NICMAR- SODE PGP-CM - MODULE NO: 01

ASSIGNMENT NO: TWO

CONSTRUCTION CONTRACTS AND CONTRACTING

COURSE CODE: NCP 23

PREPARED & SUBMITTED BY:

NAME: M.S.MADHURI REG NO: 212-06-11-10652-2141

CONTENTS
(I) (II) (III) (IV) (V) (VI) Introduction...03 Contracts...03 Contract administration.03 Functions of contract administration 05 Case Study.06 Organization Chart....15

(VII) Functions...16 (VIII) Recommendations.19 (IX) (X) Conclusion.20 Bibliography..20

CONSTRUCTION CONTRACTS AND CONTRACTING

INTRODUCTION: CONTRACTS: Contract in law can be defined as an agreement made between two or more parties whereby legal rights and obligations are created which the law will enforce and have no existence outside the legal system. All such details, clauses, and conditions are recorded by documentation legally signed by the judiciary on mutual agreement of the parties involved. These documents are listed and enumerated in the agreement and referred to in the conditions of the contract for the work to be performed. Construction documents are defined as the written and graphic documents prepared or assembled by the owner or engineer for communicating the project design for construction and administering the construction contract. One should understand the process of preparation of these documents for a greater understanding of how to benefit from their use. CONTRACT ADMINISTRATION: Construction Contract Administration or CCA involves the activities necessary to affect and determine the fulfillment of the contract requirements by the parties to the construction contract. A prerequisite to executing the work is a basic understanding of the documents used in construction. The parties should understand the contract conditions and the implications of agreeing to a particular condition. Contract Administration usually begins when the owner-contractor agreement is signed till the work as per contract concludes and final payment is accepted by the contractor. The start and completion milestones of construction, will identify the duration of CCAthat is, beginning with execution of the owner-contractor agreement and ending with acceptance of final payment by the contractor.

The following can be listed as synopsis for contract administration and its role: Duration: Contract administration begins when the contract is awarded to when the work is completed, payments have been made, all disputes have been resolved and/or till the contract is terminated. Need - Contract Files : Since contracts are very specific in nature, contract administration ensures that the department and the supplier have a clear and mutual understanding of all the requirements of the contract.

Purpose - Contract outline: The purpose of contract administration is to administer a contract which defines the need, develops a means and method to meet the need, ensures that all the legal requirements are met, assessing any and all risks, allocating necessary resources, monitoring the actual contract, comparing measured performance to established standards, open communication throughout the process, the receipt of the product and/or service and the documentation of all final results.

Process - Business team:

Contract administration manages the contract from the pre-contract to the final stages. This is done by both parties forming a contract administration team and/or appointing a contract administration manager.

Problems Facilitator: To help avoid contract administration problems, both parties utilize an alternative dispute resolution technique called partnering. Under partnering, both parties develop a plan for success with the help of a neutral facilitator

FUNCTIONS OF CONTRACT ADMINISTRATION: For effective administration of the contract, the following activities must be carried out with regularity and perfection:

Communication- The basis of contract administration is to keep the lines of communication open among the contractor, the buyer, the end user and any other stakeholders. This is necessary to ensure everyone has a clear understanding of the contract terms and of their rights and obligations.

Quality -Regularly check the executed work against agreed-upon quality standards. This ensures your organization gets the quality expected by the owner for his money.

Deadlines Verify that contract milestones are met with and that regular deliveries are made within the required turnaround time. This prevents project delays and ensures the smooth flow of operations within your organization. Cost Savings - Check all invoices and expenses carefully against the goods received or services being carried out, and against contract pricing. Enforce

agreed-upon price escalations and ensure your organization is paid for all executed works without having to incur losses. Risk Management -Ensure the company has the required insurance and bonding in place, and the personnels are strictly adhering to all safety protocols and applicable laws. This lowers your risk of damages, injuries and litigation. Relationship Management -Provide the owner with regular feedback on required work, and ensure timely payment of the companys invoices. This fosters a long and mutually profitable partnership between client and contractor.

CASE STUDY:
Name of the project: Client: Contractor: Consultant: Location : Scope of work: The scope of work shall include complete Civil, Structural, and Architectural works for the structures listed below including mobilizing, supply of materials, manpower, equipment tools and tackles and consumables required for all works. 2 x 270 MW Mahadeo Prasad Super Thermal Power Plant Adhunik Power & natural Resourced Ltd. NCC Limited, Hyderabad. DCPL, Kolkata. Padampur Village, Saraikela Kharsawan Dist, Jharkhand.

Structures to be executed: Power House Boiler feed pump foundations Turbine generator foundation Circulatory water Pipe line Cooling towers Circulatory Water Pump House with Fore bay and Channel Side Stream Filters Chlorination Building MCC Building ESP and ESP Control Room Boiler to chimney Duct Supports Air Compressor House Pipe and Cable Racks ID Fan, PA Fan, FD Fan foundations Mill Bay and Mill Building Boiler Intermittent Blow down Tank Transformer Yard Switch Yard Control Room Ash Water tank and Pump House Low density oil tank and Fuel Oil Pump House Ash Silo and Utility Building Water recovery system- Clariflocculator and Chemical House Coal Handling Plant with: o Track Hopper for coal o Stacker cum reclaimer for coal o Conveyor Belt foundations o Crusher house for coal

o Truck tippler for coal o Control room for Coal handling plant Roads, drains, culverts and pavements for all plant area. Scope of work under the Bid document shall be on a single source responsibility basis completely covering all services, works and materials specified and will inter-alia include that: a) Any item(s) though not covered in specification/ drawing/ schedule but are required for reliability and safety and as per good engineering practice shall be deemed to be included in the scope of work unless specifically excluded in the contract. b) All preparatory activities including scaffoldings, formwork shall be taken as a part of the job. c) Drawings/plans shall mean that all drawings shall be furnished to the contractor by the owner/ consultant d) Construction materials namely Cement, Reinforcement steel and non-fabricated structural steel shall be supplied free of cost to the contractor. The contractor shall produce a calculated statement with exact quantites of issued materials consumed with the physical stock remaining with the contractor at the end of every month. The consumption of free issue materials shall be as per standard consumption and the following wastages shall be termed allowable: I. 1% allowable invisible wastage in cement. II. 3% allowable wastage in cement III. 1% allowable invisible wastage in reinforcement steel IV. 3% allowable scrap production in reinforcement steel. V. 5% allowable wastage including scrap for structural steel. Type of contract: The contract is an ITEM-RATE Contract. The work done will be paid according to the rates specified in the contract Bill Of Quantities( BOQ). The rates shall remain valid, fixed

and firm for the entire duration of the contract till the completion of execution of quantities specified in the BOQ. The agreed rates shall be inclusive of all direct costs, overheads, and profit margins for executing the works in the contract.

Duration of contract: The duration of the contract shall be 48 months from the day of commencement which shall not be later than 60 days after signing of the contract. Any work not included in the contract shall be taken as extra work and the time for execution of the same shall be considered extra/ separate after mutual agreement by the contractor and the owner. A month shall refer to all months irrespective of number of days and shall include all non working days and holidays) Contract Value: The total value of works as assigned to the contractor ( a sum of Rupees 1,96,99,12,500/-) are based on the rates and quantities agreed upon in the BOQ of the contact. This shall be inclusive of all prevailing taxes and duties such as excise duty, custom duty, work contract tax, royalties, sales tax, octroi, or any other levies associated with the execution of the contract. However if new statutory taxes, duties, levies are imposed by the central/ state/ local authority after commencement of work, the same shall be reimbursed at actuals by the owner against documentary evidence furnished by the contractor. CLAUSE I: Quantity exceeding over and above 100% BOQ: The contractor may claim extra amount for items that exceed over and above 100% of the BOQ quantity and shall claim for it as: A) CIVIL & ARCHITECTURAL WORK ITEMS: i. +10% over existing BOQ rate for total executed Qty for such items

or, ii. +30% over existing BOQ rates for quantities exceeding +100% of BOQ quantity. B) STRUCTURAL ITEMS: i. +8% over existing BOQ rate for total executed Qty for such items or, ii. +20% over existing BOQ rates for quantities exceeding +100% of BOQ quantity.

CLAUSE II: Price Escalation: The contractor shall herewith produce a bill with all documentary proofs for a claim for Price escalation of fuel (diesel) procured and consumed for all construction calculated against the exact value of work executed considered during the period of the bill claim. The contractor shall herewith adhere to the following Diesel rate variation formula for all claims against price escalation:

V = 0.05 x R x (D - D0) D0

Where, V = Amount in INR payable extra by the owner to the contractor. R = Value of work done in INR during the period under consideration. D = Price of diesel prevailing during the period under consideration.

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D0 =Price of diesel prevailing at the Indian Oil Petrol Pump situated at the nearest station to the site applicable as on the date of signing of the contract.

Project Management: The contractor shall submit within 15 days from the signing of the contract a detailed extensive network prepared using Microsoft Projects software covering the various key phases of the activities to be carried out during execution showing surveying, procurement, manufacturing/scaffolding and execution at site. During the construction phase, an experienced project manager of the contractor shall periodically prepare the schedule of execution of works at site with start and end dates for all activities building wise and shall submit the same to the owner for approval. The dates mentioned in the schedules shall be actual probable dates and shall be adhered to during the construction unless delay accepted by the owner. The contractor shall submit daily and monthly progress reports to the owner with remarks and reasons acceptable by the owner for non-conformity of work done.

Force Majeure Conditions The event of Force Majeure means any of the event or circumstances which adversely affects the performance of either party of the obligations in the agreement and which are beyond the reasonable control of the affected party and which the affected party could not have prevented by the prudent utility practices or by exercise of reasonable skill and care: I. Act of God, epidemic, famine, lightening, earthquake, cyclone, whirlwind, flood, accident, tempest, storm, land slide, drought, tornado, tsunami, subsidence action of the elements, meteorite falls, objects falling from aircrafts, pressure waves caused by air craft or aerial devices traveling at supersonic speed, volcanic eruptions, fire or explosion, quarantine restrictions, air crash.
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II. Act of war, invasion, armed conflict, or act of foreign enemy, blockade, embargo, revolution, riots, insurrection, piracy, terrorist or military action, civil commotion or sabotage. III. Strikes/ lockouts or other industrial actions Any event or circumstances that of a nature analogous to any of the above, the contractor shall not be liable for the delays in performing their obligations resulting from and only to the extent applicable and necessitating rescheduling of the balance activities. In event of any loss due to any Force Majeure conditions listed, the contractor shall be responsible to make good all such losses/ damages at its own cost and expense.

Terms of Payment: The total contract price shall be paid as follows: 1. 5% of the total contract price shall be paid after mobilization of sufficient construction equipment, deployment of manpower and construction of site office. The contractor shall give a list of construction equipment and list of manpower which they are proposing for claiming the 5% payment. The same shall be released within 15 days from the date of receipt of the following documents: invoice of 5% of total contract price Advance Bank Guarantee of 5% of the total contract price. Performance guarantee of 10% of Total contract price. 2. Payment for 85% of the total contract price shall be made as running payment on prorate basis on actual execution of works. This payment shall be released by the owner within 30 days from the date of receipt of the owner approval invoice from

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the contractor. For claiming this payment the contractor shall raise the monthly invoices which shall be duly approved by the owner. 3. Remaining 10% of the total contract price will be paid by the owner after completion of civil, structural and architectural work within 30 days after the receipt of invoice of equivalent amount of work done from the contractor.

Important Points from Contractors Point of View The contractor must be well informed of the following conditions and also decide upon for taking apt measures for overcoming the same: 1. Local Condition: It is imperative for the contractor to be fully informed of all local conditions and factors that may have any affect on the execution of works covered in the contract. The contractor must have an amicable relation with the local inhabitants and should make sure that there shall be no resistance for execution of work howsoever by from them for whatever reason possible. He should be planned well for any such event occurring inevitably at site. 2. Site Condition: The contractor must examine the site well for commencement of work. It must be well informed of all locations in that vicinity for procurement, mobilization of manpower etc. The contractor should be well acquainted by the region for easy procurement and execution. 3. Scope of work: The contractor should have enough knowledge of the works to be executed in the project and should have a detailed and effective schedule prepared for the same. The contractor should exclusively deploy one person for the administering of the contract who can elucidate upon the activities to be executed and monitor them from time to time.

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4. Time Required: The contractor must be well aware of the probable time to be taken for execution of each work. Depending on this the contractors project planning in charge must prepare a detailed schedule for execution of works and also monitor the execution for non conformity. 5. Material Procurement: The contractor must make all necessary arrangements for procurement of materials from the suppliers and also maintain good relationships with the suppliers. The contractor should clearly plan out the procurement schedule to avoid any delay in work execution due to non availability of material. 6. Equipment: The contractor should make sure to mobilize all necessary equipment for construction videlicet excavators, JCB, rock/pavement breakers, dumpers, water tankers, dozers, vibro rollers, compactors, concrete pumps, concrete boom placers, bar cutting and bending machines, loaders, MIG machines, welding machines, Gas Cutting sets, Drill machines, Grinding machines, Hydraulic jacks, Turn buckle, master oven, lathe machine, scaffolding material, formwork material, winch machine, hydra cranes, tower crane, telescopic crane, builders hoist, DG set, welding transformer, surveying instruments, material weighing equipments etc.

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ORGANISATION CHART

Project Manager

Dy Project Manager Project planning

Dy Project Manager Structural

Adminis tration

Site Execution

QS/ Planning

QA/ QC

Account s

Stores

R&M

Safety

Mechanical

Electrical

EDP

QS/ Billing

Fabrication

Erection / sheeting

Officer

Sr Engr

Sr Engr

Senior Engr

Offic er

Officer

Asst Manager

Offic er

Asst Officer

Asst Engr

Sr. Technician

Asst

Senior Engr

Asst Engr

Asst Engr

Asst

Jr. Engr

Jr. Engr

Junior Engr

Sup

Sr Assistan t

Assistan t

Junio r Asst

Junior Asst

Sr Technician

Junior electrician

Junior Engr

Junior Engr

Junior Engr

Jr. Engr

Jr. Engr

Sup

Sup Asst

Sup Asst

Sup Asst

Sup Asst

Sup Asst

Sup

Sup

Sup Sup Sup Sup Sup

Sup

opertr

opertr

opertr
Sup Sup

opertr

opertr

opertr

EFFICIENCY OF THE ORGANISATION CHART The above formulated organization chart has proved to be effective in timely and profitable execution of all works in the project. The following are the functions that are carried out by each staff member:

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FUNCTIONS (I) Project Manager The Project Manager is the authorized person for all decisions to be taken at site for execution of work. He does inspect every department for quality of work to be done. Site execution, QS, Stores, Accounts, QC, Mechanical, and all departments are monitored for work progress. (II) Deputy Project Manager- Planning The Deputy Project manager Planning sees and discusses with the Project Manager for all schedules prepared and monitor for timely execution of the same. He plans the cash flow schedules and accordingly plans for procurement of material, mobilization or de-mobilisation of manpower depending o the work front available. He makes sure that all works are executed as per schedules and that manpower or hired machinery are not left idle during work hours. He coordinated with the QS and planning department for timely preparation and submission of RA Bills for ensuring zero cash flow constraints. (III) Deputy Project Manager- Structural The Deputy Project manager Structural takes care of all fabrication and erection works executed at site and ensures that all are in accordance with the details provided by client. He ensures timely preparation and submission of RA Bills for ensuring zero cash flow constraints After discussing the progress status with the project manager, he indents for the material required for further works.

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 He makes sure that all works are executed as per schedules and that manpower or hired machinery are not left idle during work hours. (IV) Administration: The officer monitors the needs of the project namely accommodation, transportation, mess facilities, and checks to cater to all basic requirement being fulfilled for the staff. He is responsible for communicating to the head office for all site correspondence not related to contract work execution. He obtains all labour licenses and maintains all insurance policies with a check for the renewal dates for the same. The assistants job is to coordinate with the office for all administrative related works. (V) Site Execution: Two senior engineers deputed at site see that all works are in accordance with the drawings issued by the client and also follow up the same with the client officials deputed at site. They are responsible to assign jobs to the junior engineers at various locations to monitor all works with quality. The junior engineers .

(VI)

QS/Planning: The department prepares Quantity estimation and billing for Client, Sub contractor & PRW. Making Daily, Weekly & Monthly progress reports and MIS reports & reporting to the HO for the same.

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 The departmental in charge coordinates with Sub-contractors and Project Engineer. Executing RA Bills, Subcontractors bills, PRW and Target Bills. Preparing Variation Statements and Reconciliation of materials. Maintaining the correspondence from the client. Preparation of comparative statements & work orders of PRWs. Maintaining hindrance records (caused by client/ inclement weather conditions). Preparing Time extension & Price escalation reports & bills. Preparing Deviation Statements/ Project Cash Flows. Generating periodical MIS /reports in prescribed form in order to update all concerned authorities on the matter & reporting to HO for the same. Maintain Drawings & Records thereof including date of receiving & issuance of drawings etc.

(VII) Stores: The stores in charge makes all purchases required for the project and is authorized for all All recording of procured material, received material, consumed material, and balance stock is maintained by the stores assistant. The stores supervisors make a note of all issued material on daily basis and report the same for recording in the database. (VIII) QA/QC: The QC officer checks for the quality assurance and quality control. He needs to be assisted by a supervisor for all supportive documentation in the project.

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 All testing and client correspondence of the same is the responsibility that the QC officer undertakes. (IX) Electrical: All required electrical maintenance and services of earthing are carried out by the electrical technician and his subordinates. (X) Accounts: The accounts officer monitors cash flows and reports the same in accordance to the zero cost of the project to the project manager. The assistant checks all bill payments and database entry of all cash vouchers, expenses, and cheques utilized. (XI) EDP The EDP person has to check for the entire service and maintenance of all computer systems being used at site. He makes a database record of all important data pertaining to the site.

RECOMMENDATIONS: Every project can be completed as per targets with the marginal profit credited if the project is well planned and all activities are carried out as per schedules and the contract requirement. Hence the deployment of an experienced contract administrator is necessary. The contract administrator must ensure that contractors, such as suppliers, meet the contract's requirements. Additionally, the administrator must identify specific targets in delivery, quality, cost or other areas. Once identified, the administrator will have the knowledge necessary for altering the contract, if necessary, to improve operational efficiency.
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 Because of this compliance role, the administrator must have the authority to recommend service provider improvements or the use of different contractors altogether. The Contract administrator must notice and document the building progress or observe the program evaluations by the clients. He must compare how much work has been done compared to how much was required by the contract at this point. This should be done a minimum of every three months, so if there is a delay or problem, it can get attention before the project gets way off schedule.

CONCLUSIONS: Whether the project is for a government, a non-profit or a private corporation, the duties as a contract administrator are central and form the base to the organization's efficient operation. These organizations enter into contractual agreements to receive products or service from third parties. Hence the involvement of an efficient Contract Administrator is necessary for any organization to have a profitable bargain.

BIBLIOGRAPHY Fundamentals of Building Contract Management- Thomas E Uher/ Philip Davenport Managing Contracts- A guide to Contracts Administrators.

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