Contract Management

Contract
Definition: Legally binding agreement between
two or more parties which to do or not do a
business, if it contains the elements of a valid
legal agreement, is enforceable by law or by
binding arbitration.
There should be offer from one party and
acceptance from the other.
All Contracts are Agreements but all agreements
are not Contracts.

Contract
- Law of Contract in Nepal 2056 (2000) defines a
contract as an agreement enforceable by law
concluded between two or more parties for
performing or not performing any work.

Methods of Work Execution

Public

Procurement Act,2063 has directed to use one

of the following methods for procurement of goods,
works or other services.

i.

International Open Bidding

ii.

National Open Bidding

iii.

Sealed quotation

iv.

Direct Purchase

v.

Through Users Committee or beneficiaries

vi.

Through NGO

Types of Contract
- Valid, Void & Voidable Contract
- Expressed and Implied Contract
- Contingent or Conditional Contract

Valid, Void & Voidable Contract

- Valid: Contract fulfilling legal requirements
& having legal status
- Void: if,
1. contract is against existing law & public
welfare
2. subject matter of a contract is unclear to
give meanings
3. contract is not found possible to perform
from the time of entering the contract

Valid, Void & Voidable Contract

- Voidable: if, contract is made under
coercion, undue influence and
misrepresentation, the suffering party may
have the rights to make the contract void
- The contract of a minor, usually a person
under the age of 18, is not void, but voidable,
and it may be affirmed by that person on
attainment of full age.

Valid, Void & Voidable Contract

- The contract of a person mentally impaired,
or a person so under the influence of
psychotropic (mind-altering) drugs or
alcohol as to be incapable of a free exercise
of will is sometimes said to be wholly void or
may be regarded as merely voidable; and in
some instances they are enforced if the other
contracting party is unaware of the
incompetency and the terms are fair.

Expressed and Implied Contract

- Expressed: Contract made by parties by
clearly expressing their intentions of entering
the contract, either in written or oral
- Implied: If there is no clear expression of the
intention of the parties but their conduct and
understanding
establishes
contractual
relationship between them.

Contingent or Conditional Contract

- If contractual relationship between the
parties exists based on the event or
incident taking place in the future.

Tender & Tender Notice

- A tender is an offer to do or perform an act
which the party offering, is bound to perform
to the party to whom the offer is made.
- Tender documents are prepared before inviting
bids. Tender documents should include all
works to be completed and minimum necessary
expenses required
- Tender format should be as per FAR for
uniformity

Fig.: Tender Notice

Tender Notice should include:

-

Methods of tender submission

Tender submission office or authority
Last Date & Time for submission of tender
Description of potential bidders, type, Class, financial
position, technical ability etc.
Place, Date & Time for opening of tenders
Date for making decisions on tenders
Bid Amount and Amount & Period of Bank Guarantee
Types
Any related information to the tender.

Evaluation of Tenders & Selection of

Contractor

Step-1: Preliminary Examination of Bids

-To identify & reject incomplete bids
Verifications
Eligibility
Bid Security
Completeness
Qualification
Other Requirements of FAR(Financial
Administrative Rule)

Evaluation of Tenders & Selection of

Contractor
Step-2: Determination of Substantial
Responsiveness of Bids
- To reject bids, which do not substantially
respond to major commercial & technical
requirements

Evaluation of Tenders & Selection of

Contractor
Step-3: Detailed Evaluation of Bids.
Correction of Errors
Correction for Provision Sum
Modifications and Discounts
Evaluation Currency
Omissions
Adjustment
Price Deviation
Domestic Preference
Cross Discounts

Evaluation of Tenders & Selection of

Contractor
Step-4: Bid Evaluation Report
- By Bid Evaluation Committee
- Submitted to PM or concerned authority
Step-5: Selection of Contractor
- After detailed evaluation and considerations
- Comply with FAR and PWD(Public Works
Directive)

Contract Agreement
- After Detailed Evaluation of Bids, contract
generally awarded to lowest bidder
- Owner offers contract to winning bidder and
asks for letter of acceptance within certain days
along with Performance Guarantee
- Contract is formally signed, which is the basis
for further works.

Contract Documents
Contract Agreement
Letter of Acceptance (LOA)
Tender Documents
Conditions of Contract
Specifications
Drawings
Priced BOQ (Bill of Quantities)

THANK YOU