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ASSIGNMENT ON CONSTRUCTION CONRACTS & CONTRACTING PGPM 14

SUBMITTED BY

G.S.VINOD VASAN, PG PPM, REG NO: 211-03-31-9250-2133

ASSIGNMENT NICMAR/CODE OFFFICE 1. Course No 2. Course title 3. Assignment No 4. Date of dispatch 5. Last date of receipt of

: : : :

PGPM 14 Construction Contracts & Contracting 04 20-06-2011

Assignment at CODE office

Assignment Contract administration and monitoring is the most important area of construction management. Contract administration process should start right from the day work is assigned to the company. Discuss any project contract currently in progress with your company and how administration and monitoring is being done. Draw the organization chart for this activity and explain all the function carried out. Do you think the system is achieving results? Discuss.

INTRODUCTION

Contract management is the process that enables both parties to a contract to meet their obligations in order to deliver the objectives required from the contract. It also involves building a good working relationship between customer and provider. It continues throughout the life of a contract and involves managing proactively to anticipate future needs as well as reacting to situations that arise. The central aim of contract management is to obtain the services as agreed in the contract and achieve value for money. This means optimising the efficiency, effectiveness and economy of the service or relationship described by the contract, balancing costs against risks and actively managing the customerprovider relationship. Contract management may also invol ve aiming for continuous improvement in performance over the life of the contract.

The company has got approval from the OHS and the blank tabulated form is given below:
CONTRACT MANAGEMENT Document 1h: Contract OHS System Approval for Labour Hire
Last Update: Owner:

Labour hire consists of contractors engaged directly or through labour hire agencies to carry out work under similar arrangements to normal staff. The contractor will be supervised directly by University staff. This does not include contractor managed work teams which fit under the other classifications of contract management. This document when completed is to be kept with the current version of the Contractors Health and Safety Plan and forms part of the contract documentation .
Contract Long Medium Ongoing Short Major Minor Business services Event Mgt Light delivery Heavy delivery Contract staff L/M/H hazard L/M/H hazard L/M/H hazard L/M/H hazard Off-site Venue hire

In general, contractors in this group must be treated in the same manner as staff members as regards induction, supervision and other OHS requirements. The University is described as the Host Employer.

Contract Details: Contract Name. Company Name: Name of Contact Person: Contact details: Position: Name and Contact Details of Deakin Representative: Date: Contract Number:

Contract Characteristics
Type of Contract? CT 1 -9 Type of Engagement? E1-4

Class

Notes

CT 1: Labour hire contract staff

The type of contract is an important factor in determining the types of OHS controls required

E1: Long term project or service contract (more than 2 weeks) E2: Medium term project or event (up to 2 weeks) E3: Ongoing but intermittent E4: Short term (few hours), one-off or annual

Hazard level? L/M/H

Low: Serious injury is unlikely Medium: Serious injury is possible High: Serious injury is likely if not well managed (Serious injury is any injury that involves lost time or hospital treatment)

Element (see Table 1:OHS Control Measures for Labour Hire)


Contract for Labour Hire Labour Hire Contractor insurances Labour Hire Contractor OHS Management System

Date Received

Satisfactory/ Unsatisfactory / Not Applicable

Labour Hire Contractor has established systems and procedures for managing OHS hazards Labour Hire Contractor and contractor employees hold all necessary qualifications and permits. Labour hire employee has a good understanding of the hazards and risks associated with the contract (University responsibility) Plant and equipment used by the contractor is appropriately licensed or registered and is maintained on a regular basis The Labour Hire Contractor is recommended for inclusion on the Approved Contractor List (Panel) for (describe type of contract) Hazard Disclosure and Labour Hire Job Description (University responsibility) Project Risk Assessment The University will be required to develop (if required) and use Job Safety Assessments and/or Safe Working Method Statements The labour hire employee will operate under University Permit and Isolation procedures and have been made familiar with them The labour hire employee have completed the General University Induction The labour hire employee will complete a Local Site Induction before commencing work The labour hire employee has received copies of the Site Safety Rules Deakin staff will be required to supervise the contractor The labour hire employee will follow University sign in/sign out procedures The labour hire employee will be monitored (indicate how frequently and whether randomly or by agreement)

Element (see Table 1:OHS Control Measures for Labour Hire)

Date Received

Satisfactory/ Unsatisfactory / Not Applicable

The performance of the labour hire employee will be formally evaluated (indicate when) Comments

Authorisation
Local supervisor Contract Manager Contractor Representative

Signature

Date

Element

Date

Yes / No

The Contractor is approved for inclusion on the Approved Contractor List The Contract meets the University OHS contractor management requirements

Authorisation
Dean / Head of School / Director

Signature

Date

Table 1:OHS Control Measures for Labour Hire

Resources and Tools OHS Control Measures Notes All the forms are intended for adaption as required
For use of the Contract Manager: (1a) Contract OHS Management System Guidelines Contract OHS Management Contracts cannot transfer responsibility for OHS to the contractor (1b) Contract OHS Management System Template for Labour Hire (This document) WorkSafe Victoria: Host Employers: Managing the safety of labour hire workers OHS requirements must be included in the contract. For use of the Contract Manager: (2) Model Contract Clauses

Written contract

Hazard Management
For use of the Contract Manager and Contractor: (3a) Contract OHS Risk Assessment for construction and related works (3a) Contract OHS Risk Assessment for maintenance and related works

Project Risk Assessment

Required for all contracts that involve a medium to high hazard level. An initial risk assessment should be carried by the Contract Manager to identify issues. The risk assessment must be discussed with the labour hire employee

OHS Management System

Large labour hire contractors will have an established OHS Management System.

For use of the Contract Manager: (4a) OHS Guidelines for Contractor

Resources and Tools OHS Control Measures Notes All the forms are intended for adaption as required
Selection (4c) Tender OHS Management System Evaluation Proof of WorkCover and insurance coverage Normally required for all contracts For completion by the contractor: (4b) Tender OHS Management System Questionnaire WorkSafe Victoria: Labour Hire Agency health and safety health check The Hazard Disclosure Statement is a formal advice to the Contractor about hazards known to Deakin University that may affect the safety of the contractor The Labour Hire Provider may require the University to complete a Labour Hire Description or OHS Management System assessment In major works where there are activities with a medium to high hazard level In major works where there are activities with a medium to high hazard level The labour hire employee must be familiar with these procedures. Where work requires that the operator has certification (e.g. forklift driver),

For use of the Contract Manager: (6) OHS Hazard Disclosure Statement (6b) Labour Hire Job Description WorkSafe Victoria: Assessment of host employers system for managing OHS

Hazard Disclosure Statement

Job Safety Assessments

For use of the Contract Manager or local supervisor: (10a) Guidelines for Job Safety Assessments (10b) Job Safety Assessment Template (10c) Safe Working Method Statement Template Local procedure

Safe Work Method Statements

Universitys Permit and Isolation procedures Labour Hire employee Certificates

The Contract Manager must verify their currency

Resources and Tools OHS Control Measures Notes All the forms are intended for adaption as required
This is the normal induction process for casual and contracted staff Local induction For use of the Contract Manager: (15a) Contractor OHS Induction Checklist Maintenance and Service contracts This induction is required and would be the same as a similar University staff member The induction checklist chosen will depend upon the nature of the work (15b) Contractor OHS Induction Checklist Office based labour hire, casual staff, temporary staff contracts (15c) Contractor OHS Induction Checklist Venue hire contracts (15d) Contractor OHS Induction Checklist Laboratory and workshop based contractors and temporary staff (15e) Contractor OHS Induction Checklist Labour Hire Selection, Induction and Training Record Site Safety Rules Booklet Site Safety Rules provided as a booklet to the Labour Hire employee

Site induction

Local arrangements

Supervision and Monitoring


The University is responsible for supervision Sign in and Sign out procedures Monitoring the performance of the contract

Required

The supervisor nominated in this document

Requirements for the contractor: Normal University arrangements (21a) Site Sign In / Out Template Direct responsibility of the University supervisor

Resources and Tools OHS Control Measures Notes All the forms are intended for adaption as required
For use of the Contract Manager: (23a) Non Conformance Report Form (23b) Post / Annual Contractor Evaluation Form

Evaluating contractor performance

Where a labour hire contractor has an ongoing relationship with the University, the contractors OHS performance must be periodically reviewed.

Based on the above data and elements of consideration i do have submitted a labour contract that happened in a company.

Name of Project

Completing Water Supply System for the upcoming project Aditya Aluminum, at Lapanga, Sambalpur, Orissa.

Scope of Work

Complete Design and Engineering, Manufacture, Supply, Transport, Handling, Erection, Testing and commissioning including Performance Guarantee Test for Water Supply System and related Substation, pipe Line, WBM Road for supply of Raw Water from Hirakud Reservoir to Aditya Aluminium Smelter & Captive Power Plant at Lapanga, District Sambalpur, Orissa.
Important details of the contract:

Name of the company

Aditya Aluminium, (A Division of HINDALCO Industries Ltd.) Lapanga, Sambalpur, Orissa

Name of contractor

Not to Display

Type of Contract

The contract is of Lump sum Fixed Price type turnkey contract. The above contract includes complete design, engineering, supply, erection, testing and commissioning of equipment. In case any item is missed out or omitted from the list of technical specification for completion of the job as per contract provision it is also deemed to be in scope of the supplier without any cost implication to the company.

Price of the contract

The contract price is payable by the company to the supplier in consideration of all the supplies to be made and all services to be provided by the suppliers according to the terms of the contract shall be: (i) Supply of equipment including Commissioning spares, packing Forwarding, transit Insurance (ii) Design, Engineering, Unloading, Storage, Handling, Erection and Commissioning including all civil Work etc. with supervision and insurance for storage and erection of the water Supply System in Complete The above prices are exclusive of Transport, Excise Duty with education cess, Sales Tax, Entry Tax, but inclusive of work Contract Tax and other Taxes and duties as applicable to the scope of the contract. Not to Display Not to Display

Price Variation

In this contract the aforesaid contract price shall remain firm throughout the entire contract period and shall not be subject to any escalation on the any account whatsoever expect for any statutory variation (Increase or decrease) in taxes and duties and the price of the MS spirally welded pipe for main water supply. The price of the MS pipe are based on 11 th jan,2010 if any variation in the in price by the SAIL shall be applied on the supply price of the pipe with its correspondence impact on taxes and duties and shall be paid. Similarly for intake well & pipe line laying system the depth/length variation are applicable at mutually agreed unit rates. In case of any variation (increased and decreased) in account , the total contract price shall be increased or decreased and the advances/payments already paid and/or due for payment shall be adjusted accordingly.

Time of Completion

The program of delivery, installation and commissioning of the Equipment will be effective from the effective date and will be according to the schedule of 24 months from the effective date. For construction of the raw water pipe line land corridor will be provided by Aditya Aluminiumin phases within 8 month of the date of LOI. Incase of any delay in providing land corridor due to any reason attributable to Aditya Amuminium, the contract period shall be extended correspondingly without any financial impact to the company. Similarly for the construction of intake well and channel inside the Hirakud Reservoir, in case any delay in the construction due to change in stipulation of government of the Orissa and central government or Dam authority etc. the contract period will also be extended correspondingly without levying and LD.

Payment terms

The payment of the contract price will be made by the company in accordance with the following terms on receipt of invoices and other related documents:
For supplies

1. 10% contact value as advance with LOI against of BG 2. 5% of contract value against the submission & approval of GA drawings. 3. 60% of contract along with 100% taxes &duties on pro -rata as per approved billing schedule against lawful invoice. 4. 10% of contract value against achievement of milestone. 5. 5% of contract value after issuing of commissioning certificate against performance bank guarantee of equivalent amount. 6. 10% of contract value against issue of final acceptance certificate (FAC). i.e. after completion of defect liability period of 12 month from date of commissioning certificate.
For Civil, Erection, Testing & Commissioning

1. 10% contact value as mobilization advance against of BG of equivalent. 2. 5% of contract value against the submission & approval of GA drawings. 3. 60% of contract along with 100% taxes &duties on pro -rata as per approved billing schedule against lawful invoice. 4. 10% of contract value against achievement of erection milestone. 5. 5% of contract value after issuing of commissioning certificate against performance bank guarantee of equivalent amount. 6. 10% of contract value against issue of final acceptance certificate (FAC). i.e. after completion of defect liability period of 12 month from date of commissioning certificate.

Quality inspection and testing during manufacturing

The company will be entitled at all reasonable times to witness the inspection, examination and testing of the equipment and erection & construction work at workshop of supplier. For this the contract should give one week prior notice to company for testing. The supplier should provide such assistance, labour, material, electricity, fuels, apparatus and instrument etc. for carry out test. If, after inspecting, examination, or testing any part of the equi pment and erection & construction work, the company should decide that such part is defective or not in accordance with the terms and specification for the contract, then it may reject such part by giving to supplier seven working days written notice of such defect. The company will bear all the costs and expenses for deputing its inspector.

Warranty

The supplier warrant that all material and all services provided by the supplier should new, free from defect in workmanship and material or design and fit purpose for which they are supplied. The supplier warranty shall be effective for 18 month from last date of receipt of supplies or 12 month from the date of successful commissioning. During the warranty period if there are any failure, the supplier, on it option, repair. Make good, replace, or modify with all possible speed without any additional cost to company. If supplier does not commence the correction activities the company may, at its option, correct the defect at the suppler expenses. In such case the warranty period will extended to 12 month from the date on which such replacement or repair is completed.

Project Management, Co-Ordination, Monitoring and Supervision

The supplier should depute at their own expense duly qualified supervisors to site to supervise the erection and construction work and putting in to operation at site. The supplier should provide supervisory services for project

management, installation and commissioning also bear all the cost against the facilities provided to its supervisors. All the work should be complete on or before time if any site supervisor deputed at site for work is not able to complete the work on time or at any guilty of serious misconduct, the supplier should remove or replace such persons at supplier expense so as not to cause any interruption in carrying out the erection & construction work or any delay in specified time schedule for the work. The supplier should provide adequate on the job training to operating and maintenance staff of the company at site during the erection & commissioning without charging any additional cost to the co mpany. Liaison and co-ordination for processing of all statutory clearances with State Government Authority at Bhubaneswar or at District Level or with the DAM Authorities shall be carried by the supplier.

Liquidated damages (LD) for delays and shortfall in performance

In the event of delay in completion of supply and commissioning of the water supply system, beyond the completion period as per schedule, the supplier shall pay LD @ 0.5% of the contract price per week of delay subjected to a maximum of 5% of the contract prices for both supply and erection order value. The payments of deduction of liquidated damages shall in no way relieve the supplier from completing the supplies and works and discharging all its other obligations under the contr act provided however that the above mentioned liquidated damages are the supplier only obligation to financially compensate the company in case of delay completion of the facility and/or failure to achieve the performance guarantees.

The important point from contract point of view to be monitored/ resolved

1. The company should furnish all the pertinent data and informations available to it without charges and within a reasonable time and should give such assistance as should reasonably requ ired by the supplier for carrying out the supplier obligations under the contract as per schedule. 2. The supplier , in carrying out its responsibilities, shall comply with the legislation, laws, by-laws, rules, regulations of the Govt. of India, the State of Orissa and other local authorities as may be applicable including those relating to environment, labour and safety. 3. The company should make timely payment to the suppliers for all amounts due to the suppliers under the contract in accordingly with the terms and provisions of the contract. 4. The Engineer-in-charge (EIC) carryout such duties in issuing certificates, decision, instructions and order as per contract to be carried out by the supplier. EIC shall have the full authority to act on behalf of the comp any for all purpose in connection with the contract and shall be supplier primary point of contact with company in relation to the execution of the work. The supplier shall proceed with the works in accordance with decision, instruction and order given by EIC subject to and in accordance with the contract, including provision for variation hereof. 5. Liaison and co-ordination for processing of all statutory clearances with State Government Authority at Bhubaneswar or at District Level or with the DAM Authorities shall be carried by the supplier. 6. During the contractual period, the supplier shall indemnify the company to co-ordinate and ensure to take care of all the Local, socio, economic, cultural, education and political requirement of various non profitable organizations, association, institution including district and local administration if any form time to time as a part of their contractual and social obligation with due consultation and approval from the company.

7. The supplier shall also get approved by th e company the list of its vendors engaged for the purpose of the contract. 8. The supplier shall make its own arrangement for land, supply of water, electricity or any other facilities required for fabrication, erection, and commissioning of the work. 9. The supplier shall indemnify to the company that they will create as environment of awareness and physical being that is conducive to a safe and healthy workplace, in accordance with all federal, state, local and corporate regulation and contractual obligations. The supplier shall provide safety programs that are effective in identifying and reducing hazards in the work place and impart training to their employees to develop safe work practices that efficiently produce quality products in a safe manner with an objective to have an injury free workplace and zero accident. 10. The supplier shall use liberal factors of safety throughout the design and shall follow all other relevant IS and also international codes, wherever applicable.

The Consultant

The Consultant will be totally responsible for all the engineering of Projects going on at all the branches. He will be involved in each activities from initial idea, generation of layout drawings with all infrastructure requirements, Detail working drawings, estimates, and site execution up to hand over. The consultants would be responsible for preparation of drawings and documentation within their various disciplines with regard the Services. Site visits would be made by the consultants at specified milestones, or as may be required.
The Group Head (CEO & COO):

The group heads role would be the monitoring of the designers output and activities, and taking responsibility for all the work that is generated by the group.

Project In charge (Sr. V.P.):

Interaction with contractors to detail out their requirements, obtaining signoffs and overseeing the tendering and negotiating process. Subsequently, during the execution stage, he monitors the project for cost, quality, and schedules and local administration.

The Project Manager (GM):

The project manager audits the project during the drawing/design stage, for conformance to the stipulated process, and for adherence to agreed schedules. Subsequently, during the execution stage, he monitors the project for cost, quality, and schedules.

The Site In Charge(Manager/ Sr. Manager):

The site in charge is responsible for achieving quality on site, interpreting the drawings and documentation on site, and raising reports on quality and scheduling.
Assistant Site In charge (Asst. Manager/ Engineer):

The role of a Assistant site In Charge is the day to day monitoring of site activities. Monitoring of day to day schedules and raw material quality fall within the scope of duties. He is responsible for Co-ordination between Vendors and the generation of daily and weekly status reports.

Recommendations & Conclusion

1. In this contract there is no provision and any point hasnt made about change of the scheme for drawl of water from the reservoir and change in the price of the contract according to that change. 2. The contract doesnt have the provision of the penalty as p er contract the contract cant leave work there is provision of the liquidity damage maximum of 5 % of the contract value. The contract has to complete the work and if there is any defect in the work the contractor has to rectify it on his own expenses within the guarantee period in case of any delay of contract due to unsatisfactory work the company will suffer the loss by unavailability of the water at plant area.

References:

- NICMAR publication lesson books on Construction Contract

Management

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