI (Letter of intent).


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II. FORMAL CONTRACTThis involves besides technical and commercialaspects, to a great extent, legal aspects. An

agreement to become legally binding, the followingshould be noted :-i) There must be free consent of the parties;ii) Parties must be competent to contract;

iii) Consideration must be lawful;iv) Object must be lawful;v) Agreement must not be expressly declared as

void; And


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FORMAL CONTRACT (CONTD.)

Agreement must comply with provisions of any lawrequiring to be in writing or attested or registered.

A formal contract on stamp paper is absolutelynecessary while dealing with state ownedcorporations, departments of government (likeCPWD/ PWDs), public limited companies. ThoughLOIs can be acted upon, formal


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III. POST AWARD STAGE OR EXECUTIONSTAGE

This involves the following material aspects:-

INCEPTION- Detailed planning;- Work methods and construction scheme;

- Schedules (Construction, Resource, cost andinvoicing);- Framing of cost estimates (ACE);- Invoicing methodology.


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Scheduling :Scheduling is to systematically plan the course ofaction for achieving the targets/ objectives withinstipulated time in the most economical manner

For any Engineering project the followingschedules shall be prepared :Schedule for milestone eventsSchedule for construction activities

Schedule for resourcesManpower (Staff, workmen, etc,)Material (Bulk, consumables, spares, etc)Plant

Schedule for InvoicingSchedule for cost (Direct and Indirect)


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EXECUTION- Systems & controls- Project management

- Delays - documentation- Attributable to clients/consultants.- Attributable to force majeure

conditions.- Attributable to government actions.- Attributable to contractors/sub-

contractors.


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- CONSEQUENCES OF DELAYS :

A) Cost overruns - documentation

B) idling of resourcesC) acceleration of work to offset delaysD) financing cost due to delays in paymentE) penalties / liquidated damages

- Scope / quantity variation of abnormal nature- Extra items of work not envisaged in contract- Claims management


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IV. CLOSURE OF CONTRACT :- Reconciliation of billing;- Measurements & certification- Reconciliation of materials

(Free supplies etc.)- Claims follow up- Final bill

- Retrieval of BGs, insurances, deposits - Disposal of installations- Completion certificate

- Completion of defects liability period


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V. DISPUTE RESOLUTION

- By negotiation

- By accord and satisfaction- By goodwill- By arbitration, if provided for- By court action.


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Dos and donts Contract management :

1. When contractors are faced with lack of work and idleoverheads they tend to under quote and take up jobs atcutthroat rates which will land them in a soup.

Contractors are so afraid of dying that they commitsuicide.2. Better to avoid remarks I never heard of a

contractor who lost money on a job he didnt get. 3. Good-claims-management practice means:a)Eliminating risks before entering into contract to the

best extent possible, andb)During the course of work to have, variation orders

settled without elevating them to the status of claims.


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Dos and donts Contract management : (Cotnd..,)

4.Be careful how the law of the land interprets No damages clause in favour of the owner.

5.United States has a civil law system, which has

spawned the highest number of lawyers, which makesclaims settlement difficult.6.Dont throw good money after bad money in pursuing

bad claims.7.Dont set up ego-barriers in settling disputes during

the course of work.8.Negotiated contracts have fewer claims than lump

sum contracts.


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Dos and donts Contract management : (Contd.),

9.Most owners engineers tend to assume that thecontractors have covered all risks while quoting.Enumerate areas not covered in your quotation.

10.Study contract conditions and local lawsthoroughly.11.Educate your staff to act early at the lower level

so that disputes do not escalate and rise to thehighest decision making level.

12.Do not pile up claims to the end which results inthe owners engineer also getting hemmed in. Havethem settled in the early stages before the amountlocks big.

13. Provide analysis and documentation early and not


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Dos and donts Contract management : (Contd.)14. Relate every claim to the project schedule drawnup in the beginning. This base plan must be preparedright at the beginning of the contract and this shouldnot be lost sight of either mentally or physically. Keep

a copy of the original schedule in your cash box orbank locker so that it is not lost.15. Concurrent delays cannot be seen from bar chart.

It is better to use CPM network so that the floats areknown. Do the CPM network right in the beginning ofthe project. You can build a project without CPM but

you cannot build a delay claim without it. Update theCPM network by periodical monitoring so that you canprove delays, as the onus of proof is on the

contractor.


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Dos and donts Contract management : (Contd.,)

16. Claim is a three-legged table.Liability which means contractual facts.Causation which means connection, and

Damages which means claims presented.17.Submission of claims should be subject to IRACTest as follows:

a) Issue Area we entitled to recovery?b) Review Contractual and factual right to

recoverc) Analysis If necessary get expert opinion and

judgments available.d) Chronology Perspective to be drawn up.


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18.Submissions should be understandable by thearbitrator. If available enclose periodical progressphotographs which can speak volumes.

19.Do not lose credibility by submitting untenable orexorbitant claims.20.Have your submissions examined by your own

people, or experts. You never have a second chance tomake the first impression.

21.Have your claims settled during the course ofexecution when you have leverage.


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22.While negotiating international contracts, suggestsa formula from outside the country preferably aneutral country to settle the disputes.

Also, suggest mediator from neutral country to adviseduring the course of contract.


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