Professional Documents
Culture Documents
Contract:
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
Contract 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
• 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
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:
Lesson 2: Tender structure for different types of contracts item rate lump sum, plant design build
EPC turn key
Advantages: Disadvantages:
Nontraditional –Design and build: Builder can control design process and
accelerate to be more cost effective
Builder is project leader for project
delivery Nontraditional –Design and build-
Client and builder in direct contract Disadvantages:
relationship
All risks with contractor Cost pressures on builder‟s side can
Builder appoints and manages lead to shortcuts in design
consultants Promotes cheapest capital cost
Selective or negotiated based on options which could have
performance brief ramifications on cost and durability
Client may need to retain
Single point of responsibility independent consultant to monitor the
design
Builder accepts major portion of risk To change contractors in the event of
non performance difficult
Nontraditional – BOT
Cost plus: Client pays the contractor the cost incurred plus a fees. It lacks competition. This is
better suited for strategic alliances
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
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.
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.
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.
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.
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.
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.
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
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.
Definition of the project and its complexity, various services required, PPR
Architect & construction manager facilitate design process. Client has direct contract with
consultants
Contract price – Costs + Fee
No detailed documents at tender stage
Advantages: Disadvantages:
Advantages: Disadvantages:
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
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.
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
Lesson 9 & 10: Rights and obligations of parties in tendering process for various types of
contracts
Traditional contracts:
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
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 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
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 442
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 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
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
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.
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
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.
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.
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.
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.
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 449
(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.
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.
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.
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.
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.
Earnest Money
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
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
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 456
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
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.
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
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 459
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
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 460
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
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
Receipt of tenders
S.R.P** NICMAR-2ND TERM- TENDERING ,BIDDING AND CONTRACTING Page 467
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
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.
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 in at least financial years, a
Achieved a minimum annual financial turnover in minimum annual financial turnover (usually
any one year not less than 2 times the estimated annual
payments)
Satisfactorily completed (no less than 75%) as a Satisfactorily completed (not less than 90%)
prime contractor at least one similar work of as a prime contractor at least one similar
value work of value.
Cost of Bidding:
Site visit :
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
To give prospective bidders reasonable time in Bidders bidding for this contract together with
which to take an addendum into account in other Contracts stated in the IFB to form a
preparing their bids. package will so indicate in the bid together
with any discounts offered for the award of
Documents comprising the Bid more than one contract.
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
Late Bids
Same as SCB
Any Bid received by the Employer after the
deadline prescribed in Clause 20 will be returned
unopened to the bidder.
Conciliator: Adjudicator:
The Employer proposes that CIDC – SIAC The employer proposes that (name of
Arbitration Center be appointed as proposed adjudicator) be appointed as
conciliator under the Contract, at a daily fee of adjudicator under the contract at a daily fee.
Rs...... plus reimbursable expenses. If the If the bidder disagrees with his proposed, the
Bidder disagrees with this proposal, the Bidder bidder should so fall in the bid.
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.
“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.”