TENDERING BIDDING AND CONTRACTING

S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 431

TENDERING BIDDING AND CONTRACTING

Contract: An agreement enforceable by law is contract. (Section 2 (h) of Indian Contract Act) Contract means a written undertaking for execution of works or supply of materials or for the

performance of any service connected therewith duly accepted and registered by the competent authority

The contract invariably follows a proposal from one party and its acceptance by the other In absence of any of the above elements of a contract it becomes void, i.e., without a legal effect

or voidable An agreement not enforceable by law is said to be void

Contractors and their qualifications

Contractors mean Private individuals, Partnership firm, Public or Private Limited concerns who have made such an undertaking for the execution of works, supply of materials, or for services concerned

They should have an engineering organization to deal with works entrusted to them They must possess valid licenses in the respective fields Expected to have the machinery and equipment required for the job the professional ability to understand and implement the contractual obligations and subsidiary

instructions given by the engineer-in-charge of the department their financial resources their capacity to control labour, particularly by way of regular payment of fair wages and

observance of Labour Regulations their zeal for maintaining reputation and integrity

Essentials of Contracts

• That the contract shall be made by parties competent to contract • That the contract shall be made by free consent of the parties • That there shall be a definite proposal and its acceptance • That the contract shall be made so that the considerations and objects are lawful • That the meaning shall be certain

Contract Documents

• A typical contract may include the following documents

1. Tender notice 2. General instructions and directions for the use of contractors 3. Form of contract 4. Conditions of contract 5. List of materials, if any, agreed to be supplied to the contractor by the owner, and the conditions of supply 6. Bill of quantities 7. Specifications- General and Particular 8. Drawings


Types of Contract

• Basically building and engineering contracts can be divided into the following groups 1. Contract between an owner and a contractor 2. Contract between a contractor and a sub-contractor 3. Engineer‟s or Architecture‟s contract (with the owner) for engineering and architecture services Types of Engineering Contracts

• A) Traditional contracts 1. Item rate contract 2. Percentage rate contract 3. Lump-sum contract 4. Labour contract 5. Materials supply contract 6. Piece work agreement 7. Cost plus percentage rate contract 8. Cost plus fixed fee contract 9. Cost plus sliding or fluctuating-fee scale

contract

10. Target contract 11. Measured contract or Schedule contract 12. Negotiated contract 13. Rate contract

B) Non-Traditional contracts

1. Turn-key or combined Engineering and Construction contracts

2. Concession contracts (BOOT projects)

•

Lesson 1: Tender as a basis for creating contract, contents detailing complexity of work, quality, technical and commercial conditions.

Tender: Calling for proposals from prospective tenderers in the specified tender form. The process involves:

Deciding scope, details of work, preparation and issue of tender notice

Detailing complexity of work:

Schedule of work, Bill of quantities Instructions to tenderers, Notes General Conditions Special conditions, Commercial terms Technical specifications Drawings Technology and equipment Arrangements for import licenses, foreign exchange and other assistance for land acquisition

Lesson 2: Tender structure for different types of contracts item rate lump sum, plant design build EPC turn key

Types of contracts:

Lump sum contracts Measurable – Item rate contracts Cost plus percentage contracts Cost plus fixed fee contracts

Maximum price contracts Incentive contracts Design and build contracts EPC turn key contracts Partnering


Traditional lump sum:

Client appoints architect, contracts builder Architect as project team leader for design management, documentation and appointment of

consultants Open, selective or negotiated tendering, schedule of quantities or cost plus In a lump sum contract, the owner has essentially assigned all the risk to the contractor, who in

turn can be expected to ask for a higher markup in order to take care of unforeseen contingencies. Beside the fixed lump sum price, other commitments are often made by the contractor in the form of submittals such as a specific schedule, the management reporting system or a quality control program. If the actual cost of the project is underestimated, the underestimated cost will reduce the contractor's profit by that amount. An overestimate has an opposite effect, but may reduce the chance of being a low bidder for the project.

Traditional lump sum:

Advantages:

Client involvement in design process limited

Standard forms are time tested for disputes/ arbitration

Drawings/ specifications basis for tendering

Provision for variations, can be controlled if designed properly initially

Cost control through priced bill of quantities

Disadvantages:

Significant risk with client Ignores benefits of integration of

contractor‟s expertise Design and construction are end on Due to time pressure errors/

omissions possible Not suitable for large/ complex

projects Precludes innovation, tendency to

accept lowest bids

Nontraditional –Design and build:

Builder is project leader for project delivery

Client and builder in direct contract relationship

All risks with contractor Builder appoints and manages

consultants Selective or negotiated based on

performance brief

Single point of responsibility

Builder accepts major portion of risk

Builder can control design process and accelerate to be more cost effective

Nontraditional –Design and build- Disadvantages:

Cost pressures on builder‟s side can lead to shortcuts in design

Promotes cheapest capital cost options which could have ramifications on cost and durability

Client may need to retain independent consultant to monitor the design

To change contractors in the event of non performance difficult


Nontraditional – Turnkey:

Builder is lead for project delivery Client contracts builder for funding, site procurement and construction Builder appoints and manages consultants to deliver within terms of project brief Selective or negotiated contract Builder subcontracts to principal participants and assign the risks to the party best suitable to

control the risks

Nontraditional – BOT

Builder is the lead for project delivery Client contracts builder for funding, site procurement , construction and operation of facility for a

contracted period of time Builder appoints SPV to deliver the project Selective in single/ two stage tender

Contract price strategies:

Cost plus: Client pays the contractor the cost incurred plus a fees. It lacks competition. This is better suited for strategic alliances

Public private partnerships:

Private sector construction of infrastructure owned and operated by Government Private sector design and construction of infrastructure with maintenance obligation

Equity joint venture between private sector and Government for the delivery of infrastructure. The government contributes the land as its equity. The private sector arranges the finance and constructs. After completion the profit is split in proportion of the equities

Unit Price Contract

In a unit price contract, the risk of inaccurate estimation of uncertain quantities for some key tasks has been removed from the contractor. However, some contractors may submit an "unbalanced bid" when it discovers large discrepancies between its estimates and the owner's estimates of these quantities. Depending on the confidence of the contractor on its own estimates and its propensity on risk, a contractor can slightly raise the unit prices on the underestimated tasks while lowering the unit prices on other tasks. If the contractor is correct in its assessment, it can increase its profit substantially since the payment is made on the actual quantities of tasks; and if the reverse is true, it can lose on this basis. Furthermore, the owner may disqualify a contractor if the bid appears to be heavily unbalanced. To the extent that an underestimate or overestimate is caused by changes in the quantities of work, neither error will effect the contractor's profit beyond the markup in the unit prices.


Cost Plus Fixed Percentage Contract

For certain types of construction involving new technology or extremely pressing needs, the owner is sometimes forced to assume all risks of cost overruns. The contractor will receive the actual direct job cost plus a fixed percentage, and have little incentive to reduce job cost. Furthermore, if there are pressing needs to complete the project, overtime payments to workers are common and will further increase the job cost. Unless there are compelling reasons, such as the urgency in the construction of military installations, the owner should not use this type of contract.

Cost Plus Fixed Fee Contract

Under this type of contract, the contractor will receive the actual direct job cost plus a fixed fee, and will have some incentive to complete the job quickly since its fee is fixed regardless of the duration of the project. However, the owner still assumes the risks of direct job cost overrun while the contractor may risk the erosion of its profits if the project is dragged on beyond the expected time.

Cost Plus Variable Percentage Contract

For this type of contract, the contractor agrees to a penalty if the actual cost exceeds the estimated job cost, or a reward if the actual cost is below the estimated job cost. In return for taking the risk on its own estimate, the contractor is allowed a variable percentage of the direct job-cost for its fee. Furthermore, the project duration is usually specified and the contractor must abide by the deadline for completion. This type of contract allocates considerable risk for cost overruns to the owner, but also provides incentives to contractors to reduce costs as much as possible.

Target Estimate Contract

This is another form of contract which specifies a penalty or reward to a contractor, depending on whether the actual cost is greater than or less than the contractor's estimated direct job cost. Usually, the percentages of savings or overrun to be shared by the owner and the contractor are predetermined and the project duration is specified in the contract. Bonuses or penalties may be stipulated for different project completion dates.

Guaranteed Maximum Cost Contract

When the project scope is well defined, an owner may choose to ask the contractor to take all the risks, both in terms of actual project cost and project time. Any work change orders from the owner must be extremely minor if at all, since performance specifications are provided to the owner at the outset of construction. The owner and the contractor agree to a project cost guaranteed by the contractor as maximum. There may be or may not be additional provisions to share any savings if any in the contract. This type of contract is particularly suitable for turnkey operation.


Lesson 3:

Creating pool of appropriate agencies for procurement of consulting construction services, plant & machinery, goods and services registration of contractors, suppliers and their prequalification criteria:

The contracting system requires various agencies like consultants, site engineers, equipment suppliers, suppliers, contractors. For all these agencies the fundamental requirements are QUALITY, TIME, and COST AND PERFORMANCE

Architectural consultants – Selection will be based on their capability to do the architectural drawings and co-ordinate the work of all other consultants so as to meet the aspirations of the employer and produce the structure to the desired standards and architectural features commensurate with the type of construction. The organizational strength, similar works carried by them in the past will give an indication. They must be conversant with latest materials.

Structural consultants – Size, organization and their capability to carry out complex designs and their previous credentials. They will be responsible for design, checking design at site and giving structural safety certificate and carry out necessary tests

MEP consultants – Responsible for design and site checking of mechanical, electrical and plumbing works. They must be conversant with latest materials of their trades.

Suppliers of equipment – The quality quantity variety of equipment held by the supplier and operating and maintenance support provided by them are important indicators for selection.

Material suppliers – Companies capable of supplying various construction materials fittings and fixtures with valid registration and ITCC.

Contractors: The contractor will be graded according to the category of work to which he was registered with an organization, financial classification of the work. The contractor‟s experience on similar works, financial standing and technical capabilities.

Subcontractors: These agencies will be selected by the main contractor for independent trades or sometimes by the owner for specialist works.

Landscape consultants: They are selected to give advice for creating greenery, planting trees and shrubs to create ecological balance.

Quantity surveyors: This organization shall be responsible for preparing tenders, specifications, BOQ, and to deal contractual matters.

Financial consultants: To deal with cost planning, cost control and to render advice on financial issues.

Lesson 4: Office Engineering

Defining the scope of procedures of procurement of design, engineering construction and project management services, procurement of plant and equipment:

Definition of the project and its complexity, various services required, PPR

Collection of site data and Investigations Design philosophy, availability of design expertise locally/abroad, identifying suitable agencies

by prebid meetings Identifying architectural, structural aspects and fixing the agencies Identifying the type of contract suitable for the project, with reference to designing and

contracting organization held by the owner, technological capability to handle the complexity of the project, expected period of completion

Specifying the qualitative requirements of civil engineering, MEP contractors


Selecting suitable contractors after pre-bid meetings, verifying their credentials by visiting the works executed by them, checking financial, technical and organizational capabilities and equipment held by them.

Identifying suitable construction management system (i.e.) project management system, construction management system

Nontraditional – Construction management:

Architect & construction manager facilitate design process. Client has direct contract with consultants

Contract price – Costs + Fee No detailed documents at tender stage

Advantages:

Promotes team approach Builder part of design team Client gains financial benefit of

contractor‟s buying/negotiating power Time saving through fast track Builder‟s costs reimbursed

Disadvantages:

Higher degree of risk with client due to direct contracts with subcontractors

Continuous involvement of client Less incentive for competitive bids

Nontraditional – Project management:

Client appoints project manager who is professionally & commercially competent Client contracts directly with all consultants, builder. PM responsible for performance PM appoints and manages design process Selective or negotiated tendering Bill of quantities or cost plus for contract price

Advantages:

Single point responsibility with PM Client can focus on his business Suitable for large/ complicated projects

Disadvantages:

Can lead to lengthy expensive litigation

Lesson 5: Preparation of tender documents and invitation of bids prequalification criteria:

1. Project Strategy

Procurement method Form of tendering Time schedules

2. Prequalification documents

Tender notice/ Letter of invitation Information about prequalification procedure Project information Prequalification information


Lesson 6: Preparation of bid documents, processes methods and techniques, submission process:

1. Invitation to prequalify

Advertisement in press/ Important magazines

Employer and Engineer Outline of project ( Scope, location,

programme, source of finance) Date of issue/ receipt Instructions for prequalification Minimum requirements for

prequalification Submission date for contractor‟s

prequalification data

2. Issue and submission of prequalification documents:

Organization and structure Experience in the intended type of work Resources (Managerial, technical, labor,

plant & equipment) Financial statements Current contract commitments Litigation History

3. Analysis of prequalification applications:

Company/ Joint venture structure Experience Resources Financial capabilities General suitability Selection of tenderers Prepare list of tenderers

4. Preparation of tender documents:

Letter of invitation to tender Instructions to tenderers Conditions of contract Form of tender and appendices Drawings Bill of quantities Schedule of additional information Information data

5. Issue of tender documents:

Issue tender documents to tenderers who are selected for issue

6. Visit to site by tenderers:

Arrange date and time for site visit Employer or engineer to accompany the

site visits

7. Tender queries/ Correspondence/ tenderer’s conference

Replies/ send minutes of meetings

8. Addenda/ Amendments to tender documents:

Issue addenda/ amendments in time and allow sufficient time for submission of tenders

9. Submission and receipt of tenders:

Record date and time of receipt of tenders

Acknowledge receipt or return unopened tenders received late

10. Opening of tenders-Tender opening by public or restricted opening:

Announce and record the names of tenderers and prices

Announce and record names of tenderers disqualified due to late or non arrival of tender

11. Scrutiny and evaluation of tenders:

Assess tenders in accordance with evaluation criteria

Raise further points requiring clarification Prepare comparative statement of

tenders Complete evaluation Check with funding agency Reject non conforming tenders Advise tenderers concerned


12. Acceptance and preparation of contract document:

Decide on contract award, if necessary after pre-award discussions Issue letter of acceptance Obtain performance security Preparation of contract documents and signing Notify unsuccessful tenderers and return of tender security / earnest money

Tendering procedure for private organizations:

Preparation of project brief through consultants, site investigations, soil investigation, getting approvals of Municipal Authorities, environmental clearance, zoning clearances

Appointment of architectural consultants Appointment of structural consultants Appointment of MEP consultants Appointment of project management consultants Appointment of quantity surveyors and financial consultants Identifying suitable contractors Obtaining quotations, negotiations and selecting lowest quotation or nomination of suitable

contractor

Lesson 7: Tendering documents for LCB, NCB:

Local competitive bidding is the process of calling for bids within the country where the locally available expertise is considered adequate

Till early 1990 various organizations were using their own formats. In 1992 CPWD constituted a committee to review existing documents. Various ministries of central Govt., State depts., industry associations and NICMAR participated.

The committee submitted the revised draft in 1995 which was approved by Govt. Construction industry development council (CIDC) was formed in 1996. Govt. of India appointed

a committee under the chairmanship of secretary Ministry of Statistics and programme implementation to suggest common format for contracts after considering the latest edition of FIDIC and in consultation with CIDC and other

Departments. A common document containing conditions under the name of MOSPI was submitted by the committee which was approved in 2002. This document was prepared based on conditions of contract for construction, FIDC. And certain modifications were made to suit Indian conditions. Various departments and construction companies are presently following this format for LCB.

Lesson 8: Tendering documents for ICB

This form is meant for International competitive bidding by inviting tenders from global players in addition to local firms.

World bank and other multinational funding agencies who finance large infrastructure or developmental projects, insist on world bank standard forms which were based on FIDIC formats with certain modifications.

In world bank and other international institution funded projects where foreign currency payments are involved ICB conditions need to be followed..

Mode of payments in foreign currency, repatriation of earnings deployment of foreign personnel their fees taxes import of capital goods and duties applicable shall be necessary.

ICB was made applicable for works costing above Rs.20 crores


For world bank aided projects ICB is mandatory The SDB (standard bidding document) was indigenized by Govt. of India in consultation with

world bank ICB form also caters for clauses for dispute resolution based on New York / Geneva convention

which is now incorporated in Arbitration and conciliation 1996 in respect .of international awards

Lesson 9 & 10: Rights and obligations of parties in tendering process for various types of contracts

Traditional contracts:

1. Identification of specific elements of the project

2. Giving possession of entire site within the specified time, and arranging necessary permissions from statutory bodies

3. Making necessary financial arrangements

4. To provide necessary drawings, materials and instructions in time

5. Non Interference in contractor‟s work and extending co-operation for the contractor to progress work

6. Appointment of engineer and staff 7. Making payments in time 8. Giving extension of time 9. Employer‟s claims by giving notice

Obligations and rights of contractor:

1. Inspection of site and interpretation of data and assessing all risks

2. Depositing performance security, insurance

3. Furnishing programme for completion 4. Commence and progress work as per

programme to complete work with diligence

5. Appointment of project management team 6. Selection of resourceful sub contractors 7. Planning and control 8. Quality assurance 9. Employment of equipment as required 10. Labour welfare 11. Submission of information, alerts and

notices 12. Claim payment for work done 13. Extra claims 14. Remedy all defects during defect liability

period 15. Design, execute and complete work as per

contract 16. Provides the plant and contractor‟s

documents, contractor‟s personnel, goods and services whether temporary or

permanent to satisfy employer‟s requirements

17. Contractor shall be responsible for adequacy and safety of site operations, and all methods of construction

18. The contractor shall institute a quality assurance system to demonstrate compliance with the requirements of contract and employer is entitled to audit any aspect of the system

19. Details of all procedures and compliance documents shall be submitted for information before each design and execution stage is commenced.

20. The employer shall make available to the contractor for information, prior to base date, all relevant data on subsurface and hydrological conditions at site including environmental aspects and other data in possession of employer.

21. The contractor shall be deemed to have obtained all necessary information as to risks, contingencies and other circumstances which may influence or affect the works


Lesson 11: Registration of contractors, gradation and similar procedures:

Registration is the process of obtaining the credentials of the contractor and maintaining the lists of

such contractors. Registration could be category wise viz.Buildings, roads, water supply, electrification,

air-conditioning etc. based on certain criteria. The registration is also done monetary limit wise.

Lesson 11: Registration criteria:

Constitution, legal status, partners

Immovable, movable properties and bank deposits

Turnover during last five years, balance sheets

Valid ITCC

Performance from previous employers

Major equipment held

Qualifications and experience of key personnel

Information regarding litigations

List of works carried out in time

Engineers proposed to be employed and technical capability of the firm

Whether proprietorship or partnership firm

Lesson 12: Procurement of tender documents, pre-bid conferences and site investigation:

Open tendering – Public works: Advertisement in press calling tenders

Restricted or selective tendering – Public works: Calling for expression of interest, pre-

qualification and issue of tender forms to pre-qualified firms

Negotiated tendering – Public/Private works: An authority may call one or two service providers

and negotiate with the terms of contract

Competitive dialogue – Private works: This a variant of negotiated tendering. An authority may

pursue a process of dialogue with selected tenderers through successive rounds of negotiation.

Clarifications are sought during dialogue on scope but not on prices.

Two envelope system – For specialist works: One envelope containing technical and pre-

qualification criteria and the second envelope containing the quotation

Issue of tender notice based on the type of tendering selected

Application for issue of tender forms after assessing suitability as laid down in tender notice

Issue of tender forms to eligible bidders

Site visit and pre-bid meetings:

The bidders are invariably advised to visit the site, acquaint with conditions of site, working

conditions and study the data given in the tender and its implications before quoting. No

misunderstanding in this regard will be accepted after the tender is submitted.

Tender forms specify date, time and place of opening of tenders

Prebid meetings are arranged by the employer for all intending bidders in all large size and

complex projects. The employer clarifies any ambiguities, doubts on scope, specifications,

drawings, designs, contract clauses included in the tender and raised by the bidders. Necessary

amendments to tender documents will be issued where considered necessary. A summary of

points may be forwarded to all concerned.


Lesson 13: Study of contract conditions, bank guarantees and performance bonds:

The bidder is required to study the schedules, general & special conditions, technical

specifications, bill of quantities and drawings to understand the scope of work to decide whether

the bidder can execute the work and the risks and difficulties likely to be encountered by him.

:

The bidder is required to study the stipulations on performance bonds and bank guarantees that

need to be submitted by the bidder and their financial and their implications like lock in period,

interest and the effect on other on going works.

The bidder is required to study the need for deploying equipment and its availability

The bidder need to study the availability of material, labour and extra establishment needed

The bidder needs to examine the cash flows required and they can be arranged.

Lesson 14: Amendments, correspondence, opening of tenders:

The bidder needs to make necessary correspondence with the employer on any ambiguous

points that requires clarification even after pre-bid meetings

Any amendments issued by the employer need to be studied carefully for their financial and

other implications and amend his quotation accordingly.

Missing an amendment may cost the contractor heavily. Normally the employer numbers the

amendments serially and non receipt of any amendment can be taken up immediately with the

employer. All the amendments will form part of the tender.

:

Opening tenders:

Tender boxes meant for receiving tenders will be sealed at the appointed time by officers

nominated (Normally 2) . Late tenders will not be allowed to be put into the tender box.

Tenders will be opened at the appointed time in the presence of bidders present

:

Signature of bidders present will be obtained

Opening officers will open the tenders and read out the amounts quoted by each bidder and

initial on quoted pages

Corrections, overwriting will be initialed

Rates written in words will take precedence over figures.

The opening officers will make comparative statement of tenders and hand over to the contract

section for further disposal. Blank tenders will be noted as such. They will not check extensions

or totals.

Lesson 15: Contract administration and project diary, creating project record:

Following documents are maintained at site:

Copy of contract document

Project diary showing resources employed, nature of work carried out, weather conditions,

materials brought

Programme of work – CPM, Bar charts

Materials register

Equipment register

Checks carried out at site

Pour cards, Batch plant, transit mixer record

Important stages passed


Register of tests

Register of reinforcement

Measurement books

Samples register

Cement register

Site order book

Progress reports

Register of variations

Interim bills

Correspondence files

Safety hazard warnings, SOP

Construction photographs

Labour welfare and first aid arrangements

Security aspects

Lesson 16: Planning at head office of contractor and preparing for execution:

Deciding organization at site

Planning site office, workshop, transport, water, electricity and communications, office furniture

and equipment

Planning security fence and personnel

Planning labour camp

Planning surveying equipment

Planning for storage of stores, steel yard, Concrete handling arrangements like cranes, hoists

Obtaining work order for commencement

Obtaining copy of agreement, drawings

Obtaining necessary licenses for labour, insurance

Mobilizing construction equipment

Submitting performance security

Making programme for completion of work and allocating resources

Prepare cash flow charts

Lesson 17:Appointment of project manager mobilization and commencement of work:

Appoint project manager with appropriate technical and managerial skills. The project manager

should have executed similar projects earlier

He should be capable of coordinating with employer, consultants, site engineers and other staff

He will have to organize all activities at site and guide in resolving bottlenecks to achieve

desired rate of progress

The project manager shall obtain either mobilization advance or arrange for finance through his

head office

Arrange all material, labour resources and arrange for construction equipment

Arrange RMC/ site mix concrete

Arrange for labour camp, their accommodation, water, bathing and toilet facilities, canteen and

other welfare measures

Arrange fabrication yard, security and safety measures

Identify site and arrange for mark out to commence work

Arrange site lighting

Supplying instructions to carry out work


Obtaining drawings and specifications

Prepare master programme, monthly, weekly and daily programmes and their implementation.

Arrange adequate resources and equipment

Prepare progress reports

Carry out investigations, quality checks, tests and maintenance of records

Prepare running bills and pursue for payment

Lesson 18: Selecting and appointing subcontractors on suitable terms, interaction with

consultants and clients:

Sub contractors / Nominated subcontractors:

Decide the number of trade items to be subcontracted

Decide about suitable subcontractors based on their previous performance, quality

consciousness, timely completion and resourcefulness and time constraints as per contract

Obtaining quotations on the same terms of main contract

Payment terms, Financial soundness

Capability to employ skilled labour

Capability to employ equipment

Knowledge of standards, procedures, methods of execution

Capability to study the drawings and understanding specifications

Organizing capacity and to cope with urgency of work

Capability to obtain permits, approvals, licenses from various authorities

Adherence to labour laws

Safety arrangements

Agreement with subcontractor

Withdrawal by subcontractor

Interaction with with consultants and clients:

The project manager must be capable of interacting with architects, Structural consultants very

frequently.

The services must be interwoven with other civil works at appropriate stages of planning and

construction, so that no important service left behind requiring modifications, breakages and

additional works

The interaction is generally involves obtaining necessary drawings/ designs in time, obtaining

clarifications, amendments based on site data/ investigations, impracticable provisions,

nonconformity to standards, non availability of materials, mismatch of services

Study of drawings and specifications at information drawing stage, good for construction stage

and pointing out

Obtaining list of drawings at the beginning of construction

Keep the client informed of interaction with consultants, and obtain his views, approvals and

communicate back to consultants

Keep record of interaction through minutes of meeting


Lesson 19: Submission of reports, bills and follow up for payment:

Reports:

Daily progress report showing status of work, manpower and equipment at site, weather, visitors

to site, important stages of work completed, material brought on site

Concrete pour record

Steel fabrication/erection report

Problems encountered at site and how resolved/ still pending

Hold up of work with reasons and suggested action

Test information

Photos showing progress at various stages

Weekly/monthly physical and financial progress

Variations

Correspondence with contractor/ consultants

Payments:

Submission of interim bills

Submission of reconciliation of materials

Supporting details

Submissions of joint measurement record

Submission of vouchers

Clarifying any doubts in the bill

Monitoring the movement of bill Obtaining payment

Lesson 20: Contract close out, defects notification period, role of gradation agencies like

ICRA and different methods of grading:

Contract completion and close out:

Giving notice of completion to client

Joint inspection

Completion certificate from client

Preparation of list of defects to be rectified

Defect notification period/ Defect liability period:

Intimation of defects by employer

Attending for rectification of defects

Informing client of completion of rectification

Requesting for performance certificate on satisfactory completion of defect liability period

Release of security performance guarantee

Grading by ICRA and other grading agencies:

ICRA is an associate of Moody rating agency

The rating grades based on timely completion without cost overruns, quality

Financial capability of the company


Definitions of Liquidated damages

Liquidated damages (also referred to as liquidated and ascertained damages) are damages whose

amount the parties designate during the formation of a contract for the injured party to collect as

compensation upon a specific breach (e.g., late performance).

If the Contractor foils to complete the work within the stipulated dates or such extension thereof as communicated by the Engineer in writing, the Contractor shall pay as compensation (Liquidated Damage) to the Trustees and not as a penalty, 1/2% (half percent) of the total value of work (contract price) as mentioned in the letter of acceptance of the tender/offer, for every week or port thereof the work remains unfinished. Provided always that the amount of such compensation shall not exceed 10% of the said value of work.

„Liquidated Damages‟ means that it shall be taken as the sum which the parties have by the contract assessed as damages to be paid whatever may be the actual damage. The parties to the contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other, or may agree that in the event of breach by one party any amount paid by him to the other shall be forfeited. It is a genuine “pre-estimate of damages” likely to flow from the breach. However, this liquidated damage shall be distinguished from the term “penalty” which is an amount intended to secure performance of the contract.

Question : What is the role of the Engineer ? As per the FIDIC

3 .The Engineer (Duties and Authority)

The employer shall appoint Engineer who shall carry out duties assigned to him in the contract

Whenever the Engineer exercises a specified authority for which employer‟s approval is required the employer is deemed to have issued the approval

The engineer shall have no authority to amend the contract

The engineer shall have no authority to relieve either party of their duties

Any approval, check, certificate, consent, examination, inspection, instruction, notice, proposal,

request, test or similar act by the engineer shall nor relieve the contractor from any of his

responsibilities he has under the contract

3.3 Instructions of the engineer:

The instructions shall be given in writing

If the engineer gives oral instruction, receives written confirmation from the contractor within two

working days and does not reply by issuing written rejection within two working days after

receiving the confirmation the confirmation constitutes written instruction of the engineer

3.5 Determinations:

The engineer shall consult with each party in an endeavour to reach an agreement or

determination in a particular issue after issuing necessary notices. If agreement is not achieved

he shall make a fair determination in accordance with contract


THE CONTRACT & GENERAL OBLIGATIONS OF CONTRACTOR

1. English language to be used.

The contract documents shall be drawn-up in English language.

The contract shall be governed by all relevant Indian Acts as applicable only within the jurisdiction

of the High Court at Calcutta, India, including the following Act

Applicability of laws on the contract.

1.The Indian Contract Act, 1872.

The Major Port Trust Act, 1963.

The Workmen‟s Compensation Act, 1923.

The Minimum Wages Act, 1948.

The Contract Labour (Regulation & Abolition) Act,1970.

The Dock Workers‟ Act, 1948.

The Indian Arbitration Act (1940) (in the case of a definite Arbitration Agreement only).

2. Contractor to Execute Contract Agreement.

After acceptance of his Tender/Offer and when called upon to do so by the Engineer or his

representative, the Contractor shall, at his own expense, enter into and execute a Contract

Agreement to be prepared by him in the form annexed hereto. Until such Contract Agreement is

executed, the other documents referred to in the definition of the term “Contract” here-in-before,

shall collectively be the Contract.

3. Interpretation of Contract documents - Engineers’ Power

Several documents farming the contract are to be taken as mutually explanatory of one another.

Should there be any discrepancy, ambiguity, omission or error in the various contract documents,

the Engineer shall have the power to correct the same and his decision shall be final and binding on

the parties to the Contract.

4. All Drawings are Trustees property

Two copies of the Drawings referred to in the General and Special Conditions of Contract and in

the Bill of Quantities, shall be furnished by the Engineer to the Contractors free of cost for his use

on the work, but these shall remain the property of the Trustees and hence, the Contractor shall

return them to the Engineer or his Representative on completion of the work, if not torn or mutilated

on being regularly used at site.

5. Contractor to prepare working/ progress drawings.

The Contractor shall prove and make at his own expense any working or progress drawings

required by him or necessary for the proper execution of the works and shall, when required,

furnish copies of the same free of cost to the Engineer for his information and/or approval, without

meaning thereby the shifting of Contractor‟s responsibility on the Engineer in any way whatsoever.

6. Contractor cannot sub-let the work.

The Contractor shall not directly or indirectly transfer, assign or sublet the Contract or any part

thereof without the written permission of the Engineer. Even if such permission be granted, the

Contractor shall remain responsible (a) for the acts, defaults and neglect of any sub-contractor, his


agents, servants or workmen as fully as if these were the acts, defaults or neglects of the

Contractor himself or his agents, servants or workmen, and (b) for his full and entire responsibility

of the contract and for active superintendence of the works by him despite being sublet. provided

always that the provision of labourers on a “piece rate” basis shall not be deemed to be sub letting

under this clause.

7. Contractors’ price is inclusive of all costs.

Unless otherwise specified, the Contractor shall be deemed to have included in his Tender/Offer all

his cost for supplying and providing all constructional plant, temporary work, materials both for

temporary and permanent works, labour including supervision thereof, transporting to and from the

site and in and about the work, including loading, unloading, fencing, watching, lighting, payment of

fees, taxes and duties to the appropriate authorities and other things of every kind required for the

construction, erection, completion and maintenance of the work.

8. Contractor is responsible for all construction process, except for correctness of design and

specification formulated by the Engineer.

The Contractor shall be solely responsible for the adequacy, stability and safety of all site

operations and methods of construction, even if any prior approval thereto has been taken from the

Engineer or his Representative. The Contractor shall not be responsible for the correctness of the

design or specification of the Temporary and Permanent works formulated by the Engineer; but the

contractor shall be fully responsible for the correct implementation thereof, as also for any design

and specification prepared/proposed/used by the Contractor.

9. Contractor to submit his programme of work.

Whenever required by the Engineer or his Representative, the Contractor shall submit to him the

details of his (a) programme for execution of the work, (b) proposed procedure and methods of

work, (c) proposed deployment of plant, equipment, labour, materials and temporary works. The

submission to and/or any approval by the Engineer or his Representative to any such programme

or particulars, shall not relieve the Contractor of any of his obligations under the contract. If for any

reason the contractor be unable to adhere to his earlier programme, he shall submit his revised

programme for completion of work within the stipulated time whenever asked to do so.

10. Contractor to supervise the works.

Necessary and adequate supervision shall be provided by the Contractor during execution of the

works and as long thereafter as the Engineer or his Representative shall consider necessary during

the maintenance period. The Contractor or his competent and authorised agent or representative

shall be constantly at site and instructions given to him by the Engineer or his Representative in

writing shall be binding upon the Contractor subject to limitation in clause 2.5 hereof. The

Contractor shall inform the Engineer or his Representative in writing about such

representative/agent of him at site. Contractor to deploy qualified men and Engineer‟s power to

remove,

11. Contractor’s men.

The Contractor shall employ in execution of the Contract only qualified, careful and experienced

persons and the Engineer shall be at liberty to direct the Contractor to stop deployment of any of his

staff, workmen or official at site and the Contractor shall within 48 hours comply with such


instruction without any demur, whenever the Engineer shall feel that the deployment of the person

concerned will not be conducive to the proper and timely completion of the work.

12. Contractor is responsible for line, level and setting out etc.

The Contractor shall be responsible for the true and proper setting-out of the works in relation to

reference points/lines/levels given by the Engineer in writing. The checking of any setting-out or of

any alignment or level by the Engineer or his Representative shall not in any way relieve the

contractor of his responsibility for the correctness thereof and he shall fully provide, protect and

preserve all stakes, templates, bench marks, sight rails, pegs, level marks, profile marks and other

things used in setting-out the works.

13. Contractor is responsible to protect the work.

From the commencement of the works till issue of the completion certificate in Form G.C. 1, vide

Clause 5.12 hereof, the contractor shall take full responsibility for the care thereof. Save for the

excepted risks, any damage, loss or injury to the work or any part thereof shall be made good by

the Contractor at his own cost as per instruction and to the satisfaction of the Engineer, failing

which the Engineer or his Representative my cause the same to be made good by any other

agency and the expenses incurred and certified by the Engineer, shall be recoverable from the

Contractor in whatever manner the Engineer shall deem proper.

14. Contractor is responsible for all damages to other structures/persons caused by him in

executing the work.

The Contractor shall at his own cost protect, support and take all precautions in regard to the

personnel or structure or services or properties belonging to the Trustees or not, which may be

interfered with or affected or disturbed or endangered and shall indemnify and keep indemnified the

Trustees against claim for injury, loss or damage caused by the Contractor in connection with the

execution and maintenance of the work to the aforesaid properties, structures and services and/or

to any person including the Contractor‟s workmen. Cost of Insurance Cover, if any, taken by the

Contractor shall not be reimbursed by the Trustees, unless otherwise stipulated in the Contract.

15. Fossils, Treasure troves, etc. are Trustees’ property.

The Contractor shall immediately inform the Engineer‟s Representatives if any fossil coins, articles

of value or antiquity and structures and other remains or things of geological or archaeological

importance be discovered at site which shall remain the property of the Trustees and protect them

from being damaged by his workmen and arrange for disposal of them at the Trustees‟ expense as

per the instruction of the Engineer‟s Representative.

16. Contractor to indemnify the Trustees against all claims for loss, damage etc.

The Contractor shall be deemed to have indemnified the Trustees against all claims, demands,

actions and proceedings and all costs arising there from on account of

(a) Infringement of any patent right, design, trade-mark, or name or other protected right, in

connection with the works or temporary work,

(b) Payment of all royalties, rent, toll charges, local taxes, other payments or compensation, if

any, for getting all materials and equipment required for the work.

(c) Unauthorised obstruction or nuisance caused by the Contractor in respect of Public or

Private road, railway tracks, footpaths, crane tracks, waterways, quays and other properties

belonging to the Trustees or any other person.


(d) Damage/injury caused to any highway and bridge on account of the movement of

Contractor‟s plants and materials in connection with the work.

(e) Pollution of waterway and damage caused to river, lock, sea-wall or other structure

related to waterway, in transporting contractor‟s plants and materials.

(f) The Contractor‟s default in affording all reasonable facilities and accommodation as

per the direction of the Engineer or his Representative to the workmen of the Trustees and other

agencies employed by or with the permission and/or knowledge of the Trustees

on or near the site of work.

17. Dismantled materials Trustees’ property.

Debris and materials, if obtained by demolishing any property, building or structure in terms of the

Contract shall remain the property of the Trustees.

18. Contractor’s quoted rates/price must be all inclusive

The Contractor‟s quoted rates shall be deemed to have been inclusive of the following:

(a) Keeping the site free of unnecessary obstruction and removal from site of , constructional

plant wreckage, rubbish, surplus earth or temporary works no longer required.

(b) Cleaning and removal from site all the surplus materials of every kind to leave the site clean

and tidy after completion of the work, without which payment against final bill may be liable

to be withheld.

(c) Precautionary measures to secure efficient protection of Docks, the River Hooghly and other

waterways against pollution of whatever nature during execution and maintenance of the works

and to prevent rubbish, refuse and other materials from being thrown info the water by the

Contractor‟s men or those of his agency.

(d) Making arrangements for deployment of all labourers and workers, local or otherwise including

payment for their wages, transport, accommodation, medical and all other statutory benefits and

entry permits, wherever necessary.

19. Notice to Contractor.

Every direction or notice to be given to the Contractor shall be deemed to have been duly served on

or received by the Contractor, if the same is posted or sent by hand to the address given in the

tender or to the Contractor‟s Site Office or in case of Trustee‟s enlisted Contractor to the address as

appearing in the Trustees‟ Register or to the Registered Office of the Contractor. The time

mentioned in these conditions for doing any act after direction or notice shall be reckoned from the

time of such posting or dispatch.

20. Contractor not to publish photograph or particulars of work

The Contractor and his subcontractor or their agents and men and any firm supplying , plant

materials, and equipment shall not publish or caused to be published any photographs or

description of the works without the prior authority of the Engineer in writing.

21. Contractor to provide facilities to outsiders.

The Contractor shall, at the Trustees‟ cost to be decided by the Engineer, render all reasonable

facilities and Co-operation as per direction of the Engineer or his representative to any other

Contractor engaged by the Trustees and their workmen, to the Trustees‟ own staff and to the men

of other Public Body, on or near the site of work and in default, the contractor shall be liable to the

Trustees for any delay or expense incurred by reason of such default.


22. Work to cause minimum possible hindrance to traffic movement.

The work has to be carried out by the Contractor causing the minimum of hindrance for any

maritime traffic or surface traffic.

23. Trustees’ lien on Contractor's Plant & equipment.

All constructional plants, temporary works and materials when brought to the site by the contractor,

shall be deemed to be the property of the Trustees who will have a lien on the same until the

satisfactory completion of the work and shall only be removed from the site in part or in full with the

written permission of the Engineer or his Representative.

Performance security:

The contractor shall deliver performance security within 28 days after receiving letter of

acceptance in the form, currency, amount specified and valid and enforceable until the

contractor has executed and completed the works and remedied all defects

A void contract is one that has no effect due to some fundamental defect. Generally no

property can pass under a void contract. Contracts contrary to public policy, for example, to restrain another from pursuing their business, are usually void.

A voidable contract on the other hand, is a valid contract but the law gives one party an

option whether or not to proceed with the agreement. For instance, there may be misrepresentation which allows the innocent party to make certain choices, thus a contract declared voidable.

Void Versus Voidable Contracts

There is an important distinction between "void"and "voidable" contracts. Confusion sometimes arises from the failure to understand the difference. A contract is void when the law declares it to be so absolutely - there is no contract whatever and no change in the legal position of the parties; it cannot be ratified. A voidable contract, on the other hand, binds one party but not the other; it is valid until it is avoided by the party entitled to avoid it (refuse to do his part). Until thus disaffirmed it is binding. It may be ratified. Thus, A agrees to sell a $5,000 automobile to B, a minor (not yet 21 years of age). A is bound to furnish the automobile and cannot plead that B was not of age; B may refuse to take the automobile, in which case A is helpless; B may ratify after becoming of age - that is, agree to fulfill his part of the contract he had entered into when a minor. As we shall see later, a minor is bound to pay for necessaries, but even then only a reasonable price. For instance, B, a minor, agrees to purchase a $30 suit from A, who furnishes the suit. B then tries to avoid paying for it, alleging that when he entered into the contract he was a minor and therefore could not be bound on the contract. He will be compelled to pay A for the suit, but only what it is worth - the reasonable value - regardless of the fact that he had agreed to pay $30.

http://chestofbooks.com/finance/banking/Elementary-Banking-AIB/Chapter-V-Drafts-And-Acceptances-What-Is-A-Draft.html#parties


Contractors All Risk (CAR)

This policy covers Property lost, damaged or destroyed by any causes other than those specifically excluded . Covers cost of clearance and removal of debris.

Contractors All Risk policy insures damage to any contract works including construction plant and equipment, third party property, surrounding property etc. The policy can be extended to insure the maintenance period in addition to the actual construction period. There are two kinds of Contractors All Risk policies, annual policies for contractors handling many small to medium contracts of a similar nature and a single contract policy for specific contracts.

Covers all types of civil engineering projects Contractors All Risk (CAR) policy is designed to cover all types of civil engineering projects like buildings, dams, flyovers, etc.It is possible to record the interest of Principal, Contractors and Subcontractors in the policy.

1. Scope of cover This Policy broadly covers the risk of accidental physical loss or damage in respect of the contract works, during the execution of a civil project. CAR insurance provides an „all risk „cover. All perils are covered unless specifically excluded. Cover incepts from the commencement of work or after unloading of first consignment at project site, whichever is earlier and terminates on handing over of works to the principal or expiry of policy, whichever is earlier.

2. Sum Insured The Sum insured shall be the fully completed value of the contract works inclusive of all materials, wages, freights, and custom duty and materials or items supplied by the principal.

3. Premium Premium depends on factors like type, value and duration of the project.

4. Significant Exclusions This Policy does not cover loss or damage due to willful misconduct, cessation of work whether total or partial, delay, damage due to faulty design, rectification of defective material and/or workmanship inventory losses etc. Policy is subject to deductible excess as stipulated in the tariff.

5. Main Extension Main policy can be extended on payment of additional premium to cover - Owner‟s Surrounding Property. - Third Party Liability. - Maintenance Cover. - Escalation. - Clearance and Removal of Debris. - Contractor's Plant and Machinery.


CONTRACT CLOSEOUT

1.DESCRIPTION

Scope : The work required in this Section consists of the final inspections and the submission

of all closeout documents and related items to complete the Work indicated on the

Drawings and described in the Project Manual.

2.FINAL INSPECTIONS

A. Professional's Inspection: The Contractor shall make written request for a final inspection to

the Professional; notice to be given ten (10) days prior to the inspection. A list of any

deficiencies, compiled by the Professional, will be corrected by the Contractor. If, in the

Professional's judgment, the Project is not ready for a final inspection, the Professional may

schedule another inspection

B. Owner's Inspection: After the Professional has ascertained the Project to be ready, an Owner's

inspection will be scheduled within ten (10) days thereafter. The Contractor will have ten

(10) days after the Owner's acceptance to make any corrections of punch list items and to

submit closeout documents.

C. Correction of Work Before Final Payment : The Contractor shall promptly remove from the

Owner's premises all materials condemned for failure to conform to the Contract, whether

incorporated in the Work or not, and the Contractor shall, at his own expense, replace such

condemned materials with those conforming to the requirements of the Contract. Failure to

remedy such defects after ten (10) days written notice will allow the Owner to make good such

defects and such costs shall be deducted from the balance due the Contractor, or charged to

the Contractor in the event no payment is due.

3.CLOSEOUT DOCUMENTS

Unless otherwise notified, the Contractor shall submit to the Owner through the Professional, three

(3) copies of thefollowing before final payment is made:

A. Request for Final Payment: : AIA Document G702, current edition, completed in full or a

computer generated form acceptable to MSU having similar data.

B. Consent of Surety Company to Final Payment : AIA Document G707, current edition, or

similar company form acceptable to MSU completed in full by the Bonding company.

C. Power of Attorney : Closeout documents should be accompanied by an appropriate Power of

Attorney.

D. Release of Liens and Certification that All Bills Have Been Paid : AIA Document G706A,

current edition, or similar company form acceptable to MSU completed in full or a sworn

statement and affidavit from the Contractor to the Owner stating that all bills for this job have

been paid and that the Owner is released from any and all claims and/or damages.

E. Contractor's Affidavit of Payment of Debts and Claims: AIA Document G706, current

edition, or similar company form acceptable to MSU completed in full.

F. Guarantee of Work : Sworn statement that all work is guaranteed against defects in materials

and workmanship for one (1) year from date of Owner's acceptance, except where specified for

longer periods.

1. Word the Guarantee as follows, or in a similar manner:

2. We hereby guarantee all work performed by us on the above captioned Project to be free

from defective materials and workmanship for a period of one (1) year or such longer period

of time as may be called for in the Contract Documents for such portions of the Work.


3. All guarantees and warranties shall be obtained in the Owner's name.

4. Within the Guaranty period, if repairs or changes are requested in connection with

guaranteed work which, in the opinion of the Owner, are rendered necessary as a result of

the use of materials, equipment or workmanship which are inferior, defective or not in

accordance with the terms of the Contract, the Contractor shall promptly, upon receipt of

notice from and without expense to the Owner, place in satisfactory condition building,

site, equipment or contents thereof. The Contractor shall make good any work, materials,

equipment or contents of said buildings or site which may be disturbed by fulfilling any such

Guaranty.

5. If, after notice, the Contractor fails to proceed promptly to comply with the terms of the

Guaranty, the

6. Owner may have the defects corrected and the Contractor and his Sureties shall be liable for

all expense incurred.

7. All special guarantees applicable to definite parts of the work stipulated in the Project Manual

or other

8. documents forming part of the Contract shall be subject to the terms of this paragraph during

the first year of the life of such special guaranty.

G. Project Record Document : Furnish all other record documents as set forth in Section 01720

entitled Project Record Documents.

What Does International Competitive Bidding - ICB Mean?

In financing arrangements involving the World Bank, a bidding process that requires the borrower to

procure resources funded by its loan according to a number of specified conditions. ICB requires

World Bank borrowers to internationally advertise the required goods or services funded by their

loans, issue bids for advertisement in an acceptable international language and award contracts to

the lowest acceptable bids, subject to certain considerations for qualitative judgment.

The goal of imposing an international competitive bidding requirement on loans issued by the

World Bank is to promote fair and healthy competition for World Bank funded economic

opportunities. The borrowing country in such an arrangement maintains a certain degree of

freedom in selecting a winning bid for its projects, but it is expected that the lowest-priced,

competitive bid be selected.

Earnest Money

An earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase. When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations

Q: What is “earnest money?”

A: It is money you give to the seller (or the seller‟s agent) to show your good faith when making an

offer to purchase the seller‟s property.

http://en.wikipedia.org/wiki/Real_estate


Q: Who can hold earnest money?

A: Any person (or entity) agreeable to you and the seller, but usually a licensed real estate broker. As

a buyer, be aware that if you allow earnest money to be held and deposited by a seller or by a builder

or developer for use in construction, you risk that they will not be able to return it to you in the event the

transaction does not close (due to the seller‟s death, divorce, bankruptcy, judgment liens, receivership,

fraud, tax liens, title problems, etc.). Consequently, most buyers prefer to have real estate agents or at-

torneys hold the earnest money deposit. Since they are licensed by the state and required to deposit

the money in a trust or escrow account, this reduces the risk that the monies will be improperly used.

Tenders and contract Administration-progress and completion

Commencement of work Contractor to commence work on receipt of notice from Engineer with in time given in the tender.

This may be in the form of work order

The Employer will give the contractor possession of site in accordance with the contract

Contractor to proceed as per the programme

Works shall be completed as per time stipulated in the contract

If the contract provides phase wise completion, works will be completed accordingly

Progress of works

Performance

Contractor should mobilise his resources to achieve planned progress

Monitoring progress will be done periodically

One of the methods is by time and progress chart

contractor should ensure

commence work with in stipulated time

proceed with the work with due diligence

Comply with any other terms and conditions of contract

Complete the work with in stipulated time

Execute the work as per quality specified in the con tract

Supervision by Engineer-Material , plant and workmanship

Material, plant and workmanship shall be of respective kinds described in the contract

The work will be executed in accordance with the Engineer‟s instructions

Necessary tests as specified in the contract shall be carried out to ensure the quality of work

The testing facilities to be provided by the contractor as specified

Passing of works

As when any stage of work is ready for inspection, the contractor requests the Engineer for

inspection

After satisfying that the work is executed as per contract specification and the test results are

satisfactory, the Engineer shall pass the work

The Engineer may order additional tests not intended in the contract- the cost will be born by the

contractor if test fails; otherwise payment will be made to contractor. Suitable extension will also be

determined.

Engineer will accordingly notify the contractor


Rejection of work

If engineer, on inspection, determines that any material or plant are defective he may reject

He will issue notice to contractor with reasons for rejection

Contractor to promptly make good the defect

In case of contractor‟s default , the Employer shall be entitled to pay other person to carry out the

same at the cost of contractor

Issue of stores

Sch B- Issue of stores

Description of item

Unit and rate

Place of issue

Quantity as per actual requirements in

works

Unstamped receipt

Recovery from bills

Surplus stores to be returned back

Recovery for nonreturn

Issue of T&P

Sch C-issue of T&P

Description of item

Place of issue

Working day charges includes

Capital cost, depreciation, maintenance,

repair, crew, fuel, oil ,lubricants

Idle day charges

Includes items above except crew ,fuel,

oil, lubricants

Contractor’s risks

Care of works is contractor‟s responsibility from commencement date until the date of issue of

taking over certificate

He has to provide watch and ward and has to take responsibility for risks and damages

Any loss or damages due to any causes (other than excepted risks ) should be rectified by him

at his cost without any delay

The risks excepted are called excepted risks

Excepted risks

Excepted risks include

War, hostilities, invasion, act of foreign enemies

Rebellion, revolution, insurrection of military or usurped power

Damage by aircraft

Earthquake

Riot commotion or disorder (by other than contractor‟s own employees)

Any other causes specifically mentioned in the contract

Excepted risks- contractor’s responsibilities

In the event of any such happening, contactor should immediately rectify the damages as

directed by Engineer

The cost of rectifications shall be paid to him by the Employer

The rates shall be fixed by Engineer as per the procedure laid down for variation orders

Taking over certificate/Completion certificate

When the work is substantially completed and satisfactorily passed the tests, contractor may

give notice to this effect to the Engineer, with copy to Employer, with undertaking to complete

any outstanding work with expedition during Defect Liability Period.

The Engineer ,with in 21days ,may issue taking over certificate to the contractor with copy to

Employer, if he is satisfied that the works are substantially completed.

Alternatively, he may specify to the contractor the work yet to be completed before issue of

taking over certificate. He will also intimate the defects to be rectified


Defect Liability Period/Defect Notification Period

Defects Liability Period is named in the Appendix to tender - normally one year

Commences from date of Taking over Certificate

All outstanding work and defect rectification shall be completed by contractor during this period

Once such outstanding works are completed and defects rectified to the satisfaction of

Engineer, the work shall be considered as fully completed and the Performance Certificate is

issued by the Engineer

Cancellation of contract

Diligence notice under the specific condition of contract pointing out the delays and instructing

him to improve progress

Draw attention to the contract clause for Cancellation of contract for contractor‟s defaults

Cancellation notice intimating contractor that balance works will be executed at his risk and cost

The site including the material, plant and machinery will be taken over by Employer

Inventory of works, materials, plant and machinery as on date of cancellation

Contractor will be given opportunity to be present notifying the date and time

Risk and cost contract- same terms and specifications

Execution of risk and contract

Charging extra cost to defaulting contractor and recovery

Foreclosure

In case a part or whole of work not required to be executed, Employer may give notice to the

contractor that such a part is no longer required and as such foreclosed.

The foreclosed work cannot be executed by any other agency

Contractor will be paid for the value of work already executed and/or materials collected if any at

contractual rates or rates fixed as is done for variation orders

He will not have any claim due any loss of profit he may have earned or any other claim

Disputes-claims

Construction contract is between two parties-Employer and Contactor

Long duration of contract-various issues arise during construction

Views of one party may not be acceptable to the other resulting in dispute

Unresolved disputes may lead to claims/counter claims

Disputes and claims-major impediments to smooth progress and timely completion of

construction projects leading to time and cost overruns.

Arbitration and conciliation act-1996-arbitration

If settlement is not reached by conciliation, case is referred to arbitration

The arbitral tribunal is appointed as per the provision of arbitration agreement

The tribunal calls for statement of claims and pleadings in defence from the parties

Hears both parties and makes the award on their claims

The award is final and binding on both parties


Contract Administration-Payments

Conditions of contract

The contract is binding on both parties

While the Contractor is responsible for proper execution of work, the Employer is responsible for

timely payments

The construction contract is of long duration; hence payments are made periodically as

stipulated

While the contractor is entitled for payment for the value of work done and materials collected at

site, the Employer may deduct any dues to him from the Contractor‟s bill while making payment

Conditions of contract- terms of payment

Mobilization advance-normally 10%

Machinery advance- normally 5%

Provisional sum

Prime cost sum

Interim payments-normally every month

Retention money-normally 5-10% depending on value of work

Bank guarantee bonds

Price variation clause

Final payment

Mobilisation advance

The mobilisation advance is paid to the Contractor if stipulated in the contract, immediately after

signing the contract agreement

This helps the Contactor to augment his resources for immediate commencement of work

This may be around 10% of the contract value as specified

A bank guarantee bond for the amount of advance is obtained. This is released on recovery of

advance

This will be recovered from interim payments in installments

Machinery advance

This is similar to mobilisation advance; may be limited to 5%

This is paid based on the cost of machinery purchased, limited to the laid down percentage

A bank guarantee for the amount is taken before payment

This is also recovered in installments

The BGB is released on recovery of advance

Provisional sum

If detailed quantities are not available at tender stage for inclusion in BoQ, a lump sum amount

my be provided in the tender. The tenderer is asked to quote percentage on/off SSR rates. The

work, when ordered and executed, shall be paid at SSR rates duly adjusted by the percentage

quoted by the contractor

Prime cost sum

For certain specialist works, where the work is to be done by specialized agencies, Prime cost

sum may be provided in the contract.

Quotations will be obtained by Employer, the agency will be nominated and the amount payable

will be fixed.


Work will be executed through the main contractor and payment will also be made through the

main contractor. The main contractor will be allowed certain percentage for getting the work

executed by the specialist

Variation orders

Engineer , if he considers it necessary, can order variations consisting any of the following:

Increase or decrease of quantities

Omit any item of work

Change the character or type

Order any extra item

Change of alignment, levels, dimensions

Variations-pricing

Contractor shall not make any variation without instructions from Engineer

Pricing at contract BQ rates if applicable

If rates are directly not available, new rate shall be derived based on contract rates

If this is also not possible, Engineer consults both Employer and Contractor. A suitable rate may

be agreed upon between Engineer and Contractor

In the event of disagreement , the Engineer shall fix rate as is considered appropriate by him and

notify to contractor with copy to Employer

Until such time the rates are agreed or fixed, provisional rates shall be fixed to facilitate on-

account payments

Variation limit

There is a certain limit up to which variations can be ordered. This is called variation limit.

The variation limit is normally 10% or 15% as is specified in the contract.

The percentage is on the contract amount

The excess over variation limit shall be paid at agreed rates .If there is no agreement, at the

rates determined by the Engineer .

Periodicity of running payment

The periodicity of IPC is specified in the Conditions of Contract.

This is normally not less than 30 days counted from the date of earlier IPC;

May be later than 30 days if adequate value of work was not done during the period

The contract may specify minimum value of work to be done during the period

Work done only up to the date of submission of IPC is counted

Work done beyond the date is counted in next IPC

Value of work for interim payments

Running payment as specified to maintain cash flow and progress of work

Subject to final adjustment at final bill stage

Quantities executed as per measurement books during the period from date of last IPC up to the

date of submission of the current IPC

Amount at contract rates

Amount of variations ordered and executed priced at contract rates as available

If contract rates are not available, pricing is done at special rates as fixed

Total amount accordingly worked out

Adjustment for price variation

If price variation clause is included in the contract, the amounts payable to the contractor shall

be adjusted for rises and falls in the cost of labour, goods and other inputs to the work as

determined by the formula prescribed in contract clause


Adjustment (plus or minus) as per price variation formula is made to the value of work done

during the period to arrive at total value for running payment

No such adjustment shall be made in respect special rates fixed on the basis of current market

rates

Retention money

Retention money is the amount, as percentage of work done, retained from each IPC as

stipulated in the contract

It is normally 5%-10% of value of work done as stipulated. For large works it may be limited to

5% or a certain amount

Upon issue of taking over certificate, one half of the retention money shall be released and the

other half on issue of defect liability certificate as stipulated.

The contractor may give bank guarantee bonds for not deducting corresponding amount or

release of already deducted amount of corresponding value

Bank guarantee bonds

Banks give guarantee to the Employer against payments made to contractor taking

responsibility for payment in case of contractor‟s default

Contractor may obtain BGB from banks as per specified format by paying some commission

charged by banks

This will help in payment of corresponding amount of advance or release of corresponding

amount of retention money which would have other wise been deducted from contract payments

This in turn will improve cash flow and progress of work, thereby both contractor and Employer

are benefited

The bonds are accepted after verifying with bank. May have to be extended from time to time as

required

Bonds are released when no longer required

Materials collected at site

Materials collected at site as measured on the date of IPC can be considered for payment

Materials shall be solely for incorporation in the work and not in excess to the requirement for

the work

Nonperishable items, adequately protected from damage or theft.

Rates as per purchase vouchers. Amount worked out accordingly

75% of the amount can be claimed for payment

Test certificates to be verified for quality as per contract

Recoveries to be made

Installment of recovery of mobilization advance

Installment of recovery of machinery advance

Recovery of cost of stores issued to the contractor by the Employer during the period

Recovery of cost of T&P issued to the contractor by the Employer during the period

Recovery of cost of electricity/water supplied to the contractor by the Employer during the

period

Liquidated damages if recoverable and any other dues

Statement of recoveries is attached to the IPC for verification

Preparing Interim payment bill

Timely and correct payments are the life line for any construction contract

While under payment will retard the progress of work, overpayment can result in serious cash

flow problems towards the end of the project.

Hence, it is in the interest of both contractor and Employer to ensure correct payments


The payments are made for the value of work done at contract rates as on date subject to

retention of retention money as stipulated

Payment is also made for the materials collected at site after retaining 25%

Adjustment for price variation is also included

Processing interim payments

Recoveries of any dues from the contractor are accounted

Deduction of earlier interim payments is made to arrive at net payable amount

The contractor‟s Quantity Surveyor ensures that all the work done is included for payment and

the IPC prepared accordingly is submitted to Engineer

He will coordinate with all concerned at each stage of processing of IPC to ensure smooth

passage and early payment

After certification by Engineer with the assistance of his Quantity Surveyor ,the bill is sent for

audit check

Passed amount is paid after deducting TDS

Final Statement and bill

After issue of defect liability certificate, the contractor shall submit completion drawings

The final bill will be submitted with the following:

1. value of complete work done

2. recoveries to be made

3. amount of running payments already made

4. all measurement books and other related documents

Balance amount payable is claimed by the contractor

The bill will be scrutinised by Quantity Surveyor of Engineer. After certification by Engineer and

audit check, the payment will be released

Retention money will also be released

No claim certificate

The contractor shall be entitled to be paid the final sum less the value of payments already

made

The contractor shall submit a „No claim certificate‟ with the final bill

The bill will be technically checked by Quantity Surveyor of the EE. After certification by

Engineer and audit check, the payment (including Retention money) will be released

However, in case the contractor has got any claims, these are listed and attached with the final

bill along with supporting details

On account payment

The claims submitted by the contractor, shall be examined by the EE/ Accepting officer and

where agreed, a variation order is issued and the amount included in the final bill for payment

The payment of the bill will be made as „on account payment‟ and not as final settlement

The disputed claims are referred to Conciliation and Arbitration as the case may be

Duties of Quantity Surveyor of contractor-1

Quantity Surveyor of contractor is responsible for preparing IPC, submission, smooth progress

and quick payment

Collecting all the details of approved work done during the period from site supervisors

Measurement books are updated in coordination with Engineer‟s supervisors

Obtain signatures of contractor‟s authorised representative after convincing that all

measurements are accounted for payment

Ensure that the work done on variation orders is also accounted for


Duties of Quantity Surveyor of contractor-2

Ensure that special rates, if any, are duly processed with supporting data and convince the

Engineer for fixing the rate

In case of delay in fixing rates, payment may be claimed on provisional rates

Obtain indices for price variation clause with supporting documents and submit to Engineer for

verification

Arrange and submit Bank Guarantee bonds for getting corresponding amounts released

Pursue release of BGBs when due for release

Importance of payments

The contractor shall submit monthly statement promptly to ensure timely payments of IPC

Timely payments should be made to contractor to maintain cash flow of Contractor

This will help in achieving smooth progress of work

No over payment should be made to ensure that no cash flow problems occur towards end of

the project and safe guard Employer‟s interest against default of Contractor

Administration of contracts Introduction-Site documents-contract labour

Execution of works-contract administration

Efficient execution of works is dependent on proper administration of contracts

The administration of contracts is governed by the conditions of contract

The conditions of contract include both General conditions and Special conditions

General conditions of contract

The central, state government departments, public sector undertakings/big private organisations

etc. have published their own forms of General conditions which are used for their works.

General conditions form is published as a book as this is applicable to all contracts of the

respective organisations and is to be used repetitively

The basis for the conditions is The Indian Contract Act and other applicable laws of India

FIDIC and Domestic/Government forms-applicability

FIDIC form

Devised by a private international organization

Used generally for international bidding.

Recommended by funding agencies

Domestic/Government form

Approved by Government /organization (State, Central or Government Undertaking)

Used for works of the said organisations

Supervision by departmental engineers

The Government contract form provides for direct supervision by departmental engineers

without the need of any consultant/ Engineer

Direct responsibility of supervision rests with Executive Engineer and Assistant Engineer and

they are vested with the requite powers under the General conditions of contract

The EE controls the quality of work, monitors the progress, gives day to day site decisions

The EE and AE are assisted by qualified supervisory staff

Private organisations may have their own system of supervision


The contract operated through EE

All correspondence between the contractor and the department is through the EE who will place

work order/ variation orders, issue notices etc.

Any approvals required from higher authorities shall be obtained by EE

Contractor‟s payments are also made by the EE after scrutiny and audit check

The Accepting Officer

The contract is accepted after scrutiny by an Engineer officer on behalf of the Employer

(President of India in case central govt. departments)

The Accepting officer may be Executive Engineer for smaller contracts, SE for medium value

contracts and Chief Engineer for large works.

The financial limits for acceptance of are laid down by the government

The work is to be sanctioned, funds allotted and technical sanction is to be given before

acceptance

Powers of Accepting Officer

The Accepting Officer shall be vested with the powers of granting extension of time, according

approval for variations, interpretation of contract, accepting, encashing and releasing Bank

Guarantee Bonds, cancellation as well as foreclosure of a contract, referring the disputes to

arbitration etc.

These powers are distinctly laid down in the respective General conditions contract

Site documents

The Assistant Engineer, called the Engineer-in-charge for the work, as well as the contractor will

have their site offices for day to day supervision and passing of works.

They maintain site documents for effective supervision and as permanent record.

These documents are duly signed by representatives of department as well as contractor.

Documents maintained by EIC

Copy of contract agreement and drawings

Time and progress chart

Works dairy: Daily record of events indicating works being executed, labour and equipment

employed, weather, any special events

Site order book: Record of site orders given by EIC regarding site activities and

compliance/remarks

Progress reports (contd..

Site documents- stage passing

Sample register with approved samples of materials duly labeled and signed by approving

authority

Stage passing register: Record of passing of each stage of construction

Lab test records: Record of lab tests, results and approvals

Measurement books and level books

The measurements/ levels are recorded in the respective books by the EIC in presence of

contractor‟s rep. and signed by both

These books are issued by specified authority- MB numbers and page numbers duly marked

The quantities of each item of work will be worked out which form the basis for payment

The books are checked by audit authorities also while auditing bills for payment

These are kept under safe custody

Contractor’s employment of labour

Contractor shall employ required number of labour to maintain the progress and the quality of

workmanship


He shall be liable to for payment of all wages under the Payment of Wages Act,1936, Minimum

Wages Act,1948, Employer‟s Liability Act,1938, Workman‟s Compensation Act,1923 or any

other enactments

Contractor shall not employ any person of less than 15 years of age

Contractor shall arrange for all safety provisions

Sub contractor

The contractor may appoint a sub-contractor for execution a certain portion of work and NOT

the whole of work

He shall intimate such appointment to the Engineer who may give his concurrence

Contractor is responsible for the work executed by sub-contractor and making payments to him

at the rates agreed to between them

The Employer makes payments to the main contractor at contract rates and the main contractor

is accountable to him

Inspection of Labour Welfare Officer

Labour Welfare Officer from Ministry of Labour shall inspect and report any irregularities in

observing Labour Regulations.

The Employer shall watch enforcement of labour laws and compliance of observations made by

LWO

Employer is authorised to make any recoveries towards payment of wages

Minimum Wages are published by Labour Department and are revised every 6months

The minimum wage is taken as index for variation of wages in the Price Variation clause

Enlistment/Registration of Contractors-classification

The Government departments have continued work load and therefore need permanently

enlisted contractors whose capability and performance are known to the departments and under

periodical watch

The magnitude of works also vary widely; may be as small as Rs.50000 and as large as 50

crores. To meet this varied requirement, the enlistment is done for various financial limits

The A class contractor may be given tender for a 50 crore (and above) work; B class-up to 25

crore ;C class-10 crore; D class- 5 crore; E class-1 crore etc.

,

Enlisted contractors-categories

Each class of contractors may have specialist categories such as (a) Complex structural works

(b) Air conditioning and refrigeration (c) Lifts and the like

The performance of enlisted contractors is periodically reviewed. An enlisted contractor may be

upgraded, downgraded, suspended, removed or blacked listed based on reports on his

performance. All these decisions are widely circulated in the department

Enlisted contractors-Standing security deposit

As the enlisted contractors work with the department on long term basis, they may give

Standing Security Deposit of an amount corresponding to their financial limit. With this, they

need not give EMD or SD for each individual work.

This is a good facility as the contractor‟s money is not stuck in several deposits

However, if the contract amount is more than the financial limit of contractor, he has to deposit

additional security deposit.


Tenders And Contract Procedure-Procurement Of Works

Tender notice

Press advertisement

Notice of tender

Name of work; location and scope

Estimated cost

Period of completion

Eligible class of contractors

Earnest money-Bid security

Security deposit-Performance security

Date of issue and receipt of tenders

Expression of interest/Application for tenders

Interested companies send applications with their credentials including:

Constitution of the firm

Resources and technical capability

Past performance and ongoing works

Documents supporting financial soundness

Prequalification of contractors

After scrutiny of documents submitted by various contractors and after satisfying with regard to their

capability to execute the particular work the Employer short lists some contractors for issuing tender

documents to them

The prequalified contractors submit their quoted tenders which includes technical and financial bids

Earnest money-security deposit

At the tender stage ,the tenderers are asked to submit earnest money with their bids to ensure that

the bids are bonafide

This may be in the form of demand draft or bank guarantee bond in favour of the Employer

After acceptance of offer of reasonable tender , the EMD of other tenderers is released

The successful tenderer/the Contractor may convert his EMD into security deposit

The security deposit is kept with the Employer to safeguard his interest against the Contractor

The scale of earnest money and security deposit is as laid down by the Employer in the Notice of

Tender

The security deposit is released on successful completion of work and expiry of defect liability

period

Mobilisation advance

The mobilisation advance is paid to the Contractor if stipulated in the contract, immediately after

signing the contract agreement

This helps the Contactor to augment his resources for immediate commencement of work

This may be around 10% of the contract value as specified

A bank guarantee bond for the amount of advance is obtained. This is released on recovery of

advance

This will be recovered from interim payments in installments

Machinery advance

This is similar to mobilisation advance; may be limited to 5%

This is paid based on the cost of machinery purchased, limited to the laid down percentage


A bank guarantee for the amount is taken before payment

This is also recovered in installments

The BGB is released on recovery of advance

Tender documents

Tender documents are prepared which include the following:

a) Site plan with site data such as soil conditions, accessibility of site, quarries, layout indicating

existing waterways, power and water lines etc.,

b) Schedule of works/ Bill of Quantities with estimated cost, period of completion

c) Tender conditions- General and Special conditions

d) Tender specifications- General and particular Specifications

e) Detailed drawings

f) Any other relevant particulars

Issue of tenders

Tenders are issued with all these documents to short listed contractors for submission of priced

bids.

Bidders are advised to visit the site and acquaint themselves with all local conditions

Bidders are required to be given adequate time for their study of tender documents thoroughly

and gather requisite data for pricing and submission of their offers

Quantities- cost estimate

Taking off quantities: Scrutinising the working drawings, computing dimensions for each item

and entering in take off sheets in a methodical manner, along with description of the item

Squaring the dimensions: adding and/or multiplying the recorded dimensions for the purpose of

obtaining cubic, superficial and lineal quantities as per the standard method of measurement

Abstracting: collecting quantities of identical items, entering in abstract sheets in trade wise

sequence and working out quantities against each item

Billing: Entering the description and quantities item wise and trade wise in the bill form from the

abstract sheets. There after entering unit of measurement and unit rate and working out the cost

Standard method of measurement

Standardisation of method of measurement is considered desirable for satisfactory execution of

works

This should lessen the likelihood of errors in estimates, bills of quantities and quoting rates and

help in avoiding disputes

Widespread use of standard method of measurement facilitates the training of personnel in

contract management, reducing the need for working under ever changing methods

Indian standard method of measurement

The Indian Standard for method of measurement of building works was prepared by Bureau of

Indian Standards in consultation with various construction organisations and institutions

IS:1200 covers all building and civil works including water supply, sewer lines, road work and

airfield pavements. The provisions are flexible and can be modified for a particular project as

may be necessary

Some departments have their own SSRs and rules for method of measurement similar to IS:

1200 which should be followed for works in their organisations

Booking dimensions

Take off to abstracting


After completion of take off, squaring the dimensions (adding and/ or multiplying) is done for

each item and entered in the relevant column

It is to be cross checked to avoid errors

The quantities are now ready for abstracting

Billing

The purpose of billing is to prepare Bill of Quantities

Bill are prepared trade wise

Each bill commences with preambles

Item no., description, unit, quantity are entered from the abstract

When ever an entry is transferred from abstract sheet, the entry is ticked to ensure that no item

is left out

Unit rates are worked out based on market analysis and inserted

Amount worked out and inserted in the next column

Page totals are carried to summary page where total cost is calculated

Analysis of prices-Market survey

Market survey has to be done to obtain data relating to all price sensitive factors such as

- availability of labour and prevailing rates,

- quarries and leads,

- market rates of local materials and manufactured items,

- arranging equipment & machinery and costs,

- taxes and duties,

- environment and safety provisions and costs etc.

Constants for materials, labour and equipment-rate of an item

A rate of an item consists of components of material, labour and equipment

Constants for these elements can be obtained from Standard data book or based on practical

experience

Based on these constants and rates obtained during market survey, costs of these elements are

worked out and totaled

Over heads and profits on a percentage basis (may be 17.5% or more) are added to these total

to obtain the price for the item

Other factors affecting costs

Risk factors and insurance

Cost of technology

Cost of funds

Safety precautions

Compliance with environmental requirements

Level of competition

Present work load and extra capability etc.

Price forecasting and bidding

The prices are worked out based on market analysis and the other factors

Based on quantities and prices the amount to be quoted for the tender is decided.

While the Quantity Surveyor provides all the inputs, the management will take an overall view

and bid for the work based on their own assessment.

All the details are kept confidential

Receipt of tenders


The quoted tenders are to be dropped in tender box within the date and time fixed for receipt of

tenders

The tenders are opened in presence of bidders‟ representatives at the appointed time by

nominated opening officers and scheduled by them

Scrutiny and acceptance

The Employer scrutinises the bids

Arithmetical check is done

Reasonability of rates of lowest tender which meets all the requirements is verified

The tender is accepted after obtaining performance security bond

Conciliation

Conciliation-general

Conciliation is the process by which the parties are facilitated to reach an amicable settlement of

their disputes (part III of Arbitration and Conciliation Act,1996)

This is adopted prior to Arbitration like DRB for settlement of disputes without resorting to

Arbitration

Conciliation takes place only if the parties agree to it.

Conciliator is appointed as per contract provision

He shall be guided by the principles of objectivity, fairness and justice. He facilitates the parties

to come together for an agreed settlement

When the parties sign settlement agreement ,it shall be final and binding on the parties

Conciliator authenticates settlement agreement

The settlement agreement shall have the status of arbitral award

Conciliation-commencement

The party initiating conciliation shall send to the other party a written invitation to conciliate,

briefly describing the subject of dispute

Conciliation proceedings shall commence when the other party accepts in writing the invitation

to conciliate

If the other party rejects the invitation, there will be no conciliation proceedings

If the party inviting the other party does not receive a reply within a specified time, the party may

elect it as rejection and intimate the other party

Appointment of conciliators

Normally there will be one conciliator and the parties may agree on the name of sole conciliator

For two conciliators, each party may appoint one conciliator

For three conciliators, each party may appoint one conciliator. The two conciliators may appoint

the third conciliator

Institutional assistance may be taken for obtaining appropriate names of conciliators

Submission of statements to conciliator

Conciliator, on his appoint, request each party to submit their statement describing the general

nature of dispute, points at issue with supporting details/documents with copy to the other party

He may request for any further details in the course of conciliation proceedings with copy to the

other party.

With this, the conciliator will be fully acquainted with the intricacies of the dispute


Conciliator’s role-amicable settlement

He shall be independent and imartial

He is not bound by the Code of Civil Procedure,1908 (5 of 1908) or Indian Evidence Act,1872

(1of 1972)

Conciliator shall assist parties in an independent and impartial manner in their attempt to reach

an amicable settlement of their dispute

Conciliator’s role-proceedings

The conciliator shall be guided by the principles of objectivity, fairness and justice

He conducts proceedings in an appropriate manner, hear oral statements

Give consideration to

a) the rights and obligations of the parties

b) the usages of the trade concerned,

c) including any previous business practices between the parties

Conciliator’s role-proposal for settlement

Conciliator may, at any stage of proceedings, make proposals for settlement of disputes

Need not be in writing

Need not be accompanied by a statement of reasons there for

He may invite parties to meet him, communicate orally or in writing

He may meet parties together or each of them separately

Place of meeting to be decided in consultation with parties

Cooperation of parties

The parties shall cooperate with conciliator in attending meetings and submitting evidence

If any party requests that certain information given by him to be kept confidential, the conciliator

shall not reveal to the other party

Parties may give suggestions for settlement of dispute

Settlement agreement

When it appears to conciliator that there is possibility of settlement, he will formulate the terms

of possible settlement.

Based on observations of the parties, he may reformulate the terms of settlement

Finally, if the parties reach agreement on settlement of dispute, he may assist the parties in

drawing up a settlement agreement

The agreement shall be signed by the parties as well as the conciliator

The agreement shall be final and binding on the parties

The conciliator shall authenticate and furnish copies to both parties

Status and effect of settlement agreement

The settlement agreement shall have the same status and effect as if it is an arbitral award on

agreed terms on the substance of dispute

Given by arbitral tribunal under Sec. 30

Confidentiality

The conciliator and parties keep confidential all matters relating to conciliation proceedings

The settlement agreement shall also be kept confidential unless it is required to be disclosed for

purposes of implementation and enforcement

Termination of conciliation proceedings

The conciliation agreement shall be terminated –

a) by signing of a conciliation agreement

b) by written declaration of conciliator when it is considered that further efforts on conciliation

are no longer justified


c) by written declaration of parties to the conciliator terminating the proceedings

d) by written declaration of a party to the other party with copy to the conciliator

Resort to arbitral or judicial proceedings

During conciliation proceedings, the parties shall not initiate arbitral or judicial proceedings

unless a party considers it necessary to preserve his rights

Costs and deposits

On termination of proceedings, the conciliator shall fix costs of conciliation and give notice to the

parties.

The costs relate to the fees and expenses of conciliator and other expenses of conciliation

proceedings

The costs shall be equally borne by the parties unless other wise stated in the settlement

agreement.

o The conciliator may ask parties to deposit certain amounts as an advance towards the

expected costs and settle the account on completion of proceedings. If the amounts are

not deposited, the conciliator may suspend proceedings

Role of conciliator in other proceedings

The conciliator shall not act as arbitrator or as representative or counsel of a party in any arbitral

or judicial proceedings in respect of a dispute that is a subject matter of conciliation proceedings

He shall not participate as a witness in the above proceedings

Admissibility of evidence in other proceedings

The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings:

a) views expressed or suggestions made by the other party in respect of a possible settlement

b) admissions made by the other party in the course of conciliation proceedings

c) proposals made by the conciliator

d) the fact that the other party had indicated his willingness to accept a proposal for settlement

made by the conciliator

12 STANDARD CONTRACT CLAUSES


The 12 Standard Contract Clauses are the basic clauses which provide the structure for a contract

between two parties for carrying out specific activities in a desired manner. Whereas the Standard

General Conditions for domestic contracts as given in Part II of the document provide a complete

framework for preparation of the contract documents.

STANDARD CONTRACT CLAUSES FOR SCB AND LCB

1-Eligibility and Pre- qualification (PQ)

A. Eligibility Criteria:

a. Experience on similar works executed during the last five years; and details like

monetary value, clients, proof of satisfactory completion ;

b. Registration, if any, with specified deptts/ organizations, class / type of registration ;

c. Documentary evidence of adequate financial standing.

B. Pre-qualification Information to be called for :

a. Constitution and legal status. Joint-venturing or other tie-ups for technology,

equipment, financial backing and / or project management;

b. Registration (class and type) with specified agencies and previous pre-

qualification(s) for similar projects.

c. Experience on similar work(s) during last 5 years with details including year wise monetary

value, clients, and proof of satisfactory completion of works.

d. Financial standing as certified by Bankers, Audited Profit & Loss A/c and Balance Sheet,

Annual turnover in last 5 years, access to adequate working capital.

e. Construction Equipment proposed to be deployed for the project and proof of its availability;

equipment proposed to be purchased or leased.

f. Key personnel available and proposed to be engaged for management and

supervision of the Project, their qualifications and experience.

g. Project planning and quality control procedures to be adopted.

h. Information regarding projects in hand, current litigation, orders regarding ex-

clusion/expulsion or black listing, if any.

2 -Earnest Money (EM)

A. For projects estimated to cost Rs. 25 crores and above, earnest money should be 1% of the

estimated cost; and maximum amount of earnest money should be Rs. 50 lakh.

B. For projects estimated to cost less than Rs. 25 crores also, the earnest money should be 1%

of the estimated cost . Maximum amount of earnest money may be stipulated at the discretion

of the owner .

C. Earnest money may be submitted in the form of irrecoverable Bank Guarantee with

Banks to be specified by the Owners. Certified cheques and Demand Drafts should also be

acceptable; Bank Guarantees submitted as Earnest Money shall be valid for 28 days beyond

the validity of the bid.

D. Earnest money of unsuccessful bidders should be refunded as promptly as possible, but not

later than 28 days after the expiry of the bid validity.

3- Security Deposit (SD)


A. Security Deposit shall consist of two parts;

a) Performance Guarantee to be submitted at award of work, and

b) Retention money to be recovered from Running Bills.

B. Performance Guarantee should be 5% of Contract amount and should be submitted as Bank

Guarantee, Government Securities, FDR or any other form of deposit stipulated by the

Owner,within 28 days of receipt of letter of acceptance.

C. Retention Money should be deducted at 5% from Running Bills. Total of Performance

Guarantee & Retention Money should not exceed 10% of Contract amount or lesser sum

indicated in the bid document.

D. 5% Performance Guarantee should be refunded within 14 days of the issue of the defect liability

Certificate (taking over Certificate with a list of defects). Retention money should be refunded after

issue of No. Defects Certificate. This balance amount can be substituted by “on demand” Bank

Guarantee.

4 -Variations, Extra/ Substituted Items:

A. Variation permitted should be ± 25% in quantity of each individual item, and ± 10% of the total

contract price. Within 14 days of the date of instruction for executing varied work, extra work or

substitution, and before the commencement of such work, notice shall be given either

(a) by thecontractor to the owner of his intention to claim extra payment or a varied rate or

price, or

(b) by the owner to the contractor of his intention to vary a rate or price

B. If there is delay in the owner and the contractor coming to an agreement on the rate of an

extra item, provisional rates as proposed by the owner should be payable till such time as the

rates are finally determined.

5 -Payment of Running Bills:

A. Bills should be prepared and submitted by the Contractor. Joint measurements should be taken

continuously and need not be connected with billing stage. System of 4copies of measurements,

one each for Contractor, Client and Engineer, and signed by both Contractor and Client can be

tried.

B. 75% of bill amount should be paid within 14 days of submission of the bill. Balance amount of the

verified bill should be paid within 28 days of the submission of the bill.

C. For delay in payment beyond these periods specified in B) above, interest at a prespecified rate

suggested rate 12% p. a. should be paid.

6 -Payment of Final Bills

A. Contractor should submit final Bill within 60 days of issue of defects liability certificate. Client‟s

engineer should check the bill within 60 days after its receipt and return the bill to Contractor for

corrections, if any are needed. 50% of undisputed amount should be paid to the Contractor at the

stage of returning the bill.

B. The contractor should re-submit the bill, with corrections within 30 days of its return by the

Engineer. The re-submitted bill should be checked and paid within 60 days of its receipt.


7 -Advance Payment

A. Mobilisation Advance and Construction Equipment Advance should be given at 12% interest or

free of interest at the discretion of the owner and against Bank Guarantee for Mobilisation

Advance and against hypothecation of Construction Equipment to the Owner for Construction

Equipment Advance.

B. Mobilisation Advance should be given upto 10% of Contract price, payable in two equal

instalments.

C. Construction Equipment Advance should be paid upto 5% of Contract price, limited to 90% of

assessed cost of machinery. For special cases, a higher advance for construction equipment upto

10% of contract price may be considered.

8 -Secured Advance:

75% of cost of materials brought to site for incorporation into works only should be paid as

Secured Advance. Materials which are of perishable nature should be adequately insured. In case,

advance is not payable against any particular items, they should be listed in the Contract

Document.

9 -Liquidated Damages and Incentives:

The owner, if not satisfied that the works can be completed by the contractor, and in the event of

failure on the part of the contractor to complete work within further extension of time allowed as

aforesaid, shall be entitled, without prejudice to any other right, or remedy available in that behalf,

to rescind the contract.

Ministries/Departments/Project Enterprises may adopt a suitable percent of the contract price as

liquidated damages and allowable time-limit depending upon the nature of turnkey contract.

Incentives or Bonus (Optional Clause)

For early completion of the contract before the stipulated date of completion of an incentive

amount at the rate of half per cent (½%) of the contract price per week of early completion, subject

to a maximum of five per cent (5%) of the contract price may be paid to the contractor.

10- Escalation

All short duration contracts up to 24 months should be awarded on fixed price basis and are not

subject to any escalation what so ever. However, only statutory variation limited to duties and taxes

are considered for adjustment in contract price.

For calculating escalation, base prices should be taken as on the date of opening of the Bids.

Escalation Reimbursement should be calculated for to the extent of 85% of the escalation so

calculated.

11 - Disputed Items and Arbitration

12 -Owner’s Risk and Compensation Events:

A. Owners Risks: The owner is responsible for the excepted risks, which are :-

a) War, hostilities, invasion, act of foreign enemies, rebellion, revolution, insurrection of military or

usurped power, or civil war;

b) Riot, commotion, disorder, unless solely restricted to employees of the Contractor or his

sub-contractors and arising from the conduct of the works;

c) Contamination by radio activity from any nuclear fuel, or from any nuclear waste

radioactive toxic explosive;

d) A cause due solely to the design of the Works, other than the Contractors design;

e) Pressure waves caused by aircraft or other aerial devices travelling at sonic or

supersonic speeds;


STANDARD GENERAL CONDITIONS Standard General Conditions for Domestic Contracts consist of a complete framework for preparation

of contract documents which include Invitation for Bids (IFB) and its basic details, format for Standard

Bidding Document, General Conditions of Contract and Special Conditions of Contract including

Standard Contract Clauses, contract data, specifications of the project, supporting drawings, bill of

quantities and formats for securities etc. These documents have been arranged in the sequence of

their formulation and implementation as given in the contents of this document.

Comparison of SCB and LCB Bidding documents:

Scope of work:

In SCB and LCB they invites bids for the construction of works (as defined in these documents and

referred to as “the works”) detailed in the table given in IFB. The bidders may submit bids for any or

all of the works detailed in the table given in IFB.

The successful bidder will be expected to complete the works by the intended completion date

specified in the Contract data.

SCB NCB

Source of funds: The Employer has arranged the funds from .....(indicate the source) and will have sufficient funds in Indian currency for execution of the works.

The government of India has received a loan/ from the International Bank for Reconstruction and Development or the International Development. Payments by the Bank will be made only at the request of the Borrower and upon approval by the Bank in accordance with the terms and conditions of the financing agreement. The Loan Agreement prohibits a withdrawal from the loan account for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Bank, is prohibited by decision of the United Nations Security Council.

Eligible Bidders: The Invitation for Bids is open to all eligible bidders meeting the eligibility criteria as defined All bidders shall provide in Section 2, Forms of Bid and Qualification Information, a statement that the Bidder is not associated, nor has been associated in the past, directly or indirectly, with the Consultant or any other entity that has prepared the design, specifications, and other documents for the Project Manager for the Contract. A firm that has been engaged by the Employer to provide consulting services for the preparation or supervision of the works, and any of its affiliates, shall not be eligible to bid.

Government-owned enterprises may only participate if they are legally and

Bidding is open to all bidders from eligible source countries as defined in the IRBD. Guidelines for procurement. Bidders from India should, however be registered with Govt. of India. Bidders are advised to the minimum qualification.


financially autonomous, operate under commercial law and are not a dependent agency of the Employer.

Eligibility Criteria The Bidder must have experience on similar works executed during the last five years. Details like monetary value, clients, proof of satisfactory completion should be submitted for establishing eligibility. Registration if any with specified deptts/organisations, class/type of registration

Achieved a minimum annual financial turnover in any one year

Satisfactorily completed (no less than 75%) as a prime contractor at least one similar work of value

One bid per bidder.

Achieved in at least financial years, a minimum annual financial turnover (usually not less than 2 times the estimated annual payments) Satisfactorily completed (not less than 90%) as a prime contractor at least one similar work of value. One bid per bidder.

Cost of Bidding: The bidder shall bear all costs associated with the preparation and submission of his Bid, and the Employer will in no case be responsible and liable for those costs. Site visit :

The Bidder, at the Bidder‟s own responsibility and risk is encouraged to visit and examine the Site of Works and its surroundings and obtain all information that may be necessary for preparing the Bid and entering into a contract for construction of the Works. The costs of visiting the Site shall be at the Bidders‟ own expense.

BIDDING DOCUMENTS

The set of bidding documents comprises Invitation for Bids (IFB)

1. Instructions to Bidders 2 Forms of Bid and Qualification Information 3 Conditions of Contract 4 Contract Data 5 Specifications 6 Drawings 7 Bills of Quantities 8 Forms of Securities

Same as SCB Same as SCB


Clarification of the Bidding Documents A prospective bidder requiring any clarification of the bidding documents may notify the employer in writing or by cable (hereinafter “cable” includes telex and facsimile) at the Employer‟s address indicated in the invitation to bid. The Employer will respond to any request for clarification which he received earlier than

15 days prior to the deadline for submission of bids.

Pre-bid meeting The bidder or his official representative is invited to attend a pre-bid meeting which will take place (address of venue,time and date) is to inform.

Non-attendance at the pre-bid meeting will not be a cause for disqualification of a bidder.

Amendment of Bidding Documents Before the deadline for submission of bids, the Employer may modify the bidding documents by using addenda.

To give prospective bidders reasonable time in which to take an addendum into account in preparing their bids.

Documents comprising the Bid The bid submitted by the bidder shall comprise the following:

(a) The Bid (in the format indicated in Section 2)

(b) Bid Security (c) Priced Bill of Quantities (d) Qualification Information Form and

Documents and any other materials required to be completed and submitted by bidders in accor-

dance with these instructions. Format and Signing of Bid The Bidder shall prepare one original and one copy of the documents comprising the bid as described in Clause 12 of these Instructions to Bidders, bound with the volume containing the Form of Bid, and clearly marked „ORIGINAL” and „COPY” as appropriate. In the event of

Same as SCB Same as SCB Bidders bidding for this contract together with other Contracts stated in the IFB to form a package will so indicate in the bid together with any discounts offered for the award of more than one contract. The bidder shall furnish information as described in the form of Bid on commission of guarantees if any paid or to be paid to agents relating to this bid and to contract execution if the bidder is awarded the contract.


discrepancy between them, the original shall prevail.

SUBMISSION OF BIDS The Bid shall be submitted in two separate sealed envelopes duly marked Envelop 1 and Envelope 2. The Envelope 1 will contain Employer‟s Bid documents (other than priced BOQ) which will be submitted under formal forwarding letter in standard printed form addressed to the Employer interalia containing an undertaking that the Bid docs not contain any amendment, modification or change of any type whatsoever in the Bid documents and to any amendment issued after pre-bid meeting. The Envelope 2 will contain priced BOQ only giving the unit price and amount against each item with grand total at the end in figures and in words.

If all envelopes are not sealed and marked as required, the Purchaser will assume no responsibility for the misplacement or premature opening of the bid.

Late Bids Any Bid received by the Employer after the deadline prescribed in Clause 20 will be returned unopened to the bidder.

Bidders submitting bids by mail or by hand, shall enclose the original and each copy of the Bid, including alternative bids, if permitted in accordance with ITB Clause 13, in separate sealed envelopes, duly marking the envelopes as “ORIGINAL” and “COPY.” These envelopes containing the original and the copies shall then be enclosed in one single envelope. The rest of the procedure shall be in accordance with ITB. Same as SCB

BID OPENING AND EVALUATION: The bidders shall abide by the provisions of the minutes.

Evaluation and Comparison of Bids The Employer will evaluate and compare only the Bids determined to be responsive. In evaluating the Bids, the Employer will determine for each Bid the evaluated. Bid Price by adjusting the Bid Price as follows:

(a) making any correction for errors pursuant

(b) making appropriate adjustments to reflect discounts or other price modifications offered.

Process to be confidential information relating to the examination clarification. Same as SCB


AWARD OF CONTRACT The Employer will award the Contract to the Bidder whose Bid has been determined to be responsive to the Bidding documents and who has offered the lowest evaluated Bid Price, provided that such Bidder has been determined to be eligible in accordance with the provisions qualified in accordance with the provisions. The Employer shall award the contract within 15 days of the opening of the priced bids.

The notification of award shall be according to the provision of award.

The employer will award the contract as in the case of SCB and it, pursuant to clause, this contract is being let along with other contract, the lowest evaluated bid price will be determined when evaluating this contracts to be awarded concurrently, taking in to account any discounts offered by the bidders for the award of more than one contract.

Conciliator: The Employer proposes that CIDC – SIAC Arbitration Center be appointed as conciliator under the Contract, at a daily fee of Rs...... plus reimbursable expenses. If the Bidder disagrees with this proposal, the Bidder should so state in the Bid. If in the Letter of Acceptance, the Employer has not agreed to the

ppointment of the conciliator, the conciliator shall be appointed by [name of Appointing Authority] @ at the request of either party.

Adjudicator: The employer proposes that (name of proposed adjudicator) be appointed as adjudicator under the contract at a daily fee. If the bidder disagrees with his proposed, the bidder should so fall in the bid.

“We are motivated by a keen desire for praise, and the better a man is the more he is inspired by glory.

The very philosophers themselves, even in those books which they write in contempt of glory, inscribe

their names.”

http://thinkexist.com/quotation/we_are_motivated_by_a_keen_desire_for_praise-and/148603.html

